<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 29, 1999
REGISTRATION NO. 333-89521
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
CE GENERATION, LLC
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4911 47-0818523
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
--------------
302 SOUTH 36TH STREET, SUITE 400
OMAHA, NEBRASKA 68131
(402) 231-1641
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
DOUGLAS L. ANDERSON
VICE PRESIDENT AND GENERAL COUNSEL
CE GENERATION, LLC
302 SOUTH 36TH STREET, SUITE 400
OMAHA, NEBRASKA 68131
(402) 231-1641
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------
Copy to:
KELLEY M. GALE, ESQ.
LATHAM & WATKINS
701 B STREET, SUITE 2100
SAN DIEGO, CALIFORNIA 92101
(619) 236-1234
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>
PROPOSED PROPOSED AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SECURITY(1) OFFERING PRICE(1) FEE(2)
<S> <C> <C> <C> <C>
7.416% Senior Secured Bonds Due December 15, 2018 $400,000,000 100% $400,000,000 $111,200
</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.
--------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 29, 1999
PROSPECTUS
CE GENERATION, LLC
Exchange Offer for 7.416% Senior Secured Bonds Due December 15, 2018
----------------
This is an offer to exchange our outstanding, unregistered 7.416% Senior
Secured Bonds you now hold for new, substantially identical 7.416% Senior
Secured Bonds that will be free of the transfer restrictions that apply to the
old bonds. This offer will expire at 5:00 p.m., New York City time, on ,
1999, unless we extend it. You must tender the old, unregistered bonds by the
deadline to obtain new, registered bonds and the liquidity benefits they offer.
We agreed with the initial purchasers of the old bonds to make this offer
and register the issuance of the new bonds following the closing. This offer
applies to any and all old bonds tendered before the deadline.
The new bonds will not trade on any established exchange. The new bonds
have the same financial terms and covenants as the old bonds, and are subject
to the same business and financial risks.
A DESCRIPTION OF THOSE RISKS BEGINS ON PAGE 14.
The terms of the exchange offer will include the following:
o We will exchange all old securities that are validly tendered and not
withdrawn prior to the expiration of the exchange offer.
o You may withdraw tenders of old securities at any time prior to the
expiration of the exchange offer.
o We will not receive any proceeds from the exchange offer.
----------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------
The date of this prospectus is November , 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Prospectus Summary .......................... 1 Legal Matters ............................. 126
Risk Factors ................................ 14 Experts ................................... 126
The Exchange Offer .......................... 20 Power Generation Projects Independent
Engineer ............................... 126
Capitalization .............................. 30 Natural Gas Projects Independent
Selected Financial Data ..................... 31 Engineer ............................... 126
Management's Discussion and Geothermal Projects Independent
Analysis of Financial Condition Engineer ............................... 126
and Results of Operations .................. 33 Consultants' Reports ...................... 127
Our Business and the Business of the Where You Can Find More Information ....... 127
Designated Subsidiaries ................... 42 Index to Financial Statements ............. F-1
Our Management .............................. 50 Appendix A--Power Generation
Ownership of Our Membership Projects Independent Engineer's
Interests ................................. 52 Report ................................. A-1
Our Relationships and Related Appendix B--Natural Gas Projects
Transactions ............................... 52 Independent Engineer's Report ........ B-1
Reports of Third Party Consultants .......... 53 Appendix C--Geothermal Projects
Summary Description of Principal Independent Engineer's Report ......... C-1
Project Contracts .......................... 59 Appendix D--Power Market
Description of the Securities ............... 90 Consultant's Report ................... D-1
Summary Description of the Principal Appendix E--Geothermal Resource
Financing Documents ........................ 98 Consultant's Report ................... E-1
Plan of Distribution ........................ 123
United States Federal Income Tax
Considerations ............................. 124
</TABLE>
i
<PAGE>
PROSPECTUS SUMMARY
The following summary highlights selected information from this prospectus
and may not contain all of the information that is important to you. This
prospectus includes specific terms of the securities we are offering, as well
as information regarding our business and detailed financial data. We encourage
you to read the prospectus in its entirety. You should pay special attention to
the "Risk Factors" section beginning on page 14 of this prospectus.
SUMMARY OF OUR EXCHANGE OFFER
On March 2, 1999 we completed the offering of $400,000,000 aggregate
principal amount of our 7.416% Senior Secured Bonds due 2018 in reliance on
exemptions from the registration requirements of the Securities Act. As part of
that offering, we entered into a registration rights agreement with the initial
purchasers of those old Securities in which we agreed, among other things, to
deliver this prospectus to you and to complete an exchange offer for the old
Securities. Below is a summary of the exchange offer.
The Exchange Offer.......... We are offering to exchange up to $400,000,000
principal amount of new Securities which have
been registered under the Securities Act for up
to $400,000,000 principal amount of old
Securities. We will exchange old Securities only
in integral multiples of $1,000.
In order to be exchanged, an old Security must
be properly tendered and accepted. We will
exchange all old Securities that are validly
tendered and not withdrawn. As of the date of
this prospectus, there are $400,000,000
principal amount of old Securities outstanding.
We will issue new Securities promptly after the
expiration of the exchange offer.
Resales Without Further
Registration................ Based on interpretations by the staff of the
Securities and Exchange Commission, we believe
that the new Securities issued in the exchange
offer may be offered for resale, resold or
otherwise transferred by you without compliance
with the registration and prospectus delivery
requirements of the Securities Act, so long as:
o you are acquiring the new Securities in the
ordinary course of your business;
o you are not participating, do not intend to
participate and have no arrangement or
understanding with any person to participate,
in a distribution of the new Securities; and
o you are not an "affiliate" of ours.
By tendering your old Securities as described
below, you will be making representations to
this effect.
Transfer Restrictions on
New Securities.............. If you are an affiliate of ours, are engaged
in, or intend to engage in or have any
arrangement or understanding with any person to
participate in, the distribution of the new
Securities:
1
<PAGE>
(1) you cannot rely on the applicable
interpretations of the staff of the
Securities and Exchange Commission; and
(2) you must comply with the registration
requirements of the Securities Act in
connection with any resale transaction.
Each broker or dealer that receives new
Securities for its own account in exchange for
old Securities that were acquired as a result of
market-making or other trading activities must
acknowledge that it will deliver this prospectus
in connection with any offer to resell, resale
or other transfer of the new Securities issued
in the exchange offer.
Expiration Date............. 5:00 p.m., New York City time, on 1999,
unless we extend the expiration date.
Accrued Interest on the New
Securities and
Old Securities.............. The new Securities will bear interest from the
most recent date to which interest has been paid
on the old Securities. If your old Securities are
accepted for exchange, then you will waive
interest on the old Securities accrued to the
date the new Securities are issued.
Increase in Interest Rate... As the registration statement of which this
prospectus is a part was not declared effective
by November 27, 1999, the interest rate on the
old Securities was increased by 0.50% per annum
beginning November 28, 1999 until the
registration statement is declared effective.
Conditions to our Acceptance and
Exchange of Old Securities... Our obligations to accept old Securities and
exchange old Securities for new Securities are
subject to the following conditions, which we may
assert or waive in our sole discretion:
o the exchange offer cannot violate applicable
law;
o there cannot exist any law or governmental
proceeding which (1) seeks to restrain or
prohibit the exchange offer, (2) seeks
damages as a result of the exchange offer or
(3) results in a material delay in our
ability to exchange old Securities;
o there cannot have occurred (1) a suspension
of trading in securities on the New York
Stock Exchange, (2) a declaration of a
banking moratorium or (3) a commencement of a
war involving the United States; and
o there cannot have occurred a material
adverse change in our business, financial or
other condition, operations, stock ownership
or prospects.
2
<PAGE>
Procedures for Tendering Old
Securities.................. If you wish to tender your old Securities, you
must complete, sign and date the letter of
transmittal, or a facsimile of it, in accordance
with its instructions and transmit the letter of
transmittal, together with your old Securities
and any other required documentation, and Chase
Manhattan Bank and Trust Company, National
Association, who is the exchange agent, must
receive the documentation at the address set
forth in the letter of transmittal by 5:00 p.m.
New York City time, on the expiration date. By
executing the letter of transmittal, you will
represent to us that you are acquiring the new
Securities in the ordinary course of your
business, that you are not participating, do not
intend to participate and have no arrangement or
understanding with any person to participate, in
the distribution of new Securities, and that you
are not an "affiliate" of ours.
Special Procedures for Beneficial
Holders..................... If you are the beneficial holder of old
Securities that are registered in the name of
your broker, dealer, commercial bank, trust
company or other nominee, and you wish to tender
in the exchange offer, you should promptly
contact the person in whose name your old
Securities are registered and instruct them to
tender on your behalf.
Guaranteed Delivery
Procedures.................. If you wish to tender your old Securities and you
cannot deliver your notes, the letter of
transmittal or any other required documents to
the exchange agent before the expiration date,
you may tender your old Securities according to
the guaranteed delivery procedures.
Withdrawal Rights........... Tenders may be withdrawn at any time before 5:
00 p.m., New York City time, on the expiration
date.
Acceptance of Old Securities and
Delivery of New Securities... Subject to the conditions described above, we
will accept for exchange any and all old
Securities which are properly tendered in the
exchange offer before 5:00 p.m., New York City
time, on the expiration date. The new Securities
will be delivered promptly after the expiration
date.
Exchange Agent.............. Chase Manhattan Bank and Trust Company,
National Association, is serving as exchange
agent in connection with the exchange offer.
Federal Income Tax
Considerations.............. We believe that your exchange of old Securities
for new Securities in the exchange offer will not
result in any gain or loss to you for United
States federal income tax purposes.
Use of Proceeds............. We will not receive any proceeds from the
issuance of new Securities in the exchange offer.
We will pay all expenses incident to the exchange
offer.
3
<PAGE>
SUMMARY OF THE TERMS OF THE SECURITIES
The form and terms of the new Securities and the old Securities are
identical in all material respects, except that transfer restrictions and
registration rights applicable to the old Securities do not apply to the new
Securities. The new Securities will evidence the same debt as the old
Securities and will be governed by the same indenture. Where we refer to
"Securities" in this prospectus, we are referring to both old Securities and
new Securities.
Securities Offered.......... $400,000,000 7.416% Senior Secured Bonds Due
December 15, 2018.
Interest Payment Dates...... June 15 and December 15.
Scheduled Principal
Payments.................... Principal of the Securities will be payable in
semiannual installments on each June 15 and
December 15, beginning June 15, 2000, as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
PRINCIPAL
PAYMENT DATE AMOUNT PAYABLE
----------------------------- ---------------
<S> <C>
June 15, 1999 ............. 0.000%
December 15, 1999 ......... 0.000%
June 15, 2000 ............. 1.300%
December 15, 2000 ......... 1.300%
June 15, 2001 ............. 1.575%
December 15, 2001 ......... 1.575%
June 15, 2002 ............. 2.575%
December 15, 2002 ......... 2.575%
June 15, 2003 ............. 2.250%
December 15, 2003 ......... 2.250%
June 15, 2004 ............. 1.825%
December 15, 2004 ......... 1.825%
June 15, 2005 ............. 1.850%
December 15, 2005 ......... 1.850%
June 15, 2006 ............. 2.400%
December 15, 2006 ......... 2.400%
June 15, 2007 ............. 2.250%
December 15, 2007 ......... 2.250%
June 15, 2008 ............. 3.525%
December 15, 2008 ......... 3.525%
June 15, 2009 ............. 3.075%
December 15, 2009 ......... 3.075%
June 15, 2010 ............. 1.775%
December 15, 2010 ......... 1.775%
June 15, 2011 ............. 1.900%
December 15, 2011 ......... 1.900%
June 15, 2012 ............. 2.560%
December 15, 2012 ......... 2.560%
June 15, 2013 ............. 2.550%
December 15, 2013 ......... 2.550%
June 15, 2014 ............. 3.225%
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
PRINCIPAL
PAYMENT DATE AMOUNT PAYABLE
----------------------------- ---------------
<S> <C>
December 15, 2014 ......... 3.225%
June 15, 2015 ............. 3.380%
December 15, 2015 ......... 3.380%
June 15, 2016 ............. 3.660%
December 15, 2016 ......... 3.660%
June 15, 2017 ............. 3.780%
December 15, 2017 ......... 3.780%
June 15, 2018 ............. 4.545%
December 15, 2018 ......... 4.545%
</TABLE>
Average Number of Years that the
Securities will
be Outstanding The average number of years during which Securities will
be outstanding is approximately 11.9 years.
Denominations............... We issued the old Securities in minimum
denominations of $100,000 or any integral
multiple of $1,000 in excess of $100,000. We will
issue the new Securities in minimum denominations
of $1,000.
Ratings..................... "Baa3" by Moody's Investor Services, Inc.,
"BBB-" by Standard & Poor's Ratings Group and
"BBB" by Duff & Phelps Credit Rating Co.
Optional Redemption......... We may redeem all or any portion of the
Securities at a redemption price equal to:
o 100% of the principal amount of the
Securities being redeemed, plus
o accrued and unpaid interest on the
Securities being redeemed, plus
o a yield maintenance premium which is based
on the rates of comparable treasury
securities plus 50 basis points.
Mandatory Redemption With
Yield Maintenance Premium... We will be obligated to redeem the Securities
at par plus accrued interest to the date of
redemption, plus a yield maintenance premium, in
the following circumstances:
o if one of our designated subsidiaries
receives more than $15,000,000 of available
cash flow in net proceeds from one or more
financings of its project or refinancings of
the project financing debt of its project
company, we will be required to use all of
these proceeds to redeem Securities;
o if a designated subsidiary receives more
than $15,000,000 of available cash flow in
net proceeds from a sale of assets by its
project company and the sale is not in the
ordinary course of business, we will be
required to use all of these proceeds to
redeem Securities;
5
<PAGE>
o if we receive more than $15,000,000 in
proceeds from the sale of all or any portion
of our interest in any designated subsidiary
and the sale was not specifically permitted
under the indenture for the Securities, we
will be required to use all of these proceeds
to redeem Securities; and
o if a designated subsidiary receives more
than $15,000,000 in proceeds from the sale of
all or any portion of its interest in any
project company and the sale was not
specifically permitted under the indenture
for the Securities, we will be required to
use all of these proceeds to redeem
Securities.
In each of the above cases, we will be obligated
to redeem only the amount of Securities to the
extent which will cause each rating agency to
confirm that, after giving effect to the
redemption, the rating assigned to the
Securities by the rating agency will be at least
as good as the higher of (a) the then-current
rating assigned to the Securities by the rating
agency or (b) the initial rating assigned to the
Securities by the rating agency as of the
closing date for the old Securities.
Mandatory Redemption Without
Yield Maintenance Premium... We will be obligated to redeem the Securities
at par plus accrued interest to the date of
redemption in the following circumstances:
o if a designated subsidiary receives more
than $15,000,000 of available cash flow in
net proceeds related to the damage or
destruction of all or a portion of the
designated subsidiary's project, we will be
required to use all of these proceeds to
redeem Securities;
o if a designated subsidiary receives more
than $15,000,000 of available cash flow in
net proceeds related to a governmental
authority's compulsory taking or transfer, or
the threat of a governmental authority's
compulsory taking or transfer, of the
designated subsidiary's project, we will be
required to use all of these proceeds to
redeem Securities;
o if a designated subsidiary receives more
than $15,000,000 of available cash flow in
net proceeds related to a defect in the title
to the land on which the designated
subsidiary's project is located, we will be
required to use all of these proceeds to
redeem Securities; and
o if a designated subsidiary receives more
than $15,000,000 of available cash flow in
net proceeds related to the termination of a
designated subsidiary's power purchase
agreement or the amendment of a designated
subsidiary's power purchase agreement which
reduces the amount of capacity and energy
sold under the agreement, we will be required
to use all of these proceeds to redeem
Securities.
6
<PAGE>
However, in the case of a termination or an
amendment of a power purchase agreement, we will
be obligated to redeem only the amount of
Securities to the extent which will cause each
rating agency to confirm that, after giving
effect to the redemption, the rating assigned to
the Securities by the rating agency will be at
least as good as the higher of (a) the
then-current rating assigned to the Securities
by the rating agency or (b) the initial rating
assigned to the Securities by the rating agency
as of the closing date for the old Securities.
Ranking of the Securities... The Securities:
o are senior secured debt owed by us;
o rank equally in right of payment with our
other senior secured debt permitted under the
indenture for the Securities; the amount of
other senior secured debt that we can incur
is unlimited if we satisfy the additional
debt tests under the indenture;
o share equally in the collateral with our
other senior secured debt permitted under the
indenture;
o rank senior to any of our subordinated debt
permitted under the indenture;
o are effectively subordinated to the existing
project financing debt and all other debt of
the designated subsidiaries, SECI Holdings,
California Energy Yuma, the project companies
and the holding companies associated with the
projects; as of September 30, 1999, the
aggregate amount of this debt was $677.7
million; and
o are the only debt, other than the debt
permitted under the indenture, which we owe.
Collateral.................. The Securities are secured by the following
collateral:
o all available cash flow of the designated
subsidiaries deposited with the depositary
bank;
o a pledge of 99% of the equity interests in
Salton Sea Power Company and all of the
equity interests in CE Texas Gas LLC, the
designated subsidiaries, other than Magma
Power Company, and California Energy Yuma
Corporation;
o upon the redemption of, or earlier release
of security interests under, Magma's 9 7/8%
promissory notes, a pledge of all of the
capital stock of Magma;
o a pledge of all of the capital stock of SECI
Holdings Inc.;
o a grant of a lien on and security interest
in the depositary accounts; and
o a grant of a lien on and security interest
in all of our other tangible and intangible
property, to the extent it is possible to
grant a lien on the property.
7
<PAGE>
Non-Recourse Obligations.... We are the only person obligated to pay
principal of, premium, if any, and interest on
the Securities. Our members, MidAmerican Energy
Holdings Company and El Paso Power Holding
Company, will not guarantee the Securities or
have any obligation to make payments on the
Securities. None of our or our members' officers,
directors, employees or affiliates, other than
the designated subsidiaries to the extent of
their available cash flow, will guarantee the
Securities or have any obligation to make
payments on the Securities.
Debt Service
Reserve Account............. We are required to maintain an amount on deposit
in the debt service reserve account equal on any
date to the maximum semiannual principal and
interest payment due on the Securities for the
remaining term. We are permitted to satisfy this
obligation by depositing cash into the debt
service reserve account or by delivering to the
depositary bank a letter of credit provided by a
commercial bank or other financial institution
whose long-term unsecured debt obligations are
rated at least "A" by S&P and "A2" by Moody's. We
initially funded the debt service reserve account
by providing the depositary bank with a debt
service reserve letter of credit in an amount of
approximately $24 million.
Covenants................... We have agreed in the indenture for the
Securities to, among other things:
o maintain our existence;
o comply with applicable laws and governmental
approvals;
o perform our obligations under the financing
documents;
o maintain the liens on the collateral in
favor of the collateral agent;
o provide the trustee, the collateral agent
and depositary bank with reasonable
inspection rights;
o pay our taxes and maintain our books and
records; and
o pledge all of Magma's capital stock within
ten days after the stock is released from the
liens securing Magma's 9 7/8% promissory
notes.
We have agreed not to, among other things:
o incur debt other than as permitted under the
indenture;
o create liens on our property other than as
permitted under the indenture;
o engage in any activities other than those
permitted by the financing documents; or
o form subsidiaries, make investments, loans
or advances or acquire the stock, obligations
or securities of any other person, other than
as permitted under the indenture.
These affirmative and negative covenants are
subject to a number of important qualifications
and exceptions set forth in the indenture.
8
<PAGE>
SUMMARY OF OUR BUSINESS
We are a special purpose Delaware limited liability company formed for the
sole purpose of issuing securities and holding the equity interests in our
subsidiaries. Our designated subsidiaries are the following companies:
o Magma Power Company
o Salton Sea Power Company
o Falcon Seaboard Resources, Inc.
o Falcon Seaboard Power Corporation
o Falcon Seaboard Oil Company
o California Energy Development Corporation
o CE Texas Energy LLC
The designated subsidiaries own equity interests in project companies
which own ten geothermal and four natural gas-fired electric generating
facilities located in California, New York, Texas, Pennsylvania and Arizona. We
own 100% of the interests in twelve of these projects. In addition, we manage,
control and have substantial equity interests in the remaining two projects.
Substantially all of the cash flow received by us is received indirectly from
these projects. Below is a simplified chart which illustrates both our current
ownership structure as well as the current ownership structure of each project.
9
<PAGE>
[BLOCK CHART SHOWING THE OWNERSHIP STRUCTURE OF CE GENERATION AND THE PROJECTS]
----------
(1) The percentage of distributions from the Saranac project indirectly
beneficially owned by us varies over time.
(2) The percentage of distributions from the NorCon project indirectly
beneficially owned by us varies over time.
In October 1999, our indirect subsidiary, NorCon Power Partners, LP,
reached an agreement with Niagara Mohawk Power Corporation, the NorCon power
purchaser, General Electric Capital Corporation, the NorCon project lender, and
Louis Dreyfus Natural Gas Corporation, the gas supplier for the NorCon project,
to settle the outstanding litigation between NorCon and Niagara Mohawk, to
terminate NorCon's power purchase agreement with Niagara Mohawk and gas
purchase agreement with Louis Dreyfus, to transfer the NorCon project to
General Electric Capital and to provide for General Electric Capital to assume
responsibility for third party claims related to the NorCon project. Upon the
closing of these terminations and transfers, NorCon expects that it will not
have any further rights, interests, profits, costs or losses with respect to
the NorCon project.
Our subsidiaries operate all of the projects and sell substantially all of
the power produced by the projects to utility purchasers under long-term
contracts. The principal purchasers are Southern California Edison Company, New
York State Electric and Gas Corporation and Texas Utilities Energy Company,
whom we depend on for substantially all of our revenues. The operation of
geothermal projects involves drilling and maintaining geothermal wells which
produce steam that generates electricity when run through a geothermal power
plant. Gas-fired power plants burn natural gas to produce steam and generate
electricity. Following are tables describing the projects. The availability and
capacity factor figures shown in the tables are averages for 1996, 1997 and
1998.
10
<PAGE>
<TABLE>
<CAPTION>
SALTON SEA SALTON SEA SALTON SEA
PROJECT UNIT I UNIT II UNIT III
---------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
Project Company(ies) Salton Sea Salton Sea Salton Sea
Power Power Power
Generation L.P. Generation L.P. Generation L.P.
Location Imperial Imperial Imperial
Valley, CA Valley, CA Valley, CA
Capacity(1) 10 megawatts 20 megawatts 49.8 megawatts
Fuel Type Geothermal Geothermal Geothermal
Ownership Interest 100% 100% 100%
Commercial
Operation July 1987 April 1990 February 1989
Availability 96.0% 96.7% 96.0%
Capacity Factor 81.9% 119.1% 99.9%
Power Purchaser Southern Southern Southern
California California California
Edison Edison Edison
Company Company Company
Power Contract
Expiration June 2017 April 2020 February 2019
Thermal Energy Host N/A N/A N/A
Fuel Supplier N/A N/A N/A
Operator CalEnergy CalEnergy CalEnergy
Operating Operating Operating
Corporation Corporation Corporation
Outstanding Debt (2) (2) (2)
Debt Service
Coverage Ratio
Test(3) 1.4x prior to 1.4x prior to 1.4x prior to
2000/1.5x 2000/1.5x 2000/1.5x
thereafter thereafter thereafter
<CAPTION>
SALTON SEA SALTON SEA
PROJECT UNIT IV UNIT V LEATHERS DEL RANCH
---------------------- --------------------- ------------------- -------------------- ---------------------
<S> <C> <C> <C> <C>
Project Company(ies) Salton Sea Salton Sea Leathers, L.P. Del Ranch, L.P.
Power Power L.L.C.
Generation L.P.
and Fish Lake
Power LLC
Location Imperial Imperial Imperial Imperial
Valley, CA Valley, CA Valley, CA Valley, CA
Capacity(1) 39.6 megawatts 49 megawatts 38 megawatts 38 megawatts
Fuel Type Geothermal Geothermal Geothermal Geothermal
Ownership Interest 100% 100% 100% 100%
Commercial
Operation May 1996 Mid-2000 January 1990 January 1989
Availability 94.5% N/A 97.2% 97.4%
Capacity Factor 114.8% N/A 115.9% 118.2%
Power Purchaser Southern Zinc facility/ Southern Southern
California California California California
Edison power exchange Edison Edison
Company Company Company
Power Contract
Expiration May 2026 N/A December 2019 December 2018
Thermal Energy Host N/A N/A N/A N/A
Fuel Supplier N/A N/A N/A N/A
Operator CalEnergy CalEnergy CalEnergy CalEnergy
Operating Operating Operating Operating
Corporation Corporation Corporation Corporation
Outstanding Debt (2) (2) (2) (2)
Debt Service
Coverage Ratio
Test(3) 1.4x prior to 1.4x prior to 1.4x prior to 1.4x prior to
2000/1.5x 2000/1.5x 2000/1.5x 2000/1.5x
thereafter thereafter thereafter thereafter
</TABLE>
--------
(1) Capacity figures for Salton Sea Units I-IV and the Leathers, Del Ranch,
Elmore and Vulcan projects represent the capacity levels utilized to
calculate capacity payments under the current power purchase agreements
for these projects. Capacity figures for Salton Sea Unit V and the CE
Turbo project represent the expected capacity of each project to deliver
electricity for sale to others upon completion of construction of these
projects. Capacity figures for the Saranac, Power Resources, Norcon and
Yuma projects represent the maximum quantities permitted to be sold by
those projects under their current power purchase agreements. The actual
capacity of a project at any time varies with ambient temperatures and,
in the case of the geothermal projects, reservoir and wellfield
conditions.
(2) The total debt outstanding at September 30, 1999 for Salton Sea Units I-V
and the Leathers, Del Ranch, Elmore, Vulcan and CE Turbo projects, and a
zinc facility which was financed with these projects and is owned by our
affiliates, is $597.9 million, of which $140.5 million is scheduled to be
repaid by our affiliates that own the zinc facility.
(3) Represents historical and projected debt service coverage level required
to make equity distributions under the applicable project financing
documents.
11
<PAGE>
<TABLE>
<CAPTION>
PROJECT ELMORE VULCAN CE TURBO
---------------------- ------------------ ------------------- -------------------
<S> <C> <C> <C>
Project Company(ies) Elmore, L.P. Vulcan/BN CE Turbo LLC
Geothermal
Power
Company
Location Imperial Imperial Imperial
Valley, CA Valley, CA Valley, CA
Capacity(1) 38 megawatts 34 megawatts 10 megawatts
Fuel Type Geothermal Geothermal Geothermal
Ownership Interest 100% 100% 100%
Commercial
Operation January 1989 February 1986 Mid-2000
Availability 96.9% 95.4% N/A
Capacity Factor 114.6% 113.5% N/A
Power Purchaser Southern Southern California
California California power exchange
Edison Edison
Company Company
Power Contract
Expiration December 2018 February 2016 N/A
Thermal Energy Host N/A N/A N/A
Fuel Supplier N/A N/A N/A
Operator CalEnergy CalEnergy CalEnergy
Operating Operating Operating
Corporation Corporation
Outstanding Debt (2) (2) (2)
Debt Service
Coverage Ratio
Test(3) 1.4x prior to 1.4x prior to 1.4x prior to
2000/1.5x 2000/1.5x 2000/1.5x
thereafter thereafter thereafter
<CAPTION>
PROJECT SARANAC POWER RESOURCES NORCON YUMA
---------------------- ------------------ ------------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Project Company(ies) Saranac Power Power NorCon Power Yuma
Partners, L.P. Resources, Inc. Partners, LP Cogeneration
Associates
Location Plattsburgh, Big Spring, TX North East, PA Yuma, AZ
NY
Capacity(1) 240 megawatts 200 megawatts 80 megawatts 50 megawatts
Fuel Type Natural Gas Natural Gas Natural Gas Natural Gas
Ownership Interest Varies 100% Varies 100%
Commercial
Operation June 1994 June 1988 December 1992 May 1994
Availability 95.2% 91.2% 94.4% 96.4%
Capacity Factor 92.5% 79.7% 94.5% 88.3%
Power Purchaser New York State Texas Utilities Niagara San Diego Gas
Electric and Energy Mohawk Power & Electric
Gas Company Corporation
Corporation
Power Contract
Expiration June 2009 September 2003 December 2017 May 2024
Thermal Energy Host Georgia-Pacific Fina Oil and Welch Foods, Queen Carpet,
Corporation/ Chemical Inc. Inc.
Tenneco Company
Packaging, Inc.
Fuel Supplier Coral Energy Fina/Louis Louis Dreyfus Southwest Gas
Canada (Shell) Dreyfus Corporation
Operator Falcon Power Falcon Power Falcon Power Falcon Power
Operating Operating Operating Operating
Company Company Company Company
Outstanding Debt $183.1 million $79.8 million $98.4 million None
Debt Service
Coverage Ratio
Test(3) 1.2x Varies(4) 1.15x N/A
</TABLE>
--------
(1) Capacity figures for Salton Sea Units I-IV and the Leathers, Del Ranch,
Elmore and Vulcan projects represent the capacity levels utilized to
calculate capacity payments under the current power purchase agreements
for these projects. Capacity figures for Salton Sea Unit V and the CE
Turbo project represent the expected capacity of each project to deliver
electricity for sale to others upon completion of construction of these
projects. Capacity figures for the Saranac, Power Resources, Norcon and
Yuma projects represent the maximum quantities permitted to be sold by
those projects under their current power purchase agreements. The actual
capacity of a project at any time varies with ambient temperatures and,
in the case of the geothermal projects, reservoir and wellfield
conditions.
(2) The total debt outstanding at September 30, 1999 for Salton Sea Units I-V
and the Leathers, Del Ranch, Elmore, Vulcan and CE Turbo projects, and a
zinc facility which was financed with these projects and is owned by our
affiliates, is $597.9 million, of which $140.5 million is scheduled to be
paid by our affiliates that own the zinc facility.
(3) Represents historical and projected debt service coverage levels required
to make equity distributions under the applicable project financing
documents.
(4) To distribute 100% of available cash flow, the debt service coverage
ratio must be at least 1.2x. If the debt service coverage ratio is 1.17x
to 1.19x, 50% of available cash flow may be distributed. If the debt
service coverage ratio is 1.15x to 1.17x, 40% of available cash flow may
be distributed. If the debt service coverage ratio is 1.13x to 1.15x, 30%
of available cash flow may be distributed. If the debt service coverage
ratio is 1.1x to 1.13x, 20% of available cash flow may be distributed. If
the debt service coverage ratio is less than 1.1x, 10% of available cash
flow may be distributed.
12
<PAGE>
We will make payments on the new Securities with the following available
cash flow received by our designated subsidiaries:
o with respect to any designated subsidiary, distributions received by the
designated subsidiary from the project company(ies) that own its
project(s), so long as these equity distributions are no longer subject
to any liens imposed by any applicable project financing document and are
delivered to the depositary bank; and
o with respect to Magma, fees, royalties and other payments received by
Magma to the extent not otherwise required to be used for Magma project
costs or otherwise under any project financing document or project
document.
The structure of the transaction described in this prospectus has been
designed to pool and cross-collateralize the available cash flow of the
designated subsidiaries from the projects. A chart depicting the transaction
structure is shown below.
[BLOCK CHART SHOWING THE STRUCTURE OF THE TRANSACTION DESCRIBED IN THIS
PROSPECTUS]
There are a number of risks to the repayment of the new Securities which are
described below starting on page 14 of this prospectus.
13
<PAGE>
RISK FACTORS
You should carefully consider the following factors before deciding to
tender your old Securities in the exchange offer.
YOUR FAILURE TO EXCHANGE YOUR OLD SECURITIES FOR NEW SECURITIES COULD RESULT IN
YOUR HOLDING ILLIQUID SECURITIES WHICH CANNOT BE RESOLD UNLESS YOU REGISTER
THEM UNDER THE SECURITIES ACT OR FIND AN EXEMPTION FROM REGISTRATION.
The old Securities were not registered under the Securities Act or under
the securities laws of any state and may not be resold, offered for resale or
otherwise transferred unless they are subsequently registered or resold by use
of an exemption from the registration requirements of the Securities Act and
applicable state securities laws. If you do not exchange your unregistered old
Securities for registered new Securities in the exchange offer, you will not be
able to resell, offer to resell or otherwise transfer the old Securities unless
they are registered under the Securities Act or unless you resell them, offer
to resell them or otherwise transfer them under an exemption from the
registration requirements of, or in a transaction not subject to, the
Securities Act. In addition, we will no longer be under an obligation to
register the old Securities under the Securities Act except in the limited
circumstances provided under the registration rights agreement between us and
the initial purchasers of the old Securities. In addition, to the extent that
old Securities are tendered for exchange and accepted in the exchange offer,
the trading market for the untendered and tendered but unaccepted old
Securities could be illiquid.
YOU WILL NOT HAVE ANY RECOURSE TO THE ASSETS OF THE PROJECT COMPANIES OR THE
ASSETS OF MIDAMERICAN OR EL PASO POWER.
You will have recourse only to us and the collateral described in this
prospectus. Other than the designated subsidiaries to the extent of their
available cash flow, none of our shareholders or affiliates, including
MidAmerican, El Paso Power and the project companies, or any of our
shareholders' or affiliates' officers, directors or employees will guarantee
our obligation to make payments on the Securities or be liable in any other way
for the payment of the Securities. If we are unable to make payments on the
Securities and you foreclose on the collateral which secures the Securities,
the proceeds that you receive from the sale may not be sufficient to fully
repay your Securities.
OUR ABILITY TO MAKE PAYMENTS ON THE SECURITIES IS DEPENDENT ON THE DESIGNATED
SUBSIDIARIES' RECEIPT OF EQUITY DISTRIBUTIONS FROM THE PROJECT COMPANIES, WHICH
IS IN TURN DEPENDENT ON EVENTS WHICH ARE BEYOND OUR CONTROL.
We were formed for the purpose of issuing the Securities and owning our
subsidiaries. We do not have any operations. Accordingly, the sole source of
repayment of the Securities is the available cash flow of the designated
subsidiaries. The designated subsidiaries' sources of available cash flow are
limited. Salton Sea Power, Falcon Seaboard Resources, Falcon Seaboard Power,
Falcon Seaboard Oil, California Energy Development and CE Texas Energy conduct
no business other than owning direct and indirect interests in their project
companies. Magma conducts no material business other than owning its equity
interests in the Imperial Valley project companies and providing administrative
and operation services and real estate rights to the Imperial Valley project
companies. Falcon Power Operating conducts no business other than providing
operation and maintenance services for the Saranac, Power Resources, NorCon and
Yuma projects. CE Texas Gas conducts no business other than procuring natural
gas for the Power Resources Project. In addition, the project financing
documents entered into by the project companies in connection with the
development and construction of their projects place limitations on the ability
of the project companies to make distributions to the designated subsidiaries.
For example, if there is a default under a project financing document, the
project company would not be permitted to make distributions to the relevant
designated subsidiary. A default could result from the making of an untrue
representation by the project company or the failure of the project company to
satisfy a covenant. Finally, if a designated subsidiary were to be found to be
bankrupt, the assignment of the designated subsidiary's cash flow to the
secured parties would not be considered a lien that would continue if effect
following the bankruptcy.
14
<PAGE>
THE PROJECT LENDERS MUST MAKE PAYMENTS ON DEBT INCURRED BY THEM BEFORE MAKING
EQUITY DISTRIBUTIONS TO THE DESIGNATED SUBSIDIARIES.
The project companies other than Yuma paid for a portion of the costs of
constructing their projects with loans from banks and proceeds from the sale of
bonds. As of September 30, 1999, the aggregate amount of this debt was
approximately $959.2 million. The project companies must make regular payments
on this debt prior to making distributions to the designated subsidiaries. Any
additional debt incurred by the project companies would also in all likelihood
have to be paid before distributions could occur. Accordingly, the existence of
debt at the project company level reduces the amount of distributions that can
be made to the designated subsidiaries and, in turn, the amount of funds
available to make payments on the Securities. In addition, if there was a
default under the documents evidencing the project company level debt, the
lenders of the debt could foreclose on the collateral securing the debt, which
could include the project company's project. If this were to occur, we would
lose an important source of funds to use to make payments on the Securities.
WE CANNOT PREDICT THE REVENUES FROM THE SALE OF ELECTRICITY UNDER THE POWER
PURCHASE AGREEMENTS OR IN THE COMPETITIVE POWER MARKETS AND THE AMOUNT OF THESE
REVENUES MAY BE LOWER THAN AS SHOWN IN THE INDEPENDENT ENGINEER'S PROJECTIONS.
Other than the Salton Sea Unit I power purchase agreements, the energy
payments under the power purchase agreements for the operating Imperial Valley
projects depend, or will in the future depend, at least in part, on the cost
that Southern California Edison avoids by purchasing energy from the Imperial
Valley projects instead of obtaining the energy from other sources. The energy
payments under the Yuma power purchase agreement are dependent on the cost that
San Diego Gas & Electric avoids by purchasing energy from the Yuma project
instead of obtaining the energy from other sources. Estimates of Southern
California Edison's and San Diego Gas & Electric's avoided costs vary
substantially and we cannot predict the level of payments to be made in the
future under these power purchase agreements. These future payments may be
lower than as contemplated by the projections. Accordingly, there may be less
funds available for repayment of the Securities than as shown in the
projections.
Although approximately one-third of the net electrical output of Salton
Sea Unit V is expected to be sold under a contract for use by the zinc
facility, neither Salton Sea Unit V nor the CE Turbo project currently has any
material long-term power sales agreement for the rest of their capacity. The
strategy for Salton Sea Unit V and the CE Turbo project is to sell output not
needed by the zinc facility in short term transactions through the California
power exchange or in other transactions from time to time as may be found to be
more advantageous than those conducted through the California power exchange.
The California power exchange was recently created to establish markets for the
sale of power on a daily and an hourly basis. Thus, California power exchange
prices are expected to have the characteristics of short term spot prices and
to fluctuate from time to time in a manner that cannot be predicted with
accuracy and is not within our control or the control of any other person. The
projections use California power exchange prices. These estimates may turn out
to be wrong and the California power exchange prices may actually be lower than
as shown in the projections. If this is the case, there will be less funds
available to make payments on the Securities than is shown in the projections.
SOME OF THE POWER PURCHASE AGREEMENTS FOR THE PROJECTS WILL EXPIRE BEFORE THE
MATURITY DATE FOR THE SECURITIES AND THE PRICES AT WHICH THE POWER FROM THE
AFFECTED PROJECTS CAN BE SOLD AFTER EXPIRATION MAY BE LOWER THAN THE PRICES
UNDER THE POWER PURCHASE AGREEMENTS.
The initial terms of the power purchase agreements for Salton Sea Unit I
and the Power Resources, Saranac and Vulcan projects end in 2017, 2003, 2009
and 2016, respectively, and we cannot assure you that the terms of these power
purchase agreements will be extended beyond the initial terms. The revenues of
PRI, Vulcan and Salton Sea Unit I represented 28%, 5% and 2% of total sales of
electricity and steam, respectively, for the nine months ended September 30,
1999. Saranac is accounted for as an equity investment and our share of its
earnings comprise 95% of the equity
15
<PAGE>
earnings in subsidiaries for the nine months ended September 30, 1999. Upon
termination or expiration of a power purchase agreements, the affected project
company may make "spot" sales to the competitive market, enter into one or more
replacement power purchase agreements or sell power through a combination of
these approaches. In any of these cases, we cannot assure you that net revenues
generated from market sales or replacement power purchase agreements will not
be lower than the revenues contemplated by the projections. If the revenues are
lower, there will be less funds available to make payments on the Securities
than as shown in the projections.
THE PROCEEDS RECEIVED UNDER THE PROJECT COMPANIES' INSURANCE POLICIES MAY NOT
BE SUFFICIENT TO COVER ALL LOSSES AND THE INSURANCE COVERAGE FOR THE PROJECTS
MAY NOT BE AVAILABLE IN THE FUTURE ON COMMERCIALLY REASONABLE TERMS.
The operation of the projects involves many risks, including the breakdown
or failure of power generating equipment, pipelines, transmission lines or
other equipment or processes, fuel interruption, performance below expected
levels of output or efficiency, operator error and catastrophic events
including fires, earthquakes or explosions. The occurrence of any of these
events could significantly reduce or eliminate revenues generated by a project
or significantly increase the expenses of a project, thereby reducing the funds
available to make distributions to the designated subsidiaries and,
consequently, reducing the funds available to make payments on the Securities.
The projects companies currently possess property, business interruption,
catastrophic and general liability insurance. However, this comprehensive
insurance coverage may not be available in the future at commercially
reasonable costs or terms and the amounts for which the project companies are
or will be insured may not cover all potential losses.
THE PROJECT COMPANIES RELY ON A LIMITED NUMBER OF CUSTOMERS AND SUPPLIERS.
Each project depends on a single or limited number of companies to
purchase electricity or thermal energy, to supply water, to supply gas, to
transport gas, to dispose of wastes or to deliver electricity. For example,
each of the eight operating Imperial Valley projects relies on a power purchase
agreement with Southern California Edison for all of its revenues. The failure
of any power purchaser, thermal energy purchaser, water or gas supplier, gas
transporter, transmitting utility or other project participant to fulfill its
contractual obligations could increase the expenditures of or decrease the
revenues earned by the affected project company. This would, in turn, decrease
the amounts available for distribution to the designated subsidiaries and, as a
result, decrease the funds available to make payments on the Securities.
THE CONSTRUCTION OF THE NEW PROJECTS MAY BE DELAYED AND MAY COST MORE THAN WE
EXPECTED.
Although twelve of the projects have been operating for a number of years,
Salton Sea Unit V and the CE Turbo project are under construction according to
the terms of engineering, procurement and construction contracts. These new
projects are subject to risks associated with the construction of power plants
including risks of delays in completion, cost overruns and failures of the
construction contractors to perform in accordance with contract terms. Any
material unremedied delay in or unsatisfactory completion of the new projects
could hurt the affected project companies' results of operations. This would,
in turn, decrease the amounts available for distribution to the designated
subsidiaries and, as a result decrease the funds available to make payments on
the Securities.
THE AVAILABLE GEOTHERMAL RESOURCES MAY NOT BE SUFFICIENT TO OPERATE THE
GEOTHERMAL PROJECTS FOR THE ENTIRE TERM OF THE SECURITIES AND THE USE OF
GEOTHERMAL FUEL IN THESE PROJECTS MAY RESULT IN SIGNIFICANT COSTS WHICH ARE NOT
WITHIN OUR CONTROL.
The Salton Sea Units I-V, Leathers, Del Ranch, Elmore, Vulcan and CE Turbo
projects are geothermal power projects. The revenues of these geothermal
projects represented 66% of our total sales of electricity and steam for the
nine months ended September 30, 1999. Geothermal exploration, development and
operations are subject to uncertainties which vary among different geothermal
reservoirs and are similar to those typically associated with oil and gas
exploration and development,
16
<PAGE>
including dry holes and uncontrolled releases. Because of the geological
complexities of geothermal reservoirs, the geographic area and sustainable
output of the reservoirs can only be estimated and cannot be definitively
established. There is, accordingly, a risk of an unexpected decline in the
capacity of geothermal wells and a risk of geothermal reservoirs not being
sufficient for sustained production of electricity by the Imperial Valley
projects at the expected levels.
In addition, both the cost of operations and the operating performance of
the Imperial Valley projects may be hurt by a variety of operating factors.
Production and injection wells can require frequent maintenance or replacement.
Corrosion caused by high-temperature and high-salinity geothermal fluids may
require the replacement or repair of equipment, vessels or pipelines. New
production and injection wells may be required for the maintenance of current
operating levels, thereby requiring substantial capital expenditures.
THE PROJECT COMPANIES' BUSINESSES ARE SUBJECT TO A LARGE NUMBER OF REGULATIONS
AND PERMITTING REQUIREMENTS AND MAY BE HURT BY CHANGES IN THESE REGULATIONS AND
REQUIREMENTS.
The project companies are subject to a number of environmental laws and
regulations affecting many aspects of their present and future operations.
These laws and regulations generally require the project companies to obtain
and comply with a wide variety of licenses, permits and other approvals. The
project companies are also subject to environmental and energy regulations that
both public officials and private individuals may seek to enforce. We cannot
assure you that existing regulations will not be revised or that new
regulations will not be adopted or become applicable to the project companies
which could have an adverse impact on their operations.
The structure of federal and state energy regulations is currently
undergoing change and has in the past, and may in the future, be the subject of
various challenges, initiatives and restructuring proposals by utilities and
other electric industry participants. The implementation of regulatory changes
in response to these challenges, initiatives and restructuring proposals could
result in the imposition of more comprehensive or stringent requirements on the
project companies, electric utilities and other electric industry participants,
which would result in increased compliance costs and could otherwise have an
adverse effect on:
o the results of the project companies' operations;
o the project companies' ability to make distributions to the designated
subsidiaries; or
o the operations and financial condition of electric utilities (including
the utilities which have entered into power purchase agreements with
the project companies) and other industry participants.
THERE IS A PENDING LAWSUIT RELATED TO THE SARANAC PROJECT, WHICH MAY HURT THE
REVENUES OF SARANAC IF ADVERSELY DETERMINED.
New York State Electric and Gas has filed a complaint in federal court
challenging the implementation of the Public Utility Regulatory Policies Act of
1978 by the Federal Energy Regulatory Commission and the New York State Public
Service Commission and claiming that the prices in the Saranac power purchase
agreement exceed the prices mandated by the Public Utility Regulatory Policies
Act. The Public Service Commission also filed a related cross-claim against
FERC making similar assertions. We believe that New York State Electric and
Gas's and the Public Service Commission's claims are without merit because,
among other things, these claims were unanimously denied by FERC in earlier
proceedings which found that (1) New York State Electric and Gas's challenge to
the regulatory scheme was grossly untimely, (2) the Saranac power purchase
agreement was exempt from further regulatory review and (3) the rates payable
under the Saranac power purchase agreement were consistent with the Public
Utility Regulatory Policies Act and FERC regulations. If, however, New York
State Electric and Gas were successful in reducing the rates payable under the
Saranac power purchase agreement or in obtaining any restitution, this rate
reduction or restitution payment could reduce the revenues of Saranac. This
reduction would result in decreased distributions made to Falcon Seaboard
Resources, which would mean less funds available to make payments on the bonds.
17
<PAGE>
IT IS POSSIBLE THAT THE DESIGNATED SUBSIDIARIES' ASSIGNMENT OF THEIR AVAILABLE
CASH FLOW COULD BE SUBORDINATED OR DECLARED UNENFORCEABLE IN A BANKRUPTCY OR
SIMILAR PROCEEDING.
We distributed a substantial portion of the proceeds from the sale of the
old Securities to MidAmerican. The portion of the proceeds from the sale which
we contributed to each designated subsidiary was less than the amount of
available cash flow assigned by each designated subsidiary to secure our
obligations with respect to the Securities. It is possible that a creditor of a
designated subsidiary could make a claim, under federal or state fraudulent
conveyance laws, that the Security holders' claims under the designated
subsidiary security agreement should be subordinated or not enforced or that
payments thereunder (including payments to the Security holders) should be
recovered.
In order to prevail on this type of claim, a claimant would have to
demonstrate that:
o either:
o the obligations incurred under the designated subsidiary security
agreement were not incurred in good faith; or
o that any designated subsidiary did not receive fair consideration for
its assignment of available cash flow; and
o that any designated subsidiary:
o was insolvent at the time it entered into the designated subsidiary
security agreement; or
o at any time did not have and will not have sufficient capital for
carrying on its business or was not and will not be able to pay its
debts as they mature.
WE HAVE RELIED ON PROJECTIONS OF THE FUTURE PERFORMANCE OF THE PROJECTS IN
ASSESSING OUR ABILITY TO MAKE PAYMENTS ON THE SECURITIES. THESE PROJECTIONS,
WHICH WERE NOT VERIFIED BY OUR ACCOUNTANTS, ARE BASED ON ASSUMPTIONS WHICH MAY
PROVE TO BE INCORRECT.
In order to assess our ability to make payments on the Securities, we
engaged independent engineers to prepare reports containing, among other
things, projections of the distributions to us from the projects. R.W. Beck,
Inc. prepared a report which contains projections of distributions from the
natural gas projects and Fluor Daniel, Inc. prepared a report which contains
projections of distributions from the Imperial Valley geothermal projects.
Fluor Daniel also prepared a report which contains projections of the
consolidated distributions from all of the projects. A summary of these
independent engineers' reports and other third-party reports appears later in
this prospectus. The reports in their entirety are attached as appendices to
this prospectus. All projections of future operations and the economic results
of the projections included in the independent engineers' reports have been
prepared or confirmed by Fluor Daniel and R.W. Beck. Deloitte & Touche LLP, our
independent auditors, have neither examined nor compiled the projections and,
accordingly, do not express an opinion or any other form of assurance with
respect to the projections. The reports were prepared prior to our offering of
the old Securities and have not been updated since that time.
For purposes of preparing the projections, assumptions were made, of
necessity, with respect to general business and economic conditions, the
revenues the project companies will earn in their respective businesses, the
amount of available cash flow the designated subsidiaries will receive and
several other matters that are not within the control of the designated
subsidiaries and the outcome of which cannot be predicted by us, the designated
subsidiaries, Fluor Daniel, R.W. Beck or any other person with any certainty or
accuracy. We believe that the assumptions were reasonable for purposes of
preparing the projections. These assumptions and the other assumptions used in
preparing the projections are, however, inherently subject to significant
uncertainties and actual results may differ, perhaps materially, from those
projected. If actual results are less favorable than those shown or if the
assumptions used in formulating the projections prove to be incorrect, our
ability to make payments on the Securities may be adversely affected.
18
<PAGE>
THERE IS NO EXISTING MARKET FOR THE NEW SECURITIES AND WE CANNOT ASSURE YOU
THAT AN ACTIVE TRADING MARKET WILL DEVELOP.
We are offering the new Securities to the holders of the old Securities.
There is no existing market for the new Securities and we cannot assure you
that a market will develop. If a market for the new Securities were to develop,
future trading prices would depend on many factors, including prevailing
interest rates, the operating results of the project companies and the market
for similar securities. We do not intend to apply for listing or quotation of
the new Securities on any securities exchange or stock market. As a result, it
may be difficult for you to find a buyer for your Securities at the time you
want to sell them, and even if you found a buyer, you might not get the price
you want.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT ARE DEPENDENT ON
CIRCUMSTANCES AND EVENTS WHICH MAY BE OUTSIDE OF OUR CONTROL.
Some of the statements contained in this prospectus are forward-looking
statements that are dependent on circumstances and events that may be outside
of our control. We identify these statements by using words like "expect,"
"believe," "anticipate," "estimate" and "projected" and similar expressions.
The forward-looking statements in this prospectus involve known and unknown
risks, uncertainties and other important factors that could cause our actual
results, performance or achievements, or the results, performance or
achievements of our affiliates, or industry results, to differ materially from
any future results, performance or achievements expressed or implied by the
forward-looking statements.
These risks, uncertainties and other important factors include:
o general economic and business conditions in the United States;
o governmental, statutory, regulatory or administrative initiatives
affecting us, the designated subsidiaries, the project companies, the
projects or the U.S. electricity industry;
o weather effects on sales and revenues;
o general industry trends; competition;
o fuel and power costs and availability;
o changes in business strategy, development plans or vendor
relationships;
o fuel transportation; availability, term and deployment of capital;
o availability of qualified personnel; and
o changes in, or the failure or inability to comply with, governmental
regulation, including industry deregulation and restructuring,
environmental and tax regulations and legislation.
19
<PAGE>
THE EXCHANGE OFFER
BACKGROUND INFORMATION REGARDING THE EXCHANGE OFFER
We originally sold the outstanding 7.416% Senior Secured Bonds Due
December 15, 2018 on March 2, 1999 in a transaction exempt from the
registration requirements of the Securities Act. Credit Suisse First Boston
Corporation and Goldman, Sachs & Co., as the initial purchasers, subsequently
resold the notes to qualified institutional buyers in reliance on Rule 144A and
under Regulation S under the Securities Act. As of the date of this prospectus,
$400 million aggregate principal amount of unregistered bonds are outstanding.
We entered into an exchange and registration rights agreement with Credit
Suisse First Boston Corporation and Goldman, Sachs & Co. under which we agreed
that we would, at our own cost, do the following:
o use our reasonable best efforts to cause the registration statement, of
which this prospectus is a part, relating to the exchange offer to be
declared effective by the Securities and Exchange Commission by November
27, 1999;
o keep the exchange offer open for a period of not less than the shorter
of:
(1) the period ending when the last of the remaining old Securities is
tendered into the exchange offer, and
(2) 30 days from the date notice is mailed to holders of the old
Securities; and
o maintain the registration statement continuously effective for a period
of not less than the longer of:
(1) the period ending upon consummation of the exchange offer, and
(2) 120 days after effectiveness of the registration statement, subject
to extension.
However, in the event that all resales of new Securities covered by the
registration statement have been made, the registration statement need
not remain continuously effective.
YOUR ABILITY TO RESELL THE NEW SECURITIES
Based on no-action letters issued by the staff of the Securities and
Exchange Commission to third parties, we believe that a holder of old
Securities who exchanges old Securities for new Securities in the exchange
offer generally may offer the new Securities for resale, sell the new
Securities and otherwise transfer the new Securities without further
registration under the Securities Act and without delivery of a prospectus that
satisfies the requirements of Section 10 of the Securities Act. This does not
apply, however, to a holder who is an affiliate of ours within the meaning of
Rule 405 of the Securities Act. We also believe that a holder may offer, sell
or transfer the new Securities only if the holder acquires the new Securities
in the ordinary course of its business and is not participating, does not
intend to participate and has no arrangement or understanding with any person
to participate in a distribution of the new Securities.
Any holder of old Securities using the exchange offer to participate in a
distribution of new Securities cannot rely on the no-action letters referred to
above. This category of holders includes a broker-dealer that acquired old
Securities directly from us, but not as a result of market-making activities or
other trading activities. Consequently, this type of holder must comply with
the registration and prospectus delivery requirements of the Securities Act in
the absence of an exemption from these requirements.
Each broker-dealer that receives new Securities for its own account in
exchange for old Securities, where the old Securities were acquired by the
broker-dealer as a result of market-making activities or other trading
activities, may be a statutory underwriter and must acknowledge that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with the resale of new
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Securities received in exchange for old Securities. The letter of transmittal
(which accompanies this prospectus) states that by so acknowledging and by
delivering a prospectus, a participating broker-dealer will not be deemed to
admit that it is an underwriter within the meaning of the Securities Act. A
participating broker-dealer may use this prospectus, as it may be amended from
time to time, in connection with resales of new Securities it receives in
exchange for old Securities in the exchange offer. We will make this prospectus
available to any participating broker-dealer in connection with any resale of
this kind for a period of 30 days after the expiration date of the exchange
offer.
REPRESENTATIONS AND ACKNOWLEDGEMENTS THAT YOU MUST MAKE IN ORDER TO EXCHANGE
YOUR OLD SECURITIES FOR NEW SECURITIES
Each holder of the old Securities who wishes to exchange old Securities
for new Securities in the exchange offer will be required to represent and
acknowledge, for the holder and for each beneficial owner of the old
Securities, whether or not the beneficial owner is the holder, in the letter of
transmittal that:
o the new Securities to be acquired by the holder and each beneficial
owner, if any, are being acquired in the ordinary course of business,
o neither the holder nor any beneficial owner is an affiliate, as defined
in Rule 405 of the Securities Act, of ours or any of our subsidiaries,
o any person participating in the exchange offer with the intention or
purpose of distributing new Securities received in exchange for old
Securities, including a broker-dealer that acquired old Securities
directly from us, but not as a result of market-making activities or
other trading activities, cannot rely on the no-action letters referenced
above and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
of the new Securities,
o if the holder is not a broker-dealer, the holder and each beneficial
owner, if any, are not participating, do not intend to participate and
have no arrangement or understanding with any person to participate in
any distribution of the new Securities received in exchange for old
Securities, and
o if the holder is a broker-dealer that will receive new Securities for
the holder's own account in exchange for old Securities, the old
Securities to be so exchanged were acquired by the holder as a result of
market-making or other trading activities and the holder will deliver a
prospectus meeting the requirements of the Securities Act in connection
with any resale of the new Securities received in the exchange offer.
However, by so representing and acknowledging and by delivering a
prospectus, the holder will not be deemed to admit that it is an
underwriter within the meaning of the Securities Act.
SITUATIONS IN WHICH WE WILL BE REQUIRED TO FILE A SHELF REGISTRATION STATEMENT
If applicable law or interpretations of the staff of the Securities and
Exchange Commission are changed so that the new Securities received by holders
who make all of the above representations in the letter of transmittal are not
or would not be, upon receipt, transferable by each holder without restriction
under the Securities Act, we will, at our cost:
o file a shelf registration statement covering resales of the old
Securities,
o use our reasonable best efforts to cause the shelf registration
statement to be declared effective under the Securities Act on or prior
to November 27, 1999, and
o use our reasonable best efforts to keep effective the shelf
registration statement until the earlier of three years after March 2,
1998, subject to exceptions, or the time when all of the applicable old
Securities are no longer outstanding.
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We may postpone or suspend the filing or the effectiveness of any shelf
registration statement if the postponement or suspension is taken by us in good
faith and for valid business reasons. We will, if and when we file the shelf
registration statement, provide to each holder of the old Securities copies of
the prospectus which is a part of the shelf registration statement, notify each
holder when the shelf registration statement has become effective and take
other actions as are required to permit unrestricted resales of the old
Securities.
THE INTEREST RATE ON THE OLD SECURITIES IS INCREASED FROM AND AFTER NOVEMBER
28, 1999 BECAUSE A REGISTRATION STATEMENT WAS NOT DECLARED EFFECTIVE BY
NOVEMBER 27, 1999
As neither the exchange offer registration statement nor a shelf
registration statement was declared effective by November 27, 1999, the interest
rate on the old Securities was increased by 0.50% per annum from and after
November 28, 1999 until the exchange offer registration statement or the shelf
registration statement is declared effective. Upon consummation of the exchange
offer, holders of old Securities will not be entitled to any increase in the
rate of interest on the old Securities, but the old Securities will still be
governed by the indenture under which the old Securities were issued.
GENERAL TERMS OF THE EXCHANGE OFFER
We hereby offer, upon the terms and subject to the conditions set forth in
this prospectus and in the accompanying letter of transmittal, to exchange new
Securities for a like aggregate principal amount of old Securities properly
tendered on or prior to the expiration date and not properly withdrawn in
accordance with the procedures described below. We will issue, promptly after
the expiration date, the new Securities in exchange for a like principal amount
of outstanding old Securities tendered and accepted in connection with the
exchange offer. You may tender your old Securities in whole or in part in a
principal amount of $1,000 and integral multiples thereof, provided that if any
old Securities are tendered for exchange in part, the untendered principal
amount of the old Securities must be $100,000 or any integral multiple of
$1,000 in excess of $100,000.
The exchange offer is not conditioned upon any minimum number of old
Securities being tendered. As of the date of this prospectus, $400,000,000
aggregate principal amount of the old Securities is outstanding.
If any tendered old Securities are not accepted for exchange because of an
invalid tender or any other reason, certificates for any unaccepted old
Securities will be returned, without expense to the tendering holder promptly
after the expiration date.
You will not be required to pay brokerage commissions or fees or, subject
to the instructions in the Letter of Transmittal, transfer taxes with respect
to the exchange of old Securities. We will pay all charges and expenses, other
than applicable taxes described below, in connection with the exchange offer.
Neither we nor our board of directors makes any recommendation to you as
to whether to tender or refrain from tendering all or any portion of your old
Securities in the exchange offer. In addition, no one has been authorized to
make this type of recommendation. You must make your own decision whether to
tender in the exchange offer and, if you do tender, the aggregate amount of old
Securities to tender. In making these decisions, you should read this
prospectus and the letter of transmittal and consult with your advisers. You
should make the decision whether to tender based on your own financial position
and requirements.
THE EXPIRATION DATE FOR THE EXCHANGE OFFER AND OUR ABILITY TO EXTEND THE
EXPIRATION DATE
The exchange offer expires on the expiration date. The term "expiration
date" means 5:00 p.m., New York City time, on , 1999, unless we in our
sole discretion extend the period during which the exchange offer is open. If
we do so, the term "expiration date" will mean the latest time and date to
which the exchange offer is extended. We may extend the exchange offer at any
time and from time to time by giving oral or written notice to the exchange
agent and by timely public announcement. Without limiting the manner in which
we may choose to make any public
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announcement and subject to applicable law, we will have no obligation to
publish, advertise or otherwise communicate any public announcement other than
by issuing a release to an appropriate news agency. During any extension of the
exchange offer, all old Securities previously tendered in the exchange offer
will remain subject to the exchange offer.
WE CAN WAIVE CONDITIONS TO THE EXCHANGE OFFER AND AMEND THE EXCHANGE OFFER IN
OTHER WAYS
We reserve the right (1) to delay accepting any old Securities, to extend
the exchange offer or to terminate the exchange offer and not accept old
Securities not previously accepted for any reason, including if any of the
conditions to the exchange offer described below are not satisfied and are not
waived by us, or (2) to amend the terms of the exchange offer in any manner,
whether prior to or after the tender of any of the old Securities. If any
delay, extension, termination or amendment occurs, we will give oral or written
notice to the exchange agent and will either cause a public announcement or
give notice to the holders of the Securities as promptly as practicable. If the
delay, extension, termination or amendment is material, we will be required to
file a post-effective amendment to the registration statement of which this
prospectus is a part.
If (1) we waive any material condition to the exchange offer or amend the
exchange offer in any other material respect and (2) the exchange offer is
scheduled to expire at any time earlier than the expiration of a period ending
on the fifth business day after the date that notice of the waiver or amendment
is first published, sent or given, then the exchange offer will be extended
until the expiration of the five business day period.
THE PROCEDURES YOU MUST FOLLOW IN ORDER TO TENDER YOUR OLD SECURITIES
THE ITEMS YOU MUST SUBMIT IN ORDER TO TENDER YOUR OLD SECURITIES
To tender in the exchange offer, you must (1) complete, sign and date the
letter of transmittal, or a facsimile of the letter, (2) have the signatures
thereon guaranteed if required by the letter of transmittal and (3) mail or
otherwise deliver the letter of transmittal, together with any other required
documents or an agent's message in case of book-entry delivery as described
below, to the exchange agent prior to the expiration date. In addition, either
o certificates for the old Securities being tendered must be received by
the exchange agent along with the letter of transmittal on or prior to
the expiration date,
o a timely confirmation of a book-entry transfer of the old Securities,
if this procedure is available, into the exchange agent's account at The
Depository Trust Company by the procedure for book-entry transfer
described below, along with the letter of transmittal, must be received
by the exchange agent on or prior to the expiration date, or
o you must comply with the guaranteed delivery procedures described
below.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT YOUR OPTION AND SOLE RISK. IF YOU DELIVER BY
MAIL, WE RECOMMEND REGISTERED MAIL (RETURN RECEIPT REQUESTED AND PROPERLY
INSURED) OR AN OVERNIGHT DELIVERY SERVICE. IN ALL CASES, YOU SHOULD ALLOW
SUFFICIENT TIME TO ENSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD
SECURITIES SHOULD BE SENT TO US.
SPECIAL CIRCUMSTANCES THAT MAY APPLY TO YOUR TENDER
To be tendered effectively, the old Securities, letter of transmittal and
all other required documents, or, in the case of a participant in The
Depository Trust Company, an agent's message must be received by the exchange
agent prior to 5:00 p.m., New York City time, on the expiration date. Except in
the case of a participant in The Depository Trust Company who transfers
Securities by an agent's message, delivery of all documents must be made to the
exchange agent at its address set forth on the back of this prospectus. You may
also request your respective broker, dealer, commercial bank, trust company or
nominee to effect your tender for you.
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Your tender of old Securities will constitute an agreement between you and
us in accordance with the terms and subject to the conditions set forth in the
prospectus and in the letter of transmittal. If you tender less than all of
your old Securities, you should fill in the amount of old Securities being
tendered in the appropriate box on the letter of transmittal. The entire amount
of old Securities delivered to the exchange agent will be deemed to have been
tendered unless you indicate otherwise.
Only a holder of old Securities may tender the old Securities in the
exchange offer. The term "holder" with respect to the exchange offer means any
person in whose name old Securities are registered on our books or any other
person who has obtained a properly completed bond power from the registered
holder.
Any beneficial owner whose old Securities 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 the
registered holder to tender on his behalf. If the beneficial owner wishes to
tender on his own behalf, the beneficial owner must, prior to completing and
executing the letter of transmittal and delivering his old Securities, either
make appropriate arrangements to register ownership of the old Securities in
the beneficial 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, as the
case may be, must be guaranteed by a firm (an "eligible institution") that is a
member of a recognized signature guarantee medallion program within the meaning
of Rule 17Ad-15 under the Exchange Act, unless the old Securities tendered with
the letter are tendered (1) by a registered holder who has not completed the
box entitled "Special Issuance Instructions" or "Special Delivery Instructions"
on the letter of transmittal or (2) 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, the guarantee
must be by an eligible institution.
If the letter of transmittal is signed by a person other than the
registered holder of any old Securities listed in the letter, the old
Securities must be endorsed or accompanied by bond powers and a proxy which
authorizes that person to tender the old Securities on behalf of the registered
holder, in each case as the name of the registered holder appears on the old
Securities. If the letter of transmittal or any old Securities 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, the signer should so indicate when signing, and unless
waived by us, evidence satisfactory to us of their authority to so act must be
submitted with the letter of transmittal.
OUR RIGHTS IN CONNECTION WITH THE TENDERING PROCEDURES
All questions as to the validity, form, eligibility (including time of
receipt) and withdrawal of the tendered old Securities 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 old Securities not properly
tendered or any old Securities which, if accepted by us, would be unlawful. We
also reserve the right to waive any irregularities or conditions of tender as
to particular old Securities. 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 old Securities must be cured
within a time period determined by us. Neither we, the exchange agent or any
other person will be under any duty to give notification of defects or
irregularities with respect to tenders of old Securities, nor will we or any of
them incur any liability for failure to give notification. Tenders of old
Securities will not be deemed to have been made until any irregularities have
been cured or waived. Any old Securities received by the exchange agent that
are not properly tendered, and which have defects or irregularities which have
not been timely cured or waived, will be returned without cost to the holder by
the exchange agent as soon as practicable following the expiration date.
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In addition, we reserve the right in our sole discretion (1) to purchase
or make offers for any old Securities that remain outstanding subsequent to the
expiration date or to terminate the exchange offer, and (2) to the extent
permitted by applicable law, to purchase old Securities in the open market, in
privately negotiated transactions or otherwise. We have no present plan to
acquire any old Securities which are not tendered in the exchange offer. The
terms of any purchases or offers could differ from the terms of the exchange
offer.
YOU MAY BE ABLE TO USE THE DEPOSITORY TRUST COMPANY IN CONNECTION WITH YOUR
TENDER
The exchange agent will make a request to establish an account with
respect to the old Securities at The Depository Trust Company for purposes of
the exchange offer within two business days after the date of this prospectus.
Any financial institution that is a participant in The Depository Trust Company
may book-entry deliver old Securities by causing The Depository Trust Company
to transfer the old Securities into the exchange agent's account at The
Depository Trust Company in accordance with The Depository Trust Company's
procedures for transfer on or prior to the expiration date. If you are a
participant in The Depository Trust Company and transfer your old Securities by
an agent's message, you do not need to transmit the letter of transmittal to
the exchange agent to consummate your exchange.
The term "agent's message" means a message transmitted through electronic
means by The Depository Trust Company to and received by the exchange agent and
forming a part of a book-entry confirmation, which states that The Depository
Trust Company has received an express acknowledgment from the participant in
The Depository Trust Company tendering the Securities that the participant has
received and agrees to be bound by the letter of transmittal and/or the notice
of guaranteed delivery discussed below, where applicable.
YOUR ABILITY TO TENDER BY PROVIDING A NOTICE OF GUARANTEED DELIVERY
If you would like to tender your old Securities, and (1) your old
Securities are not immediately available, (2) time will not permit your old
Securities or other required documents to reach the exchange agent before the
expiration date, or (3) the procedure for book-entry transfer cannot be
completed on a timely basis, your tender may still be effected if:
o the tender is made through an eligible institution;
o on or prior to the expiration date, the exchange agent received from
the eligible institution a properly completed and duly executed letter of
transmittal (or in the case of a participant in The Depository Trust
Company, an agent's message) and notice of guaranteed delivery,
substantially in the form provided by us (or, in the case of a
participant in The Depository Trust Company, by an agent's message),
setting forth your name and address and the amount of old Securities
tendered, stating that the tender is being made thereby and guaranteeing
that within three New York Stock Exchange trading days after the date of
execution of the notice of guaranteed delivery, the certificates for all
physically tendered old Securities, 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
o the certificates for all physically tendered old Securities, 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 are received by
the exchange agent within three New York Stock Exchange trading days
after the date of execution of the notice of guaranteed delivery.
A tender will be deemed to have been received as of the date when your
properly completed and duly signed letter of transmittal accompanied by your
old Securities is received by the exchange agent, or if you are a participant
in The Depository Trust Company, as of the date when an agent's message has
been received by the exchange agent. Issuances of new Securities in exchange
for old Securities tendered by a notice of guaranteed delivery by an eligible
institution will be made only against deposit of the letter of transmittal (and
any other required documents) and the tendered old Securities.
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TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL THAT YOU MAY BE REQUIRED TO
SUBMIT WITH YOUR TENDERED SECURITIES
The letter of transmittal contains the following terms and conditions,
which are part of the exchange offer:
o If you tender your old Securities for exchange, you exchange, assign
and transfer the old Securities to us and irrevocably constitute and
appoint the exchange agent as your agent and attorney-in-fact to cause
the old Securities to be assigned, transferred and exchanged.
o You represent and warrant that you have full power and authority to
tender, exchange, assign and transfer the old Securities and to acquire
new Securities issuable upon the exchange of the tendered old Securities,
and that, when the same are accepted for exchange, we will acquire good
and unencumbered title to the tendered old Securities, free and clear of
all liens, restrictions, charges and encumbrances and not subject to any
adverse claim.
o You also warrant that you will, upon request, execute and deliver any
additional documents deemed by us to be necessary or desirable to
complete the exchange, assignment and transfer of tendered old
Securities.
o You agree that acceptance of any tendered old Securities by us and the
issuance of new Securities in exchange therefor will constitute
performance in full of our obligations under the registration rights
agreement and that we will have no further obligations or liabilities
thereunder.
o All authority conferred by you will survive your death or incapacity
and your obligations will be binding upon your heirs, legal
representatives. successors, assigns, executors and administrators.
By tendering old Securities, you certify that (1) you are not an
"affiliate" of ours within the meaning of Rule 405 under the Securities Act,
that you are not a broker-dealer that owns old Securities acquired directly
from us, that you are acquiring the new Securities offered hereby in the
ordinary course of your business and that you have no arrangement with any
person to participate in the distribution of the new Securities or (2) you are
an "affiliate" of ours or of an initial purchaser and that you will comply with
the registration and prospectus delivery requirements of the Securities Act to
the extent applicable to you. Each broker-dealer that receives new Securities
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
the new Securities.
YOU MAY WITHDRAW YOUR TENDER
Old Securities tendered in the exchange offer may be withdrawn at any time
prior to 5:00 p.m. New York City time, on the expiration date. For a withdrawal
to be effective, a written, telegraphic, telex or facsimile transmission notice
of withdrawal must be timely received by the exchange agent at its address set
forth on the back of this prospectus. Any notice of withdrawal must specify the
name of the person having tendered the old Securities to be withdrawn, identify
the old Securities to be withdrawn, specify the name in which the old
Securities are registered if different from that of the withdrawing holder,
accompanied by evidence satisfactory to us that the person withdrawing the
tender has succeeded to the beneficial ownership of the old Securities being
withdrawn. If certificates for old Securities have been delivered or otherwise
identified to the exchange agent, then, prior to the release of the
certificates, the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an eligible institution unless the holder is an
eligible institution. If old Securities have been tendered by using the
procedure for book-entry transfer described above, any notice of withdrawal
must specify the name and number of the account at The Depository Trust Company
to be credited with the withdrawn old Securities and otherwise comply with the
Depository Trust Company's procedures. If any old Securities are tendered for
exchange but are not exchanged for any reason, or if any old Securities are
submitted for a greater principal amount than the holder desires to exchange,
the
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unaccepted or nonexchanged old Securities will be returned to the holder
without cost to the holder as soon as practicable after withdrawal, rejection
of tender, termination of the exchange offer or submission of nonexchanged old
Securities.
IF YOU WITHDRAW YOUR TENDER, YOU MAY RETENDER YOUR OLD SECURITIES PRIOR TO THE
EXPIRATION DATE
Withdrawals of tenders of old Securities may not be rescinded. Old
Securities properly withdrawn will not be deemed validly tendered for purposes
of the exchange offer, but may be retendered at any subsequent time on or prior
to the expiration date by following any of the procedures described above.
All questions as to the validity, form and eligibility (including time of
receipt) of withdrawal notices will be determined by us in our sole discretion,
and our determination will be final and binding on all parties. Neither we, any
affiliates or assigns of ours, the exchange agent nor any other person will be
under any duty to give any notification of any irregularities in any notice of
withdrawal or incur any liability for failure to give any notification.
ACCEPTANCE OF OLD SECURITIES AND DELIVERY OF NEW SECURITIES
Upon the terms and subject to the conditions of the exchange offer, we
will exchange, and will issue to the exchange agent, new Securities for old
Securities validly tendered and not withdrawn promptly after the expiration
date. For the purposes of the exchange offer, we will be deemed to have
accepted for exchange validly tendered old Securities when and if we have given
oral or written notice of acceptance to the exchange agent. The exchange agent
will act as agent for the tendering holders of old Securities for the purposes
of receiving new Securities from us and causing the old Securities to be
assigned, transferred and exchanged. Upon the terms and subject to the
conditions of the exchange offer, delivery of new Securities to be issued in
exchange for accepted old Securities will be made by the exchange agent only
after timely receipt by the exchange agent of certificates for the old
Securities or a timely book-entry confirmation of the old Securities into the
exchange agent's account at The Depository Trust Company, a properly completed
and duly executed letter of transmittal and all other required documents, or,
in the case of a book-entry delivery, an agent's message.
SITUATIONS IN WHICH WE WILL NOT BE REQUIRED TO EFFECT THE EXCHANGE OFFER
Notwithstanding any other provisions of the exchange offer, or any
extension of the exchange offer, we will not be required to accept for
exchange, or to exchange, any old Securities for any new Securities, and, as
described below, may terminate the exchange offer (whether or not any old
Securities have already been accepted for exchange) or may waive any conditions
to or amend the exchange offer, if any of the following conditions has occurred
or exists or has not been satisfied:
o the exchange offer, or the making of any exchange by a holder, violates
any applicable law or any applicable interpretation of the staff of the
Securities and Exchange Commission;
o in our reasonable judgment there is be threatened, instituted or
pending any action or proceeding before, or any injunction, order or
decree has been issued by, any court or governmental agency or other
governmental regulatory or administrative agency or commission, (1)
seeking to restrain or prohibit the making or consummation of the
exchange offer or any other transaction contemplated by the exchange
offer, (2) assessing or seeking any damages as a result of the exchange
offer or any other transaction contemplated by the exchange offer, or (3)
resulting in a material delay in our ability to accept for exchange or
exchange some or all of the old Securities in the exchange offer;
o any statute, rule, regulation, order or injunction is sought, proposed,
introduced, enacted, promulgated or deemed applicable to the exchange
offer or any of the transactions contemplated by the exchange offer by
any government or governmental authority, domestic or foreign, or any
action will have been taken, proposed or threatened by any government,
governmental authority, agency or court, domestic or foreign, that in our
reasonable judgment
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might directly or indirectly result in any of the consequences referred
to in clauses (1), (2) or (3) immediately above or, in our reasonable
judgment, might result in the holders of new Securities having
obligations with respect to resales and transfers of new Securities which
are greater than those described in the interpretations of the staff of
the Securities and Exchange Commission referred to in this prospectus, or
would otherwise make it inadvisable to proceed with the exchange offer;
o there will have occurred (1) any general suspension of trading in, or
general limitation on prices for, securities on the New York Stock
Exchange, (2) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or any limitation by
any governmental agency or authority that adversely affects the extension
of credit to us, or (3) a commencement of a war, armed hostilities or
other similar international calamity directly or indirectly involving the
United States, or, in the case any of the foregoing exists at the time of
commencement of the exchange offer, a material acceleration or worsening
of the event; or
o a material adverse change will have occurred or be threatened in our
business, condition (financial or otherwise), operations, stock ownership
or prospects.
The foregoing conditions are for our sole benefit and may be asserted by
us with respect to all or any portion of the exchange offer regardless of the
circumstances (including any action or inaction by us) giving rise to the
condition or may be waived by us in whole or in part at any time or from time
to time in our sole discretion. Our failure at any time to exercise any of the
foregoing rights will not be deemed a waiver of these rights, and each right
will be deemed an ongoing right which may be asserted at any time or from time
to time. In addition, we have reserved the right, notwithstanding the
satisfaction of each of the foregoing conditions, to amend the exchange offer.
Any determination by us concerning the fulfillment or non-fulfillment of any
conditions will be final and binding upon all parties.
In addition, we will not accept for exchange any old Securities tendered
and no new Securities will be issued in exchange for any old Securities, if at
the time any stop order will be threatened or in effect with respect to (1) the
registration statement of which this prospectus constitutes a part or (2) the
qualification of the indenture under the Trust Indenture Act of 1939.
THE PERSON ACTING AS EXCHANGE AGENT FOR THE EXCHANGE OFFER
Chase Manhattan Bank and Trust Company, National Association, has been
appointed as the exchange agent for the exchange offer. Chase Manhattan Bank
and Trust Company, National Association, also acts as trustee under the
indenture.
Delivery of letters of transmittal and any other required documents and
questions, requests for assistance and requests for additional copies of this
prospectus or the letter of transmittal, should be directed to the exchange
agent at its address and numbers set forth on the back of this prospectus.
Except in the case of a participant in The Depository Trust Company who
transfers Securities by an agent's message, delivery to an address other than
as set forth in this prospectus, or transmissions of instructions via a
facsimile or telex number other than to the exchange agent as set forth in this
prospectus, will not constitute a valid delivery.
THE FEES AND EXPENSES WE WILL PAY IN CONNECTION WITH THE EXCHANGE OFFER
We have not retained any dealer-manager or similar agent in connection
with the exchange offer and will not make any payments to brokers, dealers or
others for soliciting acceptances of the exchange offer. We will, however, pay
the exchange agent reasonable and customary fees for its services and will
reimburse it for reasonable out-of-pocket expenses in connection therewith. We
will also pay brokerage houses and other custodians, nominees and fiduciaries
the reasonable out-of-pocket expenses incurred by them in forwarding copies of
this prospectus and related documents to the beneficial owners of old
Securities, and in handling tenders for their customers. The
28
<PAGE>
expenses to be incurred in connection with the exchange offer, including the
fees and expenses of the exchange agent and printing, accounting and legal
fees, will be paid by us and are estimated at approximately $250,000.
YOU MAY BE REQUIRED TO PAY TRANSFER TAXES IN CONNECTION WITH YOUR TENDER
Holders who tender their old Securities for exchange will not be obligated
to pay any transfer taxes in connection therewith. If, however, new Securities
are to be delivered to, or are to be issued in the name of, any person other
than a registered holder of the old Securities tendered, or if a transfer tax
is imposed for any reason other than the exchange of old Securities in
connection with the exchange offer, then the amount of transfer taxes (whether
imposed on the registered holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of the taxes or exemption
therefrom is not submitted with the letter of transmittal, the amount of
transfer taxes will be billed directly to the tendering holder.
NO ONE ELSE HAS BEEN AUTHORIZED TO PROVIDE YOU WITH INFORMATION REGARDING THE
EXCHANGE OFFER
No person has been authorized to give any information or to make any
representations in connection with the exchange offer other than those
contained in this prospectus. If so given or made, the information or
representations should not be relied upon as having been authorized by us.
Neither the delivery of this prospectus nor any exchange made under this
prospectus will, under any circumstances, create any implication that there has
been no change in our affairs since the respective dates as of which
information is given in this prospectus.
The exchange offer is not being made to (nor will tenders be accepted from
or on behalf of) holders of old Securities in any jurisdiction in which the
making or acceptance of the exchange offer would not be in compliance with the
laws of the jurisdiction. However, we may, at our discretion, take any action
as we may deem necessary to make the exchange offer in the affected
jurisdiction and extend the exchange offer to holders of old Securities in the
affected jurisdiction. In any jurisdiction that has securities laws or blue sky
laws which require the exchange offer to be made by a licensed broker or
dealer, the exchange offer is being made on behalf of us by one or more
registered brokers or dealers which are licensed under the laws of the
jurisdiction.
YOU WILL NOT HAVE APPRAISAL RIGHTS
Holders of old Securities will not have dissenters' rights or appraisal
rights in connection with the exchange offer.
THE FEDERAL INCOME TAX CONSEQUENCES OF YOUR EXCHANGE
The exchange of old Securities for new Securities will not be a taxable
exchange for federal income tax purposes, and holders will not recognize any
taxable gain or loss or any interest income as a result of the exchange.
29
<PAGE>
CAPITALIZATION
(IN THOUSANDS)
The following table sets forth our capitalization as of September 30,
1999. This table should be read in conjunction with our consolidated financial
statements and the notes to the consolidated financial statements appearing
elsewhere in this prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
-------------------
INDEBTEDNESS:
<S> <C>
Parent company debt:
Old securities ......................... $ 400,000
Subsidiary and project debt(1):
Project loan ........................... 79,828
Salton Sea notes and bonds(2) .......... 597,898
----------
Total consolidated indebtedness ......... 1,077,726
----------
Members' equity ........................... 379,467
----------
Total capitalization .................... $1,457,193
==========
</TABLE>
----------
(1) Represents debt for which the repayment obligation is at the project or
subsidiary level.
(2) Subject to the terms and conditions of the guarantee, MidAmerican has
guaranteed the payment by the zinc guarantors of a specified portion of
the scheduled debt service, in an amount up to the current principal
amount of $140,520 and associated interest.
30
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS)
The selected data presented below as of September 30, 1999 and for the
nine months ended September 30, 1999 and 1998 are derived from our unaudited
consolidated financial statements which reflect all adjustments necessary in
the opinion of our management for a fair presentation of the data and which are
included elsewhere in this prospectus. The selected data presented below as of
December 31, 1998 and 1997 and for the years ended December 31, 1998, 1997 and
1996 are derived from our audited consolidated financial statements. The
consolidated financial statements reflect the consolidated financial statements
of Magma and subsidiaries (excluding wholly-owned subsidiaries retained by
MidAmerican), Falcon Seaboard Resources and subsidiaries and Yuma Cogeneration,
each a wholly-owned subsidiary of MidAmerican. The consolidated financial
statements present our financial position, results of our operations and our
cash flows as if we were a separate legal entity for all periods presented.
These consolidated financial statements and auditors' report thereon are
included elsewhere in this prospectus. The selected data presented below as of
December 31, 1996 and 1995 and for the year ended December 31, 1995 are derived
from our unaudited consolidated financial statements and reflect all
adjustments necessary in the opinion of our management for a fair presentation
of the data. The selected data presented below as of December 31, 1994 and for
the year then ended are derived from the audited consolidated financial
statements of Magma and its subsidiaries which were not under MidAmerican
control prior to February 24, 1995 ("predecessor" to CE Generation).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
PREDECESSOR SUCCESSOR
------------- -------------------------------------------------------
1994 1995 (1) 1996 (2) 1997 1998
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales of electricity and thermal energy ........... $ 158,374 $ 179,393 $ 281,307 $ 381,458 $ 395,560
Equity earnings in subsidiaries ................... -- -- 4,263 14,542 10,732
Interest and Other income ......................... 32,508 37,789 19,273 11,138 29,883
Total revenue ..................................... 190,882 217,182 304,843 407,138 436,175
Plant operations, general and
administrative, royalty and other expenses ....... 96,047 70,458 97,748 124,353 119,055
Depreciation and amortization ..................... 23,985 47,044 72,533 88,504 96,818
Interest expense, net of capitalized interest ..... 12,469 60,201 72,864 80,907 74,306
Provision for income taxes ........................ 19,832 10,348 15,487 43,378 52,218
Income before minority interest and
extraordinary item ............................... 38,549 29,131 46,211 69,996 93,778
Minority interest ................................. -- 4,091 -- -- --
Extraordinary item (3) ............................ -- -- -- -- --
Net income ........................................ 38,549 25,040 46,211 69,996 93,778
OTHER DATA:
Capital expenditures .............................. 58,045 93,944 90,734 21,676 46,222
Cash flows from operating activities .............. 72,968 69,234 90,703 151,070 150,030
Cash flows from investing activities .............. (30,846) (763,971) (261,814) 13,346 (151,575)
Cash flows from financing activities .............. (36,085) 732,879 153,715 (162,224) 3,635
EBITDA (4) ........................................ 94,835 146,724 207,095 282,785 317,120
Ratio of EBITDA to fixed charges (4)(5) ........... 7.20 2.22 2.67 3.50 4.25
Ratio of earnings to fixed charges (5) ............ 5.38 1.51 1.79 2.52 3.04
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1998 1999
----------- -----------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales of electricity and thermal energy ........... $ 293,485 $ 231,613
Equity earnings in subsidiaries ................... 8,635 17,718
Interest and Other income ......................... 21,823 17,665
Total revenue ..................................... 323,943 266,996
Plant operations, general and
administrative, royalty and other expenses ....... 87,914 88,181
Depreciation and amortization ..................... 71,901 43,400
Interest expense, net of capitalized interest ..... 54,784 55,729
Provision for income taxes ........................ 39,364 30,520
Income before minority interest and
extraordinary item ............................... 69,980 49,166
Minority interest ................................. -- --
Extraordinary item (3) ............................ -- (17,478)
Net income ........................................ 69,980 31,688
OTHER DATA:
Capital expenditures .............................. 28,471 119,322
Cash flows from operating activities .............. 112,168 104,970
Cash flows from investing activities .............. (15,914) (21,430)
Cash flows from financing activities .............. (49,738) (51,409)
EBITDA (4) ........................................ 236,029 178,815
Ratio of EBITDA to fixed charges (4)(5) ........... 4.31 3.06
Ratio of earnings to fixed charges (5) ............ 3.09 2.41
</TABLE>
(footnotes on following page)
31
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
PREDECESSOR SUCCESSOR SEPTEMBER 30,
------------- --------------------------------------------------- --------------
1994 1995 (1) 1996 (2) 1997 1998 1999
------------- ------------ ------------ ------------ ------------ --------------
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C> <C>
Cash, restricted cash and investments .......... $113,428 $ 108,368 $ 43,422 $ 30,591 $ 154,327 $ 136,792
Properties, plants, contracts and equipment,
net ........................................... 438,862 724,763 990,285 932,207 893,492 982,258
Note receivable from related party ............. -- -- -- -- 140,520 140,520
Total assets ................................... 623,486 1,149,858 1,611,087 1,527,976 1,750,632 1,772,853
Project loans .................................. 179,546 54,707 114,571 103,334 90,529 79,828
Salton Sea notes and bonds ..................... -- 452,088 538,982 448,754 626,816 597,898
Senior Secured Bonds ........................... -- -- -- -- -- 400,000
Notes payable to related party ................. -- 248,292 247,812 247,812 247,681 --
Total liabilities .............................. 233,670 916,433 1,156,184 1,063,836 1,213,685 1,393,386
Net investments and advances (members'
equity at September 30, 1999) ................. 389,816 233,425 454,903 464,140 536,947 379,467
</TABLE>
----------
(1) Reflects the acquisition of approximately 51% of Magma Power Company on
January 10, 1995, and the remaining 49% on February 24, 1995. Includes
the results of operations of Magma Power Company from January 10, 1995
through December 31, 1995 adjusted for the Company's percentage ownership
during that time period.
(2) Reflects the acquisition of the remaining 50% of the Elmore, Vulcan, Del
Ranch and Leathers projects on April 17, 1996 and the acquisition of
Falcon Seaboard Resources on August 7, 1996.
(3) The extraordinary item recognized in the nine months ended September 30,
1999 reflects the early redemption of substantially all of the
outstanding 9 7/8% Limited Recourse Senior Secured Notes Due 2003.
(4) EBITDA means earnings before interest, taxes, depreciation and
amortization. EBITDA does not represent cash flows as defined by
generally accepted accounting principles (GAAP) and does not necessarily
indicate that cash flows are sufficient to fund all of a company's cash
needs. EBITDA is presented because the Company believes it is a widely
accepted financial indicator of a company's ability to incur and service
debt. EBITDA should not be construed as an alternative to either (1)
operating income (determined in accordance with GAAP) or (2) cash flow
from operating activities (determined in accordance with GAAP). EBITDA,
as defined, may differ from EBITDA as defined in similar offerings and,
as such, may not be comparable.
(5) For purposes of computing historical ratios of earnings to fixed charges,
earnings are divided by fixed charges. "Earnings" represent the aggregate
of (a) our pre-tax income, and (b) fixed charges, less capitalized
interest. "Fixed charges" represent interest (whether expensed or
capitalized), amortization of deferred financing and bank fees, and the
portion of rentals considered to be representative of the interest factor
(one-third of lease payments) and preferred stock dividend requirements
of majority subsidiaries.
32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars and Shares in Thousands, Except Per Share Amounts)
The following is management's discussion and analysis of significant
factors which have affected our financial condition and results of operations
during the periods included in the accompanying statements of operations. Our
actual results in the future could differ significantly from the our historical
results.
BUSINESS
MidAmerican Energy Holdings Company ("MEHC" and formerly CalEnergy
Company, Inc.) completed a strategic restructuring in conjunction with its
acquisition of MidAmerican Energy Holdings Company in which MEHC's common stock
interests in Magma Power Company, Falcon Seaboard Resources, Inc. and
California Energy Development Corporation, and their subsidiaries (which own
the geothermal and natural gas-fired combined cycle cogeneration facilities
described below), were contributed by MEHC to us. This restructuring was
completed in February 1999.
Our consolidated financial statements reflect the consolidated financial
statements of Magma Power Company and subsidiaries (excluding wholly-owned
subsidiaries retained by MEHC), Falcon Seaboard Resources, Inc. and
subsidiaries and Yuma Cogeneration Associates, each a wholly-owned subsidiary.
The consolidated financial statements present our financial position, results
of operations and cash flows as if we were a separate legal entity for all
periods presented. Our basis in assets and liabilities have been carried over
from MEHC. All material intercompany transactions and balances have been
eliminated in consolidation.
We are engaged in the independent power business. The following table sets
out information concerning our projects:
<TABLE>
<CAPTION>
COMMERCIAL
PROJECT FUEL OPERATION CAPACITY LOCATION
---------------- ------------ ----------- ---------- -------------
<S> <C> <C> <C> <C>
Vulcan Geothermal 1986 34 MW California
Del Ranch Geothermal 1989 38 MW California
Elmore Geothermal 1989 38 MW California
Leathers Geothermal 1990 38 MW California
Salton Sea I Geothermal 1987 10 MW California
Salton Sea II Geothermal 1990 20 MW California
Salton Sea III Geothermal 1989 49.8 MW California
Salton Sea IV Geothermal 1996 39.6 MW California
Salton Sea V Geothermal 2000 49 MW California
CE Turbo Geothermal 2000 10 MW California
PRI Gas 1988 200 MW Texas
Yuma Gas 1994 50 MW Arizona
Saranac Gas 1994 240 MW New York
Norcon Gas 1992 80 MW Pennsylvania
</TABLE>
Vulcan, Del Ranch, Elmore, Leathers and CE Turbo are referred to as the
Partnership Projects. Salton Sea I, II, III, IV and V are referred to as the
Salton Sea Projects. The Partnership Projects and the Salton Sea Projects are
collectively referred to as the Imperial Valley Projects. PRI, Yuma, Saranac
and Norcon are referred to as the Gas Projects.
ACQUISITIONS
In April 1996, one of the three predecessor businesses combined in our
formation completed the buy-out of approximately $70,000 of its partner's
interests in four electric generating plants in Southern California, resulting
in sole ownership of the Imperial Valley projects. In August 1996,
33
<PAGE>
another one of the predecessor businesses acquired Falcon Seaboard Resources,
Inc. for approximately $226,000, thereby acquiring significant ownership in 520
megawatts of natural gas-fired electric production facilities located in New
York, Texas and Pennsylvania and a related gas transmission pipeline.
POWER GENERATION PROJECTS
The capacity factor for a particular project is determined by dividing
total quantity of electricity sold by the product of the project's capacity and
the total hours in the year. The capacity factors for Vulcan, Hoch (Del Ranch),
Elmore and Leathers plants are based on nominal capacity amounts of 34, 38, 38
and 38 net megawatts, respectively. The capacity factors for Salton Sea Unit I,
Salton Sea Unit II, Salton Sea Unit III and Salton Sea Unit IV are based on
capacity amounts of 10, 20, 49.8 and 39.6 net megawatts, respectively. The
capacity factors for the Saranac, Power Resources, NorCon and Yuma plants are
based on capacity amounts of 240, 200, 80 and 50 net megawatts, respectively.
Each plant, except NorCon, possesses an operating margin which allows for
production in excess of the amount listed above. Utilization of this operating
margin is based upon a variety of factors and can be expected to vary
throughout the year under normal operating conditions.
Imperial Valley Projects--The current partnership projects sell all
electricity generated by the respective plants under four long-term standard
offer no. 4 agreements between the partnership projects and Southern California
Edison Company. These standard offer no. 4 agreements provide for capacity
payments, capacity bonus payments and energy payments. Southern California
Edison makes fixed annual capacity and capacity bonus payments to the
partnership projects to the extent that capacity factors exceed benchmarks set
forth in the agreements. The price for capacity and capacity bonus payments is
fixed for the life of the standard offer no. 4 agreements. Energy is sold at
increasing scheduled rates for the first ten years after firm operation and
thereafter at rates based on the cost that Southern California Edison avoids by
purchasing energy from the Imperial Valley projects instead of obtaining the
energy from other sources. We explain how Southern California Edison's avoided
cost of energy is expected to be determined under the heading "Description of
Principal Project Contracts--Imperial Valley Projects--Sale and Transmission of
Power--Standard Terms of SO4 Agreements--Fluctuating Energy Payments."
The California power exchange is a nonprofit public benefit corporation
formed under California law to provide a competitive marketplace where buyers
and sellers of power, including utilities, end-use customers, independent power
producers and power marketers, complete wholesale trades through an electronic
auction. The California power exchange currently operates two markets: (1) a
day ahead market which is comprised of twenty-four separate concurrent auctions
for each hour of the following day; and (2) an hour ahead market for each hour
of each day for which bids are due two hours before each hour. In each market,
the California power exchange receives bids from buyers and sellers and, based
on the bids, establishes the market clearing price for each hour and schedules
deliveries from sellers whose bids did not exceed the market clearing price to
buyers whose bids were not less than the market clearing price. All trades are
executed at the market clearing price.
The scheduled energy price periods of the partnership projects' long-term
agreements extended until February 1996, December 1998 and December 1998 for
each of the Vulcan, Del Ranch and Elmore projects, respectively, and extend
until December 1999 for the Leathers project. The Del Ranch and Elmore
projects' agreement provided for energy rates of 14.6 cents per kilowatt-hour
in 1998. The Leathers project's standard offer no. 4 agreement provided for an
energy rate of 14.6 cents per kilowatt-hour in 1998 and provides for an energy
rate of 15.6 cents per kilowatt-hour in 1999. The weighted average energy rate
for all of the partnership projects agreements was 11.7 cents per kilowatt-hour
in 1998 and 6.4 cents per kilowatt-hour for the nine months ended September 30,
1999.
Salton Sea Unit I sells electricity to Southern California Edison under a
30-year negotiated power purchase agreement, which provides for capacity and
energy payments. The energy payment is calculated using a base price which is
subject to quarterly adjustments based on a basket of indices. The time period
weighted average energy payment for Salton Sea Unit I was 5.4 cents per
kilowatt-hour during 1998 and 5.3 cents per kilowatt-hour for the nine months
ended September 30,
34
<PAGE>
1999. As the Salton Sea Unit I power purchase agreement is not a standard offer
no. 4 agreement, the energy payments do not revert to payments based on the
cost that Southern California Energy avoids by purchasing energy from Salton
Sea Unit I instead of obtaining the energy from other sources. The capacity
payment is approximately $1,100 per annum.
Salton Sea Unit II and Salton Sea Unit III sell electricity to Southern
California Edison under 30-year modified standard offer no. 4 agreements that
provide for capacity payments, capacity bonus payments and energy payments. The
price for contract capacity and contract capacity bonus payments is fixed for
the life of the modified standard offer no. 4 agreements. The energy payments
for each of the first ten year periods, which periods expire in April 2000 and
February 1999, respectively, are levelized at a time period weighted average of
10.6 cents per kilowatt-hour and 9.8 cents per kilowatt-hour for Salton Sea
Unit II and Salton Sea Unit III, respectively. Thereafter, the monthly energy
payments will be based on the cost that Southern California Energy avoids by
purchasing energy from Salton Sea Unit II or III instead of obtaining the
energy from other sources. For Salton Sea Unit II only, Southern California
Edison is entitled to receive, at no cost, 5% of all energy delivered in excess
of 80% of contract capacity through September 30, 2004. The annual capacity and
bonus payments for Salton Sea Unit II and Salton Sea Unit III are approximately
$3,300 and $9,700, respectively.
Salton Sea Unit IV sells electricity to Southern California Edison under a
modified standard offer no. 4 agreement which provides for contract capacity
payments on 34 megawatts of capacity at two different rates based on the
respective contract capacities deemed attributable to the original Salton Sea
Unit I power purchase agreement option (20 megawatts) and to the original Fish
Lake power purchase agreement (14 megawatts). The capacity payment price for
the 20 megawatts portion adjusts quarterly based upon specified indices and the
capacity payment price for the 14 megawatts portion is a fixed levelized rate.
The energy payment (for deliveries up to a rate of 39.6 megawatts) is at a
fixed rate for 55.6% of the total energy delivered by Salton Sea Unit IV and is
based on an energy payment schedule for 44.4% of the total energy delivered by
Salton Sea Unit IV. The contract has a 30-year term but Southern California
Edison is not required to purchase the 20 megawatts of capacity and energy
originally attributable to the Salton Sea Unit I power purchase agreement
option after September 30, 2017, the original termination date of the Salton
Sea Unit I power purchase agreement.
For the years ended December 31, 1998, 1997 and 1996, Southern California
Edison's average price paid for energy was 3.0 cents, 3.3 cents and 2.5 cents
per kilowatt-hour, respectively, which is substantially below the contract
energy prices earned for the year ended December 31, 1998. We cannot predict
the likely level of energy prices under the standard offer no. 4 agreements and
the modified standard offer no. 4 agreements at the expiration of the scheduled
payment periods. The revenues generated by each of the projects operating under
standard offer no. 4 agreements will decline significantly after the expiration
of the respective scheduled payment periods. Revenues for the Vulcan Project
decreased from $41,335 in the year ended December 31, 1995 to $16,968 in the
year ended December 31, 1996 after the end of the contract energy price period
in February 1996. Revenues for the Del Ranch Project decreased from $43,717 in
the nine months ended September 30, 1998 to $15,301 in the nine months ended
September 30, 1999 after the end of the contract energy price period in
December 1998. Revenues for the Elmore Project decreased from $40,886 in the
nine months ended September 30, 1998 to $14,912 in the nine months ended
September 30, 1999 after the end of the contract energy price period in
December 1998. If the Leathers Project received avoided cost energy rates in
1999 rather than the contract energy prices, revenues would have decreased from
$47,333 to $15,074 in the nine months ended September 30, 1999.
Natural Gas Projects--The Saranac project sells electricity to New York
State Electric and Gas Corporation under a 15-year negotiated power purchase
agreement, which provides for capacity and energy payments. Capacity payments,
which in 1998 total 2.3 cents per kilowatt-hour, are received for electricity
produced during "peak hours" as defined in the Saranac power purchase agreement
and escalate at approximately 4.1% annually for the remaining term of the
contract. Energy payments, which averaged 6.7 cents per kilowatt-hour in 1998,
escalate at approximately 4.4% annually for the remaining term of the Saranac
power purchase agreement. The Saranac power purchase agreement expires in June
of 2009.
35
<PAGE>
The Power Resources project sells electricity to Texas Utilities Electric
Company under a 15 year negotiated power purchase agreement, which provides for
capacity and energy payments. Capacity payments and energy payments, which in
1998 are $3,138 per month and 3.0 cents per kilowatt-hour, respectively, and in
1999 are $3,248 per month and 3.1 cents per kilowatt-hour, respectively,
escalate at 3.5% annually for the remaining term of the Power Resources power
purchase agreement. The Power Resources power purchase agreement expires in
September 2003.
The NorCon project sells electricity to Niagara Mohawk Power Corporation
under a 25-year negotiated power purchase agreement which provides for energy
payments calculated using an adjusting formula based on Niagara Mohawk's
ongoing tariff price and the cost that Niagara Mohawk avoids in the long-run by
purchasing energy from the NorCon project instead of obtaining the energy from
other sources. The NorCon power purchase agreement term extends through
December 2017.
The Yuma project sells electricity to San Diego Gas & Electric Company
under a 30-year power purchase agreement. The energy is sold at a price based
on the cost that San Diego Gas & Electric avoids by purchasing energy from the
Yuma project instead of obtaining the energy from other sources and the
capacity is sold to San Diego Gas & Electric at a fixed price for the life of
the power purchase agreement. The power is delivered to San Diego Gas &
Electric over transmission lines constructed and owned by Arizona Public
Service Company.
RESULTS OF OPERATIONS, NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Sales of electricity and steam decreased to $231,613 for the nine months
ended September 30, 1999 from $293,485 for the nine months ended September 30,
1998, a 21.1% decrease. This decrease was primarily a result of the expiration
of the fixed price periods for the Elmore and Del Ranch projects and for Salton
Sea Unit III. These periods ended in December 1998, December 1998 and February
1999, respectively.
The following operating data represents the aggregate capacity and
electricity production of the Imperial Valley projects:
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
-------------------- -------------------
<S> <C> <C>
Overall capacity factor ........................ 97.3% 96.4%
Kilowatt-hours produced (in thousands) ......... 1,704,500 1,689,600
Capacity (net megawatts) (average) ............. 267.4 267.4
</TABLE>
The following operating data represents the aggregate capacity and
electricity production of the natural gas projects:
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
-------------------- -------------------
<S> <C> <C>
Overall capacity factor ........................ 86.5% 79.5%
Kilowatt-hours produced (in thousands) ......... 3,260,600 2,969,840
Capacity (net megawatts) (average) ............. 570 570
</TABLE>
The overall capacity factor of the natural gas projects reflects the
effect of contractual curtailments. The capacity factors adjusted for these
contractual curtailments are 96.64% and 91.60% for the nine months ended
September 30, 1999 and 1998, respectively. The overall increased capacity
factor of the natural gas projects reflects the impact of the January 1998 ice
storm at Saranac. The plant was down for approximately two months in the first
quarter of 1998.
The increase in equity earnings of subsidiaries for the nine months ended
September 30, 1999 to $17,718 from $8,635 for the nine months ended September
30, 1998 represents the negative impact of the January 1998 ice storm at
Saranac.
Interest and other income decreased to $17,665 for the nine months ended
September 30, 1999 from $21,823 for the nine months ended September 30, 1998.
This decrease was primarily due to reduced royalty income at the Imperial
Valley projects.
36
<PAGE>
Plant operating expenses increased marginally for the nine months ended
September 30, 1999 to $84,848 from $84,100 for the nine months ended September
30, 1998. These costs include operating, maintenance, resource, fuel and other
plant operating expenses and the stability of these costs from period to period
reflect the maturity of plant operations.
General and administrative expenses decreased for the nine months ended
September 30, 1999 to $3,333 from $3,814 for the same period in 1998, a 12.6%
decrease. These costs include administrative services provided to us, including
executive, financial, legal, tax and other corporate functions. The decrease
reflects reduced corporate allocations to us due to a reduction in services
provided.
Depreciation and amortization decreased to $43,400 for the nine months
ended September 30, 1999 from $71,901 for the nine months ended September 30,
1998, a 39.6% decrease. The decrease was primarily due to reduced step up
depreciation after the end of the fixed price periods for the Del Ranch, Elmore
and Salton Sea Unit III projects as a result of greater value being assigned to
the scheduled price periods for the contracts relating to these projects at the
time of acquisition. The scheduled price periods for the contracts relating to
Del Ranch and Elmore expired in December 1998, with the Salton Sea III
scheduled price period terminating in February 1999.
Interest expense, less amounts capitalized, increased for the nine months
ended September 30, 1999 to $55,729 from $54,784 for the nine months ended
September 30, 1998, an increase of 1.7%. The increase was primarily due to
increased indebtedness from the issuances of the old Securities in 1999.
The provision for income taxes decreased to $30,520 for the nine months
ended September 30, 1999 from $39,364 for the nine months ended September 30,
1998. The effective tax rate was 38.3% and 36% for the nine months ended
September 30, 1999 and 1998, respectively. The changes from year to year in the
effective rate are due primarily to the generation of energy tax credits and
depletion deductions.
RESULTS OF OPERATIONS, THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Sales of electricity and steam increased to $395,560 in the year ended
December 31, 1998 from $381,458 in the year ended December 31, 1997, a 3.7%
increase. This increase was primarily due to an increase in electricity
production at the Imperial Valley projects.
Sales of electricity and steam increased to $381,458 in the year ended
December 31, 1997 from $281,307 in the year ended December 31, 1996, a 35.6%
increase. This increase was due to the acquisition of Falcon Seaboard Resources
and the partnership interest in the Imperial Valley projects, as well as the
commencement of operations at Salton Sea Unit IV.
The following operating data represents the aggregate capacity and
electricity production of the Imperial Valley projects:
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Overall capacity factor ..................... 98.2% 99.2% 98.9%
Kilowatt-hours produced (in thousands) 2,299,400 2,323,800 2,179,200
Capacity (net megawatts) (average) .......... 267.4 267.4 251.0*
</TABLE>
----------
* Weighted average for the commencement of operations at Salton Sea Unit
IV in 1996.
The following operating data represents the aggregate capacity and
electricity production of the natural gas projects:
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Overall capacity factor ..................... 81.6% 84.3% 84.2%
Kilowatt-hours produced (in thousands) 4,072,620 4,211,030 4,216,800
Capacity (net megawatts) (average) .......... 570 570 570
</TABLE>
37
<PAGE>
The overall capacity factor of the natural gas projects reflects the
effect of contractual curtailments. The capacity factors adjusted for these
contractual curtailments are 92.2%, 95.7% and 93.2% for 1998, 1997 and 1996,
respectively. The decrease in the overall capacity factor was due to lower
electricity production at Saranac due to severe winter snow and ice storms
which caused transmission curtailment, as well as a turbine overhaul at Power
Resources.
The decrease in equity earnings of subsidiaries in 1998 to $10,732 from
$14,542 in 1997 was primarily due to lower electricity production at Saranac
due to severe winter snow and ice storms which caused transmission
curtailments. The increase in equity earnings of subsidiaries in 1997 to
$14,542 from $4,263 in 1996 was primarily due to the acquisition of Falcon
Seaboard Resources in August 1996.
Interest and other income increased to $29,883 in the year ended December
31, 1998 from $11,138 in the year ended December 31, 1997. This increase was
primarily due to interest earned on higher cash balances as a result of the
issuance of Salton Sea Funding Corporation bonds in October 1998 and the
amortization of deferred income of $6,920, related to a settlement with respect
to our rights to receive payments in connection with our assignment to East
Mesa of power purchase contracts, power project facilities and geothermal
resource rights, which was received in 1998 and recognized as income through
the remainder of East Mesa's contract energy price period in June 1999.
Interest and other income decreased to $11,138 in the year ended December 31,
1997 from $19,273 in the year ended December 31, 1996, a 42.2% decrease. The
decrease is primarily attributable to lower cash balances and the fact we are
no longer recognizing management fee income as a result of the Imperial Valley
partnership interest acquisition in April 1996. Magma management services
income decreased by $5,311 as a result of this income being eliminated in
consolidation.
Plant operating expenses decreased in 1998 to $114,092 from $119,973 in
1997, a 4.9% decrease. The decrease was primarily due to operating
efficiencies. Operating expenses increased in 1997 to $119,973 from $94,245 in
1996, a 27.3% increase. This increase is primarily a result of the acquisitions
of Falcon Seaboard Resources and the Imperial Valley partnership interest as
well as the commencement of operations at Salton Sea Unit IV.
General and administrative expenses increased to $4,963 in the year ended
December 31, 1998 from $4,380 in the year ended December 31, 1997. General and
administrative expenses increased to $4,380 in the year ended December 31, 1997
from $3,503 in the year ended December 31, 1996. These costs include
administrative services provided to us, including executive, financial, legal,
tax and other corporate functions. The increases reflect increased bank service
charges relating to increased indebtedness.
Depreciation and amortization increased to $96,818 in 1998 from $88,504 in
1997, a 9.4% increase. This increase was due primarily to an increased step up
depreciation resulting from a change in the estimated useful life related to
the acquisition of the Imperial Valley projects. Depreciation and amortization
increased to $88,504 in 1997 from $72,533 in 1996, a 22.0% increase. This
increase is a result of the acquisitions of Falcon Seaboard Resources and the
Imperial Valley partnership interest as well as the commencement of operations
at Salton Sea Unit IV.
Interest expense, less amounts capitalized, decreased in 1998 to $74,306
from $80,907 in 1997, a decrease of 8.2%. Lower interest expense resulted from
the paydown of the Salton Sea Funding Corporation and Power Resources debt
offset by Salton Sea Funding Corporation's Series F issuance in October 1998.
Interest expense increased in 1997 to $80,907 from $72,864 in 1996, a 11.0%
increase. Higher interest expense for 1996 is primarily due to higher interest
expense on the Salton Sea Funding Corporation notes and bonds.
The provision for income taxes increased to $52,218 in 1998 from $43,378
in 1997 and $15,487 in 1996. The effective tax rate was 35.8%, 38.3% and 25.1%
in 1998, 1997 and 1996, respectively. The changes from year to year in the
effective rate are due primarily to the generation of energy tax credits and
depletion deductions.
38
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $83,981 at September 30, 1999 as compared
to $25,774 at December 31, 1998. In addition, restricted cash was $52,811 and
$128,553 at September 30, 1999 and December 31, 1998, respectively. The
decrease in restricted cash was primarily due to the use of the proceeds from
issuance of Salton Sea Funding Corporation bonds for the construction of Salton
Sea Unit IV and the CE Turbo project and the construction of upgrades to the
brine facilities at some of the Imperial Valley projects.
We believe that existing cash and cash generated by operating activities
will be sufficient to finance capital expenditures and make scheduled repayment
of debt for the foreseeable future.
On March 2, 1999, we closed the sale of $400,000 aggregate principal
amount of old Securities. The proceeds were used to repay Magma's 9 7/8% note
payable to MidAmerican of $200,000 and Yuma's note payable to MidAmerican of
$47,681. The remaining amount represented a distribution to MEHC in return for
MEHC's contribution of common stock and partnership interests in certain
geothermal and natural gas-fired combined cycle cogeneration facilities to
create the Company in MEHC's strategic restructuring which was completed in
February, 1999. These payments to MEHC were accounted as repayments of notes
payable to a related party and as an equity distribution to MEHC.
These Securities are senior secured debt which rank equally in right of
payment with the Company's other senior secured debt permitted under the
indenture for the Securities, share equally in the collateral with the
Company's other senior secured debt permitted under the indenture for the
Securities, and rank senior to any of the Company's subordinated debt permitted
under the indenture for the Securities. These Securities are effectively
subordinated to the existing project financing debt and all other debt of the
Company's consolidated subsidiaries.
The Senior Secured Bonds are primarily secured by the following
collateral: (1) all available cash flow of the designated subsidiaries; (2) a
pledge of 99% of the equity interests in Salton Sea Power Company and all of
the equity interests in CE Texas Gas LLC, the designated subsidiaries (other
than Magma Power Company) and California Energy Yuma Corporation; (3) upon the
redemption of, or earlier release of security interests under, Magma's 9 7/8%
promissory notes, a pledge of all of the capital stock of Magma; (4) a pledge
of all of the capital stock of SECI Holdings Inc.; (5) a grant of a lien on and
security interest in the depositary accounts; and (6) a grant of a lien on and
security interest in all of the Company's other tangible and intangible
property.
Scheduled principal payments on these securities commence on June 15,
2000, and are payable thereafter through December 15, 2018, in varying
semi-annual payments ranging from approximately $5,000 to $18,000. The maximum
annual principal payment obligation during the period is approximately $36,000
in 2018.
Salton Sea Power L.L.C., one of our indirect wholly-owned subsidiaries, is
constructing Salton Sea Unit V. Salton Sea Unit V will be a 49 net megawatt
geothermal power plant which will sell approximately one-third of its net
output to the zinc facility, which will be retained by MidAmerican. The
remainder will be sold through the California power exchange.
Salton Sea Unit V is being constructed under an engineering, procurement
and construction contract by Stone & Webster Engineering Corporation. Salton
Sea Unit V is scheduled to commence commercial operation in mid-2000. Total
project costs of Salton Sea Unit V are expected to be approximately $119,067
which will be funded by $76,281 of debt from Salton Sea Funding Corporation and
$42,786 from equity contributions. Salton Sea Power has incurred approximately
$61,300 of these costs through September 30, 1999.
CE Turbo LLC, one of our indirect wholly-owned subsidiaries, is
constructing the CE Turbo project. The CE Turbo project will have a capacity of
10 net megawatts. The net output of the CE Turbo project will be sold to the
zinc facility or sold through the California power exchange.
The partnership projects are upgrading the geothermal brine processing
facilities at the Vulcan and Del Ranch projects with the region 2 brine
facilities construction.
39
<PAGE>
The CE Turbo project and the region 2 brine facilities construction are
being constructed by Stone & Webster under an engineering, procurement and
construction contract. The obligations of Stone & Webster are guaranteed by
Stone & Webster, Incorporated. The CE Turbo project is scheduled to commence
initial operations in early-2000 and the region 2 brine facilities construction
is scheduled to be completed in early-2000. Total project costs for both the CE
Turbo project and the region 2 brine facilities construction are expected to be
approximately $63,747 which will be funded by $55,602 of debt from Salton Sea
Funding Corporation and $8,145 from equity contributions. CE Turbo has incurred
approximately $29,700 of these costs through September 30, 1999.
The net revenues, equity distributions and royalties from the partnership
projects are used to pay principal and interest payments on outstanding senior
secured bonds issued by the Salton Sea Funding Corporation, the final series of
which is scheduled to mature in November 2018. The Salton Sea Funding
Corporation debt is guaranteed by subsidiaries of Magma and secured by the
capital stock of the Salton Sea Funding Corporation. The proceeds of the Salton
Sea Funding Corporation debt were loaned by the Salton Sea Funding Corporation
under loan agreements and notes to subsidiaries of Magma and used for
construction of Salton Sea Unit V and the CE Turbo project, refinancing of
indebtedness and other purposes. Debt service on the Imperial Valley loans is
used to repay debt service on the Salton Sea Funding Corporation Debt. The
Imperial Valley loans and the guarantees of the Salton Sea Funding Corporation
debt are secured by substantially all of the assets of the guarantors,
including the Imperial Valley projects, and by the equity interests in the
guarantors.
The proceeds of Series F of the Salton Sea Funding Corporation debt are
being used in part to construct the zinc facility, and the direct and indirect
owners of the zinc facility are among the guarantors of the Salton Sea Funding
Corporation debt. MidAmerican has guaranteed the payment by the zinc guarantors
of a specified portion of the scheduled debt service on the Imperial Valley
loans described in the preceding paragraph, including the current principal
amount of $140,520 and associated interest.
YEAR 2000 ISSUES
What is generally known as the year 2000 computer issue arose because many
existing computer programs and embedded systems use only the last two digits to
refer to a year. Therefore, those computer programs do not properly distinguish
between a year that begins with "20" instead of "19". If not corrected, many
computer applications could fail or create erroneous results. The failure to
correct a material year 2000 item could result in an interruption in, or a
failure of, normal business activities or operations including the generation
of electricity. These failures could materially and adversely affect our
results of operations, liquidity and financial condition.
We have commenced, for all of our information systems, a year 2000 date
conversion project to address all necessary code changes, testing and
implementation in order to resolve the year 2000 issue. We created a year 2000
project team to identify, assess and correct all of our information technology
and non-information technology systems, as well as identify and assess systems
and equipment provided by other organizations. We have identified and assessed
substantially all of our information technology and non-information technology
systems as well as third party systems, and have substantially completed the
process of repairing or replacing those systems which were not year 2000
compliant.
Total year 2000 expenditures, for both repairing or replacing
non-compliant systems, were $344. We are not aware of any additional material
costs needed to be incurred to bring all of our systems into compliance,
however, we cannot assure you that additional costs will not be incurred.
In addition to our own information systems, the year 2000 issue also
creates uncertainty for us from potential issues with third parties with whom
we deal on transactions. As a result, year 2000 readiness of suppliers,
vendors, service providers or customers could impact our operations. We are
assessing the readiness of these constituent entities and the impacts on those
entities that rely upon our services. We have identified the critical vendors
and have currently completed the assessment of over 90% of these vendors. We
expect to complete our assessment in December 1999. If we determine that these
vendors put our business at risk because of a lack of preparation, alternate
vendors are
40
<PAGE>
secured or other measures are put into place to provide the necessary goods and
services, however, we are unable to determine at this time whether the
consequences of year 2000 failures of third parties will have a material impact
on our results of operations, liquidity or financial condition.
A contingency plan identifying credible worst-case scenarios has been
developed. The contingency plan is comprised of both mitigation and recovery
aspects. Mitigation entails planning to reduce the impact of unresolved year
2000 problems, and recovery entails planning to restore services in the event
that year 2000 problems occur. The contingency plan contains various worst-case
scenarios, which include loss of internal and external voice and data
communications, loss of natural gas supply, transmission control, along with
numerous other scenarios, none of which is expected to be reasonably likely to
occur. Although the plan is substantially complete, it will be refined
throughout the remainder of the year, based on results of contingency planning
drills and changes in circumstances.
Although management believes that the year 2000 project will be
substantially complete before January 1, 2000, any unforeseen failures of our
and/or third parties' computer systems could have a material impact on our
ability to conduct its business.
INFLATION
Inflation has not had a significant impact on our cost structure.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which established accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
This statement is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. We have has not yet determined the impact of this
accounting pronouncement.
INTEREST RATE RISK
The following discussion of our exposure to various market risks contains
"forward-looking statements" that involve risks and uncertainties. These
projected results have been prepared utilizing assumptions considered
reasonable in the circumstances and in light of information currently available
to us. Actual results could differ materially from those projected in the
forward-looking information.
At December 31, 1998, we had a fixed-rate long-term debt (excluding note
payable to related party) of $626,816 in principal amount and having a fair
value of $646,397. These instruments are fixed-rate and therefore do not expose
us to the risk of earnings loss due to changes in market interest rates.
However, the fair value of these instruments would decrease by approximately
$35,000 if interest rates were to increase by 10% from their levels at December
31, 1998. In general, a decrease in fair value would impact earnings and cash
flows only if we were to reacquire all or a portion of these instruments prior
to their maturity.
At December 31, 1998, we had floating-rate obligations of $90,529 which
exposes us to the risk of increased interest expense in the event of increases
in short-term interest rates. We have entered into interest rate swap
agreements for the purpose of completely offsetting these interest rate
fluctuations. The interest rate differential is reflected as an adjustment to
interest expense over the life of the instruments. At December 31, 1998, these
interest rate swaps had an aggregate notional amount of $90,529, which we could
terminate at a cost of approximately $9,904. A decrease of 10% in the December
31, 1998 level of interest rates would increase the cost of terminating the
swaps by approximately $1,528. These termination costs would impact our
earnings and cash flows only if all or a portion of the swap instruments were
terminated prior to their expiration.
At September 30, 1999, the $400,000 of old Securities had a fair value of
$363,419. However, the fair value would decrease by approximately $28,000 if
interest rates were to increase by 10% from their levels at September 30, 1999.
41
<PAGE>
OUR BUSINESS AND THE BUSINESS OF THE DESIGNATED SUBSIDIARIES
OUR BUSINESS
We were formed as a special purpose Delaware limited liability company on
February 8, 1999. We were created to own our subsidiaries in order to
facilitate the transfer of a 50% interest in those subsidiaries to El Paso
Power Holding Company, a subsidiary of El Paso Energy Corporation. MidAmerican
Energy Holdings Company determined to sell 50% of its interest in us and our
subsidiaries in order to facilitate MidAmerican's acquisition of MHC Inc. In
August 1998, MidAmerican, which was then known as CalEnergy Company, Inc.,
announced its intention to acquire MHC Inc. (then known as MidAmerican Energy
Holdings Company). As MHC Inc. owned an electric utility, MidAmerican Energy
Company, MidAmerican was required to divest a portion of its ownership
interests in our power projects in order to permit those projects to maintain
their status as qualifying facilities under the Public Utilities Regulatory
Policies Act of 1978. This law requires that a non-electric utility own at
least 50% of a qualifying facility. The sale to El Paso Power, which does not
own an electric utility, was intended to permit our power projects to satisfy
this ownership requirement. By maintaining qualifying facility status, our
power projects are entitled to an exemption from federal and state utility
regulation under the Public Utilities Regulatory Policies Act and are able to
maintain compliance with the provisions of their current power purchase
agreements which require that they be qualifying facilities during the term of
those agreements.
On March 3, 1999, El Paso Power acquired 50% of MidAmerican's ownership
interests in us for approximately $245 million in cash plus $6.5 million in
contingent payments and the assumption of $23.5 million in obligations to make
equity contributions for the construction of Salton Sea Unit V and the CE Turbo
project. Our limited liability company operating agreement provides that
MidAmerican and El Paso Power each are entitled to appoint 50% of the directors
and are entitled to 50% of the distributions that we make.
MidAmerican agreed to provide administrative services, including
accounting, legal, personnel and cash management services, to us under an
administrative services agreement. MidAmerican is reimbursed for its actual
costs and expenses of providing the services. El Paso Power agreed to provide
power marketing and fuel management services to us in return for reimbursement
of its actual costs and expenses of providing the services. These agreements
each have an initial term of one year and then continue from year to year until
terminated by either party.
Our business activities will be limited to issuing the Securities and
other debt as permitted under the indenture for the Securities, holding the
equity interests in the designated subsidiaries and related activities, and any
other activities which could not reasonably be expected to result in a material
adverse effect and which the rating agencies confirm in writing will not result
in a ratings downgrade. The only funds available to us to pay principal of,
premium (if any) and interest on the Securities will be the available cash flow
received by the designated subsidiaries and amounts on deposit in the debt
service reserve account.
OUR MEMBERS
MidAmerican. MidAmerican is a fast-growing global energy company with an
increasingly diversified portfolio of regulated and non-regulated assets. The
focus of MidAmerican has evolved over time from development and acquisition
activities in the domestic and international power generation markets to
strategic electric and gas utility acquisitions, with a particular emphasis on
investment-grade countries including the United States, the United Kingdom,
Australia, Canada, New Zealand and the countries of Western Europe. This focus
has provided MidAmerican with increased scale, skill, revenue diversity, credit
quality, quality of cash flows and additional growth opportunities associated
with each of the acquired businesses. MidAmerican's investments in related
activities, including producing gas fields, gas reserves and advanced utility
information systems, are primarily intended to support and augment the
profitability of its existing core businesses.
MidAmerican, headquartered in Des Moines, Iowa, has approximately 9,800
employees and is the largest publicly traded company in Iowa. Through its
retail utility subsidiaries, MidAmerican Energy
42
<PAGE>
Company in the United States and Northern Electric plc in the United Kingdom,
MidAmerican provides electric service to 2.2 million customers and natural gas
service to 1.2 million customers worldwide. Through CalEnergy Generation,
MidAmerican's independent power production and non-regulated business
subsidiary, and MidAmerican Energy's utility operations, MidAmerican manages
and owns interests in approximately 8,300 net megawatts of diversified power
generation facilities in operation, construction and development. MidAmerican
is the successor of CalEnergy Company, Inc.
On October 25, 1999, MidAmerican announced that an investor group
comprised of Berkshire Hathaway Inc., Walter Scott, Jr. and David L. Sokol had
reached agreement to acquire MidAmerican for $35.05 per share in cash. The
purchase price together with the assumption of debt represents a total
enterprise value of approximately $9 billion. Upon completion of the
transaction, which is expected to occur by April 2000, MidAmerican would become
a privately owned company with publicly traded fixed income securities.
El Paso Power and El Paso Energy. El Paso Power is a wholly-owned
subsidiary of El Paso Energy. With over $10 billion in assets, El Paso Energy
provides energy solutions through its strategic business units: Tennessee Gas
Pipeline Company, El Paso Natural Gas Company, El Paso Field Services Company,
El Paso Power Services Company, El Paso Merchant Energy Company, and El Paso
Energy International Company. El Paso Energy owns the nation's only integrated
coast-to-coast natural gas pipeline system and has operations in natural gas
transmission, gas gathering and processing, power generation, energy marketing
and international energy infrastructure development.
THE DESIGNATED SUBSIDIARIES AND THE PROJECTS
The Designated Subsidiaries. Each designated subsidiary owns an interest
in one or more project companies. Below is a list showing those project
companies and other entities in which each designated subsidiary owns an
interest.
o MAGMA: Salton Sea Power Generation L.P., Fish Lake Power LLC, Salton
Sea Power L.L.C., Vulcan Power Company, CalEnergy Operating
Corporation, Vulcan/BN Geothermal Power Company, Leathers, L.P.,
Del Ranch, L.P., Elmore, L.P., CE Turbo LLC, Salton Sea Royalty
LLC, Magma Land Company I and Imperial Magma LLC.
o SALTON SEA POWER: Salton Sea Power Generation L.P.
o FALCON SEABOARD RESOURCES: Saranac Power Partners, L.P., Power
Resources, Inc., NorCon Power Partners, LP, Falcon
Power Operating Company and CE Texas Gas LLC.
o FALCON SEABOARD POWER: Saranac, NorCon and Falcon Power Operating.
o FALCON SEABOARD OIL: Power Resources, Inc.
o CALIFORNIA ENERGY DEVELOPMENT: Yuma Cogeneration Associates.
o CE TEXAS ENERGY LLC: CE Texas Gas.
Magma and some of its subsidiaries provide administrative and other
services and the use of various real properties to the geothermal projects.
Falcon Power Operating, a wholly-owned subsidiary of Falcon Seaboard Power,
provides operation and maintenance services to the natural gas projects. CE
Texas Gas, a wholly-owned subsidiary of CE Texas Energy, provides natural gas
for some of the natural gas projects.
The business of each of Salton Sea Power, Falcon Seaboard Resources,
Falcon Seaboard Power, Falcon Seaboard Oil, California Energy Development and
CE Texas Energy consists solely of holding its equity interest in the related
project companies. Substantially all of the business of Magma consists of
holding its equity interests in the geothermal projects and providing the
services to the geothermal projects described above. The business of each of
Falcon Power Operating and CE Texas Gas consists solely of providing the goods
and services to the natural gas projects described above. The designated
43
<PAGE>
subsidiaries' cash flow is derived solely from the activities described in this
paragraph. Each project company's business consists solely of the ownership and
operation of one or more projects or, in the case of Falcon Power Operating and
CE Texas Gas, the provision of the goods and services described above, and its
sole source of revenues consists of revenues derived from the operation of its
project(s) or the provision of goods and services.
The Projects. The following list describes each project and names the
project company that owns the project.
o SALTON SEA UNIT I: A 10 megawatt geothermal power plant owned by Salton
Sea Power Generation.
o SALTON SEA UNIT II: A 20 megawatt geothermal power plant owned by
Salton Sea Power Generation.
o SALTON SEA UNIT III: A 49.8 megawatt geothermal power plant owned by
Salton Sea Power Generation.
o SALTON SEA UNIT IV: A 39.6 megawatt geothermal power plant owned by
Salton Sea Power Generation and Fish Lake Power.
o SALTON SEA UNIT V: A 49 megawatt geothermal power plant under
construction owned by Power LLC.
o VULCAN PROJECT: A 34 megawatt geothermal power plant owned by Vulcan.
o ELMORE PROJECT: A 38 megawatt geothermal power plant owned by Elmore.
o LEATHERS PROJECT: A 38 megawatt geothermal power plant owned by
Leathers.
o DEL RANCH PROJECT: A 38 megawatt geothermal power plant owned by Del
Ranch.
o CE TURBO PROJECT: A 10 megawatt geothermal power plant under
construction owned by CE Turbo.
o SARANAC PROJECT: A 240 megawatt natural gas-fired combined cycle
cogeneration power plant owned by Saranac.
o POWER RESOURCES PROJECT: A 200 megawatt natural gas-fired combined
cycle cogeneration power plant owned by Power
Resources.
o NORCON PROJECT: An 80 megawatt natural gas-fired combined cycle
cogeneration power plant owned by NorCon.
o YUMA PROJECT: A 50 megawatt natural gas-fired combined cycle
cogeneration power plant owned by Yuma Cogeneration.
Each project, other than Salton Sea Unit V and the CE Turbo project, meets
the requirements promulgated under the Public Utility Regulatory Policies Act
of 1978 to be a qualifying facility. Salton Sea Unit V and the CE Turbo project
are expected to be qualifying facilities when they commence operation. The
geothermal projects are designed to generate electricity and the natural gas
projects are designed to generate both electric energy and thermal energy. The
projects' actual outputs of electric energy and, where applicable, thermal
energy vary based on their design and the requirements of the power purchase
agreements and, where applicable, the thermal energy agreements of the
projects. The geothermal projects generate (or, in the case of Salton Sea Unit
V and the CE Turbo project, will generate) electricity from geothermal energy
and the other projects use natural gas as their primary source of fuel.
Below are tables illustrating annual availability and annual capacity
factors for each of the projects other than Salton Sea Unit V and the CE Turbo
project. The annual availability figures are determined by dividing the sum of
the hours in which the project is operating (plus the hours the project is
available to operate but did not, due to a request by the power purchaser that
the project
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<PAGE>
not operate) by the total hours in the year. The capacity factor figures are
determined by dividing total quantity of electricity sold (plus electricity that
would have been sold but was not due to a request by the power purchaser not to
operate where compensation is paid for the curtailment) by the product of the
project's capacity and the total hours in the year. These factors provide
information regarding the historical operating performance of the projects. The
amount of revenues received by these projects is affected by the extent to which
they are able to operate and generate electricity. Accordingly, the availability
factors and capacity factors provide information on aspects of operating
performance that have affected the revenues received by these projects.
ANNUAL AVAILABILITY
<TABLE>
<CAPTION>
PROJECT AVERAGE 1998 1997 1996 1995 1994
-------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Salton Sea Unit I .............. 96.3% 97.3% 97.3% 93.5% 93.7% 99.8%
Salton Sea Unit II ............. 97.0% 98.3% 98.4% 93.4% 95.2% 99.6%
Salton Sea Unit III ............ 96.1% 95.4% 98.1% 94.6% 92.7% 99.5%
Salton Sea Unit IV(1) .......... 94.5% 96.0% 95.9% 91.7% -- --
Vulcan ......................... 96.5% 96.1% 91.8% 98.3% 98.7% 97.6%
Leathers ....................... 97.3% 96.0% 99.1% 96.5% 97.4% 97.7%
Del Ranch ...................... 97.2% 98.4% 95.0% 98.8% 95.6% 98.4%
Elmore ......................... 96.8% 95.8% 99.0% 96.0% 98.5% 94.8%
Saranac ........................ 95.0% 92.8% 97.7% 95.2% 98.4% 90.7%
Power Resources ................ 92.4% 93.7% 91.2% 88.7% 97.4% 91.0%
NorCon ......................... 94.5% 92.3% 95.5% 95.3% 94.8% --
Yuma ........................... 96.8% 96.0% 96.2% 97.0% 97.8% --
</TABLE>
ANNUAL CAPACITY FACTOR
<TABLE>
<CAPTION>
PROJECT AVERAGE 1998 1997 1996 1995 1994
-------------------------------- --------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Salton Sea Unit I .............. 75.3% 90.2% 84.1% 71.3% 65.1% 65.8%
Salton Sea Unit II ............. 117.0% 120.7% 122.3% 114.4% 112.7% 114.9%
Salton Sea Unit III ............ 99.6% 99.8% 101.9% 98.1% 95.5% 102.6%
Salton Sea Unit IV(1) .......... 114.8% 111.6% 114.3% 118.6% -- --
Vulcan ......................... 117.0% 109.6% 108.6% 122.3% 126.7% 117.8%
Leathers ....................... 115.9% 114.9% 119.4% 113.5% 116.7% 114.9%
Del Ranch ...................... 117.9% 119.8% 114.9% 120.0% 115.8% 119.2%
Elmore ......................... 115.4% 111.5% 116.2% 116.1% 117.8% 115.6%
Saranac ........................ 92.4% 85.4% 95.0% 97.0% 95.1% 89.4%
Power Resources ................ 80.9% 82.3% 79.7% 77.0% 85.9% 79.5%
NorCon ......................... 94.6% 92.7% 95.5% 95.3% 94.8% --
Yuma ........................... 89.0% 93.0% 85.3% 86.5% 91.0% --
</TABLE>
----------
(1) Began operations in May 1996; figures are annualized based on seven
months of operation.
INSURANCE
The project companies are required under the project financing documents
and project documents to maintain insurance coverages relating to their
interests in the projects. These coverages are consistent with those normally
carried by companies engaged in similar businesses. The coverages are currently
provided under a corporate umbrella program which includes liability insurance
and all-risk insurance covering physical loss or damage to the projects. This
all-risk insurance covers replacement value of all real and personal property
including losses from boiler and machinery breakdowns and
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the perils of earthquake and flood, subject to sublimits, and business
interruption. The current program also covers the designated subsidiaries,
California Energy Yuma and SECI Holdings to the extent applicable to their
respective businesses. The project financing documents typically require that
most insurance proceeds be paid to the applicable collateral agent for use in
accordance with the terms of those documents.
The lenders and trustees under the project financing documents also have
the benefit of title insurance with respect to the applicable projects.
EMPLOYEES
CalEnergy Operating and Falcon Power Operating currently employ 166 and 75
people full-time, respectively. Neither we nor Magma, Salton Sea Power, Falcon
Seaboard Resources, Falcon Seaboard Power, Falcon Seaboard Oil, California
Energy Development, CE Texas Energy or CE Texas Gas currently has any
employees.
LITIGATION
In addition to the proceedings described in the "Risk Factors" section of
this prospectus, some of the projects are currently parties to various minor
items of litigation, none of which, if determined adversely, would have a
material adverse effect on those projects.
REGULATORY MATTERS
FEDERAL ENERGY REGULATIONS
Qualifying Facility Status Under the Public Utility Regulatory Policies
Act. Qualifying facility status under the Public Utility Regulatory Policies
Act provides two primary benefits. First, regulations under the Public Utility
Regulatory Policies Act exempt qualifying facilities from the Public Utility
Holding Company Act of 1935, most provisions of the Federal Power Act and state
laws concerning rates of electric utilities and the financial and
organizational regulation of electric utilities. Second, regulations
promulgated under the Public Utility Regulatory Policies Act require that
electric utilities purchase electricity generated by qualifying facilities,
construction of which commenced on or after November 9, 1978, at a price based
on the cost that the purchasing utility avoids by purchasing energy from
qualifying facilities instead of obtaining the energy from other sources.
Order 888. In the Spring of 1996, FERC issued a landmark decision, known
as Order No. 888, designed to bring competition to the wholesale power market.
Order No. 888 required all public utilities that own, control or operate
transmission facilities used in interstate commerce to file non-discriminatory,
open access transmission tariffs (so-called "pro forma tariffs") with FERC. The
directive was intended to preclude utilities from using their ownership of
transmission facilities to favor their own generation in the marketplace. To
prevent this result, Order No. 888 required these utilities to "functionally
unbundle" all new wholesale generation and transmission service. Specifically,
the utilities were required to:
o separate the operations of their wholesale marketing arm and their
transmission provider arm, and quote separate prices for wholesale
generation and transmission service;
o take wholesale (and unbundled retail) transmission under their own pro
forma tariff; and
o provide and rely upon same time access to transmission information via
postings on so-called OASIS sites on the Internet.
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STATE ENERGY REGULATIONS
The structure of state energy regulation of independent power producers is
now undergoing change and may change in the future. Below are some of the
recent developments in the states in which the projects are located or sell
power. Restructuring that promotes access to customers may provide
opportunities for the projects to sell power when the terms of their power
purchase agreements expire.
California (Imperial Valley Projects; Yuma). In December 1995, the
California Public Utilities Commission adopted a comprehensive plan for
restructuring California's electric industry. In August 1996, the California
Legislature approved, and on September 23, 1996 Governor Wilson signed into
law, comprehensive electric industry restructuring legislation, referred to in
this prospectus as AB 1890, which confirmed and enlarged upon the plan adopted
by the California Public Utilities Commission. California electric industry
restructuring includes, among other things, the creation of an independent
system operator and the California power exchange, direct access and retail
competition for all customers which became effective in 1998.
AB 1890 outlines a methodology which establishes energy pricing for those
generators who are paid rates based on the cost that the purchasing utility
avoids by purchasing energy from a qualifying facility instead of obtaining the
energy from other sources. Initially, the pricing is based on a 12-month
average of recent, pre-1996, avoided-cost based energy prices paid by a utility
to non-utility generators and is indexed to an appropriate gas price measure.
In the future, pricing will be based on the clearing price paid by the
California power exchange when the California Public Utilities Commission has
issued an order determining that the California power exchange is functioning
properly for purposes of determining the cost that utilities avoid by
purchasing energy from qualifying facilities instead of obtaining the energy
from other sources. In July 1999, the coordinating commissioner established a
procedural schedule that contemplated the issuance of this order by June 2000.
The California power exchange is a nonprofit public benefit corporation
formed to provide a competitive marketplace where buyers and sellers of power,
including utilities, end-use customers, independent power producers and power
marketers, complete wholesale trades through an electronic auction. The
California power exchange currently operates two markets: (1) a day ahead
market which is comprised of twenty-four separate concurrent auctions for each
hour of the following day; and (2) a market for each hour of each day for which
bids are due two hours before each hour. In each market, the California power
exchange receives bids from buyers and sellers and, based on the bids,
establishes the market clearing price for each hour and schedules deliveries
from sellers whose bids did not exceed the market clearing price to buyers
whose bids were not less than the market clearing price. All trades are
executed at the market clearing price.
New York (Saranac Project and NorCon Project). In response to a mandate
from the New York State Public Service Commission, on January 31, 1997 the
eight members of the New York power pool, consisting of 7 public utilities and
the New York Power Authority, made filings with FERC evidencing their plan to
restructure the electric generation and distribution markets in New York State.
Under the plan, the New York power pool will be replaced with an independent
system operator, a New York State Reliability Council to establish reliability
standards for the competitive retail market, and the New York Power Exchange, a
coordinated bid-price market which will provide both a day-ahead market as well
as a competitive real-time spot market. In addition to these systemic changes,
the New York deregulation plan requires each of the New York independent public
utilities to generate its own plan for lowering prices, increasing competition
and introducing retail choice in their regions. Each of New York State Electric
and Gas Corporation and Niagara Mohawk has obtained New York State Public
Service Commission approval of its restructuring plan.
In 1992 Niagara Mohawk filed a petition requesting the New York State
Public Service Commission to authorize Niagara Mohawk to curtail purchases
from, and thus to avoid payment obligations to, non-utility generators during
certain periods. Niagara Mohawk claimed that curtailment would be consistent
with the Public Utility Regulatory Policies Act and the other regulations of
FERC promulgated under the Public Utility Regulatory Policies Act, including
Section 292.304(f) of
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the statute. Section 292.304(f) provides that a utility may have a right to
curtail purchases from a qualifying facility during periods in which, due to
"operational circumstances," purchases from qualifying facilities will result
in costs greater than those that the utility would incur if it did not make the
purchases, but instead generated an equivalent amount of energy itself. The New
York State Public Service Commission initiated a proceeding to investigate
whether conditions existed to justify the exercise of the Public Utility
Regulatory Policies Act curtailment rights and, if so, the procedures for
implementation. Niagara Mohawk's petition has not been ruled upon. In the
meantime, Niagara Mohawk's claim that it is obligated to buy excessive
generation has been significantly reduced by its buyout of a number of power
purchase agreements.
Texas (Power Resources Project). In June 1999, the Texas legislature
approved a comprehensive plan for restructuring Texas' electric industry. The
plan, known as SB 7, which became effective on September 1, 1999, calls for
customer choice to be fully implemented in Texas by 2004. Currently, the Public
Utility Regulatory Act of 1995 authorizes the Public Utility Commission to
regulate the electricity market and ensure that only one electric energy
provider serves each area of the state. Among other things, SB 7 amends Public
Utility Regulatory Act by deregulating the electricity generation market and
permitting certain providers to compete for customers who choose their
electricity supplier in competitive areas. SB 7 also authorizes the Commission
to develop and promulgate customer protection rules during and after a
transition to a competitive market. The Commission has not yet issued its rules
implementing SB 7.
Arizona (Yuma Project). The Arizona legislature enacted House Bill 2663,
under which retail competition in electric generation was to begin no later
than December 31, 1998 for at least 20% of Arizona's 1995 retail load, with
full retail competition expected prior to December 31, 2000. On January 5,
1999, however, the Arizona Corporation Commission voted to stay the
implementation of its HB 2663's electric competition rules, pending additional
public hearings. The Commission indicated that additional time was necessary to
fine-tune the process and rules. In April, the Commission proposed new
comprehensive retail competition and stranded cost rules to provide retail
access to all customers by January 1, 2001.
FINANCIAL INCENTIVES FOR IMPERIAL VALLEY PROJECTS
Salton Sea Power L.L.C. and CE Turbo LLC also expect to receive incentive
payments from the State of California's New Renewable Resources Account for
energy sold by Salton Sea Unit V or the CE Turbo project through the Imperial
Irrigation District's transmission system during the first five years of
operation of each of these projects. The California Energy Commission has
selected Salton Sea Unit V to receive incentive payments from the New Renewable
Resources Account in an amount equal to $0.0124 per kilowatt-hour of energy
produced, up to $25,548,364.80 altogether, for the first five years of
operation. The Energy Commission has selected the CE Turbo project to receive
incentive payments from the New Renewable Resources Account in an amount equal
to $0.0134 per kilowatt-hour of energy produced, up to $5,751,816 altogether,
for the first five years of operation. The amount of the incentive payments for
the fourth and fifth years of operation of a project will be reduced by 25% if
the actual generation from the project over the first three years of operation
averages less than 85% of the estimated annual generation of the project
(412,070,400 kilowatt-hours for Salton Sea Unit V and 85,848,000 kilowatt-hours
for the CE Turbo project). In order for a project to remain eligible for
incentive payments, the project must continue to satisfy specified eligibility
criteria (including ownership and fuel use criteria) and the project must
timely satisfy specified milestones, including completion of construction of
the project by January 1, 2002.
The State of California has also established financial incentives for
existing renewable energy power projects which are available in the 1998-2001
time period. Projects must meet specified eligibility requirements, including
date of initial operation, ownership and fuel use criteria. Each of the
operating Imperial Valley projects other than Salton Sea Unit I and Salton Sea
Unit IV will become eligible for this program upon expiration of the fixed
price period in its power purchase agreement. The program provides geothermal
plants with a monthly amount per kilowatt-hour of power sold equal to the
lowest of (1) $0.01/kilowatt-hour, (2) $0.03/kilowatt-hour minus a calculated
market
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clearing price and (3) a specified amount of funds available for the month
divided by eligible generation. The Imperial Valley projects have already begun
receiving payments under this program.
ENVIRONMENTAL MATTERS
Each of the projects is subject to environmental laws and regulations at
the federal, state and local levels in connection with the development,
ownership and operation of the projects. These environmental laws and
regulations generally require that a wide variety of permits and other
approvals be obtained for the construction and operation of an energy-producing
facility and that the facility then operate in compliance with these permits
and approvals. Failure to operate the facility in compliance with applicable
laws, permits and approvals could result in the levy of fines or curtailment of
project operations by regulatory agencies.
We believe that each of the project companies is in compliance in all
material respects with all applicable environmental regulatory requirements and
that maintaining compliance with current governmental requirements will not
require a material increase in capital expenditures or materially affect any of
the project company's financial condition or results of operations. It is
possible, however, that future developments, including more stringent
requirements of environmental laws and their enforcement policies, could affect
the costs of compliance and the manner in which the project companies conduct
their business.
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OUR MANAGEMENT
OUR DIRECTORS AND EXECUTIVE OFFICERS
Below are our current executive directors and officers and their positions
with us:
<TABLE>
<CAPTION>
EXECUTIVE OFFICER POSITION
--------------------------------- ------------------------------------------------
<S> <C>
Robert S. Silberman .......... Director, President and Chief Operating Officer
Brian K. Hankel .............. Vice President and Treasurer
Douglas L. Anderson .......... Director, Vice President and General Counsel
Richard P. Johnston .......... Vice President and Commercial Officer
Patrick J. Goodman ........... Director
Larry Kellerman .............. Director
John L. Harrison ............. Director
Steven M. Pike ............... Director
</TABLE>
ROBERT S. SILBERMAN, 40, President and Chief Operating Officer of us and
each designated subsidiary. Mr. Silberman joined MidAmerican in 1995. Prior to
that, Mr. Silberman served as Executive Assistant to the Chairman and Chief
Executive Officer of International Paper Company from 1993 to 1995, as Director
of Project Finance and Implementation for the Ogden Corporation from 1986 to
1989 and as a Project Manager in Business Development for Allied-Signal, Inc.
from 1984 to 1985. He has also served as the Assistant Secretary of the Army
for the United States Department of Defense.
BRIAN K. HANKEL, 36, Vice President and Treasurer of MidAmerican, us and
each designated subsidiary. Mr. Hankel joined MidAmerican in February 1992 as
Treasury Analyst and served in that position to December 1995. Mr. Hankel was
appointed Assistant Treasurer in January 1996 and was appointed Treasurer in
January 1997. Prior to joining MidAmerican, Mr. Hankel was a Money Position
Analyst at FirsTier Bank of Lincoln from 1988 to 1992 and Senior Credit Analyst
at FirsTier from 1987 to 1988.
DOUGLAS L. ANDERSON, 40, Vice President and General Counsel of CalEnergy
Generation, us and each designated subsidiary. Mr. Anderson joined MidAmerican
in February 1993. From 1990 to 1993, Mr. Anderson was a business attorney with
Fraser, Stryker, Vaughn, Meusey, Olson, Boyer & Cloch, P.C. in Omaha. From 1987
through 1989, Mr. Anderson was a principal in the firm Anderson & Anderson.
Prior to that, from 1985 to 1987, he was an attorney with Foster, Swift,
Collins & Coey, P.C. in Lansing, Michigan.
RICHARD P. JOHNSTON, 43, Vice President and Commercial Officer of us and
Director of Operations for El Paso Energy International. Mr. Johnston joined El
Paso Energy in 1997 and was assigned to our management team at our founding in
March of 1999. In his 21 years of experience in power generation engineering
and management, Mr. Johnston has held positions directing Plant Operations and
Maintenance, Asset Management and Project Development in both the Domestic and
International Markets for ESI Energy, a Florida Power & Light subsidiary, The
AES Corp., based in Arlington, VA, and Westinghouse, based in Orlando, FL from
1993 to 1997. Mr. Johnston has extensive experience in hands-on management of
the operations and maintenance of oil and gas-fired combustion turbines, coal,
biomass, geothermal and solar independent power, including all aspects of
construction management, mobilization and start-up.
PATRICK J. GOODMAN, 33, Senior Vice President and Chief Financial Officer
of MidAmerican and a director of us and each designated subsidiary. Mr. Goodman
joined MidAmerican in June 1995 and served as Manager of Consolidation
Accounting until September 1996 when he was promoted to Controller. Prior to
joining MidAmerican, Mr. Goodman was a financial manager for National Indemnity
Co. from 1993 to 1995 and a certified public accountant at Coopers & Lybrand
from 1989 to 1993.
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LARRY KELLERMAN, 44, President of El Paso Power Services Company and a
director of us. Mr. Kellerman joined El Paso Energy in February 1998. Prior to
joining El Paso Energy, he was President of Citizens Power, where he initiated
Citizens' activities in the power marketing field in 1988, when Citizens was
the initial power marketer granted FERC authorization. From 1982 through 1988,
Mr. Kellerman was General Manager of Power Marketing and Power Supply for
Portland General Electric. From 1979 through 1982, Mr. Kellerman was Financial
Analyst and Power Contract Negotiator with Southern California Edison, where he
negotiated some of the first Public Utility Regulatory Policies Act qualifying
facility contracts in the nation.
JOHN L. HARRISON, 40, Senior Managing Director and Chief Financial Officer
of El Paso Merchant Energy and a director of us. Mr. Harrison joined El Paso
Energy in June 1996. Prior to joining El Paso Energy, Mr. Harrison was a
partner with Coopers & Lybrand LLP for five years.
STEVEN M. PIKE, 38, Vice President Structured Transactions of El Paso
Power Services Company and a director of us. Mr. Pike joined El Paso Energy in
April of 1998. Prior to joining El Paso Energy, Mr. Pike was Vice President
Risk Management for Enerz, a wholly-owned trading subsidiary of Zeigler Coal
Holding Company, and Director of Strategic Planning for Zeigler Coal Holding
Company from 1995 to 1998, and Director of Energy Development for Kennecott
Corporation from 1995 to 1996. Mr. Pike began his career with Niagara Mohawk
Power Corporation and held a number of positions in power system transmission
operations and generation dispatch planning, power contracting, fuel supply,
fossil and hydro generation planning, and strategic planning from 1983 to 1995.
Our directors and executive officers do not receive any compensation for
serving in these positions.
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OWNERSHIP OF OUR MEMBERSHIP INTERESTS
Fifty percent of our membership interests are owned by MidAmerican and the
other 50% are owned by El Paso Power. If the two owners of our membership
interests are unable to reach agreement on budgeting or other material
operational matters, the prior year's budget (adjusted for inflation) and
operational practices will be continued until agreement is reached. As of
September 30, 1999, our total capitalization was $1,457 million. There is no
public trading market for our membership interests. None of our directors or
executive officers beneficially own any of our equity interests. MidAmerican's
common stock is publicly traded on the New York, Pacific and London Stock
Exchanges. El Paso Power is owned indirectly by El Paso Energy. El Paso
Energy's common stock is publicly traded on the New York Stock Exchange.
OUR RELATIONSHIPS AND RELATED TRANSACTIONS
OUR RELATIONSHIPS WITH SUPPLIERS AND SERVICE PROVIDERS
The Imperial Valley projects' geothermal power plants are indirectly
wholly-owned and operated by Magma or subsidiaries of Magma. Land surface
rights for, and geothermal fluid supplying, these facilities is provided from
Magma's (or a subsidiary's) geothermal resource holdings in the Salton Sea
Known Geothermal Resource Area.
The Saranac project, the Power Resources project and the NorCon project
are indirectly partially- or wholly-owned by Falcon Seaboard Resources and are
operated and maintained by Falcon Power Operating, a wholly-owned subsidiary of
Falcon Seaboard Resources. Falcon Power Operating is entitled to reimbursements
and fees in exchange for providing operation and maintenance services. In
addition CE Texas Gas, a wholly-owned indirect subsidiary of Falcon Seaboard
Resources, procures natural gas for the Power Resources project.
OUR RELATIONSHIP WITH MIDAMERICAN AND EL PASO ENERGY CORPORATION
We are 50% owned by MidAmerican and 50% owned by El Paso Power. Our
activities are restricted by the terms of the indenture for the Securities to
(1) ownership of our subsidiaries and related activities, (2) acting as issuer
of Securities and other indebtedness as permitted under the indenture and
related activities and (3) other activities which could not reasonably be
expected to result in a material adverse effect so long as the rating agencies
confirm that these activities will not result in a downgrade of their ratings
of the Securities. We and each of the designated subsidiaries have been
organized and are operated as legal entities separate and apart from
MidAmerican, El Paso Energy and their other affiliates, and, accordingly, our
assets and the assets of the designated subsidiaries will not be generally
available to satisfy the obligations of MidAmerican, El Paso Energy or any of
their other affiliates. However, our and the designated subsidiaries'
unrestricted cash and other assets which are available for distribution may,
subject to applicable law and the terms of our and the designated subsidiaries'
financing arrangements, be advanced, loaned, paid as dividends or otherwise
distributed or contributed to MidAmerican, El Paso Energy or their affiliates.
The Securities are non-recourse to MidAmerican and El Paso Energy.
In connection with El Paso Power's acquisition of 50% of our interests,
MidAmerican entered into an administrative services agreement with us and El
Paso Power entered into a power marketing services agreement and a fuel
management services agreement with us. We reimburse MidAmerican and El Paso
Power for the actual costs and expenses of performing their obligations under
these agreements. These agreements each have an initial term of one year and
then continue from year to year until terminated by either party.
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REPORTS OF THIRD PARTY CONSULTANTS
OVERVIEW OF THE THIRD PARTY CONSULTANTS' REPORTS
We have included as appendices to this prospectus reports of third party
consultants in order to provide investors with important information regarding
the projects which is not included elsewhere in this prospectus. These reports
include the following:
o A report by Fluor Daniel, attached as Appendix C to this prospectus,
which reviews the geothermal projects and includes, among other things:
(1) an assessment of the historical and current operating performance of
Salton Sea Units I-IV and the Elmore, Del Ranch, Vulcan and Leathers
projects;
(2) a review of the design and technology for Salton Sea Unit V and the
CE Turbo project;
(3) an assessment of the capability of the participants in the geothermal
projects, including the construction contractor for Salton Sea Unit V
and the CE Turbo project;
(4) a determination of the reasonableness of the budgeted construction
costs for Salton Sea Unit V and the CE Turbo project;
(5) a discussion of the environmental permits required for the geothermal
projects and the compliance by the projects with these permits; and
(6) projections of the distributions to us from the geothermal projects
(which utilize the price projections prepared by Henwood Energy
Services, Inc. in the report attached as Appendix D to this
prospectus).
o A report by R.W. Beck, attached as Appendix B to this prospectus, which
reviews the natural gas projects and includes, among other things:
(1) an assessment of the historical and current operating performance of
Saranac, Power Resources, NorCon and Yuma projects;
(2) a review of the technology used in the natural gas projects;
(3) an assessment of the available supply of natural gas for the natural
gas projects;
(4) a discussion of the operation and maintenance procedures used at the
natural gas projects;
(5) an estimate of the useful lives of the natural gas projects;
(6) a discussion of the environmental permits required for the natural
gas projects and the compliance by the projects with these permits;
and
(7) projections of the distributions from the natural gas projects.
o Another report by Fluor Daniel, attached as Appendix A to this
prospectus, which contains projections of the consolidated distributions
from all of the projects based on the reports found in Appendices B and
C.
o A report by Henwood Energy Services, Inc., attached as Appendix D to
this prospectus, which reviews the California electricity market and
contains, among other things:
(1) an overview of the California wholesale electricity market;
(2) a forecast of the average prices for electricity in the California
market; and
(3) an assessment of the geothermal projects' ability to compete in the
California market.
o A report by GeothermEx, Inc., attached as Appendix E to this
prospectus, which assesses the sufficiency of the geothermal resources
available to be used for the production of electricity in the geothermal
projects.
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<PAGE>
CONCLUSIONS REACHED BY THE THIRD PARTY CONSULTANTS
The third party consultants present the conclusions of their findings in
their reports. This section summarizes the principal conclusions reached by the
consultants. Additional conclusions, and the detailed discussions of how the
conclusions were reached, are contained in the reports.
Fluor Daniel reached the following conclusions, among others, in its
report regarding the geothermal projects:
o Salton Sea Units I-IV and the Vulcan, Del Ranch, Elmore and Leathers
projects use commercially proven technology and are operated in
accordance with recognized electric utility industry practices.
o The principal participants in the geothermal projects possess the
necessary experience to successfully fulfill their project obligations.
o The technology upon which Salton Sea Unit V and the CE Turbo project
are based is proven and reliable.
o Based upon a review of the construction contracts for Salton Sea Unit V
and the CE Turbo project, the capital cost budgets appear adequate for
the facilities provided under the contracts.
o The reviewed records show that no environmental notices of violation
for air emissions, wastewater or solid/hazardous waste have been filed
against the operating geothermal projects in the last two years.
o All discretionary environmental permit approvals have been received for
the proposed new construction.
o The assumptions underlying the economic/financial model appear to be
reasonable, and the projected operating results reasonably represent CE
Generation's future financial profile.
o Projected operating and maintenance costs and capital expenditures for
major maintenance projects appear to be reasonable and representative of
the planned operations of the geothermal projects.
o The financial projections, based on the base case assumptions
recommended by CE Generation, appear to be reasonable and indicate that
revenues should be adequate to pay operation and maintenance expenses and
provide cash flow for debt service and distributions.
R.W. Beck reached the following conclusions, among others, in its report
regarding the natural gas projects:
o The natural gas projects utilize sound technology and proven methods of
electric and thermal generation and have been designed and constructed in
accordance with generally accepted industry practices.
o Each of the Power Resources, Saranac and Yuma projects possesses
sufficient contracted natural gas commodity supply to meet the
requirements of its power purchase agreement and the contracted natural
gas transportation capacity for each of these projects is adequate to
reliably deliver the natural gas supply requirements.
o If the operators operate the Power Resources, Saranac and Yuma projects
in accordance with generally accepted industry practices, these projects
should have useful lives extending through the final maturity date of the
Securities.
o All of the major permits and approvals required to operate the natural
gas projects have been or are currently in the process of being obtained.
o Based on the historical performance, operation and maintenance
practices and observed conditions of the Power Resources, Saranac and
Yuma projects, these projects should be capable of achieving the average
annual availabilities, net electrical capabilities, capacity factors,
steam supply requirements and heat rates assumed in the natural gas
projections.
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Fluor Daniel reached the following conclusions, among others, in its
report regarding the consolidated distributions from the projects:
o The consolidated financial model accurately represents the results of
the four project-specific models contained in Fluor Daniel's report on
the geothermal projects and R.W. Beck's report on the natural gas
projects.
o The consolidated financial model that is based on the base case
assumptions recommended by CE Generation and R.W. Beck indicates that
revenues appear to be adequate to provide sufficient cash flow for debt
service, with base case debt service coverage ratios calculated from 1999
through 2018 of 2.59x minimum and 3.08x average.
o The financial projections remain stable across a defined range of
sensitivities and avoided cost assumptions.
Henwood reached the following conclusions, among others, in its report
regarding the California electricity market:
o All of the geothermal projects and the Yuma project will be low cost
producers in all years of the study.
o The annual average operating cost of the geothermal projects in 2005 is
$17.5 per megawatt-hour.
o The annual average operating costs of the geothermal projects and the
Yuma project, in dollars per megawatt-hour, are below the annual average
California power exchange prices.
o The California power exchange price will be greater than or equal to
$20.3 per megawatt-hour in 96 percent of all hours in 2005. This means
that the geothermal projects and the Yuma project, with an average
operating cost of $17.5 per megawatt-hour, will be below the California
power exchange price.
o The base case forecast indicates that the California power exchange
clearing price will increase from $28.3 per megawatt-hour in 1999 to
$50.3 per megawatt-hour by 2018 in nominal dollars, which translates into
an average annual rate of increase of 3.1 percent over that period.
GeothermEx reached the following conclusions, among others, in its report
regarding the geothermal resources for the geothermal projects:
o The Salton Sea Known Geothermal Resource Area of Imperial Valley,
California is highly productive and wells have historically behaved
favorably with minimal flow rate or pressure declines.
o The additional production fluid needed for Salton Sea Unit V will be
supplied from existing wellhead capacity and the nominal additional
production fluid needed for the CE Turbo project can be supplied by spare
capacity at existing wells.
o Numerical simulation studies undertaken to date forecast acceptable
well behavior for the existing and planned level of power generation.
Well behavior has historically been consistent with results predicted by
earlier simulation models; therefore, future well behavior is expected to
be adequate to support the geothermal projects.
o The recoverable geothermal energy reserves from the reservoir are more
than sufficient to support existing projects and the planned additional
increments of capacity resulting in a total capacity of 326.4 megawatts.
GeothermEx estimates that 1,200 megawatts of reserves are available
within the portion of the Salton Sea Known Geothermal Resource Area of
Imperial Valley dedicated to the geothermal projects.
o The budget for wellfield costs is reasonable and should allow the
geothermal projects to achieve the forecasted levels of electrical
generation.
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ASSUMPTIONS MADE BY THE CONSULTANTS IN PREPARING THEIR REPORTS
The third party reports contain a number of assumptions and qualifications
made by the consultants. This section describes the primary assumptions and
qualifications. Additional assumptions and qualifications are described in the
reports.
The following assumptions and qualifications, among others, are contained
in Fluor Daniel's report regarding the geothermal projects:
o Fluor Daniel's inspection of the existing geothermal operations were
limited to visits of personnel on July 24, 1998 and February 9, 1999.
o Fluor Daniel did not undertake an independent review with all
regulatory agencies which could under any circumstances have jurisdiction
over, or interests pertaining to, the geothermal projects.
The following assumptions and qualifications, among others, are contained
in R.W. Beck's report regarding the natural gas projects:
o R.W. Beck made no determination as to the validity and enforceability
of any contract, agreement, rule or regulation applicable to the natural
gas projects and their operations. R.W. Beck 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.
o R.W. Beck's review of the design of the natural gas projects was based
on information provided by CE Generation and our visual observations
during our site visits.
o R.W. Beck assumed that the operators will maintain the natural gas
projects in accordance with good engineering practice, will perform all
required major maintenance in a timely manner, and will not operate the
equipment to cause it to exceed the equipment manufacturers' recommended
maximum ratings.
o R.W. Beck assumed that the operators will employ qualified and
competent personnel and will generally operate the natural gas projects
in a sound and businesslike manner.
o R.W. Beck assumed that the natural gas projects will identify and
implement solutions to the year 2000 problem in a manner which will not
impact the projected net revenues of the natural gas projects.
o R.W. Beck assumed that inspections, overhauls, repairs and
modifications are 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.
o R.W. Beck assumed that proposed restructuring of the electric utility
industry will not significantly impact the projected electricity revenues
of the Power Resources, Saranac and Yuma projects.
o R.W. Beck assumed that all licenses, permits and approvals and permit
modifications necessary to operate the natural gas projects have been, or
will be, obtained on a timely basis and any changes in required licenses,
permits and approvals will not require reduced operation of, or increased
costs to, the natural gas projects.
o R.W. Beck assumed that the consumer price index and general inflation,
used variously to escalate various revenues and expenses, will increase
at an average annual rate of 2.7 percent.
o R.W. Beck assumed that the Yuma natural gas contracts will be extended
at pricing provisions equal to the current agreements through the term of
the Securities.
o R.W. Beck assumed that the non-fuel operating and maintenance expenses,
including the cost of major maintenance, will be consistent with the
information provided by CE Generation, and will increase thereafter at
the assumed change in the general inflation rate, except as noted
otherwise in R.W. Beck's report.
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o R.W. Beck assumed that there will be no additional capital improvements
to the Power Resources, Saranac and Yuma projects other than those
assumed in the projections.
o R.W. Beck assumed that there will be no distributions made to CE
Generation from the natural gas projects after the expiration of the
respective power purchase agreement.
o R.W. Beck assumed that there will be no distributions made to CE
Generation from the NorCon Project.
o R.W. Beck assumed that a full year of revenues from the Yuma project
will be available to pay the debt service on the Securities in 2018, as
estimated by CE Generation.
Fluor Daniel stated in its report regarding the consolidated distributions
from all of the projects that it did not undertake an independent review with
all regulatory agencies which could under any circumstances have jurisdiction
over, or interests pertaining to, the projects.
The following assumptions and qualifications, among others, are contained
in Henwood's report regarding the California electricity market:
o Henwood assumed that the California electricity market would be fully
competitive by 2005.
o Henwood included only announced retirements in its estimate of the
number of generating units to be retired.
o Henwood assumed that gas-fired combined cycle units and gas-fired
combustion turbines will be added as needed to meet the projected
increase in customer demand over the forecast period.
o Henwood assumed that inflation would be 2.5%.
o Henwood assumed that peak demand and energy requirements would increase
at less than 2% per year.
o Henwood assumed that fixed and variable operation and maintenance costs
would escalate with inflation.
o Henwood's gas price forecast was developed based on the price of gas
futures contracts for the 1999 period and estimates of gas transportation
costs associated with moving gas from the relevant gas basin to the power
plant.
o Henwood used spot coal prices to simulate the economic operation of
coal plants.
GeothermEx does not list any specific assumptions in its report regarding
the geothermal resources for the geothermal projects.
INFORMATION OBTAINED FROM OUTSIDE SOURCES AND RELATIONSHIPS TO OTHER
CONSULTANTS.
Fluor Daniel obtained the following information from outside sources and
other reports included in this prospectus in preparing its report regarding the
geothermal projects:
o GeothermEx assessed the adequacy, reliability, and costs of geothermal
resources and wells.
o The projected interest rates on the Securities, reinvestment rates,
cost of arranging the financing and the amortization schedule of the
Securities used in the debt service coverage analysis were provided to
Fluor Daniel by investment banks.
o CE Generation provided 1998 financial statements for the CE Generation
and other cost accounting information as well as future projections of
cost, expenses, prices and other key assumptions.
o GeothermEx provided brine quantities and depletion rates.
o Henwood provided the electricity pricing forecast.
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R.W. Beck obtained the following information from outside sources and
other reports included in this prospectus in preparing its report regarding the
natural gas projects:
o The price of electricity and natural gas for the Yuma project was
estimated by Henwood.
o The cost of natural gas to the Power Resources and Saranac projects and
the cost of natural gas transportation to the Yuma project was estimated
by C.C. Pace Consulting, L.L.C.
o CE Generation provided the senior debt service requirements and
interest income for the Power Resources and Saranac project.
Fluor Daniel obtained the following information from outside sources and
other reports included in this prospectus in preparing its report regarding the
consolidated distributions from all of the projects:
o R.W. Beck provided projections for the natural gas projects as
contained in Appendix B to this prospectus.
o The projected interest rates on the Securities, reinvestment rates,
cost of arranging the financing and the amortization schedule of the
Securities used in the debt service coverage analysis were provided to
Fluor Daniel by investment banks.
o CE Generation provided 1998 financial statements for the CE Generation
and other cost accounting information as well as future projections of
cost, expenses, prices and other key assumptions.
o GeothermEx provided brine quantities and depletion rates.
o Henwood provided the electricity pricing forecast as contained in
Appendix D to this prospectus.
Henwood did not list any specific information obtained from outside
sources and other reports included in this prospectus in its report regarding
the California electricity markets.
GeothermEx obtained the following information from outside sources in
preparing its report regarding the geothermal resources for the geothermal
projects:
o CE Generation provided projection and injection histories from the
California Division of Oil, Gas and Geothermal Resources.
o CE Generation provided chemical analysis and information on the
drilling and logging of recent wells.
o CE Generation provided budget information for future wellfield
expenditures.
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SUMMARY DESCRIPTION OF PRINCIPAL PROJECT CONTRACTS
The following is a summary of the contracts related to the projects and
the business of the designated subsidiaries and the project companies, and is
not considered to be a full statement of the terms of the agreements. We have
filed the material agreements as exhibits to the registration statement of
which this prospectus is a part. Unless otherwise stated, any reference in this
prospectus to any agreement will mean the agreement and all schedules, exhibits
and attachments to the agreement as amended, supplemented or otherwise modified
and in effect as of the date of this prospectus.
IMPERIAL VALLEY PROJECTS
Each of the Imperial Valley projects is (or, in the case of Salton Sea
Unit V and the CE Turbo project, is proposed to be) a geothermal power plant
located at the Salton Sea Known Geothermal Resource Area in Imperial Valley,
California. Below is a chart illustrating the commercial structure of the
Imperial Valley projects.
[BLOCK CHART SHOWING THE COMMERCIAL STRUCTURE OF THE IMPERIAL VALLEY PROJECTS]
SALE AND TRANSMISSION OF POWER
STANDARD TERMS OF SO4 AGREEMENTS
All of the power purchase agreements for the operating Imperial Valley
projects are standard offer no. 4 (or SO4) agreements, except the Salton Sea
Unit I power purchase agreement and the Salton Sea Unit IV power purchase
agreement. Although these SO4 agreements differ in some respects from the
standard SO4 agreement, many of the provisions are the same as those found in
the SO4 agreement. Below is a summary of the material terms and provisions
contained in each SO4 agreement.
Term and Termination. Each of the SO4 agreements has a contract term of 30
years from the firm operation date of the project. Upon expiration of the
contract term, the SO4 agreement remains in effect until either party
terminates the agreement upon 90 days prior written notice.
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The fixed price period is the first 10 years of the contract term. The
fluctuating price period begins upon expiration of the fixed price period and
continues for the remainder of the contract term.
Power Purchase Provisions. The SO4 agreement provides for (1) capacity
payments as described below and (2) energy payments either at an annually
escalating rate or at a levelized rate for the fixed price period and energy
payments based on the cost that the purchasing utility avoids by purchasing
energy from the project instead of obtaining the energy from other sources for
the fluctuating price period.
Capacity Payments. A project will qualify for a fixed annual capacity
payment by meeting specified performance requirements during the months of June
through September of each year. The project must deliver an average
kilowatt-hour output during specified on-peak hours of each month in the
on-peak period at a rate corresponding to at least an 80% contract capacity
factor to meet its performance requirement. The contract capacity factor equals
(1) a plant's actual electricity output divided by (2) the product of the
project's contract capacity and the number of hours in the measurement period
(less applicable maintenance and curtailment hours). If a project maintains the
required 80% contract capacity factor, then Southern California Edison must pay
a fixed annual capacity payment equal to the product of the contract capacity
price set forth in the agreement and the project's contract capacity. The fixed
annual capacity payment is paid in monthly installments, and the monthly
installment may be reduced if the contract capacity factor is less than 80% for
the month. Capacity payments are weighted toward the on-peak months.
The project company is required to annually demonstrate its contract
capacity by satisfying the performance requirement. If the project company does
not do so, it may be placed on probation for up to 15 months, and, if the
project company cannot satisfy the performance requirement during the
probationary period, the contract capacity will be reduced to the greater of
(1) what has been delivered during the probationary period or (2) what can
reasonably be delivered. Additionally, failure to satisfy the performance
requirement will subject the project company to the penalties described below.
However, if the project company's failure to meet the performance requirement
is due to a forced outage or a request by Southern California Edison to reduce
delivery, Southern California Edison must continue to pay the full firm
capacity payment. If the project company is unable to provide contract capacity
due to uncontrollable forces (such as a flood or an earthquake), Southern
California Edison must continue to pay the full firm capacity payments for 90
days from the occurrence of the uncontrollable force.
Capacity Bonus Payments. Under the SO4 agreements, the project companies
are entitled to receive capacity bonus payments in an on-peak month if the
relevant project operates at least at an 85% contract capacity factor during
the on-peak hours of the on-peak month, and qualifies in respect of non-peak
months if the contract capacity factors for all on-peak months have been at
least 85% and the project operates at a contract capacity factor of at least
85% during on-peak hours of the relevant non-peak month.
Capacity bonus payments for each month increase with the level of
kilowatt-hours delivered between the 85% and 100% contract capacity factor
levels during the month. The capacity bonus payment for each month is equal to
a percentage of the firm capacity payment based on the project's on-peak
contract capacity factor (which percentage may not exceed 18% of one-twelfth of
the firm capacity payment).
Changes in Contract Capacity. The project company may reduce contract
capacity by notice to Southern California Edison. The project company must
refund Southern California Edison an amount of money equal to the difference
between the accumulated monthly capacity payments paid by Southern California
Edison prior to the receipt of the reduction notice and the total monthly
capacity payments Southern California Edison would have paid based on the
adjusted capacity price, as well as interest at the prime rate. If the project
company fails to give notice, it can reduce contract capacity if it refunds
said amount plus a penalty equal to the product of (1) the contract capacity
being reduced, (2) the difference between the contract capacity price and the
adjusted capacity price and (3) the number of years and fractions (not less
than one year) by which the project company has been deficient in giving the
prescribed notice. If, however, the adjusted capacity price is less than the
contract capacity price, then no penalty is due.
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Energy Payments. In addition to capacity payments, each SO4 agreement
provides that Southern California Edison must make monthly energy payments
based on the number of kilowatt-hours of energy delivered by the relevant
project during the month. Energy payments are weighted toward on-peak months
and on-peak hours.
Annual Forecast Energy Payments. The Leathers SO4 agreement is an annual
forecast energy payment SO4 agreement. During the fixed price period the
project company is paid a monthly energy payment based on a schedule of the
forecast of the annual marginal cost of energy, which lists a price per
kilowatt-hour of 15.6 cents for 1999.
Levelized Energy Payments. Under the Salton Sea Unit II SO4 agreement,
during the fixed price period the energy payments are levelized to yield an
annual average of 10.6 cents per kilowatt-hour, weighted based on the relative
amounts of time to which each different price applies during the summer and
winter periods of a year. The project must deliver to Southern California
Edison at least 70% of the average annual kilowatt-hour delivered to Southern
California Edison during periods when the levelized energy payment price was
greater than the energy price in the forecast of the annual marginal cost of
energy schedule. If the project fails to satisfy this performance obligation or
fails to perform any other contract obligations during the fixed price period,
and, at that time, the net present value of the cumulative energy payments
received exceeds the net present value of what the project company would have
been paid under the annual forecast energy payment SO4 agreement, the project
company must refund the difference. The project company must post a performance
bond, guarantee, letter of credit or other security to insure payment to
Southern California Edison of any refund.
Fluctuating Energy Payments. During the fluctuating price period, all of
the project companies are paid a monthly energy payment at a rate which is
based on the cost that Southern California Edison avoids by purchasing energy
from the project instead of obtaining the energy from other sources. Southern
California Edison's avoided cost is currently determined by an approved interim
formula which adjusts historic costs by an inflation/deflation factor
representing monthly changes in the cost of natural gas at the California
border and adjustment factors based on the time of day, week and year in which
the energy is delivered. Consequently, under this methodology, energy payments
under the SO4 agreements will fluctuate based on the time of generation and
monthly changes in average fuel costs in the California energy market.
Legislation recently adopted in California establishes that the price
qualifying facilities receive as energy payments would be modified from the
current short-run avoided cost basis to the clearing price established by the
California power exchange once specified conditions are met. As the main
condition, the legislation requires that the California Public Utilities
Commission must first issue an order determining that the California power
exchange is functioning properly for the purposes of determining the short-run
avoided cost energy payments to be made to non-utility power generators.
Additionally, the project company may, upon appropriate notice to Southern
California Edison, exercise a one-time option to elect to thereafter receive
energy payments based upon the clearing price from the California power
exchange.
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In April 1995, Southern California Edison forecast its future costs
avoided by purchasing energy from qualifying power facilities instead of
obtaining it from other sources as follows:
<TABLE>
<CAPTION>
YEAR LOW MEDIAN HIGH
-------- --------- -------- ---------
<S> <C> <C> <C>
1999 2.91 2.99 3.28
2000 3.11 3.22 3.60
2001 3.30 3.46 3.91
2002 3.42 3.59 4.13
2003 3.52 3.72 4.36
2004 3.62 3.88 4.61
2005 3.72 4.11 4.86
2006 3.83 4.31 5.16
2007 3.95 4.44 5.48
2008 4.06 4.59 5.82
2009 4.18 4.74 6.19
2010 4.31 4.89 6.59
2011 4.43 5.06 7.07
2012 4.57 5.22 7.60
2013 4.70 5.40 8.16
2014 4.84 5.58 8.76
2015 4.99 5.76 9.41
</TABLE>
The power market consultant's report (included as Appendix C to this
prospectus) also contains projections of future market prices of electricity.
Neither we nor any Imperial Valley designated subsidiary has prepared or relied
upon any these forecasts. We and the Imperial Valley designated subsidiaries
believe that all forecasts of energy prices are speculative in nature and that
there can be no assurance that the price paid by Southern California Edison for
energy in the future will be equal to any of the above forecasts. Southern
California Edison's actual energy price will be dependent upon, among other
factors, Southern California Edison's future fuel costs, system operation
characteristics, market prices for electricity (including California power
exchange prices) and regulatory action.
Curtailment. Southern California Edison is not required to accept or
purchase energy for a maximum of 300 hours per year during off-peak hours (1)
if the purchase would cost more than the costs Southern California Edison would
incur if it utilized energy from another source or (2) if the Southern
California Edison electric system demand would require that Southern California
Edison hydro-project water resources be spilled to reduce generation.
IMPERIAL VALLEY POWER PURCHASE AGREEMENTS
Salton Sea Unit I Power Purchase Agreement. The Salton Sea Unit I power
purchase agreement is not an SO4 agreement, although as described below it
contains many of the provisions customarily found in an SO4 agreement.
Term and Contract Capacity. The contract term is for 30 years from the
firm operation date of July 1, 1987. The contract capacity is 10 megawatts.
Capacity Payments. The capacity payment is based on a firm capacity price
which adjusts quarterly based on inflation-related indices. If Salton Sea Unit
I is able to deliver 100% of the contract capacity set forth in the agreement,
Salton Sea Unit I receives a monthly performance payment based on the then
current firm capacity price multiplied by the contract capacity and the energy
delivered from Salton Sea Unit I up to the contract capacity. Based on the
current capacity price of $127.80 per kilowatt-year, the annual maximum
capacity payment is $1,278,000. The Salton Sea Unit I power purchase agreement
does not provide for bonus capacity payments.
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If Salton Sea Unit I does not meet the performance requirement, Southern
California Edison may place the project on probation for a period not to exceed
15 months. If the performance requirement is not met during the probationary
period, Southern California Edison may derate the contract capacity.
Energy Payments. Salton Sea Unit I receives a monthly energy payment
calculated using a base price, which is subject to quarterly adjustments based
on inflation-related indices. The time period weighted average energy payment
was 5.4 cents per kilowatt-hour for the year ended December 31, 1998. As the
Salton Sea Unit I power purchase agreement is not an SO4 agreement, the energy
payments never revert to payments based on the cost that Southern California
Edison avoids by purchasing energy from Salton Sea Unit I instead of obtaining
the energy from other sources.
Salton Sea Unit II Power Purchase Agreement. Salton Sea Unit II sells
electricity to Southern California Edison under a modified SO4 agreement.
Term and Contract Capacity. The contract term is for 30 years from the
firm operation date of April 5, 1990. The contract capacity is 16.5 megawatts
during on-peak periods and 15 megawatts during mid-and off-peak periods.
Capacity Payments. Salton Sea Unit II has a contract capacity price of
$187 per kilowatt-year and, based on the contract capacity of 15 megawatts, the
annual maximum capacity payment is $2,805,000.
Energy Payments. The fixed price period for Salton Sea Unit II expires on
April 4, 2000. During the fixed price period, the energy payment is levelized
at a time weighted average of 10.6 cents per kilowatt-hour. After the fixed
price period, energy payments will be based on the cost that Southern
California Edison avoids by purchasing energy from Salton Sea Unit II instead
of obtaining the energy from other sources. For the period from April 1, 1994
through March 31, 2004, Southern California Edison is entitled to receive, at
no cost, 5% of all energy delivered in excess of contract capacity.
Salton Sea Unit III Power Purchase Agreement. Salton Sea Unit III sells
electricity to Southern California Edison under a modified SO4 agreement.
Term and Contract Capacity. The contract term is for 30 years from the
firm operation date of February 14, 1989. The contract capacity is 47.5
megawatts.
Capacity Payments. Salton Sea Unit III has a contract capacity price of
$175 per kilowatt-year and, based on the contract capacity of 47.5 megawatts,
the annual maximum capacity payment is $8,312,500.
Energy Payments. The fixed price period for Salton Sea Unit III expired on
February 13, 1999 and thus energy payments are now based on the cost that
Southern California Edison avoids by purchasing energy from Salton Sea Unit III
instead of obtaining the energy from other sources.
Salton Sea Unit IV Power Purchase Agreements. The Salton Sea Unit IV power
purchase agreement is not an SO4 agreement, although as described below it
contains many of the provisions customarily found in an SO4 agreement.
Term and Contract Capacity. The contract term is for 30 years from the
firm operation date of May 24, 1996. The contract capacity is 34 megawatts.
Capacity Payments. Through June 30, 2017, the capacity price is $121.72
per kilowatt-year plus quarterly inflation-related adjustments for 58.8% of the
contract capacity delivered by Salton Sea Unit IV. After June 30, 2017,
Southern California Edison will not be obligated to purchase this 58.8% of
capacity. Until the end of the contract term, Salton Sea Unit IV will be paid
$158 per kilowatt-year for 41.2% of the contract capacity delivered. The 1998
capacity payment was $5,010,000. Capacity bonus payments may be earned based on
the same criteria found in an SO4 agreement.
Energy Payments. Through June 30, 2017, the energy payments for 55.6% of
the total energy delivered by Salton Sea Unit IV (up to 110% of capacity) will
be calculated based on a base price of
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4.701 cents per kilowatt-hour, adjusted in accordance with inflation-related
indices. Until the end of the contract term, the energy payments for 44.4% of
the total energy delivered will be calculated according to a fixed price, based
on an energy payment schedule, for the first 10 years, Southern California
Edison's avoided cost plus a predetermined spread per kilowatt-hour for years
11 through 15 and Southern California Edison's avoided cost thereafter. After
June 30, 2017, all energy payments will be calculated as provided in the chart
below. However, Southern California Edison will not be obliged to purchase any
energy attributable to 55.6% of Salton Sea Unit IV's capacity. The energy
payments for the 44% portion of the agreement and, after June 30, 2017, all
energy delivered under the agreement, will be as follows:
<TABLE>
<CAPTION>
ENERGY PAYMENT
YEAR (CENTS/KILOWATT-HOUR) YEAR ENERGY PAYMENT (CENTS/KILOWATT-HOUR)
-------- ----------------------- ------------ ----------------------------------------------
<S> <C> <C> <C>
1999 10.7 2006 3.5+Southern California Edison's avoided cost
2000 10.9 2007 2.9+Southern California Edison's avoided cost
2001 11.2 2008 2.2+Southern California Edison's avoided cost
2002 11.7 2009 1.2+Southern California Edison's avoided cost
2003 12.1 2010 1.0+Southern California Edison's avoided cost
2004 12.2 2011--2025 Southern California Edison's avoided cost
2005 12.4
</TABLE>
Salton Sea Unit V Power Purchase Agreement. Salton Sea Power LLC and
CalEnergy Minerals LLC, the owners of the zinc facility, have entered into a
power sales agreement whereby Power LLC has agreed to supply electricity to
Minerals LLC and Minerals LLC has agreed to purchase its electricity
requirements from Power LLC up to 49 megawatts.
Conditions Precedent. Power LLC's and Minerals LLC's obligations under the
Salton Sea Unit V power purchase agreement are subject to the prior condition
that both Salton Sea Unit V and the zinc facility are ready to commence initial
operation. If, by a specified date, the zinc facility is ready to commence
initial operation, but Salton Sea Unit V is not, Power LLC will be liable to
Minerals LLC for any resulting damages or losses. If Salton Sea Unit V is ready
to commence operations before the zinc facility, Salton Sea Unit V will be
entitled to sell its output to other customers until the zinc facility is
ready. We expect that, under these circumstances, Salton Sea Unit V would seek
to make additional short term sales of electricity through the California power
exchange or in other short term transactions.
Term. The contract term is for 25 years from the date of initial
deliveries.
Energy Payments. Power LLC will be paid a monthly energy payment equal to
the product of (1) the total quantity in kilowatt-hour of electrical energy
purchased and received by Minerals LLC during the month multiplied by (2) the
product of the California power exchange price multiplied by a percentage to
adjust for transmission losses, minus an adjustment factor based on
transmission service charges.
Elmore Power Purchase Agreement. Elmore sells electricity to Southern
California Edison under an SO4 agreement.
Term and Contract Capacity. The contract term is for 30 years from the
firm operation date of January 1, 1989. The contract capacity is 34 megawatts.
Capacity Payments. Elmore has a contract capacity price of $198 per
kilowatt-year and, based on the contract capacity of 34 megawatts, the annual
maximum capacity payment is $6,732,000.
Energy Payments. The fixed price period expired on December 31, 1998 and
thus energy payments are now based on the cost that Southern California Edison
avoids by purchasing energy from the Elmore project instead of obtaining the
energy from other sources.
Leathers Power Purchase Agreement. Leathers sells electricity to Southern
California Edison under an SO4 agreement which is identical in all material
respects to the Elmore power purchase agreement.
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Term and Contract Capacity. The contract term is for 30 years from the
firm operation date of January 1, 1990. The contract capacity is 34 megawatts.
Capacity Payments. Leathers has a contract capacity price of $187 per
kilowatt-year and, based on the contract capacity of 34 megawatts, the annual
maximum capacity payment is $6,358,000.
Energy Payments. The Leathers power purchase agreement is an annual
forecast energy payment SO4 agreement. The fixed price period expired on
December 31, 1999, and thus energy payments are based on the cost that Southern
California Edison avoids by purchasing energy from the Leathers project instead
of obtaining the energy from other sources.
Del Ranch Power Purchase Agreement. Del Ranch sells electricity to
Southern California Edison under an SO4 agreement which is identical in all
material respects to the Elmore power purchase agreement.
Term and Contract Capacity. The contract term is for 30 years from the
firm operation date of January 2, 1989. The contract capacity is 34 megawatts.
Capacity Payments. Del Ranch has a contract capacity price of $198 per
kilowatt-year and, based on the contract capacity of 34 megawatts, the annual
maximum capacity payment is $6,732,000.
Energy Payments. The fixed price period expired on December 31, 1998 and
thus energy payments are now based on the cost that Southern California Edison
avoids by purchasing energy from the Del Ranch project instead of obtaining the
energy from other sources.
Vulcan Power Purchase Agreement. Vulcan sells electricity to Southern
California Edison under an SO4 agreement.
Term and Contract Capacity. The contract term is for 30 years from the
firm operation date of February 10, 1986. The contract capacity is 29.5
megawatts.
Capacity Payments. Vulcan has a contract capacity price of $158 per
kilowatt-year and, based on the contract capacity of 29.5 megawatts, the annual
maximum capacity payment is $4,661,000.
Energy Payments. The fixed price period expired on February 9, 1996. As a
result, energy payments for the balance of the contract term will be based on
the cost that Southern California Edison avoids by purchasing energy from the
Vulcan project instead of obtaining the energy from other sources.
TRANSMISSION SERVICE AGREEMENTS
Salton Sea Unit I delivers electricity to Southern California Edison at
the Salton Sea Unit I site. Each of the other operating Imperial Valley
projects delivers electricity to Southern California Edison on transmission
lines owned by the Imperial Irrigation District. These transmission lines
interconnect the operating plants with Southern California Edison's
transmission system. Transmission service charges are paid monthly to the
Imperial Irrigation District under transmission service agreements. The
transmission service agreement for Salton Sea Unit II expires in 2020; for
Salton Sea Unit III in 2019; and for Salton Sea Unit IV in 2026. The
transmission service agreements for the Leathers project, the Elmore project,
the Del Ranch project and the Vulcan project expire in 2015.
Salton Sea Power LLC has entered into a transmission service agreement
with the Imperial Irrigation District for Salton Sea Unit V and CE Turbo LLC
has entered into a transmission service agreement with the Imperial Irrigation
District for the CE Turbo project. These new agreements are similar to the
transmission service agreements for the operating Imperial Valley projects and
their terms are 30 years from the date of initial service. Power LLC has also
entered into a construction agreement with the Imperial Irrigation District
which obligates the Imperial Irrigation District to construct the necessary
transmission facilities to provide the transmission and distribution services
for Salton Sea Unit V and the CE Turbo project described above.
OPERATION AND MAINTENANCE SERVICES
CalEnergy Operating Corporation provides day-to-day operation and
maintenance services for the Imperial Valley projects under long-term operation
and maintenance agreements with the Imperial
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Valley project companies. The services provided by CalEnergy Operating under
the operation and maintenance agreements include, among other services, plant
operations, development and implementation of preventive maintenance plans,
maintenance of inventory, procurement of spare parts and disposal of spent
geothermal brine. CalEnergy Operating is reimbursed by the Imperial Valley
project companies for its actual costs and expenses incurred in the provision
of services under the operation and maintenance agreements.
ADMINISTRATIVE SERVICES
Magma provides administrative, management and technical services for
Salton Sea Units I-V and the CE Turbo project under long-term administrative
services agreements with the relevant Imperial Valley project companies.
CalEnergy Operating provides administrative, management and technical services
for the Vulcan, Elmore, Del Ranch and Leathers projects under long-term
administrative services agreements with the relevant Imperial Valley project
companies. The services provided by Magma and CalEnergy Operating under the
administrative services agreements include, among other services, (1) ordinary
services such as general bookkeeping and financial accounting services, general
legal services, personnel administration and payroll services, energy marketing
services and assistance in obtaining necessary franchises and permits, and (2)
technical services such as environmental compliance services, industrial
hygiene and structural engineering. Magma and CalEnergy Operating receive an
administrative fee equal to their actual costs plus a reasonable profit and a
technical fee equal to an amount specified in the agreements. The fees received
by Magma under the administrative services agreements will be included in
Magma's available cash flow.
Magma and CalEnergy Operating used to provide services to the Imperial
Valley project companies under the administrative services agreements using
CalEnergy Operating personnel, supplemented by personnel from MidAmerican. In
connection with the divestiture of 50% of our interests to El Paso Energy, we
entered into an administrative services agreement with MidAmerican in order to
provide administrative services that have customarily been provided by
MidAmerican for the Imperial Valley projects. This agreement will provide that
MidAmerican will be paid (1) for its actual out-of-pocket costs to third
parties and (2) a separate fee for services provided by MidAmerican employees
and use of MidAmerican assets. The fee described in clause (2) will be
subordinate to payment of debt service on the Securities.
SURFACE LAND USE
IMPERIAL IRRIGATION DISTRICT
Salton Sea Brine Processing and Salton Sea Power Generation entered into a
ground lease with the Imperial Irrigation District. The Imperial Irrigation
District has leased the real property on which Salton Sea Units I and II are
located, consisting of approximately 117 acres, to Salton Sea Brine Processing
and Salton Sea Power Generation for a period of 33 years. The Salton Sea Units
I and II ground lease is triple net with original base rental payments of $400
per acre per annum. Every 5 years this per acre price may be adjusted based on
changes in the consumer price index as specified in the lease. The Salton Sea
Units I and II ground lease permits improvements and construction on the leased
property to increase capacity.
MAGMA
Magma and its affiliates Imperial Magma LLC and Magma Land Company I
control the land on which the Imperial Valley projects (other than Salton Sea
Units I and II) are located through a combination of fee, leasehold and royalty
interests. The Imperial Valley project companies have entered into long-term
agreements with Magma, Imperial Magma and Magma Land to obtain the surface
rights necessary to operate their projects. The payments received by Magma,
Imperial Magma and Magma Land under the surface land use agreements will be
included in Magma's available cash flow.
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GEOTHERMAL RIGHTS
Magma and Magma Land hold rights to use underground geothermal resources
in the Imperial Valley through a combination of fee and leasehold interests.
Magma and Magma Land have granted the Imperial Valley project companies the
rights to use these resources for power production purposes at their respective
projects under long-term easement agreements. We believe that the Imperial
Valley project companies have sufficient rights to geothermal resources to
operate their projects at capacity until the final maturity date of the
Securities.
CONSTRUCTION CONTRACTS
SALTON SEA UNIT V
Stone & Webster agreed to design, engineer, procure, construct, commission
and test Salton Sea Unit V for an aggregate fixed price of $91,787,000. If
Salton Sea Unit V fails to satisfy performance guarantees regarding energy
production, thermal energy production and brine temperature, Stone & Webster
must pay performance liquidated damages in accordance with the terms of the
Salton Sea Unit V construction contract. Stone & Webster will also be obligated
to pay delay liquidated damages if Salton Sea Unit V is not completed on
schedule. If Stone & Webster completes construction ahead of schedule, Salton
Sea Power LLC must pay a bonus to Stone & Webster. Stone & Webster's liability
for liquidated damages under the contract is limited to 20% of the contract
price and its aggregate liability thereunder is limited to the full contract
price. Stone & Webster's payment and performance obligations under the Salton
Sea Unit V construction contract are guaranteed by its parent, Stone & Webster,
Incorporated. Salton Sea Unit V is expected to commence commercial operation in
mid-2000.
CE TURBO PROJECT
Stone & Webster agreed to design, engineer, procure, construct, commission
and test the CE Turbo project, as well as make capital improvements to the
brine facilities at the Imperial Valley projects, for an aggregate fixed price
of $49,800,000. If the CE Turbo project fails to satisfy performance guarantees
regarding energy production, Stone & Webster must pay performance liquidated
damages in accordance with the terms of the CE Turbo construction contract.
Stone & Webster will also be obligated to pay delay liquidated damages if the
CE Turbo project is not completed on schedule and is entitled to a bonus if
construction is completed ahead of schedule. Stone & Webster's liability for
liquidated damages under the contract is limited to 20% of the contract price
and its aggregate liability thereunder is limited to the full contract price.
Stone & Webster's payment and performance obligations under the CE Turbo
construction contract are guaranteed by its parent, Stone & Webster. The CE
Turbo project is expected to commence commercial operation in mid-2000.
PROJECT COMPANY OWNERSHIP
SALTON SEA PROJECTS
Salton Sea Units I, II and III are owned by Salton Sea Power Generation,
Salton Sea Unit IV is owned by Salton Sea Power Generation and Fish Lake Power
LLC and Salton Sea Unit V is owned by Salton Sea Power LLC. Salton Sea Power
Generation is 99% owned by Salton Sea Brine Processing and 1% owned by Salton
Sea Power, which in turn is 99% owned by Magma and 1% owned by Salton Sea
Funding Corporation. Salton Sea Power also owns a 1% general partnership
interest in Salton Sea Brine Processing and Magma owns a 99% limited
partnership interest Salton Sea Brine Processing. Ninety-nine percent of the
capital stock of Fish Lake is owned by Magma, with Salton Sea Funding
Corporation owning the remaining 1%. CE Salton Sea Inc. owns 100% of the
membership interests in Power LLC. Magma owns 99% of the capital stock of CE
Salton Sea and Salton Sea Funding Corporation owns the remaining 1%. Magma owns
100% of the capital stock of Salton Sea Funding Corporation, and we own 100% of
the capital stock of Magma. Below is a chart illustrating the ownership
structure for Salton Sea Units I-V.
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[BLOCK CHART SHOWING THE OWNERSHIP STRUCTURE OF SALTON SEA UNITS I-V]
PARTNERSHIP PROJECTS
The Leathers Project is owned by Leathers, the Del Ranch project is owned
by Del Ranch, the Elmore project is owned by Elmore, the Vulcan project is
owned by Vulcan and the CE Turbo project is owned by Turbo LLC. Each of
Leathers, Del Ranch and Elmore are 40% owned by CalEnergy Operating and 10%
owned by Magma. The remaining 50% of the interests in Leathers, Del Ranch and
Elmore are owned by San Felipe Energy Company, Conejo Energy Company and Niguel
Energy Company, respectively. San Felipe, Conejo and Niguel are each
wholly-owned by CalEnergy Operating. Each of Vulcan Power Company and VPC
Geothermal LLC own a 50% interest in Vulcan. VPC Geothermal is wholly owned by
Vulcan Power. CalEnergy Operating and Vulcan Power are 99% owned by Magma and
1% owned by Salton Sea Funding Corporation. CE Salton Sea owns 100% of Turbo
LLC. Below is a chart illustrating the ownership structure for the Vulcan, Del
Ranch, Elmore, Leathers and CE Turbo projects.
[BLOCK CHART SHOWING THE OWNERSHIP STRUCTURE OF THE ELMORE, DEL RANCH, VULCAN,
LEATHERS AND CE TURBO PROJECTS]
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PROJECT FINANCING DEBT
The revenues received by the Imperial Valley project companies from the
geothermal projects and the zinc facility are used to make payments on
outstanding senior secured bonds issued by Salton Sea Funding Corporation in
multiple series. As of September 30, 1999, outstanding Imperial Valley project
financing debt totaled $597.9 million and consisted of the following:
o $33,482,000 of 6.69% Series A Senior Secured Notes due 2000;
o $104,378,000 of 7.37% Series B Senior Secured Bonds due 2005;
o $109,250,000 of 7.84% Series C Senior Secured Bonds due 2010;
o $6,825,000 of 7.02% Series D Senior Secured Bonds due 2000;
o $58,961,000 of 8.30% Series E Senior Secured Bonds due 2011; and
o $285,000,000 of 7.475% Series F Senior Secured Bonds due 2018.
Collateral; Guarantees. The proceeds of the Imperial Valley project
financing debt were loaned by Salton Sea Funding Corporation to subsidiaries of
Magma. The Imperial Valley project financing debt is secured by a pledge of the
capital stock of Salton Sea Funding Corporation and guaranteed by the Magma
subsidiaries. These loans and guarantees are secured by the following
collateral:
o an assignment of the revenues, equity distributions and royalties
received by the Magma subsidiaries;
o a lien on substantially all of the assets of the Magma subsidiaries,
including the geothermal projects and related material contracts; and
o a pledge of the equity interests in the Magma subsidiaries.
In connection with the divestiture of 50% of our interests to El Paso
Power, MidAmerican provided a guarantee to Salton Sea Funding Corporation of
the payment by the owners of the zinc facility of a portion of the principal of
and interest on the loans made to the Magma subsidiaries.
Additional Project Debt. The Imperial Valley project financing documents
permit the incurrence of the following additional project-level debt, subject
to the satisfaction of debt service coverage tests, ratings confirmations and
other conditions described in the Imperial Valley project financing documents:
o debt incurred to finance additional permitted power facilities in the
Imperial Valley region;
o debt incurred to finance capital improvements to the Imperial Valley
projects required to comply with applicable laws;
o debt incurred to finance discretionary capital improvements to the
Imperial Valley projects;
o up to $15 million of working capital debt;
o debt incurred in connection with a debt service reserve letter of
credit;
o debt incurred in connection with permitted interest rate protection
agreements;
o up to $30 million of debt incurred in connection with the development,
construction, ownership, operation, maintenance or acquisition of
permitted power facilities; and
o up to $200 million of subordinated debt from affiliates for purposes
specified in the Imperial Valley project financing documents.
Distributions. Distributions are permitted under the Imperial Valley
project financing documents upon the satisfaction of the following conditions:
o the project accounts are fully funded;
o no default or event of default has occurred and is continuing;
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o the debt service coverage ratio for the prior four fiscal quarters is
at least 1.4 to 1.0, if the distribution occurs prior to 2000, or 1.5 to
1.0, if the distribution occurs during or after 2000;
o there are sufficient geothermal resources to operate the Imperial
Valley projects at their required levels; and
o each Imperial Valley project under construction will not have failed to
be completed by its guaranteed substantial completion date (or, in the
alternative, buy-down or ratings confirmation requirements will have been
satisfied).
SELECTED FINANCIAL INFORMATION
The Imperial Valley project companies made distributions to the designated
subsidiaries in 1996, 1997 and 1998 in the amounts of approximately $75.3
million, $146.4 million and $134.0 million, respectively.
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SARANAC PROJECT
The Saranac project is a 240 megawatt natural gas-fired combined cycle
cogeneration facility located in Plattsburgh, New York. The Saranac project is
owned by Saranac Power Partners, L.P. and commenced commercial operation in
June 1994. Below is a chart illustrating the commercial structure of the
Saranac project.
[BLOCK CHART SHOWING THE COMMERCIAL STRUCTURE OF THE SARANAC PROJECT]
SALE AND TRANSMISSION OF POWER
SARANAC POWER PURCHASE AGREEMENT
Saranac sells capacity and energy from the Saranac project to New York
State Electric and Gas under the Saranac power purchase agreement. The initial
term of the Saranac power purchase agreement expires in June 2009. The contract
capacity under the Saranac power purchase agreement is 240 megawatts. New York
State Electric and Gas's long-term debt obligations were rated "Baa1" by
Moody's and "BBB" by S&P as of January 1999.
Payments for Actual Generation. The Saranac power purchase agreement
provides for payments by New York Electric and Gas for electricity produced by
the Saranac project at fixed prices specified in a schedule set forth in the
Saranac power purchase agreement, which include both a capacity component and
an energy component. Peak-hour pricing, which applies from 7:00 a.m. to 10:00
p.m., weekdays, excluding holidays, ranges from 10.34 cents per kilowatt-hour
in 1999 to 15.82 cents per kilowatt-hour in 2009. Off-peak hour pricing ranges
from 6.09 cents per kilowatt-hour in 1999 to 9.39 cents per kilowatt-hour in
2009. New York State Electric and Gas has sought to reduce these rates on the
alleged grounds that they exceed the levels permitted under the Public Utility
Regulatory Policies Act.
Dispatch and Curtailment. By an amendment to the Saranac power purchase
agreement, New York State Electric and Gas obtained limited rights to dispatch
the Saranac project at less than full capacity, agreed to make payments in
connection with any dispatch below full capacity based on the amounts Saranac
would have received if it had delivered electricity less amounts saved as a
result of its lower level of operation, and waived curtailment rights under
FERC regulations that might otherwise be claimed to apply.
Regulatory and Other Termination Rights. New York State Electric and Gas
may terminate the Saranac power purchase agreement without liability to Saranac
if the Saranac project ceases to be a
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qualifying facility under the Public Utility Regulatory Policies Act. In the
event New York State Electric and Gas terminates the Saranac power purchase
agreement as a result of a default by Saranac, Saranac is obligated to pay New
York State Electric and Gas an amount equal to the difference between the total
amount paid by New York State Electric and Gas for electricity under the
Saranac power purchase agreement prior to the termination and the amount New
York State Electric and Gas would have paid for the electricity during the term
of the Saranac power purchase agreement at a price based on the cost that New
York State Gas and Electric avoids by purchasing energy from the Saranac
project instead of obtaining the energy from other sources, plus interest.
Saranac has secured this obligation by a mortgage on and security interest in
the Saranac project which is subordinated to the liens of the Project lenders
under the Saranac project financing documents.
Other Rights of New York State Electric and Gas. If:
o Saranac fails to operate the plant for a sufficient period of time as
to create a reasonable expectation that Saranac does not intend to resume
operation;
o a bankruptcy or foreclosure proceeding against Saranac commences;
o deficiencies in project maintenance as determined by the lenders'
independent engineer are not remedied by Saranac within the time
specified by this engineer; or
o a default occurs under Saranac's agreements with its lenders,
then New York State Electric and Gas has the right to step in and operate the
Saranac project until the circumstance giving rise to this right has been
remedied, subject to the rights of the project lenders under the Saranac
project financing documents. None of these circumstances currently exist.
INTERCONNECTION
The facilities necessary to interconnect the Saranac project to the New
York State Electric and Gas system were constructed at Saranac's expense and
are owned and maintained by New York State Electric and Gas. Under the Saranac
power purchase agreement, New York State Electric and Gas is required to
arrange for the transmission of electricity generated by the Saranac project to
the extent necessary for the operation of the New York State Electric and Gas
system. For this transmission, Saranac made payments to New York State Electric
and Gas which were approximately $5,050,000 in 1998, and which increase by 5%
each year.
SALE OF THERMAL ENERGY
Saranac sells steam to Georgia-Pacific and Tenneco Packaging under
long-term steam sales agreements. We believe these agreements will enable
Saranac to sell the minimum annual quantity of thermal energy necessary for the
Saranac project to maintain its qualifying facility status under the Public
Utility Regulatory Policies Act for the term of the Saranac power purchase
agreement.
FUEL PROCUREMENT
NATURAL GAS SUPPLY
Saranac entered into a gas sale and purchase agreement with Shell Canada
Limited which provides for the delivery of a maximum daily volume of 51,000
MMBtu of gas on a firm basis for 15 years, expiring in May 2007. The agreement
has been assigned to Coral Energy Canada, an affiliate of Shell Canada, and
guaranteed by Shell Canada. The gas supply agreement provides for an initial
gas price of $2.97 per MMBtu (1994 dollars), which escalates at 4% annually,
and Saranac must pay the unutilized firm transportation costs incurred by Coral
Energy if Saranac does not take the maximum daily volume of gas. In each year
during the term of the gas supply agreement, Saranac is obligated to take or
pay for an amount of gas equal to at least 80% of the aggregate of the maximum
daily volumes of gas for each day in the year.
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NATURAL GAS TRANSPORTATION
Saranac entered into an agreement for firm gas transportation service with
TransCanada Pipelines Limited, which expires on the later of October 2008 or
another date determined by Saranac, but in no case later than March 2010. The
TransCanada gas transportation agreement provides for transportation of a
maximum daily volume of gas not to exceed 53,000 MMBtu from the
Alberta/Saskatchewan border to the United States/Canada border. Saranac
assigned the TransCanada gas transportation agreement to Shell Canada, which
pays TransCanada a portion of the payments it receives from Saranac for gas
supply under the gas supply agreement described above.
North Country Gas Pipeline Corporation, a wholly-owned subsidiary of
Saranac, transports the gas required for operation of the Saranac project from
the United States/Canada border approximately 22 miles to the Saranac project.
North Country has entered into a gas transportation agreement with Saranac
which expires in June 2024, but which can be terminated by Saranac upon one
year's notice after June 2009. The North Country gas transportation agreement
provides for daily deliveries of gas up to a maximum of 51,000 MMBtu on a firm
basis and 5,000 MMBtu on an interruptible basis. The payments made by Saranac
under the North Country gas transportation agreement provide for a recovery of
North Country's costs of acquiring, financing and maintaining its pipeline
facilities.
OPERATION AND MAINTENANCE SERVICES
Saranac entered into a 16-year agreement with Falcon Power Operating which
expires in July 2010 for the operation and maintenance of the Saranac project.
The duties of Falcon Power Operating under this agreement include coordinating
day-to-day operations with New York State Electric and Gas and the purchasers
of thermal energy from the Saranac project, performing routine on-line
maintenance and scheduled off-line maintenance, taking corrective action with
respect to any unscheduled outages and providing reports to Saranac regarding
the amount of electricity and thermal energy generated, the volume of fuel
consumed and the level of usage of other utilities. Falcon Power Operating is
paid a fixed monthly management fee of $125,000, adjusted annually for cost of
living increases, and is reimbursed for the direct costs of its services.
Falcon Power Operating is entitled to a bonus or is required to pay a penalty
based on the annual availability and heat rate of the Saranac project, provided
that the total bonus or penalty in any year may not exceed 50% of the aggregate
management fees for the year. Saranac may terminate the Saranac operation and
maintenance agreement if, due to Falcon Power Operating's operation of the
Saranac project, the annual availability of the Saranac project is less than
86% of its potential availability or the average annual heat rate exceeds the
maximum rate specified in the agreement. The liability of each of Falcon Power
Operating and Saranac (other than for penalties and bonuses) under the
operation and maintenance agreement is limited to an aggregate amount not to
exceed $1.5 million in excess of any available insurance proceeds.
OWNERSHIP OF PROJECT SITE
Title to the Saranac project and the interests in the land on which it was
constructed are held by the County of Clinton Industrial Development Agency.
Saranac occupies the Saranac project site under an installment sale agreement
with the Clinton IDA. The Clinton IDA has agreed to sell the property to
Saranac for payments equal to the amounts due from the Clinton IDA with respect
to the Saranac project financing documents and other expenses incurred by the
Clinton IDA relating to the Saranac project. The installment sale agreement
will terminate and the property will be conveyed to Saranac in 2024. The
Clinton IDA has entered into a similar installment sale agreement with North
Country with respect to the pipeline facilities used by North Country to
transport gas to the Saranac project, which terminates in 2009.
PROJECT COMPANY OWNERSHIP
Saranac Energy Company, Inc., an indirect wholly-owned subsidiary of
Falcon Seaboard Resources, is the sole general partner of Saranac and also owns
a limited partnership interest in
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Saranac. The other limited partners in Saranac are TPC Saranac Partner One,
Inc. and TPC Saranac Partner Two, Inc., each a wholly-owned indirect subsidiary
of Tomen Corporation, and GE Capital. Below is a chart illustrating the
ownership structure for the Saranac project.
[BLOCK CHART SHOWING THE OWNERSHIP STRUCTURE OF THE SARANAC PROJECT]
----------
(1) The respective percentages of distributions allocated to Saranac Energy
Company, the TPC Saranac partners and GE Capital are set forth in the
Saranac partnership agreement and described below.
PROJECT FINANCING DEBT
Saranac and the Clinton IDA financed the construction of the Saranac
project with commercial term loans made under the Saranac credit agreement. GE
Capital, which holds the largest percentage of the debt outstanding under the
Saranac credit agreement, is also a limited partner in Saranac. As of September
30, 1999, the aggregate principal amount outstanding under the Saranac credit
agreement was $183.1 million. Through swap arrangements, the interest rate on
all of the term loans outstanding under the Saranac credit agreement has been
fixed at a current annual rate of 8.185%, which will increase to 8.31% in
October 2001 and 8.56% in October 2005. In addition to the outstanding term
loans, the Saranac credit agreement provides for the issuance of up to $20.5
million in letters of credit for Coral Energy and up to $6.6 million for a
letter of credit to secure a debt service reserve fund to support the Saranac
project financing debt. The term loans outstanding under the Saranac credit
agreement mature on March 31, 2008 and are payable in 54 quarterly principal
installments which increase in annual aggregate amount from $6.14 million in
1998 to $34.38 million in 2007.
Collateral. Saranac is jointly and severally liable with the Clinton IDA
on the loans outstanding under the Saranac credit agreement, and the liability
of the Clinton IDA is limited to recourse to the Saranac project. Saranac's
obligations under the Saranac project financing documents are secured by liens
on substantially all of the real and personal property of Saranac.
Limitation on Distributions. Distributions to the Saranac partners may be
made monthly with excess cash flow from the Saranac project, to the extent
permitted by the Saranac partnership agreement, upon satisfaction of the
following conditions:
(1) no default or event of default has occurred under the Saranac project
financing documents;
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(2) all project accounts are fully funded to their required levels; and
(3) the debt service coverage ratio for the preceding three-month period
is at least 1.20 to 1.0.
If the debt service coverage ratio test described in clause (3) immediately
above is not satisfied for six consecutive quarters, all amounts otherwise
distributable to the Saranac partners for the next three months will be
retained for application to mandatory prepayment of amounts owing under the
Saranac project financing documents.
Additional Debt. Saranac is prohibited from incurring debt other than
under the Saranac project financing documents, except for:
(1) customary trade debt;
(2) debt not to exceed $750,000 incurred in accordance with the approved
Saranac operating budget;
(3) debt incurred to redeem the Saranac limited partnership interest of GE
Capital upon specified regulatory events; this debt must be repaid only
from amounts which would otherwise have been distributed to GE Capital
in respect of its Saranac limited partnership interest;
(4) intercompany debt between Saranac and North Country; and
(5) debt secured by (a) liens securing the purchase of property in an
aggregate principal amount not to exceed $250,000 and (b) liens in
favor of New York State Electric and Gas, Georgia-Pacific and the
Clinton County Development Corp. permitted under the Saranac project
financing documents.
PARTNERSHIP DISTRIBUTIONS
Each of the Saranac partners has an interest in cash distributions by
Saranac which changes when after-tax rates of return specified in the Saranac
partnership agreement are achieved by GE Capital and the TPC Saranac partners
on their contributions to Saranac. The cash distributions of Saranac are
divided into three levels:
o Level 1: distributions in fixed amounts payable during the first 15
years of operation of the Saranac project, which are applied first to pay
debt service and other amounts due under the Saranac project financing
documents and any refinancing loans, with the remainder paid to GE
Capital to enable it to achieve a base rate of return;
o Level 2: distributions of the Saranac available cash remaining after
payment of the level 1 distributions during the first 15 years of
operation of the Saranac project. During the first 15 years of operation
of the Saranac project, Saranac Energy will receive 63.51% of the level 2
distributions until TPC Saranac partners achieve an 8.35% rate of return
and, after this return is achieved, which we expect to occur in 2000,
Saranac Energy will receive 81.18% of the level 2 distributions.
o Level 3: distributions after the first 15 years of operation of the
Saranac project. After the first 15 years of operation of the Saranac
project, Saranac Energy will receive 68% of the level 3 distributions
until GE Capital achieves a supplemental rate of return specified in the
Saranac partnership agreement and, thereafter, Saranac Energy will
receive 76% of the level 3 distributions.
Distributions which would otherwise be payable to Saranac Energy and the
TPC Saranac partners on a quarterly basis may be required to be retained in a
reserve account established under the Saranac project financing documents. If
the ratio of available cash from the Saranac project to the scheduled level 1
distributions is less than 1.40 to 1.0 for any quarter, all level 2
distributions payable to Saranac Energy will be retained in the reserve
account. If this situation continues for three consecutive quarters, the amount
on deposit in the reserve account will be distributed to GE Capital as an early
level 1 distribution. When the level 1 distribution ratio has been maintained
at 1.40 to 1.0
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or greater for three consecutive quarters, the amount on deposit in the reserve
account will be released to Saranac Energy. Amounts otherwise distributable to
Saranac Energy may also be retained in a reserve account if an event has
occurred which if not cured would give GE Capital the right to replace Saranac
Energy as the general partner of Saranac. These amounts will be paid to GE
Capital if the event is not cured.
SELECTED FINANCIAL INFORMATION
Saranac made distributions to Saranac Energy in 1995, 1996, 1997 and 1998
in the amounts of approximately $13.3 million, $21.7 million, $22.8 million and
$16.2 million, respectively.
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POWER RESOURCES PROJECT
The Power Resources project is a 200 megawatt natural gas-fired combined
cycle cogeneration facility located near Big Spring, Texas. The Power Resources
project is owned by Power Resources, Inc. and commenced commercial operation in
June 1988. Below is a chart illustrating the commercial structure of the Power
Resources project.
[BLOCK CHART SHOWING THE COMMERCIAL STRUCTURE OF THE POWER RESOURCES PROJECT]
SALE AND TRANSMISSION OF POWER
POWER RESOURCES POWER PURCHASE AGREEMENT
Power Resources sells capacity and energy to Texas Utilities under the
Power Resources power purchase agreement. The initial term of the Power
Resources power purchase agreement expires in September 2003. The contract
capacity under the Power Resources power purchase agreements is 200 megawatts.
Texas Utilities' long-term unsecured debt obligations were rated "Baa1" by
Moody's, "BBB" by S&P and BBB+ by Duff & Phelps as of January 1999.
Payments. The Power Resources power purchase agreement provides for
payments by Texas Utilities for capacity and energy produced by the Power
Resources project according to a fixed schedule set forth in the contract. The
capacity and energy rates for the remaining term of the Power Resources power
purchase agreement are as follows:
<TABLE>
<CAPTION>
CAPACITY ENERGY
YEAR ($/KILOWATT/MONTH) (CENTS/KILOWATT-HOUR)
---------------- -------------------- ----------------------
<S> <C> <C>
1999 ......... 16.24 3.17
2000 ......... 16.81 3.28
2001 ......... 17.40 3.40
2002 ......... 18.00 3.52
2003 ......... 18.63 3.64
</TABLE>
However, for any month in which the rolling 12-month average capacity
factor exceeds 72.5%, Power Resources is paid an energy payment for the billing
kilowatt-hour for the months which are in excess of the 72.5% annual capacity
factor at a rate based on 99% of Texas Utilities' average cost of gas and a
specified heat rate. There is no change in the capacity payment in this
circumstance.
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Backdown. Texas Utilities has the right to request Power Resources to
backdown generation by up to 200,000 megawatt-hour per year. In addition.
subject to limitations specified in the Power Resources power purchase
agreement, Texas Utilities may request additional backdown. Over the last five
years, Texas Utilities has taken 300,000 megawatt-hour of backdown each year.
We believe that 300,000 megawatt-hour represents the upper limit on annual
backdown.
Texas Utilities Purchase Option. Texas Utilities has the option to
purchase the Power Resources project at the end of the term of the Power
Resources power purchase agreement. In addition, during the term of the Power
Resources power purchase agreement and for a period of one year following the
expiration of the agreement, Texas Utilities has a right of first refusal to
purchase the Power Resources project if Power Resources determines to lease,
sell or otherwise dispose of the Power Resources project. The purchase price
will be the agreed-upon appraised fair market value for the Power Resources
project.
Arbitration. Disputes regarding replacement of integral components of the
Power Resources project (including the generator stator, generator rotor, main
power transformer or steam turbine) and disputes concerning sales of the Power
Resources project assets in connection with Texas Utilities' option to purchase
or right of first refusal are subject to arbitration under the Texas General
Arbitration Act.
INTERCONNECTION
At Power Resources' expense, Texas Utilities modified an existing
switching station and existing transmission facilities and constructed new
transmission facilities in order to facilitate the signing of the Power
Resources power purchase agreement. Power Resources constructed an auxiliary
switchyard and substation to complete the interconnection. The Power
Resources-constructed facilities are required to interconnect with Texas
Utilities' facilities. The interconnection facilities are operated and
maintained by Texas Utilities for a minimal fee payable by Power Resources.
SALE OF THERMAL ENERGY
Power Resources has entered into a 15-year thermal energy purchase
agreement with Fina Oil and Chemical under which Power Resources agrees to
supply Fina with up to 150,000 pounds per hour of process thermal energy for
use in Fina's oil refinery, which is adjacent to the Power Resources project.
Fina returns any resulting thermal energy condensate to the Power Resources
project for re-use. The initial term of the agreement expires in September of
2003, but the agreement is subject to extension upon mutual consent by the
parties. As long as Power Resources meets its supply obligations under the
thermal energy purchase agreement, Fina is required to purchase at least the
minimum amount of thermal energy per year required to allow the Power Resources
project to maintain its qualifying facility status, even if the oil refinery is
closed or if Fina builds its own cogeneration facility. The thermal energy
purchase price is $2.48 per thousand pounds based on a base rate of $2.00
escalating at 2% annually from the commencement of delivery. If Fina closes the
refinery, the purchase price would be 60% of the contractual rate. We believe
that the refinery is critical to Fina's operations and is likely to continue
production through at least the end of the Power Resources power purchase
agreement term in 2003.
FUEL PROCUREMENT
NATURAL GAS SUPPLY
Under a fuel purchase agreement between Fina and Power Resources, Power
Resources is obligated to purchase, at $2.79 per MMbtu for 1999 escalating by
2% per year thereafter, an average of 3,600 million MMBtu per day of refinery
gas for use in the Power Resources project's combustion turbines. To meet its
additional gas requirements, Power Resources has entered into a gas purchase
agreement with CE Texas Gas, which expires on December 30, 2003. The
contractual rates under this gas purchase agreement are fixed at $2.98 per
MMBtu for 1998 and escalate by 3.0% per year thereafter, plus an annual
reservation fee of $580,842 which also escalates by 3.0% per year. Power
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Resources pays a fuel transportation charge to CE Texas Gas of $0.075 per MMBtu
for each MMBtu delivered by CE Texas Gas up to an average of 25,000 MMBtu per
day, and $0.06 per MMBtu delivered which exceeds an average of 25,000 MMBtu per
day, calculated on a monthly basis. In order to meet its supply requirements to
Power Resources, CE Texas Gas entered into a gas purchase agreement with Louis
Dreyfus Natural Gas Corporation which expires on October 1, 2003. Under this
agreement, Dreyfus will make available, sell and deliver to CE Texas Gas on a
firm basis, and CE Texas Gas will purchase and receive from Dreyfus on a firm
basis, contracted amounts of gas, allocated among four pricing tiers,
sufficient to meet the operating requirements of the Power Resources project.
If Dreyfus fails to perform under the contract, Dreyfus must reimburse CE Texas
Gas for any additional costs which CE Texas Gas incurs in obtaining the
required natural gas. If CE Texas Gas fails to purchase the agreed amount of
natural gas, it must reimburse Dreyfus for any amount of natural gas that
Dreyfus is unable to resell in the spot market. The first tier of gas
deliveries are made according to a fixed price which is $2.23 per MMBtu in 1999
and which incrementally increases to $2.51 per MMBtu in 2003 for up to 31,200
MMBtu per day. The second tier quantities are set at the West Texas spot price
plus 5 cents per MMBtu for up to an additional 3,000 MMBtu per day. The third
tier of purchases is for up to an additional 15,000 MMBtu per day, and prices
for the third and fourth tiers are negotiated between Dreyfus and Power
Resources.
NATURAL GAS TRANSPORTATION
Under the terms of the Dreyfus gas purchase agreement, Dreyfus will
deliver gas into various interconnection points of the Westar Transmission
System. CE Texas Gas has entered into long-term transmission agreements with
Westar for the delivery of gas to the Power Resources project. Under these gas
transportation agreements, CE Texas Gas pays been $0.06 and $0.12 per MMBtu to
transport the gas, depending on the point of entry into the Westar pipeline
system. These agreements are effective until September 30, 2003.
WATER SUPPLY
In addition to the thermal energy condensate returned to the Power
Resources project by Fina under the thermal energy purchase agreement, the
Power Resources project receives up to 155 gallons of water per minute from the
Colorado Municipal Water District under an agreement which expires in September
2003 and up to 65 gallons of water per minute from Sid Richardson Carbon
Limited under an agreement which expires in April 2007. The rate paid by Power
Resources under the Colorado Municipal Water District agreement is the same
rate as that charged to the City of Big Spring, Texas for water supply, subject
to a minimum of $0.60 per thousand gallons. Power Resources pays a rate of
$1.08 (escalated at 3% annually) per thousand gallons under the Sid Richardson
Carbon Limited agreement, so long as the water provided satisfies agreed-upon
conductivity standards.
OPERATION AND MAINTENANCE SERVICES
Operation and maintenance services for the Power Resources project are
provided by Falcon Power Operating under an operation and maintenance agreement
which expires in January 2004. Falcon Power Operating is obligated to provide
all services, personnel, insurance and materials necessary to operate and
maintain the Power Resources project in accordance with prudent operating
practices and contractual requirements. Power Resources is obligated to
reimburse Falcon Power Operating on a monthly basis for operating costs and pay
Falcon Power Operating an operator fee. The fee is subject to adjustment for
operating bonuses or liquidated damages based on the Power Resources project's
capacity factor. The operator fee is $1.14 million annually as of 1998, which
fee is comprised of a management fee of $0.24 million per year (with no
escalation) and an operating fee of $0.9 million in 1998, escalating at 3.5%
per year.
USE OF PROJECT SITE
Power Resources leases the real property on which the Power Resources
project is located from Fina for a nominal rent under a lease agreement which
expires on November 21, 2004. The term of
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the lease may be extended for an additional 15-year period at Power Resources'
option and will be automatically extended for an additional period if Power
Resources and Fina elect to extend the term of the thermal energy purchase
agreement. Power Resources has a right of first refusal under the lease
agreement if Fina receives an offer to purchase all or any portion of the
leased property. Except in limited circumstances, either party may terminate
the lease agreement upon an event of default by the other party under the
thermal energy purchase agreement. In addition, Power Resources owns the fee
title to a number of parcels of land adjacent to the property leased from Fina
on which are located related support facilities. Power Resources has the
benefit of non-exclusive easements over property adjacent to the Power
Resources project under an easement agreement with Fina. These easements
include the right of pedestrian access, railway access, storm water drainage,
waterline services and wastewater connection to the existing salt water
disposal well.
Power Resources also pays an annual fee of $39,753 to the City of Big
Spring, Texas in lieu of property taxes because of an agreement under which the
Power Resources project and the Fina refinery are deemed to be located outside
of the City's jurisdiction. This agreement expires in December 2003.
PROJECT COMPANY OWNERSHIP
Falcon Seaboard Oil owns all of the capital stock of Power Resources and
is wholly owned by Falcon Seaboard Resources. Falcon Seaboard Resources is a
wholly-owned subsidiary of ours. Below is a chart illustrating the ownership
structure for the Power Resources project.
[BLOCK CHART SHOWING THE OWNERSHIP STRUCTURE OF THE POWER RESOURCES PROJECT]
PROJECT FINANCING DEBT
Power Resources financed the construction of the Power Resources project
with commercial loans made by a consortium of banks under the Power Resources
credit agreement. As of September 30, 1999, the aggregate principal amount of
debt outstanding under the Power Resources credit agreement was $79.8 million.
Through swap arrangements, the interest rate on two-thirds of the loans has
been fixed at a current annual rate of 10.625% and the interest rate on the
remaining one-third of the loans has been fixed at 10.385%. After 2001, all of
the loans will bear interest at a fixed rate of 10.635%.
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Collateral. Power Resources' obligations under its project financing
documents are secured by the following collateral:
o an assignment of all revenues received by Power Resources from the
operation of the Power Resources project;
o a lien on substantially all of the real and personal property of Power
Resources; and
o a pledge of the capital stock of Power Resources.
Limitation on Distributions. Power Resources may make distributions to
Falcon Seaboard Oil with excess cash flow from the Power Resources project upon
satisfaction of the following conditions:
(1) all project accounts are fully funded to their required levels;
(2) no default or event of default has occurred and is continuing under the
Power Resources project financing documents; and
(3) the historical quarterly debt service coverage ratio is at least 1.20
to 1.0. However, even if the historical quarterly debt service coverage
ratio is less than 1.20 to 1.0:
o if the historical debt service coverage ratio is at least 1.17 to 1.0
but less than 1.20 to 1.0, distributions may be made with 50% of the
excess cash flow from the Power Resources project;
o if the historical debt service coverage ratio is at least 1.15 to 1.0
but less than 1.17 to 1.0, distributions may be made with 40% of the
excess cash flow from the Power Resources project;
o if the historical debt service coverage ratio is at least 1.13 to 1.0
but less than 1.15 to 1.0, distributions may be made with 30% of the
excess cash flow from the Power Resources project;
o if the historical debt service coverage ratio is at least 1.1 to 1.0
but less than 1.13 to 1.0, distributions may be made with 20% of the
excess cash flow from the Power Resources project; and
o if the historical debt service coverage ratio is at least 1.1 to 1.0,
distributions may be made with 10% of the excess cash flow from the
Power Resources project.
SELECTED FINANCIAL INFORMATION
Power Resources made distributions to Falcon Seaboard Oil in 1995 in the
amount of approximately $5.6 million, in 1996 in the amount of approximately
$300,000 and in 1997 in the amount of approximately $1.5 million.
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NORCON PROJECT
The NorCon project is an 80 megawatt natural gas-fired combined cycle
cogeneration facility located in North East, Pennsylvania. The NorCon project
is owned by NorCon Power Partners, LP and commenced commercial operation in
December 1992. However, in October, 1999, NorCon reached agreement with Niagara
Mohawk, General Electric Capital and Louis Dreyfus Natural Gas Corporation to
settle the outstanding litigation between NorCon and Niagara Mohawk, to
terminate NorCon's power purchase agreement with Niagara Mohawk and gas
purchase agreement with Louis Dreyfus, to transfer the NorCon project to
General Electric Capital and to provide for General Electric Capital to assume
responsibility for third party claims related to the NorCon project. Upon the
closing of these terminations and transfers, Norcon expects that it will not
have any further rights, interests, profits, costs or losses with respect to
the NorCon project.
Below is a chart illustrating the commercial structure of the NorCon
project.
[BLOCK CHART SHOWING THE COMMERCIAL STRUCTURE OF THE NORCON PROJECT]
SALE AND TRANSMISSION OF POWER
NORCON POWER PURCHASE AGREEMENT
NorCon sells capacity and energy to Niagara Mohawk under the NorCon power
purchase agreement. The NorCon power purchase agreement expires in December
2017. The contract capacity under the NorCon power purchase agreement is 80
megawatts. Niagara Mohawk's long-term unsecured debt obligations were rated
"Ba2" by Moody's and "BB+" by S&P as of January 1999.
Payments. The payments to be made by Niagara Mohawk under the NorCon power
purchase agreement are determined according to which of three time periods is
currently in effect.
First Period. During the first period, which ended in July 1996, Niagara
Mohawk paid 6 cents per kilowatt-hour until the balance in the cumulative
avoided cost account decreased to zero. The cumulative avoided cost account
tracks the theoretical difference in actual payments under the NorCon power
purchase agreement and the payments NorCon would have received if it were
compensated at rates based on the cost, as calculated in 1988, that Niagara
Mohawk avoids by purchasing energy from the NorCon project instead of obtaining
the energy from other sources.
Second Period. During the second period, which will end on the fifteenth
anniversary of the initial delivery of electricity under the NorCon power
purchase agreement (December 2007), Niagara Mohawk will pay a rate equivalent
to 95% of Niagara Mohawk's tariff price, subject to a floor of 90% of a
contractual price based on Niagara Mohawk's long-run avoided cost and a ceiling
of 110% of this contractual price. During the second period, the variance
between 95% of Niagara Mohawk's tariff
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price and the actual rate paid will be credited or debited to the adjustment
account. Balances in the cumulative avoided cost account and the adjustment
account will accrue interest at a rate of 11% per annum.
Third Period. The third period begins immediately after the end of the
second period and ends on the twenty-fifth anniversary of the initial delivery
of electricity under the NorCon power purchase agreement. During the third
period, Niagara Mohawk will pay a rate equivalent to 90% of its tariff price.
If, during the third period there exists a balance in the adjustment account,
then the rate paid to NorCon will be adjusted according to a formula contained
in the NorCon power purchase agreement designed to reduce the balance in the
adjustment account through the end of the contract term. The party owing a
balance at the end of the term of the NorCon power purchase agreement is
required to make a payment to the other party.
Dispatch. Niagara Mohawk has limited dispatch rights under the NorCon
power purchase agreement and, if Niagara Mohawk exercises these rights, Niagara
Mohawk is required to make payments to NorCon.
Security. In order to secure the operation of the NorCon project and the
balance in the adjustment account during the second period, NorCon has granted
a second security interest in the NorCon project to Niagara Mohawk to the
extent of any positive balance in the adjustment account.
INTERCONNECTION
NorCon owns and maintains the 7.3 miles of 115 kilovolt transmission line
from the NorCon project to Niagara Mohawk's South Ripley substation.
SALE OF THERMAL ENERGY
NorCon and Welch have entered into a thermal energy purchase agreement
under which Welch purchases from NorCon thermal energy for use in its grape
processing plant, which is adjacent to the NorCon project. The base term of the
agreement ends in December 2012. In conjunction with the execution of the
NorCon thermal energy purchase agreement, NorCon constructed an ammonia
refrigeration plant to provide refrigeration as well as thermal energy to
Welch. Welch is required to purchase at least the minimum amount of thermal
energy per year required to maintain the NorCon project's qualifying facility
status. If NorCon fails to deliver thermal energy, it will be liable for
liquidated damages, limited to $10,000 per occurrence. NorCon's aggregate
liability over the term of the NorCon thermal energy purchase agreement is
subject to an escalating cap, which starts at $2.0 million and increases to
$3.2 million by the twentieth year of the contract. Welch also has the right to
suspend purchases of thermal energy if NorCon does not meet specified thermal
energy reliability requirements. NorCon has constructed an auxiliary boiler to
provide a backup thermal energy supply.
Welch must provide at least two years notice to NorCon if it considers
closing its grape processing facility and at least 18 months notice of its
actual intent to close or cease the facility's operations. If Welch provides
notice, it is obligated to provide land to NorCon for construction of an
alternate thermal energy purchaser. We believe that the Welch facility is
likely to continue production for the full term of the NorCon thermal energy
purchase agreement.
FUEL PROCUREMENT
NATURAL GAS SUPPLY
NorCon and Dreyfus have entered into a gas sale and purchase agreement
whereby Dreyfus is required to sell and deliver to NorCon a daily contract
quantity of natural gas on a firm basis up to 16,820 MMBtu per day for a period
of 15 years. The term of the agreement ends in December 2007. The daily
contract quantity is expected to fulfill 100% of the NorCon project's fuel
requirements. The purchase price for gas was $3.84/MMBtu (in 1998), which
escalates at 7% per year and includes transportation charges. NorCon is
obligated to purchase at least 90% of the daily contract quantity on an annual
basis.
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NATURAL GAS TRANSPORTATION
NorCon has entered into a 20-year gas transportation agreement with
National Fuel Gas Supply Corporation to provide transportation of gas to the
NorCon project. Dreyfus is responsible for delivering gas to National Fuel Gas
and is obligated to reimburse NorCon for transportation charges under the gas
sale and purchase agreement described above.
OPERATION AND MAINTENANCE SERVICES
NorCon has entered into an operation and maintenance agreement with Falcon
Power Operating which provides for the operation and maintenance by Falcon
Power Operating of the NorCon project for a term which expires in December
2008. Falcon Power Operating is obligated to provide all services, personnel
and materials necessary to operate and maintain the NorCon project in
accordance with prudent operating practices and contractual requirements.
NorCon is obligated to reimburse Falcon Power Operating on a monthly basis for
operating costs, and also pays Falcon Power Operating a monthly fee, which
totaled $828,000 in 1998, and which escalates in accordance with an
inflation-based index each year.
OWNERSHIP OF PROJECT SITE
NorCon owns the site of the NorCon project in fee. In addition, the
adjacent site of the NorCon refrigeration plant is leased to NorCon from Welch.
Non-exclusive easements over adjoining properties were granted by Welch in
order to allow the NorCon refrigeration plant to be interconnected with the
Welch grape processing plant. The lease has an initial term of 20 years, but
may be extended for a period coterminous with any extension of the NorCon
thermal energy purchase agreement upon terms to be agreed between NorCon and
Welch.
PROJECT COMPANY OWNERSHIP
Northern Consolidated, an indirect wholly-owned subsidiary of Falcon
Seaboard Power, is the sole general partner of NorCon and owns a limited
partnership interest in NorCon. The other limited partner in NorCon is TPC
NorCon, Inc., a wholly-owned subsidiary of Tomen Power Corporation. Below is a
chart illustrating the ownership structure for the NorCon project.
[BLOCK CHART SHOWING THE OWNERSHIP STRUCTURE OF THE NORCON PROJECT]
----------
(1) The respective percentages of distributions allocated to Northern
Consolidated and TPC NorCon are set forth in the NorCon partnership
agreement.
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PROJECT FINANCING DEBT
NorCon financed the construction of the NorCon project with senior and
subordinated terms loans made by GE Capital under the NorCon credit agreement.
As of September 30, 1999, the aggregate principal amount of debt outstanding
under the NorCon credit agreement was $98.4 million. Through swap arrangements,
the interest rate on the senior debt has been fixed at a rate of 8.90% through
December 31, 2002 and 9.15% thereafter. The interest rate on the subordinated
debt has been fixed at 13.967%. The NorCon credit agreement also provides for a
letter of credit facility of $3 million for use by NorCon to satisfy its
obligation to provide credit support under the National Fuel Gas transportation
agreement.
Mandatory Prepayment; Priority Payment to GE Capital. In the event that on
a payment date during the second period under the NorCon power purchase
agreement either the scheduled debt service coverage ratio or the forecasted
debt service coverage ratio is less than 1.15 to 1.0, then 100% of cash flow
after total debt service will be used to prepay the junior debt. Commencing in
February 1999, GE Capital may apply 100% of excess cash flow to the prepayment
of the loans under circumstances set forth in the NorCon credit agreement. In
addition, GE Capital will receive a special payment equal to 20% of the sum of
the available cash flow after total debt service plus operation and maintenance
fees for the duration of the term loans prior to the making of distributions to
the NorCon partners.
Collateral. NorCon's obligations under the NorCon project financing
documents are secured by the following collateral:
o an assignment of all revenues received by NorCon from the operation of
the NorCon project;
o a lien on substantially all of the real and personal property of
NorCon; and
o a pledge of the partnership interests in NorCon and the stock of
Northern Consolidated.
Limitation on Distributions. Subject to the provisions described above for
mandatory prepayment, NorCon may make distributions to the NorCon partners with
excess cash flow from the NorCon project upon satisfaction of the following
conditions:
o all project accounts are fully funded to their required levels;
o no default or event of default has occurred and is continuing under the
NorCon project financing documents;
o the historical debt service coverage ratio is at least 1.15 to 1.0;
and
o the projected debt service coverage ratio is at least 1.15 to 1.0.
PARTNERSHIP DISTRIBUTIONS
The NorCon partners' rights to allocations of pretax cash flows from
NorCon vary over the life of the NorCon project. The nominal ownership of
NorCon is currently divided into a 1% general partnership interest held by
Northern Consolidated and 99% limited partnership interests divided between TPC
NorCon and Northern Consolidated. Allocations prior to the date on which TPC
NorCon achieves a pre-tax return of 16.5% on equity are 80% to TPC NorCon and
20% to Northern Consolidated. After this date, the allocations are 20% to TPC
NorCon and 80% to Northern Consolidated.
SELECTED FINANCIAL INFORMATION
NorCon made distributions to Northern Consolidated in 1995, 1996, 1997 and
1998 in the amounts of approximately $84,000, $26,000, $1.2 million and
$732,000, respectively.
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YUMA PROJECT
The Yuma project is a 50 megawatt natural gas-fired combined cycle
cogeneration facility located in Yuma, Arizona. The Yuma project is owned by
Yuma Cogeneration and commenced commercial operation in May 1994. Below is a
chart illustrating the commercial structure of the Yuma project.
[BLOCK CHART SHOWING THE COMMERCIAL STRUCTURE OF THE YUMA PROJECT]
SALE AND TRANSMISSION OF POWER
YUMA POWER PURCHASE AGREEMENT
Yuma Cogeneration sells capacity and energy to San Diego Gas & Electric
under the Yuma power purchase agreement. The Yuma power purchase agreement is a
standard offer no. 2 contract and expires in May 2024. The contract capacity
under the Yuma power purchase agreement is 50 megawatts. San Diego Gas &
Electric's long-term unsecured debt obligations were rated "A2" by Moody's,
"A+" by S&P and "A+" by Duff & Phelps as of January 1999.
Payments. Under the Yuma power purchase agreement, Yuma Cogeneration sells
power to San Diego Gas & Electric at a price based on the cost that San Diego
Gas & Electric avoids by purchasing energy from the Yuma project instead of
obtaining the energy from other sources. Yuma Cogeneration may deliver up to
56.5 megawatts of energy to San Diego Gas & Electric at these rates. The
average price of energy under the Yuma power purchase agreement was 3.0 cents
per kilowatt-hour in 1998. Payments for capacity are fixed at $140 per
kilowatt-year from 1999 to the end of the Yuma power purchase agreement term.
Yuma Cogeneration is eligible for capacity bonus payments of up to
approximately 18% of the contract capacity if it maintains availability in
excess of 85% during the on-peak hours of the peak months (excluding
curtailment). We expect bonus capacity payments to be $22 per kilowatt-year.
Curtailment. San Diego Gas & Electric is not required to accept or
purchase energy from the Yuma project for a maximum of 900 flexible hours and
400 block hours (in one 400 hour block or two 200 hour blocks) through year
nine, 1,400 flexible hours and 400 block hours through year 15, and 2,200
flexible hours and 400 block hours through year 30. During curtailments, Yuma
Cogeneration is free to sell power into the open market.
TRANSMISSION AND INTERCONNECTION
Power from the Yuma project is delivered over transmission lines
constructed and owned by Arizona Public Service Company to the Southwest Power
Link, a high voltage 500 kilovolt bulk
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transmission line in which San Diego Gas & Electric owns a majority interest.
An agreement for interconnection, a firm transmission service agreement and an
interruptible transmission agreement have been executed between Arizona Public
Service Company and Yuma Cogeneration. Delivery fees are $1.52 per
kilowatt-month (no escalation) plus $50,000 per year through the term of the
contracts. Yuma Cogeneration pays a transmission services charge of $0.002082
per kilowatt-hour (no escalation) under the interruptible transmission
agreement. Arizona Public Service Company reserves 50.85 megawatts of its
transmission capacity for power from the Yuma project. Both the firm and
interruptible transmission agreements expire on December 31, 2024.
SALE OF THERMAL ENERGY
Yuma Cogeneration has entered into a thermal energy sales agreement with
Queen Carpet, Inc. Queen Carpet was recently acquired by Shaw Industries, Inc.
of Dalton, Georgia, the largest tufted carpet manufacturer in the world. Queen
Carpet has the right to terminate the agreement upon one year's notice if a
change in its technology eliminates its need for thermal energy, and in any
case to terminate the agreement at any time upon three years notice. Otherwise,
the agreement expires on May 1, 2024. Queen Carpet is obligated to take a
minimum annual amount of 126,900 MMBtu per year, which is sufficient to permit
the Yuma project to meet its thermal energy requirements for qualifying
facility status. Yuma Cogeneration delivers thermal energy for use in Queen
Carpet's manufacturing process as well as for absorption chillers. The price of
thermal energy delivered for use in air conditioning is equal to 75% of Queen
Carpet's net avoided energy cost of producing chilled water. The price of
thermal energy used for textile manufacturing is 75% of the price of natural
gas purchased from the nearest available gas utility by a comparable industrial
customer. For 1998, the total thermal energy revenues were approximately
$718,000.
FUEL PROCUREMENT
Under the terms of the gas purchase agreement between Yuma Cogeneration
and Southwest Gas Corporation, Yuma Cogeneration may direct Southwest Gas to
purchase gas on its behalf and transport it to the Yuma project under the CG-30
tariff. This agreement allows Yuma Cogeneration to nominate gas from any one of
several surrounding supply basins and to receive the gas at the price of the
relevant index without a basis spread. The CG-30 tariff agreement can be
terminated by either party after June 26, 2002. If terminated, Yuma
Cogeneration will return to the CT-I transportation-only tariff, under which
Yuma Cogeneration purchases gas in the open market on its own behalf and
Southwest Gas arranges transportation. Under the CG-30 arrangement, Yuma
Cogeneration pays a $15,000 per month service charge to Southwest Gas. The
monthly service charge under the CT-I arrangement is $5,725.
OPERATION AND MAINTENANCE SERVICES
In connection with the offering of the old Securities, Yuma Cogeneration
operating personnel who had previously been employed by MidAmerican were
assigned to Falcon Power Operating, which entered into a long-term operation
and maintenance agreement with Yuma Cogeneration to provide operation and
maintenance services for the Yuma project on a cost of service basis.
OWNERSHIP OF PROJECT SITE
Yuma Cogeneration owns the fee title to the land on which the Yuma project
is located and has the benefit of associated easement rights for irrigation
purposes over adjacent land.
PROJECT COMPANY OWNERSHIP
Yuma Cogeneration is 50% owned by each of California Energy Development
and California Energy Yuma Corporation. We own all of the outstanding capital
stock of California Energy Development and California Energy Development owns
all of the capital stock of California Energy Yuma. Below is a chart
illustrating the ownership structure for the Yuma project.
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<PAGE>
[BLOCK CHART SHOWING THE OWNERSHIP STRUCTURE OF THE YUMA PROJECT]
YUMA INDEBTEDNESS
The Yuma project was financed in part by a loan from MidAmerican, which
received a note from Yuma Cogeneration. A portion of the net proceeds of the
initial offering were used to repay MidAmerican for the outstanding principal
and accrued interest on the Yuma Cogeneration note of approximately $47.7
million and $1.3 million. Yuma Cogeneration does not now have any outstanding
indebtedness for borrowed money.
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OTHER SOURCES OF AVAILABLE CASH FLOW
GAS SUPPLY ARRANGEMENTS
CE Texas Gas sells natural gas to Power Resources under its natural gas
purchase agreement with Power Resources and obtains the necessary gas supply
from Dreyfus under its gas purchase agreement with Dreyfus. The term of each of
these contracts expires in 2003. Dividends paid by CE Texas Gas to its sole
owner, CE Texas Energy, as a result of profits earned in connection with these
gas supply arrangements are included in CE Texas Energy's available cash flow.
In 1996 CE Texas Gas made distributions to CE Texas Energy of approximately
$4.2 million. In 1997 CE Texas Gas made distributions to CE Texas Energy of
approximately $4.5 million. In 1998 CE Texas Gas made distributions to CE Texas
Energy of approximately $8.8 million.
MAMMOTH ROYALTY
In addition to its ownership interests in the Imperial Valley projects,
Magma has rights to royalties from the 10 megawatt and 12 megawatt geothermal
power generating facilities owned by Mammoth-Pacific, L.P. and located in Mono
County, California. The amounts of the royalties are 12.5% and 12% of gross
proceeds, respectively. In 1996 Magma received total royalties from these
projects of approximately $1,939,000. In 1997 Magma received total royalties
from these projects of approximately $2,153,000. In 1998 Magma received total
royalties from these projects of approximately $2,284,000.
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DESCRIPTION OF THE SECURITIES
The following is a description of important provisions of the Securities.
The following information does not purport to be a complete description of the
Securities and is subject to, and qualified in its entirety by, reference to
the Securities and the indenture. Unless otherwise specified, the following
description applies to all of the Securities.
GENERAL
The old Securities were, and the new Securities will be, direct senior
obligations of ours, issued under the indenture for the Securities and secured
by the collateral. The old Securities were issued in fully registered form and
in denominations of $100,000 and any integral multiple of $1,000 in excess of
$100,000.
The indenture provides for the issuance of the Securities and other series
of senior notes or Securities as from time to time may be authorized by us,
subject to the limitations set forth in the indenture.
PRINCIPAL AMOUNT, INTEREST RATE AND FINAL MATURITY DATE
The old Securities were and the new Securities will be issued in a single
series in the aggregate principal amount of $400 million, bearing interest from
their date of issuance at 7.416% per annum and finally maturing on December 15,
2018.
PAYMENT OF INTEREST AND PRINCIPAL
INTEREST
Interest on the Securities is payable semiannually in arrears on each June
15 and December 15 to the registered holders at the close of business on the
preceding June 1 or December 1. Interest will be calculated on the basis of a
360-day year, consisting of twelve 30-day months.
PRINCIPAL
The principal of the Securities will be payable in semiannual
installments, commencing June 15, 2000, as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
PRINCIPAL AMOUNT
PAYMENT DATE PAYABLE
--------------------------------- -----------------
<S> <C>
December 15, 1999 ......... 0.000%
June 15, 2000 ............. 1.300%
December 15, 2000 ......... 1.300%
June 15, 2001 ............. 1.575%
December 15, 2001 ......... 1.575%
June 15, 2002 ............. 2.575%
December 15, 2002 ......... 2.575%
June 15, 2003 ............. 2.250%
December 15, 2003 ......... 2.250%
June 15, 2004 ............. 1.825%
December 15, 2004 ......... 1.825%
June 15, 2005 ............. 1.850%
December 15, 2005 ......... 1.850%
June 15, 2006 ............. 2.400%
December 15, 2006 ......... 2.400%
</TABLE>
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<TABLE>
<CAPTION>
PERCENTAGE OF
PRINCIPAL AMOUNT
PAYMENT DATE PAYABLE
--------------------------------- -----------------
<S> <C>
June 15, 2007 ............. 2.250%
December 15, 2007 ......... 2.250%
June 15, 2008 ............. 3.525%
December 15, 2008 ......... 3.525%
June 15, 2009 ............. 3.075%
December 15, 2009 ......... 3.075%
June 15, 2010 ............. 1.775%
December 15, 2010 ......... 1.775%
June 15, 2011 ............. 1.900%
December 15, 2011 ......... 1.900%
June 15, 2012 ............. 2.560%
December 15, 2012 ......... 2.560%
June 15, 2013 ............. 2.550%
December 15, 2013 ......... 2.550%
June 15, 2014 ............. 3.225%
December 15, 2014 ......... 3.225%
June 15, 2015 ............. 3.380%
December 15, 2015 ......... 3.380%
June 15, 2016 ............. 3.660%
December 15, 2016 ......... 3.660%
June 15, 2017 ............. 3.780%
December 15, 2017 ......... 3.780%
June 15, 2018 ............. 4.545%
December 15, 2018 ......... 4.545%
</TABLE>
REDEMPTION OF THE SECURITIES
REDEMPTION GENERALLY
We are permitted to redeem the Securities prior to the maturity date
therefor upon terms and subject to conditions contained in the indenture. We
are obligated to redeem all or a portion of the Securities prior to their
maturity date, in accordance with terms and subject to conditions contained in
the indenture.
NOTICE TO TRUSTEE
Our election or requirement to redeem any Securities will be evidenced by
our written request. If we elect to redeem all or a portion of the Securities
in accordance with terms set forth in the indenture, we will deliver to the
trustee, at least 30 days prior to the date by which notice of redemption is
required to be given to the holders of the Securities, or a shorter period as
may be agreed by the trustee, a written request specifying the date on which
the redemption will occur and the principal amount of Securities to be
redeemed. If we are required to redeem all or a portion of the Securities in
accordance with the terms of the indenture, we will deliver to the trustee,
immediately upon the occurrence of the event resulting in the obligation to
redeem, a written request specifying the principal amount of Securities to be
redeemed, the price at which the Securities will be redeemed, the applicable
yield maintenance premium, if any, the paragraph of the indenture under which
the Securities are being redeemed and the redemption date, which redemption
date will be within 90 days of the occurrence of the event resulting in the
obligation to redeem.
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NOTICE TO HOLDERS OF THE SECURITIES
Notice of any optional or mandatory redemption must be given to the
holders of Securities at least 30 but not more than 60 days prior to the
applicable redemption date. Each notice of redemption is required to set forth,
among other information:
o the redemption date;
o the redemption price and any applicable yield maintenance premium;
o if less than all outstanding Securities are to be redeemed, the
identification of the particular Securities to be redeemed and the
aggregate principal amount of Securities to be redeemed;
o in the case of Securities to be redeemed in part, the principal amount
of those Securities to be redeemed and a statement to the effect that
after the redemption date, upon surrender of those Securities, new
Securities in the aggregate principal amount equal to the unredeemed
portion will be issued;
o the place where Securities subject to redemption are to be surrendered
for payment of the redemption price; and
o a statement to the effect that the availability in a special purpose
trust fund established under the indenture for redemption of the
Securities on the redemption date of an amount of immediately available
funds sufficient to pay the redemption price and any applicable yield
maintenance premium in full is a condition precedent to the redemption
described in the notice.
SECURITIES PAYABLE ON REDEMPTION DATE
The Securities, or portions of the Securities, to be redeemed will become
due and payable on the redemption date, and from and after the redemption date
those Securities or the portions will cease to bear interest. Upon surrender of
any Security for redemption, we will pay and redeem that Security or the
portion being redeemed at the redemption price plus any applicable yield
maintenance premium. However, any payment of interest on any Security the
payment date of which is on or prior to the redemption date will be payable to
the holder of the Securities registered as such at the close of business on the
relevant record date according to the terms of the indenture and the Security.
If less than all the Securities are to be redeemed, the trustee will redeem the
Securities on a pro rata basis among the outstanding Securities not previously
called for redemption in whole.
OPTIONAL REDEMPTION
The Securities will be subject to our optional redemption, in whole or in
part, at any time on any business day, at a price equal to the redemption price
plus the yield maintenance premium.
The yield maintenance premium is calculated as follows:
o The yield maintenance premium for a Security is equal to the discounted
present value calculated for the Security less the unpaid principal
amount of the Security.
o The discounted present value of a Security is equal to the discounted
present value of all principal and interest payments scheduled to become
due on the Security after the date of 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 the Security and
trading in the secondary market at the price closest to par; plus
(2) 50 basis points.
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o If there is no United States treasury security having an average life
equal to the remaining average life of the Security, the discount rate
will 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 the Security and trading in the secondary market at the price
closest to par.
o The yield maintenance premium will never be less than zero.
MANDATORY REDEMPTION--AT PAR
EVENT OF LOSS
If (a) any designated subsidiary receives available cash flow in excess of
$15 million from one or more distributions of insurance proceeds by a project
company in connection with the damage or destruction of all or a portion of its
project, then (b) the available cash flow will be used to redeem Securities at
a price equal to the principal amount of the Securities being redeemed plus
accrued interest.
EXPROPRIATION EVENT
If (a) any designated subsidiary receives available cash flow in excess of
$15 million from one or more distributions of expropriation proceeds by a
project company in connection with a governmental authority's compulsory taking
or transfer or the threat of a governmental authority's compulsory taking or
transfer of its project, then (b) the available cash flow will be used to
redeem Securities at a price equal to the principal amount of the Securities
being redeemed plus accrued interest.
TITLE EVENT
If (a) any designated subsidiary receives available cash flow in excess of
$15 million from one or more distributions of title insurance proceeds by a
project company in connection with a defect in the title to the land on which
the designated subsidiary's project is located, then (b) the available cash
flow will be used to redeem Securities at a price equal to the principal amount
of the Securities being redeemed plus accrued interest.
PERMITTED POWER CONTRACT BUY-OUT
If (a) any designated subsidiary receives available cash flow in excess of
$15 million from one or more distributions of buy-out proceeds by a project
company in connection with one or more permitted power contract buy-outs
permitted under the project financing documents, then (b) the available cash
flow will be used to redeem the Securities. The redemption price will be equal
to the lesser of:
(1) 100% of the available cash flow; and
(2) the amount which will cause each rating agency to confirm that, after
giving effect to the redemption, the rating assigned to the Securities
by the rating agency will be equal to or better than the higher of:
o the existing rating assigned to the Securities by the rating agency;
and
o the initial rating assigned to the Securities by the rating agency.
MANDATORY REDEMPTION--WITH YIELD MAINTENANCE PREMIUM
PROJECT FINANCING OR PROJECT DEBT REFINANCING
If (a) any designated subsidiary receives available cash flow in excess of
$15 million from one or more distributions of refinancing proceeds by a project
company in connection with one or more
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project financings or project debt refinancings with respect to the designated
subsidiary's project company, then (b) the available cash flow will be used to
redeem the Securities. The redemption price will be equal to the lesser of the
following plus the yield maintenance premium:
(1) 100% of the available cash flow; and
(2) the amount which will cause each rating agency to confirm that, after
giving effect to the redemption, the rating assigned to the Securities
by the rating agency will be equal to or better than the higher of:
o the existing rating assigned to the Securities by the rating agency;
and
o the initial rating assigned to the Securities by the rating agency.
ASSET SALE
If (a) any designated subsidiary receives available cash flow in excess of
$15 million from one or more distributions of asset sale proceeds by a project
company in connection with one or more asset sales with respect to its project,
then (b) available cash flow will be used to redeem the Securities. The
redemption price will be equal to the lesser of the following plus the yield
maintenance premium:
(1) 100% of the available cash flow; and
(2) the amount which will cause each rating agency to confirm that, after
giving effect to the redemption, the rating assigned to the Securities
by the rating agency will be equal to or better than the higher of:
o the existing rating assigned to the Securities by the rating agency;
and
o the initial rating assigned to the Securities by the rating agency.
SALE OF EQUITY INTERESTS
If:
o we sell all or any portion of our interest in any designated
subsidiary, other than a transfer permitted under the financing
documents, and receive proceeds in excess of $15 million in connection
with the sale; or
o any designated subsidiary sells all or any portion of its interest in
any project company, other than a transfer permitted under the financing
documents, and receives proceeds in excess of $15 million in connection
with the sale,
then the proceeds of the sale will be used to redeem the Securities. The
redemption price will be equal to the lesser of the following plus the yield
maintenance premium
o 100% of the proceeds; and
o the amount which will cause each rating agency to confirm that, after
giving effect to the redemption, the rating assigned to the Securities by
the rating agency will be equal to or better than the higher of:
(1) the existing rating assigned to the Securities by the rating agency;
or
(2) the initial rating assigned to the Securities by the rating agency.
REDEMPTION DATE
The redemption date for any redemption will be any date we select during
the 90-day period following the date on which the event requiring the
redemption occurred.
RATINGS
Moody's, S&P and Duff & Phelps have assigned the Securities ratings of
"Baa3", "BBB-" and "BBB", respectively. Each rating reflects only the view of
the applicable rating agency at the time the
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rating was issued, and any explanation of the significance of a rating may be
obtained only from the rating agency. There is no assurance that any rating
will remain in effect for any given period of time or that any rating will not
be lowered, suspended or withdrawn entirely by the applicable rating agency,
if, in the rating agency's judgment, circumstances so warrant. Any lowering,
suspension or withdrawal by any rating agency may have an adverse effect on the
market price or marketability of the Securities.
FORM; TRANSFER AND EXCHANGE; BOOK-ENTRY SYSTEM
FORM OF SECURITIES
We will issue the new Securities (except for those sold to institutional
accredited investors) initially in the form of a single global bond or, if
required, multiple global bonds. We refer to this single global bond or
multiple global bonds as the global Security. We will issue the new Securities
in registered form.
We will issue the global Security initially to The Depository Trust
Company, referred to in this section as DTC. The global Security will be
registered in the name of Cede & Co., which is the nominee of DTC. The trustee
will act as custodian of the global Security for DTC or appoint a
sub-custodian. Because Cede & Co. will be the holder of record of the global
Security, each person owning a beneficial interest in the global Security must
rely upon the procedures of the institutions having accounts with DTC to
exercise or be entitled to any of the rights of holder.
New Securities issued to institutional accredited investors will be issued
in definitive form. Upon the transfer of a Security in definitive form, the
Security will, unless the global Security has previously been exchanged for
Securities in definitive form, be exchanged for an interest in the global
Security representing the principal amount of Securities being transferred.
PAYMENTS OF PRINCIPAL AND INTEREST
We will make payments of principal of and interest on the Securities
represented by the global Security through the Trustee to DTC or its nominee.
None of us, the trustee, any paying agents or the registrar 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 Securities
held by Cede & Co., as nominee for DTC, or Euroclear, or for maintaining,
supervising or reviewing any records relating to the beneficial ownership
interests.
Because of time zone differences, the securities account of a Euroclear
participant purchasing an interest in the global Security from a DTC
participant will be credited during the securities settlement processing day
(which must be a business day for Euroclear) immediately following the DTC
settlement date. Credit in interests in the global Security settled during the
processing day will be reported to the relevant Euroclear participant on that
day. Cash received in Euroclear as a result of sales of interests in the global
Security by or through a Euroclear participant to a DTC participant will be
received with value on the DTC settlement date but will be available in the
relevant Euroclear cash account only as of the business day following
settlement in DTC.
EXCHANGING INTERESTS IN THE GLOBAL SECURITY FOR DEFINITIVE SECURITIES
Any person having a beneficial interest in the Securities evidenced by the
global Security may, upon request, exchange its interest in the global Security
for a definitive Security. Upon receipt by the trustee of written or electronic
instructions from DTC or its nominee on behalf of any person having a
beneficial interest in the Securities evidenced by the global Security and upon
receipt by the trustee of a written order of that person containing
registration instructions: (1) the trustee will cause, in accordance with the
standing instructions and procedures existing between it and DTC, the aggregate
principal amount of the global Security to be reduced; and (2) following the
reduction, we will execute and the trustee will authenticate and deliver to the
beneficial owner or the transferee, as the case may be, a definitive Security.
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In addition, the Securities will be issued as definitive Securities to
holders or their nominees, rather than to Cede & Co. as nominee for DTC, if:
o We advise the Trustee in writing that DTC is no longer willing or able
to discharge properly its responsibilities as depositary with respect to
the Securities and we are unable to locate a qualified successor;
o We, at our option, elect to terminate the book-entry system through DTC
with respect to the Securities; or
o after the occurrence of an event of default under the indenture,
beneficial owners holding interests representing an aggregate principal
amount of Securities of not less than 51% of the Securities represented
by the global Security advise the trustee through DTC in writing that the
continuation of a book-entry system through DTC (or a successor) with
respect to the Securities is no longer in the beneficial owners' best
interest.
Upon the occurrence of any event described in the immediately preceding
paragraph, the trustee will, upon written notice and receipt of a list of all
persons who hold a beneficial interest in the global Security from DTC, be
required to notify, at our expense, all persons who hold a beneficial interest
in the global Security through DTC participants or indirect participants
through DTC participants of the issuance of definitive Securities. Upon
surrender by the trustee of the global Security and receipt from DTC of
instructions for re-registration, we will execute and the Trustee will
authenticate and deliver the definitive Securities.
TRANSFER AND EXCHANGE OF SECURITIES
Subject to the terms of the Indenture, the Securities may be surrendered
for registration of transfer or exchange for Securities of the same series, of
authorized denomination, and of like tenor, maturity and principal amount at
the corporate trust office of the Trustee. The Security registrar is not
required to do the following:
o issue or register the transfer of or exchange any Securities of any
series during a period:
o beginning at the opening of business 15 days before the day of the
mailing of a notice of redemption of the Securities of that series
selected for redemption and ending at the close of business on the day of
the mailing, or
o beginning on the record date for the stated maturity of any
installment of principal of or payment of interest on the Securities of
that series and ending on the stated maturity of the installment; or
o issue or register the transfer or exchange of any Securities selected
for redemption in whole or in part, except the unredeemed portion of any
Securities selected for redemption in part. No service charge will be
required of any holder participating in any transfer or exchange of the
Securities. However, payment may be required of any tax or other
governmental charges imposed in connection with the transfer or exchange.
DTC'S BOOK-ENTRY SYSTEM
Securities represented by the global Security will be held in book-entry
form in DTC. DTC has advised us that it is:
o a limited purpose trust company organized under the laws of the State of
New York;
o a member of the United States Federal Reserve System;
o a clearing corporation within the meaning of the New York Uniform
Commercial Code; and
o a clearing agency registered under Section 17A of the Exchange Act.
DTC was created to hold securities for its participants and to facilitate
the clearance and settlement of securities transactions between DTC
participants through electronic book-entries,
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thereby eliminating the need for physical movement of certificates. DTC
participants include securities brokers and dealers, banks, trust companies and
clearing corporations. Indirect access to the DTC system also is available to
others, such as banks, brokers and dealers and trust companies that clear
through or maintain a custodial relationship with a DTC participant, either
directly or indirectly.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers of Securities held
by it among DTC participants on whose behalf it acts and to receive and
transmit distributions of principal, premium and interest on the Securities.
DTC participants and indirect participants with which beneficial owners of
Securities held with DTC have accounts similarly are required to make
book-entry transfers and receive and transmit payments of principal and
interest on behalf of the beneficial owners. Accordingly, although beneficial
owners who hold Securities through DTC participants or indirect participants
will not possess the Securities, DTC's rules, by virtue of the requirements
described above, provide a mechanism by which DTC participants will receive
payments and will be able to transfer their interests in the Securities.
Because DTC may act only on behalf of DTC participants, who in turn act on
behalf of indirect participants, any holder of Securities through DTC desiring
to pledge its Securities to persons or entities that do not participate in DTC,
or otherwise take actions with respect to its Securities, will be required to
withdraw its Securities from DTC as described above.
DTC has advised us as follows:
o that it will take any action permitted to be taken by a holder only at
the direction of one or more DTC participants to whose accounts with DTC
the holder's Securities are credited;
o that it will take these actions with respect to any percentage of the
beneficial interests of holders who hold Securities through DTC
participants or indirect participants only at the direction of and on
behalf of DTC participants whose account holders include undivided
interests that satisfy the percentage; and
o that it may take conflicting actions with respect to other undivided
interests to the extent that these actions are taken on behalf of DTC
participants whose account holders include the undivided interests.
NATURE OF RECOURSE ON THE SECURITIES
Our obligation to make payments of principal of, premium (if any) and
interest on the Securities will be an obligation solely of ours, secured by the
collateral. Neither MidAmerican nor El Paso Energy, nor any affiliate,
shareholder, member, officer, director or employee of ours or of MidAmerican or
El Paso Energy will guarantee the payment of the Securities or has any
obligation with respect to the Securities (other than the obligations of the
designated subsidiaries under the financing documents to which they are
parties).
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SUMMARY DESCRIPTION OF THE PRINCIPAL FINANCING DOCUMENTS
The following descriptions of the material provisions of the depositary
agreement, the indenture, the debt service reserve letter of credit
reimbursement agreement and the security documents are summaries and do not
describe all of the terms of the agreements. The material financing documents
have been filed as exhibits to the registration statement of which this
prospectus is a part.
OVERVIEW OF THE PRINCIPAL FINANCING DOCUMENTS
The principal financing documents that we entered into in connection with
the issuance and sale of the old Securities, and the primary purposes of these
documents, are as follows:
o Indenture: We entered into the indenture with the trustee, as
representative of the holders of the Securities. The indenture includes,
among other things:
(1) procedures for the issuance of the Securities and additional
securities and their authentication by the trustee;
(2) provisions which permit, or require, us to redeem Securities before
their maturity date;
(3) affirmative covenants which require us to take actions while any
Securities are outstanding;
(4) negative covenants which restrict our activities while any Securities
are outstanding; and
(5) events of default which permit the holders of the Securities to
exercise remedies against us and the collateral.
o Depository Agreement: We entered into the depositary agreement with the
designated subsidiaries, the collateral agent and the depositary bank.
The depositary agreement sets forth requirements for the deposit of
available cash flow into depositary accounts established by us and the
withdrawal of monies from these accounts to pay operating and
administrative costs and debt service. The depositary agreement also
includes the conditions that we must satisfy in order to receive
distributions from the depositary accounts.
o Debt Service Reserve Letter of Credit and Reimbursement Agreement: The
depositary agreement requires us to fund the debt service reserve account
up to the required balance. We can fulfill this requirement by depositing
cash in the debt service reserve account and/or providing a letter of
credit for the account. The debt service reserve letter of credit and
reimbursement agreement provides for the issuance of a letter of credit
for the debt service reserve account and sets forth the circumstances in
which the beneficiary of the letter of credit may make drawings on the
letter of credit.
o Security Documents: The security documents provide for the collateral
agent's security interest in the collateral. We granted a security
interest in all of our personal property under the CE Generation security
agreement. The designated portfolio companies granted a security interest
in their available cash flow under the subsidiary security agreement. We,
Magma and intermediate holding companies pledged the equity interests in
some of our subsidiaries under the pledge agreements.
o Intercreditor Agreement: We entered into the intercreditor agreement
with the designated subsidiaries, the trustee, the collateral agent and
the depositary bank. The collateral agent obtains its authority to act on
behalf of the secured parties under the intercreditor agreement. The
intercreditor agreement also provides for the sharing of collateral among
the secured parties and the procedures for voting by the secured parties
on the exercise of remedies.
DEPOSITARY AGREEMENT
GENERAL
The collateral agent, acting on behalf of the trustee, the holders of the
Securities and the other secured parties, has entered into a depositary
agreement with us and the designated subsidiaries, and
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has appointed the depositary bank. Under the depositary agreement, we have
established accounts with the depositary bank and granted a security interest
in these accounts to the collateral agent for the benefit of the secured
parties. The depositary agreement sets forth, among other things:
o the terms upon which available cash flow in the depositary accounts is
disbursed to pay operating and administrative costs and payments of
principal of, premium (if any), interest on and other amounts due on the
Securities,
o the conditions which must be satisfied prior to making distributions to
us,
o the mechanism for receipt and disbursement of available cash flow
representing loss proceeds, expropriation proceeds, title proceeds,
buy-out proceeds, refinancing proceeds or asset sale proceeds and
proceeds from the sale of our interest in a designated subsidiary or the
sale by a designated subsidiary of its interest in a project company, and
o the terms upon which monies on deposit in the accounts may be invested
in permitted investments.
When used in this prospectus, the term permitted investments means
investments in securities that are:
o direct obligations of the United States or any agency of the United
States;
o obligations fully guaranteed by the United States or any agency of the
United States;
o certificates of deposit or bankers acceptances issued by commercial
banks organized under the laws of the United States or of any political
subdivision of the United States or under the laws of Canada, Japan,
Switzerland or any country that is a member of the European Economic
Community having a combined capital and surplus of at least $250 million
and having long-term unsecured debt securities then rated "A" or better
by S&P or "A2" or better by Moody's. However, at the time of investment
not more than $25 million may be invested in certificates of deposit from
any one bank;
o repurchase obligations with a term of not more than seven days for
underlying securities of the types described in the preceding paragraph;
o open market commercial paper of any corporation incorporated or doing
business under the laws of the United States or of any political
subdivision, other than MidAmerican or any of its affiliates, of the
United States having a rating of at least "A-1" from S&P and "P-1" from
Moody's. However, at the time of investment not more than $25 million may
be invested in commercial paper from any one company;
o auction rate securities or money market preferred stock, other than
securities issued by MidAmerican or any of its affiliates, having one or
the two highest ratings obtainable from either S&P or Moody's; or
o investments in money market funds or money market mutual funds sponsored
by any securities broker dealer of recognized national standing having an
investment policy that requires substantially all the invested assets of
the fund to be invested in investments descried in any one or more of the
foregoing clauses having a rating of "A" or better by S&P or "A2" or
better by Moody's.
ESTABLISHMENT OF ACCOUNTS
We have established the following depositary accounts with the depositary
bank:
o revenue account;
o debt payment account;
o debt service reserve account;
o distribution suspense account;
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o redemption account; and
o 9 7/8% notes account.
We have granted a security interest in the depositary accounts to the
collateral agent for the benefit of the secured parties. The depositary
accounts will at all times be in the name of the collateral agent and in the
exclusive possession of, and under the exclusive dominion and control of, the
depositary bank acting at the direction of the collateral agent. Neither we nor
any of the designated subsidiaries have any right to withdraw monies from the
depositary accounts or any other rights with respect to the depositary accounts
other than as described in the depositary agreement.
DEPOSIT AND DISBURSEMENT OF FUNDS
REVENUE ACCOUNT
We have and will continue to deposit or cause to be deposited into the
revenue account the following funds:
o all available cash flow, other than available cash flow required to be
deposited in the redemption account as described below,
o to the extent the debt service reserve account is fully funded, interest
and other investment income earned on funds on deposit in any of the
depositary accounts, and
o any other amounts required to be transferred to the revenue account
under the depositary agreement or the intercreditor agreement.
We are required to submit to the collateral agent, on or prior to each
date on which funds are to be transferred from the revenue account to the other
depositary accounts, a funds transfer certificate indicating the amounts which
should be transferred from the revenue account to the other depositary accounts
on that date.
PRIORITY OF PAYMENTS
On one business day of each month selected by us the depositary bank
transfers monies on deposit in the revenue account in accordance with the
following order of priority in the amounts specified by us in our funds
transfer certificate:
(1) First, to the persons entitled to the payments described in this
clause, an amount equal to the sum of (a) all of our operating and
administrative costs as well as those of the designated subsidiaries and
California Energy Yuma and SECI Holdings incurred on or before the funding date
or reasonably expected to be incurred within the next 30 days, plus (b) any
taxes, assessments or other governmental charges or levies then due. However,
operating and administrative costs payable to our affiliates or the affiliates
of the designated subsidiaries, California Energy Yuma or SECI Holdings will
not be paid under this first priority;
(2) Second, to the depositary bank, the collateral agent, the trustee and
the debt service reserve letter of credit provider, an amount equal to all
administrative expenses due and payable to those parties on the next payment
date;
(3) Third, to the debt payment account, an amount which, together with the
funds then on deposit in or credited to that account, is equal to the sum of:
(a) all principal of and interest on the Securities and all other amounts
payable under indenture, to the extent due and payable on the next
payment date;
(b) all principal of and interest on any debt service reserve bonds as
described below under the caption "Debt Service Reserve Letter of
Credit Reimbursement Agreement," to the extent due and payable on
the next payment date;
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(c) all commitment, letter of credit and fronting fees payable under any
debt service reserve letter of credit reimbursement agreement, to the
extent due and payable on the next payment date; and
(d) all interest on any debt service reserve letter of credit loans as
described below under the caption "Debt Service Reserve Letter of
Credit Reimbursement Agreement," to the extent due and payable on
the next payment date;
(4) Fourth, to a sub-account of the debt payment account, an amount which,
together with the funds then on deposit in or credited to that sub-account, is
equal to the sum of (a) all principal of any debt service reserve letter of
credit loans and (b) all related fees and charges for tax gross-ups, capital
adequacy costs and breakage costs, in each case to the extent due or becoming
due on the next payment date;
(5) Fifth, to the debt service reserve account, an amount which, together
with the sum of (a) the funds then on deposit in or credited to that account
and (b) the amount available for drawing under any debt service reserve letter
of credit, is equal to the then current debt service reserve required balance;
(6) Sixth, (a) to the debt service reserve letter of credit provider or
any other financial institution providing a debt service reserve letter of
credit loan, other breakage costs which are due and payable in connection with
debt service reserve letter of credit loans, and (b) to the secured parties,
any indemnification expenses or other amounts which are not otherwise paid and
which are required to be paid to the secured parties;
(7) Seventh, to the persons entitled to the payments described in this
clause, an amount equal to the operating and administrative costs that were not
paid under the first priority above; and
(8) Eighth, to the distribution suspense account, any amounts remaining in
the revenue account after the making of the transfers described above in
clauses (1) through (7) above.
However, in the event the Securities are accelerated and no foreclosure
occurs within 180 days afterwards, then principal of the debt service reserve
letter of credit loans will be paid in the third priority instead of the fourth
priority until the time that foreclosure has occurred or the acceleration has
been rescinded or otherwise remedied.
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The priority of transfers and payments from the revenue account as shown
above is illustrated in the following flow chart.
[FLOW CHART SHOWING THE PRIORITY OF THE PAYMENTS FROM THE REVENUE ACCOUNT]
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DEBT PAYMENT ACCOUNT
Funds on deposit in or credited to the debt payment account on any funding
date according to the third priority above will be used to pay the following:
o all principal of and interest on the Securities and all other amounts
payable under the indenture,
o all principal of and interest on any debt service reserve bonds,
o all commitment, letter of credit and fronting fees due and payable under
the debt service reserve letter of credit reimbursement agreement, and
o all interest on any debt service reserve letter of credit loans.
Funds on deposit in or credited to the sub-account of the debt payment account
on any funding date according to the fourth priority above will be used to pay
all principal of any debt service reserve letter of credit loans and related
fees and charges in connection with tax gross-ups, capital adequacy costs and
breakage costs on the payment date.
On any payment date that any of the amounts described in this paragraph
are due and payable (or if that day is not a business day, then on the next
business day), the depositary bank will remit funds on deposit in or credited
to the debt payment account or its sub-account to the persons entitled to the
payment of those amounts. If on any payment date, there are more funds on
deposit in or credited to the debt payment account than are required after
making the payments described in the immediately preceding sentence, the
depositary bank will transfer the excess funds from the debt payment account to
the revenue account on the payment date. If on any payment date, there are more
funds on deposit in or credited to the debt payment account's sub-account than
are required after making the payments described above, the depositary bank
will transfer the excess funds from the sub-account to the debt payment account
on the payment date.
DEBT SERVICE RESERVE ACCOUNT
We initially funded the debt service reserve account by providing the
depositary bank with a debt service reserve letter of credit in the amount of
approximately $24 million. We will at all times be required to maintain funds
in the debt service reserve account in an amount which, together with the
amount available for drawing under any debt service reserve letter of credit,
is equal to the then current debt service reserve required balance. The debt
service reserve required balance on any date equals the maximum semiannual
principal and interest payment due on the Securities for the remaining term.
The funds on deposit in the debt service reserve account and the amounts
available for drawing under any debt service reserve letter of credit will be
used to make the following amounts, if amounts on deposit in the debt payment
account are insufficient to make these payments:
o payments of principal of, premium (if any) and interest on the
Securities;
o any other amounts payable under the indenture for the Securities;
and
o to a limited extent as described below, interest on debt service
reserve letter of credit loans.
Any funds on deposit in or credited to the debt service reserve account which,
when aggregated with the amount available for drawing under any debt service
reserve letter of credit, exceed the then current debt service reserve required
balance, will be transferred to the revenue account.
Any debt service reserve letter of credit will be issued by a bank or
other financial institution with a long-term unsecured debt rating of at least
"A2" by Moody's and at least "A" by S&P. Each debt service reserve letter of
credit will permit the depositary bank to make drawings upon the occurrence of
the following events:
(1) there being insufficient funds in the debt payment account on any
payment date to pay interest or principal then due on the Securities
after application of funds from the debt service reserve account;
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(2) upon our failure to provide a substitute letter of credit from
another letter of credit provider within at least 45 days after
receipt of a notice from the current letter of credit provider that
its long-term debt is rated less than "A2" as determined by Moody's or
"A" as determined by S&P;
(3) upon receipt of a notice from the debt service reserve letter of
credit provider that the debt service reserve letter of credit will be
terminated before the stated expiration date;
(4) upon our failure to obtain an extension or provide a replacement debt
service reserve letter of credit at least 45 days before the
expiration of the existing debt service reserve letter of credit; and
(5) upon receipt of a notice from the letter of credit provider that
interest is due and payable, but unpaid, on outstanding debt service
reserve letter of credit loans. However, any drawing made according to
this clause (5), together with all other drawings made in the same
fiscal year, cannot exceed $5,000,000.
The depositary bank will apply the proceeds of each drawing described in
clauses (1) and (5) above to payment of the relevant obligation. The depositary
bank will apply the proceeds of each drawing described in clauses (2), (3) and
(4) above to the debt service reserve account until the amount of the debt
service reserve required balance is met.
DISTRIBUTION SUSPENSE ACCOUNT
The distribution suspense account will be funded with monies remaining in
the revenue account after all other required transfers and payments have been
made. On any funding date on which the distribution conditions described below
are satisfied, monies on deposit in the distribution suspense account may be
distributed to or as directed by us:
o the debt payment account and the debt service reserve account are funded
to their then current required levels and all payments described in
first, second, sixth and seventh priorities above are satisfied in full;
o no default or event of default has occurred and is continuing or will
result from the distribution;
o the debt service coverage ratio for the preceding four fiscal quarters
ending on or prior to the funding date, measured as one period, is
greater than or equal to 1.5 to 1.0;
o the projected debt service coverage ratio for the succeeding four fiscal
quarters, including the quarter in which the distribution is to be made,
measured as one period, is greater than or equal to 1.5 to 1.0; and
o if a material default or an event of default has occurred and is
continuing under any project financing document for the Saranac project,
the Power Resources project, the Yuma project or the geothermal projects,
the loan life coverage ratio is greater than or equal to 1.7 to 1.0.
For purposes of this description of the distribution conditions:
(1) "debt service coverage ratio" means, for any period, the ratio of
clause (1) below to clause (2) below:
(1) the sum of:
o all available cash flow for the period; plus
o all interest and other investment income earned on monies on
deposit in or credited to the depositary accounts during the
period; plus
o all other cash flow received and deposited in the revenue
account during the period.
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(2) the sum of:
o all operating and administrative costs, other than operating
and administrative costs that are subordinate to debt service
on the Securities and our other senior debt, if any, and other
expenses due and payable during the period; plus
o the aggregate of principal and interest payments, and any other
amounts due, on the Securities and all other permitted debt,
excluding subordinated debt, for the period; and
(2) "loan life coverage ratio" means, at any measurement date, the ratio
of clause (1) below to clause (2) below:
(1) the sum of:
o the net present value, at a discount rate equal to the interest
rate for the Securities, of the projected available cash flow
from the date of measurement to the final maturity date for the
Securities, other than the available cash flow of a designated
subsidiary for which there has occurred a default or an event
of default under the project financing documents for the
designated subsidiary's project company; plus
o the then remaining balance in the debt service reserve account;
plus
o all interest and other investment income then on deposit in or
credited to the revenue account and the debt service reserve
account.
(2) the sum of:
o the aggregate principal amount of the Securities and all other
permitted debt which is repayable during the period from the
measurement date up to and including the final maturity date of
the Securities; plus
o all administrative costs and other expenses due and payable
during the period from the measurement date up to and including
the final maturity date of the Securities.
If on any funding date amounts on deposit in the revenue account are
insufficient to make the transfers described in the first through seventh
priorities above, then amounts on deposit in the distribution suspense account
will be transferred to the revenue account.
REDEMPTION ACCOUNT
The following funds will be deposited in the redemption account:
o all available cash flow representing insurance proceeds for damage to or
destruction of all or a portion of a project;
o all available cash flow representing expropriation proceeds for a
governmental authority's compulsory taking or transfer of a project or
threat of a compulsory taking or transfer of a project;
o all available cash flow representing title insurance proceeds for a
defect in the title to the land on which a project is located;
o all available cash flow representing proceeds from a power contract
buy-out;
o all available cash flow representing proceeds from a sale of assets;
o all available cash flow representing proceeds from the refinancing of
project-level debt;
o all proceeds from our sale of all or a portion of our interests in any
designated subsidiary; and
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o all proceeds from a designated subsidiary's sale of all or a portion of
its interests in its project company.
Funds on deposit in the redemption account will be used to redeem the
Securities and to pay our other secured obligations.
9 7/8% NOTES ACCOUNT
MidAmerican intends to redeem all of Magma's remaining 9 7/8% promissory
notes on June 30, 2000, the first day upon which redemption is permitted under
the indenture for the 9 7/8% promissory notes (if not previously repurchased).
As of the date of this prospectus, the outstanding principal amount of the
9 7/8% notes is approximately $4.2 million.
PERMITTED INVESTMENTS
All funds held by the depositary bank in the depositary accounts will be
invested in permitted investments at our expense and risk
o if no default or event of default has occurred and is continuing, at
election and as directed in writing by one of our authorized officers;
and
o if a default or an event of default has occurred and is continuing,
at the election of and as directed by the collateral agent.
These permitted investments must mature, or be subject to redemption or be
capable of being sold or otherwise liquidated at the option of their holder, in
amounts and not later than as may be necessary to provide funds when needed to
make payments from the depositary accounts. In no event will any of the
permitted investments in the depositary accounts mature more than one year
after the date acquired. Absent written instructions from us or the collateral
agent, as applicable, the depositary bank will invest funds held in the
depositary accounts in direct obligations of the United States or any United
States agency with a maturity of 30 days or less. Net interest and other
investment income earned on any permitted investments credited to any
depositary account will be transferred (1) first to the debt service reserve
account until the amount of funds deposited in or credited to that account,
together with the amount available for drawing under any debt service reserve
letter of credit, is equal to the then current debt service reserve required
balance, and (2) then to the revenue account.
INDENTURE
GENERAL
The old Securities were, and the new Securities will be, issued under an
indenture entered into between us and the trustee acting on behalf of the
holders of Securities. The indenture describes the terms of the Securities. We
are permitted to issue additional securities under the indenture, subject to
the satisfaction of conditions described below. All additional securities will
rank evenly in priority with the Securities, will be secured by the collateral
and will have terms, be in a form and be issued at prices as approved by us in
writing. No additional Securities may be issued at any time if a default or an
event of default has occurred and is continuing or if the proposed issuance
would cause a default or an event of default. All net proceeds of any
additional securities must be used for one or more of the purposes specified in
the indenture and described below.
COVENANTS
Following is a description of some of our affirmative and negative
covenants.
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AFFIRMATIVE COVENANTS
INFORMATION REQUIREMENTS
We will furnish or cause to be furnished the following financial
statements and compliance certificates to the trustee and the rating agencies,
as well as any holder of Securities or beneficial owner of a Security at their
request:
o our unaudited consolidated financial statements for the first, second
and third quarters within 45 days after the end of the quarter;
o our annual audited consolidated financial statements within 90 days
after the end of each fiscal year; and
o an officer's certificate stating whether a default or an event of
default has occurred each time we provide the financial statements
described above.
We will also furnish notices of defaults and events of default to the
trustee and the rating agencies.
MAINTENANCE OF EXISTENCE, QUALIFICATION AND RIGHTS
Other than as provided below under the caption "Business Activities;
Fundamental Changes; Sales of Assets," we will at all times preserve and
maintain in full force and effect (1) our existence as a limited liability
company in good standing under the laws of the State of Delaware and (2) our
qualification to do business in each other jurisdiction where qualification is
necessary, except in each case as permitted under the financing documents.
We will maintain and renew all of the powers, rights, privileges and
franchises necessary to transact our business as it is actually conducted or as
it is proposed to be conducted, unless the failure to do so would not
reasonably be expected to result in a material adverse effect.
As used above and as used throughout the remainder of this summary, the
term "material adverse effect" means a material adverse effect on any of the
following:
o the financial condition of results of operation of us or the designated
subsidiaries taken as a whole;
o the validity or priority of the liens on the collateral;
o our ability to perform our material obligations under the indenture, the
securities or any of the other financing documents; or
o the ability of the designated subsidiaries to perform any of their
material obligations under the financing documents.
COMPLIANCE WITH LAWS AND GOVERNMENTAL APPROVALS
We will comply with all applicable laws and obtain all necessary
governmental approvals relating to our issuance of the Securities and the
performance of our obligations under the indenture, if our failure to do so
would reasonably be expected to result in a material adverse effect.
PERFORMANCE OF FINANCING DOCUMENTS
We will perform all of our material covenants and agreements contained in
any of the financing documents to which we are a party and will take all
reasonable and necessary actions to prevent the termination or cancellation of
any those financing document as against us, any designated subsidiary or any
affiliate of ours or any designated subsidiary, unless our failure to do so
would not reasonably be expected to result in a material adverse effect.
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MAINTENANCE OF PROPERTY; PRESERVATION OF COLLATERAL
We will preserve and maintain good and valid title to all of our
properties and assets subject to no liens other than those permitted liens
described below, unless our failure to do so would not reasonably be expected
to result in a material adverse effect.
We will preserve and maintain the liens on the collateral and will defend
our title to the collateral against the claims of all persons, unless our
failure to do so could not reasonably be expected to result in a material
adverse effect.
OTHER AFFIRMATIVE COVENANTS
The indenture also contains other affirmative covenants, including our
obligations to:
o make payments on the Securities,
o maintain an office for payment, exchange and transfer of the Securities,
o pay all taxes and charges required to be paid by us,
o keep proper books and records in accordance with generally accepted
accounting principals,
o provide the trustee, the collateral agent and the depositary bank with
reasonable inspection rights,
o use the proceeds of the issuance and sale of the Securities and any
additional securities in accordance with the indenture,
o retain a nationally recognized independent accounting firm and permit
the trustee, the collateral agent and the depositary bank to discuss our
affairs, finances and accounts with that accounting firm upon reasonable
notice and at reasonable times following and during the continuance of a
default or an event of default,
o pledge all of the capital stock of Magma within 10 days after the date
on which the stock is released from the liens securing Magma's 9 7/8%
promissory notes, and
o make an election to be treated as an association taxable as a
corporation for United States tax purposes.
NEGATIVE COVENANTS
RESTRICTIONS ON THE INCURRENCE OF DEBT AND THE CREATION OF LIENS
We will not incur any debt except the following permitted debt:
o debt incurred under the indenture and the Securities;
o debt incurred under an agreement providing for the issuance of a debt
service reserve letter of credit;
o debt in an aggregate principal amount not to exceed $10 million, so long
as, after giving effect to the incurrence of the debt, no default or
event of default will have occurred and be continuing;
o subordinated debt loaned to us by our affiliates which are not our
direct or indirect majority-owned subsidiaries, in an aggregate principal
amount not to exceed $200 million, so long as this subordinated debt is
used to finance capital expenditures, expansions or operation and
maintenance costs for the existing projects or the construction of new
projects; and
o debt incurred in excess of the $10 million of debt described above, so
long as (1) after giving effect to the incurrence of the debt, no default
or event of default will have occurred and be continuing, and (2) after
giving effect to the incurrence of the debt, the rating assigned to the
Securities by each rating agency will be equivalent to or better than an
investment grade rating.
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We will not create any lien upon or with respect to any of our properties
except the following permitted liens:
o liens specifically permitted or required by, or created by, any security
document;
o liens to secure permitted debt, so long as the holder of the permitted
debt, or a representative of the holder, will have entered into the
intercreditor agreement;
o liens for taxes, assessments or governmental charges which are either
not yet due or which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves are established
in accordance with generally accepted accounting principles;
o other liens incidental to the conduct of our business which were not
incurred in connection with the borrowing of money or the obtaining of
advances or credit, other than vendor's liens for accounts payable in the
ordinary course of business, and which do not in the aggregate materially
impair the use of the encumbered assets in the operation of our business;
and
o liens which existed on the closing date for the old Securities and are
set forth on a schedule to the indenture.
BUSINESS ACTIVITIES; FUNDAMENTAL CHANGES; SALES OF ASSETS
We will not at any time engage in any activities other than:
o owning our subsidiaries and related activities;
o the activities contemplated by the indenture and the other financing
documents and related activities; and
o any other activity which could not reasonably be expected to result in a
material adverse effect and which the rating agencies confirm in writing
will not result in a lowering of the existing ratings for the Securities.
We will not enter into any transaction of merger or consolidation, change
our form of organization or our business, liquidate, wind-up or dissolve
ourselves or discontinue our business, unless (1) we are the surviving company
or the surviving company is a domestic or Canadian company and assumes our
obligations under the Securities and the other financing documents, (2)
immediately before and after the transaction, no event of default will have
occurred and be continuing, and (3) the rating agencies confirm that the
transaction will not result in a lowering of the existing ratings for the
Securities.
We will not dispose of or encumber any of our assets, except as permitted
under the financing documents.
INVESTMENTS; TRANSACTIONS WITH AFFILIATES
We will not form or have any subsidiaries, make investments, loans or
advances or acquire the stock, obligations or securities of any person, other
than the following:
o those that existed on the closing date for the old Securities,
o permitted investments,
o investments, loans or advances made with funds which do not constitute
collateral, and
o investments in subsidiaries if the rating agencies confirm that their
formation will not result in a lowering of the existing ratings for the
Securities.
We will not enter into any transaction, whether or not in the ordinary
course of business, with any of our affiliates which is not on an arm's-length
basis. We may, however, perform our obligations under, and engage in the
transactions permitted by, the financing documents.
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RESTRICTED PAYMENTS
The following are restricted payments and will be made only from the
distribution suspense account if the distribution conditions described above
are satisfied:
o any declaration and payment of distributions, dividends or any other
similar payment made on account of our equity interests;
o any payment of the principal of or interest on any of our subordinated
debt; or
o any loans or advances to any of our affiliates.
OTHER NEGATIVE COVENANTS
The indenture also contains other negative covenants, including, without
limitation, our obligation not to do any of the following:
o amend our certificate of formation or any other organizational document
if this action could reasonably be expected to result in a material
adverse effect,
o assign any of our rights or obligations under any financing document or
enter into any additional agreements, contracts or other undertakings if
this action could reasonably be expected to result in a material adverse
effect,
o take any action which will cause us to be in violation of the Investment
Company Act of 1940, as amended, or
o contingently or otherwise become liable in connection with any guarantee
obligation other than guarantees of permitted debt which is incurred by
(a) a person that is not one of our affiliates or (b) one of our
wholly-owned subsidiaries.
EVENTS OF DEFAULT AND REMEDIES
EVENTS OF DEFAULT
The following events constitute events of default under the indenture:
(1) if we fail to pay any principal of, premium (if any) or interest on
any Security when it becomes due and payable;
(2) if we make a false representation in a financing document and the
circumstances underlying the misrepresentation have resulted in, or
could reasonably be expected to result in, a material adverse effect.
We will have 30 days to cure this default, or up to 90 days if we are
diligently pursuing the cure;
(3) if we fail to perform any covenant under the indenture relating to
maintenance of existence, payment of taxes, incurrence of debt,
creation of liens, business activities, fundamental changes, sales of
assets, restricted payments or issuance of guarantee obligations. We
will have 30 days to cure this default;
(4) if we fail to perform any of our covenants contained in the indenture
other than those referred to above. We will have 60 days to cure this
default, or up to 90 days if we are diligently pursuing the cure;
(5) if we are the subject of a bankruptcy proceeding or another similar
proceeding;
(6) if any security document ceases in any material respect to be in full
force and effect or any material lien purported to be granted in any
security document ceases to be a valid and perfected lien in favor of
the collateral agent with the priority purported to be created in the
security document. We will have 10 days to cure this default;
(7) if payment of our debt in excess of $5 million, other than debt
incurred under the indenture or a debt service reserve letter of
credit and reimbursement agreement, is accelerated following an event
of default under the instrument evidencing the debt;
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(8) if one or more final and non-appealable judgment or judgments for the
payment of money in excess of $5 million is entered against us and
remains unpaid or unstayed for a period of 90 or more consecutive
days, other than a judgment which we are diligently contesting in good
faith by appropriate proceedings and for which we have established
adequate cash reserves;
(9) if any party to any financing document, other than a secured party,
fails to perform covenant contained in the financing document, subject
to any applicable grace periods, and the failure could reasonably be
expected to result in a material adverse effect; and
(10) if MidAmerican fails to call for redemption all of Magma's
outstanding 9 7/8% promissory notes within 10 days of the first day on
which redemption is permitted under the indenture for the 9 7/8% notes.
EXERCISE OF REMEDIES
CONTROL BY HOLDERS OF SECURITIES
Holders of Securities holding more than 50% of the aggregate principal
amount of the outstanding Securities have the right to direct the time, place
and method of conducting any proceeding for any right or remedy available to
the trustee or exercising any trust or power conferred on the trustee. However,
(1) their direction may not be in conflict with any rule of law or with the
indenture or the intercreditor agreement, (2) the trustee may take any other
action deemed proper by the trustee which is not inconsistent with the
direction of the holders, and (3) the trustee need not follow any direction of
the holders if doing so would in its reasonable discretion either involve it in
personal liability or be unduly prejudicial to holders of Securities not
joining in the direction.
REMEDIES AVAILABLE
If any event of default occurs and continues:
(1) in the case of an event of default described in clause (1) above under
the caption "Events of Default," holders of Securities holding more than 331/3%
in aggregate principal amount of the outstanding Securities may, by written
notice to us and the trustee, declare the entire principal amount of the
outstanding Securities, all accrued and unpaid interest and all other amounts
payable in connection with the outstanding Securities, to be immediately due
and payable;
(2) in the case of an event of default described in clause (5) above under
the caption "Events of Default," the entire principal amount of the outstanding
Securities, all accrued and unpaid interest and all other amounts payable in
connection with the outstanding securities will automatically become due and
payable; and
(3) in the case of all other events of default described above under the
caption "Events of Default," a majority of the holders may, by written notice
to us and the trustee, declare the entire principal amount of the outstanding
Securities, all accrued and unpaid interest and all other amounts payable in
connection with the outstanding Securities, to be immediately due and payable.
Subject to the intercreditor agreement, if at any time after the principal
of the Securities becomes due and payable upon a declared acceleration, and
before any judgment or decree for the payment of the money due, or any portion
of the money due, is entered, a majority of the holders, by written notice to
us and the trustee, may rescind and annul a declaration and its consequences
if:
(1) there is paid to or deposited with the trustee a sum sufficient to
pay:
(a) all overdue installments of interest on the Securities;
(b) the principal of and premium, if any, on the Securities that have
become due other than by the declaration of acceleration, and interest
on the Securities at the rates provided in the Securities for late
payments of principal;
(c) to the extent that payment is lawful, interest upon overdue interest
at the rates provided in the Securities for late payments of interest;
and
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(d) all sums paid or advanced by the trustee under the indenture and the
reasonable compensation, expenses, disbursements and advances of the
trustee and its agents and counsel; and
(2) all events of default, other than the nonpayment of principal of the
Securities that has become due solely by the declared acceleration, have been
cured or waived in accordance with the indenture.
APPLICATIONS OF FUNDS
Following the application of funds as provided in the intercreditor
agreement, any money to be applied by the trustee after an event of default
will be applied in the following order:
(1) first, to the payment of all amounts due to the trustee or any
predecessor trustee under the indenture;
(2) second, if the unpaid principal amount of the outstanding Securities
has not become due, to the payment of any overdue interest , together
with interest, to the extent legally enforceable, on the payments of
overdue interest;
(3) third, if the unpaid principal amount of a portion of the outstanding
Securities has become due, (1) first to the payment of premium (if
any) and accrued interest on all outstanding Securities, together with
interest, to the extent legally enforceable, on the payments of
premium (if any) and overdue interest, and (2) next to the payment of
the unpaid principal amount of all Securities then due;
(4) fourth, if the unpaid principal amount of all of the outstanding
Securities has become due, to the payment of the whole amount then due
and unpaid upon the outstanding Securities for principal, premium (if
any) and interest, together with interest to the extent legally
enforceable, on the overdue principal, premium (if any) and interest;
and
(5) fifth, if the unpaid principal amount of all of the outstanding
Securities has become due, and all of the outstanding Securities have
been indefeasibly paid in full in cash or cash equivalents, any
surplus then remaining will be paid to us or to whoever may be
lawfully entitled to receive the surplus, or as a court of competent
jurisdiction may direct.
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The priority of payments described in clauses (1) through (5) above is
illustrated in the following flow chart.
[FLOW CHART SHOWING THE PRIORITY OF PAYMENTS ON THE BONDS WITH COLLATERAL
PROCEEDS]
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AMENDMENTS AND SUPPLEMENTS
We and the trustee may amend or supplement the indenture without the
consent of the holders of Securities for the following purposes:
o to add additional covenants against us, to surrender rights or powers
conferred upon us or to confer additional rights, remedies, benefits,
powers or authorities upon the holders of Securities,
o to increase the assets securing our obligations under the indenture,
o to provide for the issuance of additional securities on the conditions
described in the indenture, or
o for any purpose not inconsistent with the terms of the indenture to cure
any ambiguity, defect or inconsistency.
The indenture may be otherwise amended or supplemented by us and the
trustee with the consent of the majority holders. However, no amendment or
supplement may, without the consent of each holder of Securities, modify the
following:
o the principal, premium (if any) or interest payable upon any of the
Securities,
o the dates on which interest on or principal of any of the Securities is
paid,
o the dates of maturity of any of the Securities, or
o the procedures for amendment of the indenture by a supplemental
indenture.
SATISFACTION AND DISCHARGE
We may terminate the indenture by delivering all outstanding Securities to
the trustee for cancellation and by paying all other sums payable under the
indenture.
Legal and covenant defeasance will be permitted upon terms and conditions
customary for transactions of this nature.
TRUSTEE
There will at all times be a trustee under the indenture which will:
o be a corporation organized and doing business under the laws of the
United States, any state or territory of the United States or the
District of Columbia;
o be authorized under those laws to exercise corporate trust powers;
o be subject to supervision or examination by federal, state, territorial
or District of Columbia authority;
o either (1) have a combined capital and surplus of at least $50 million
or (2) have a combined capital and surplus of at least $10 million and be
a wholly-owned subsidiary of a corporation having a combined capital and
surplus of at least $50 million; and
o have a corporate trust office in New York City.
We agree to indemnify and hold harmless the trustee in connection with the
performance of its duties under the indenture, except for liability which
results from the gross negligence or bad faith of the trustee.
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The trustee may resign at any time by giving written notice to us. The
trustee may be removed at any time by act of the majority holders, delivered to
the trustee and us. We will give notice of each resignation and removal of the
trustee and each appointment of a successor trustee to all holders of
Securities and to the rating agencies. The trustee also serves as trustee for
the holders of the Imperial Valley project financing debt. In the event a
conflict of interest were to arise between those holders and the holders of
Securities, the trustee may determine, or be required, to resign as trustee
under the indenture.
DEBT SERVICE RESERVE LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
GENERAL
On the closing date for the old Securities, Credit Suisse First Boston
issued a debt service reserve letter of credit for our account in the amount of
approximately $24 million in favor of the depositary bank. The debt service
reserve letter of credit was issued under the debt service reserve letter of
credit and reimbursement agreement.
The depositary bank may make drawings under any debt service reserve
letter of credit upon the occurrence of the following events:
(1) there being insufficient funds in the debt payment account on any
payment date to pay interest or principal then due on the Securities
after application of funds from the debt service reserve account;
(2) upon our failure to provide a substitute letter of credit from another
letter of credit provider within not more than 45 days after receipt of
a notice from the current letter of credit provider that its long-term
debt is rated less than "A" as determined by S&P or "A2" as determined
by Moody's;
(3) upon receipt of a notice from the letter of credit provider that the
debt service reserve letter of credit will be terminated before its
stated expiration date;
(4) upon our failure to obtain an extension or provide a replacement debt
service reserve letter of credit at least 45 days before the expiration
of the current debt service reserve letter of credit; and
(5) upon receipt of a notice from the letter of credit provider that
interest is due and payable, but unpaid, with respect to outstanding
debt service reserve letter of credit loans, so long as any drawing
under this clause, together with all other drawings under the debt
service reserve letter of credit in the same calendar year, does not
exceed $5,000,000.
The depositary bank will apply the proceeds of each drawing described in
clauses (1) and (5) to payment of the relevant obligation. The depositary bank
will apply the proceeds of each drawing described in clauses (2), (3) and (4)
to the debt service reserve account until the debt service reserve required
balance is met.
The amount available for drawing under the debt service reserve letter of
credit will be reduced upon (1) the making of draws, (2) a reduction of the
debt service reserve required balance and (3) the deposit of cash in the debt
service reserve account.
DEBT SERVICE RESERVE LETTER OF CREDIT LOANS
Each drawing on the debt service reserve letter of credit submitted by the
depositary bank will be converted into a loan to us.
Each debt service reserve letter of credit loan will be evidenced by a
note and will mature on the later of (1) ten years from the closing date for
the old Securities or (2) five years from the drawing giving rise to the loan.
We will repay the principal amount of each debt service reserve letter of
credit loan as, when and to the extent funds are made available from the
revenue account for these repayments.
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CONVERSION TO DEBT SERVICE RESERVE BOND
If:
(1) 50% or more of the principal amount of any debt service reserve letter
of credit loan remains outstanding on or after 5 years from the drawing
giving rise to the loan; or
(2) the principal amount of any debt service reserve letter of credit loan
remains outstanding on or after l0 years from the closing date for the
old Securities;
then the letter of credit provider may, upon 30 days' prior written notice to
us and the trustee, convert the debt service reserve letter of credit loan into
a debt service reserve bond. Each debt service reserve bond will amortize on a
basis which results in levelized payment of the principal of and interest on
the debt service reserve bond to and including its maturity date, which will be
the final maturity date of the Securities. Each debt service reserve bond will
bear interest at a fixed rate equal to the higher of:
(a) the interest rate last applicable to the converted debt service reserve
letter of credit loan; and
(b) the rate of interest, at the time of conversion, on United States
Treasury notes with an average life most comparable to the average life
of the Securities plus the higher of (1) 2.50% and (2) the spread over
United States Treasury notes applicable to the Securities on the
closing date for the old Securities.
We will pay principal of and interest on each debt service reserve bond with
the same payment priority as payments of principal of and interest on the
Securities.
EVENTS OF DEFAULT
The following events constitute events of default under the debt service
reserve letter of credit and reimbursement agreement:
o We fail to pay any principal, interest or other amounts due under the
debt service reserve letter of credit and reimbursement agreement or any
debt service reserve letter of credit bond within 15 days after its due
date in the case of principal and interest, and within 15 days after
delivery of notice to us in the case of fees, costs and expenses;
o if we make a false and the representation in the debt service reserve
letter of credit and reimbursement agreement circumstances that gave rise
to the misrepresentation have resulted in or could reasonably be expected
to have a material adverse effect. We have 30 days to cure this default,
or up to 90 days if we are diligently pursuing the cure;
o if any provision of the indenture, the depositary agreement or any
security document is terminated, amended or otherwise modified without
the prior written approval of banks which hold at least 662/3% of the
obligations and/or commitments under the debt service reserve letter of
credit and reimbursement agreement, if the termination, amendment or
other modification would do any of the following:
o affect the priority of payments from the revenue account under the
depositary agreement in a manner adverse to the agent under the debt
service reserve letter of credit and reimbursement agreement or any bank
party to the debt service reserve letter of credit reimbursement
agreement;
o increase the interest rate on the Securities other than in accordance
with the indenture;
o amend the payment dates for the Securities in a manner adverse to the
letter of credit agent or any letter of credit bank; or
o change the voting requirements under the intercreditor agreement in a
manner adverse to the letter of credit agent or any letter of credit
bank. We have 60 days to cure this default, or up to 90 days if we are
diligently pursuing the cure;
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o if we fail to perform covenants under the indenture which are
incorporated by reference in the debt service reserve letter of credit
and reimbursement agreement and all outstanding Securities have paid in
full and the indenture is no longer in effect. We will have 30 days to
cure this default;
o if we fail to perform our covenants contained in any other provision of
the debt service reserve letter of credit and reimbursement agreement. We
will have 60 days to cure this default, or up to 90 days if we are
diligently pursuing the cure; and
o if an event of default as described under any of clauses (2) through
(10) of the summary of indenture events of default occurs and continues
until the earlier of the expiration of 30 days or an acceleration of the
Securities.
REMEDIES
Upon the occurrence of an event of default under the debt service reserve
letter of credit and reimbursement agreement, the debt service reserve letter
of credit provider may (1) terminate the debt service reserve letter of credit,
(2) accelerate any outstanding debt service reserve letter of credit loans or
debt service reserve bonds and (3) terminate its commitment.
SECURITY ARRANGEMENTS
Our payment of the principal of, premium (if any), interest on and other
amounts due under or in connection with the Securities or the other secured
obligations will be secured by the collateral under the terms of the security
documents. The preservation and administration of the collateral by the
collateral agent and the disposition of the collateral among the secured
parties upon acceleration and foreclosure will be governed by the intercreditor
agreement.
SECURITY DOCUMENTS
SUBSIDIARY SECURITY AGREEMENT
Under the subsidiary security agreement executed by the designated
subsidiaries in favor of the collateral agent, Magma, Salton Sea Power, Falcon
Seaboard Resources, Falcon Seaboard Power, Falcon Seaboard Oil, California
Energy Development and CE Texas Energy have (1) assigned to the collateral
agent all of the designated subsidiaries' rights to receive available cash flow
and (2) granted to the collateral agent, acting on behalf of the secured
parties, a lien on all of the designated subsidiaries' available cash flow
which is deposited with the depositary bank.
The subsidiary security agreement also contains affirmative and negative
covenants of the designated subsidiaries. Affirmative covenants of the
designated subsidiaries include the obligation of each designated subsidiary
to, subject to exceptions set forth in the subsidiary security agreement:
o provide notices and information to the trustee and the rating
agencies;
o maintain its existence, qualification to do business and rights and
privileges, except, with respect to qualification to do business and
rights and privileges, where the failure to do so could not reasonably be
expected to result in a material adverse effect;
o comply with all applicable laws, except where the failure to do so
could not reasonably be expected to result in a material adverse effect;
o obtain and comply with all necessary governmental approvals, except
where the failure to do so could not reasonably be expected to result in
a material adverse effect;
o perform its obligations under the financing documents, except where the
failure to do so could not reasonably be expected to result in a material
adverse effect;
o cause its project company:
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(1) to perform its covenants under its project documents and project
financing documents, except where the failure to do so could not
reasonably be expected to result in a material adverse effect;
(2) not to amend, terminate or otherwise modify any of its project
documents or project financing documents, except a power contract
buy-out which would not result in a ratings down-grade or where
doing so could not reasonably be expected to result in a material
adverse effect;
(3) to maintain the qualifying facility status of its project, except
where the failure to do so could not reasonably be expected to
result in a material adverse effect;
(4) not to enter into any additional project documents or project
financing documents, except where doing so could not reasonably be
expected to result in a material adverse effect;
(5) not to incur any additional debt except:
o if the rating agencies confirm in writing that the incurrence will
not result in a ratings downgrade; and
o other than with respect to Magma and Falcon Seaboard Resources, in
other limited circumstances; and
(6) not to create any liens other than liens permitted under the
financing documents;
o maintain title to its assets, except where the failure to do so could
not reasonably be expected to result in a material adverse effect;
o maintain the liens on its collateral in favor of the collateral agent,
except where the failure to do so could not reasonably be expected to
result in a material adverse effect;
o pay its taxes;
o keep books and records in accordance with generally accepted
accounting principals;
o cause all available cash flow to which it has a right to receipt to be
deposited into the revenue account;
o use its reasonable best efforts to cause its project company, and each
of its subsidiaries which owns an interest in its project company, to
declare and pay distributions to it with all available cash flow then
available for distribution; and
o hold all available cash flow received by it in trust for the secured
parties and immediately deliver all of its available cash flow to the
depositary bank.
Negative covenants of the designated subsidiaries include the following
obligation of each designated subsidiary not to, subject to exceptions set
forth in the subsidiary security agreement:
o incur any debt other than the secured obligations, debt existing on the
closing date for the old Securities and other permitted debt or;
o create any lien on its properties other than permitted liens;
o become liable for any guarantee obligation, except guarantees of
permitted debt which is incurred by (1) a person that is not an affiliate
of the designated subsidiary or (2) other than a wholly-owned subsidiary
of the designated subsidiary;
o engage in any activities other than (1) the ownership of an interest in
its project company, (2) with respect to Magma, the performance of its
obligations under the project documents, (3) the activities contemplated
by the indenture and the other financing documents and related activities
and (4) other activities which could not reasonably be expected to result
in a material adverse effect and which the rating agencies confirm will
not result in a lowering of the existing ratings for the Securities;
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o merge, consolidate, change its form of organization or business,
liquidate, wind-up or dissolve itself, unless: (1) the designated
subsidiary is the surviving company or the surviving company is a
domestic company that assumes the designated subsidiary's obligations
under the financing documents; (2) no event of default under the
indenture exists or results from the transaction; and (3) the rating
agencies confirm that the transaction will not result in a lowering of
the existing ratings for the Securities;
o sell, transfer or convey any portion of its interest in its project
company other than, so long as no event of default has occurred and is
continuing, (1) any sale for fair market value the proceeds of which are
in the form of cash or cash equivalents and are used to redeem Securities
in accordance with the indenture, if required, or (2) a transfer
permitted under the financing documents;
o form subsidiaries, make investments, loans or advances or acquire the
stock, obligations or securities of any person other than (1) permitted
investments, (2) investments, loans or advances made with funds which do
not constitute collateral and (3) subsidiaries the formation of which the
rating agencies confirm will not result in a lowering of the existing
ratings for the Securities;
o enter into non-arm's-length transactions with affiliates except as
permitted by the financing documents;
o make restricted payments other than the payment of available cash flow
into the revenue account;
o assign its rights or obligations under the financing documents or enter
into additional contracts or agreements if those assignments or
additional contracts or agreements could reasonably be expected to result
in a material adverse effect; or
o amend its organizational documents or any other material contract if
the amendment could reasonably be expected to result in a material
adverse effect.
CE GENERATION SECURITY AGREEMENT
Under to the CE Generation security agreement executed by us in favor of
the collateral agent, we have granted to the collateral agent, acting on behalf
of the secured parties, a lien on the following, whether currently owned or
later acquired by us:
o all of our rights under the contracts, agreements or undertakings to
which we are a party;
o the depositary accounts and all cash, investments and other assets on
deposit in or credited to those accounts;
o all of our other tangible personal and intangible property, to the
extent it is possible to grant a lien on this property, other than the
capital stock of Magma, which will be pledged upon the redemption of, or
earlier release of security interests under, Magma's 9 7/8% promissory
notes; and
o all proceeds received or receivable in connection with any of the
above, to the extent it is possible to grant a lien on these proceeds.
PLEDGE AGREEMENTS
Under the pledge agreements executed by us, Magma and some of the
intermediate holding companies in favor of the collateral agent, those parties
pledged the following to the collateral agent, acting on behalf of the secured
parties:
(1) all of the equity interests in CE Texas Gas and the designated
subsidiaries, other than the capital stock of Magma and the 1% of the
shares of capital stock of Salton Sea Power which is owned by Salton
Sea Funding Corporation;
(2) upon the redemption of, or other release of security interests under,
Magma's 9 7/8% promissory notes, all of the capital stock of Magma;
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(3) all of the capital stock of SECI Holdings; and
(4) all dividends, distributions, cash, instruments and other property and
proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for the equity interests
described in clauses (1), (2) and (3).
MidAmerican's obligation to make payments on Magma's 9 7/8% promissory
notes is secured by a pledge of the capital stock of Magma and a lien on
dividends and distributions in respect of the Magma stock. On March 3, 1999,
MidAmerican repurchased $195.8 million in aggregate principal amount of its
9 7/8% Notes in connection with a tender offer for a repurchase price, including
premium, of $215.4 million. In connection with the corresponding reduction of
$195.8 million of the principal outstanding under Magma's 9 7/8% promissory
notes, $215.4 million of the proceeds of the old Securities were paid to
MidAmerican. As a result of the 9 7/8% note repurchase offer, the outstanding
principal amount of Magma's 9 7/8% promissory notes was reduced from $200
million to approximately $4.2 million. MidAmerican intends to redeem the
remaining outstanding Magma 9 7/8% promissory notes on June 30, 2000, which is
the first day upon which an optional redemption is permitted under the trust
indenture for Magma's 9 7/8% promissory notes. A portion of the net proceeds of
the old Securities, in the amount of approximately $4.2 million, has been paid
to MidAmerican and placed into a restricted account held by the depositary bank
which is maintained solely for the purpose of paying the remaining amounts due
to the secured parties. These proceeds are being used to pay interest on, and
effect the redemption or earlier repurchase of the remaining outstanding
principal of, Magma's 9 7/8% promissory notes. At the time of this redemption,
the collateral agent is expected to obtain a pledge of all of Magma's capital
stock.
INTERCREDITOR AGREEMENT
The collateral will be shared among the secured parties as provided in the
intercreditor agreement entered into among us, the designated subsidiaries and
the secured parties. The intercreditor agreement will govern:
(1) the appointment of the collateral agent as agent for each of the
secured parties;
(2) the preservation and administration of the collateral by the
collateral agent;
(3) the disposition of the collateral among the secured parties upon
acceleration and foreclosure; and
(4) the application of:
o available cash flow representing loss proceeds, expropriation
proceeds, title proceeds, buy-out proceeds, refinancing proceeds or
asset sale proceeds; and
o proceeds from our sale of all or a portion of our interests in any
designated subsidiary or the sale by a designated subsidiary of all
or a portion of its interest in any project company.
Each person replacing any of the secured parties and each person, or a trustee
therefor or agent thereof, holding secured obligations will be required to
become a party to the intercreditor agreement, which will be amended to the
extent necessary to accommodate the replacement or addition of those persons.
VOTING
The exercise of remedies following the occurrence of a trigger event, as
described below, will be governed by the provisions of the intercreditor
agreement. The affirmative vote of secured parties holding at least the
following percentages of the combined exposure of all of the secured parties
will be sufficient to direct the collateral agent to exercise remedies or take
other actions:
o with respect to a trigger event resulting from an event of default
relating to payment, 331/3% of the combined exposure; or
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o with respect to any other trigger event or any other event or
circumstance requiring a vote of the secured parties, 50% of the combined
exposure.
TRIGGER EVENTS; EXERCISE OF REMEDIES
Each of the following events will be deemed a trigger event under the
intercreditor agreement if the collateral agent, upon direction from the
required percentage of secured parties, declares the event to be a trigger
event:
o the occurrence of an event of default under the indenture and the
acceleration of all or a portion of the principal amount of the
outstanding Securities; and
o the occurrence of an event of default under any other instrument
evidencing secured obligations and the acceleration of the secured
obligations in an aggregate principal amount in excess of $5 million;
If a trigger event occurs and continues, the collateral agent, upon the written
instructions of the required percentage of secured parties, will be authorized
to take any and all actions and to exercise any and all rights, remedies and
options available to it under the security documents.
APPLICATION OF PROCEEDS FOLLOWING A TRIGGER EVENT
Upon a foreclosure or other exercise of remedies following a trigger
event, the proceeds of any sale, disposition or other realization upon the
collateral will be distributed in the following order of priority:
(1) first, to the trustee, the letter of credit provider, the collateral
agent and the depositary bank, an amount sufficient to pay all administrative
costs due and payable to those parties under the intercreditor agreement and
the other financing documents;
(2) second, to the secured parties, an amount equal to the unpaid amount
of all secured obligations constituting principal, interest, premium (if any)
and fees due and payable to the secured parties;
(3) third, to the secured parties, an amount equal to the unpaid amount of
all other secured obligations due and payable to the secured parties as of the
date of the distribution; and
(4) fourth, to us, the designated subsidiaries or our or their successors
and assigns or to whomever may be lawfully entitled, or as a court of competent
jurisdiction may direct, any surplus remaining after giving effect to clauses
(1) through (3) immediately above.
At the time the collateral agent is to make a distribution under clause
(2) above, and with the same priority as the distribution, the collateral agent
will deposit into a separate interest-bearing trust account funds up to the
amount available for drawing on the debt service reserve letter of credit,
calculated after giving effect to the redemption of Securities with proceeds of
the distribution. The collateral agent will hold the funds in the account until
receipt of a written notice from the debt service reserve letter of credit
provider that either (a) the depositary bank has made a drawing on the debt
service reserve letter of credit, or (b) the debt service reserve letter of
credit has expired or terminated. Upon receipt of a notice specified in (a)
above, the collateral agent will distribute to the letter of credit provider
funds equal to the drawing's proportionate share of the funds in by the
account. Upon receipt of a notice specified in (b) above, the collateral agent
will distribute the balance of the funds on deposit in the account in
accordance with clauses (2), (3) and (4) above.
The proceeds of any sale, disposition or other realization with respect to
collateral held for the benefit of some but not all of the secured parties will
be applied to the payment of obligations owed to the secured parties for whose
benefit the collateral was held.
APPLICATION OF PROCEEDS
All (a) available cash flow representing loss proceeds, expropriation
proceeds, title insurance proceeds, buy-out proceeds, refinancing proceeds or
asset sale proceeds and (b) proceeds from our
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sale of all or a portion of our interests in any designated subsidiary or the
sale by a designated subsidiary of all or a portion of its interests in any
project company, in each case which are required to be applied to the
redemption of Securities, will be distributed in the following order of
priority:
(1) first, to the trustee, the letter of credit provider, the collateral
agent and the depositary bank, an amount sufficient to pay all administrative
costs due and payable to these parties as of the date of the distribution;
(2) second, to the secured parties, an amount equal to the unpaid amount
of all secured obligations constituting principal, interest, premium (if any)
and fees due and payable to the secured parties as of the date of the
distribution;
(3) third, to the secured parties, an amount equal to the unpaid amount of
all other secured obligations due and payable to the secured parties as of the
date of the distribution; and
(4) fourth, to us, the designated subsidiaries or our or their successors
and assigns or to whomever may be lawfully entitled or as a court of competent
jurisdiction may direct, any surplus remaining after giving effect to clauses
(1) through (3) immediately above.
At the time a distribution is to be made under clause (2) above, and with
the same priority as the distribution, the collateral agent will set aside
available funds in a separate interest-bearing trust account in an amount up to
the amount available for drawing on the debt service reserve letter of credit,
calculated after giving effect to the redemption of Securities with proceeds of
the distribution. Upon a subsequent draw on the debt service reserve letter of
credit, the collateral agent will transfer funds from the separate account to
the letter of credit provider up to the amount drawn. Upon an expiration or
termination of the debt service reserve letter of credit, funds in the separate
account collateralizing the debt service reserve letter of credit will be
released and applied as set forth in clauses (2), (3) and (4) above.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives new Securities for its own account as a
result of market-making activities or other trading activities in connection
with the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of the new Securities. This prospectus, as it may be
amended or supplemented from time to time, may be used by participating
broker-dealers during the period referred to below in connection with resales
of new Securities received in exchange for old Securities if the old Securities
were acquired by the participating broker-dealers for their own accounts as a
result of the market-making or other trading activities. We have agreed that
this prospectus, as it may be amended or supplemented from time to time, may be
used by a participating broker-dealer in connection with resales of new
Securities for a period ending 120 days after the registration statement of
which this prospectus is a part has been declared effective (subject to
extension) or, if earlier, when all new Securities have been disposed of by the
participating broker-dealer.
We will not receive any proceeds from the issuance of the new Securities
offered by this prospectus. New Securities received by broker-dealers for their
own accounts in connection with 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 new Securities or a
combination of these methods of resale, at market prices prevailing at the time
of resale, at prices related to prevailing market prices or at negotiated
prices. Any resale may be made directly to purchasers or to or through brokers
or dealers and/or the purchasers of any new Securities. Any broker-dealer that
resells new Securities that were received by it for its own account in
connection with the exchange offer and any broker-dealer the participates in a
distribution of new Securities may be deemed to be an "underwriter" within the
meaning of the Securities Act, and any profit on any resale of new Securities
and any commissions or concessions received by any of those 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 a "underwriter" within the meaning of the Securities Act.
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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
QUALIFICATIONS AND DEFINED TERMS
The following summary describes material United States federal income tax
considerations related to the acquisition, ownership and disposition of the
Securities.
The summary is subject to the following qualifications:
o The summary is based on the Internal Revenue Code of 1986, as amended,
and regulations, rulings and judicial decisions as of the date hereof,
all of which may be repealed, revoked or modified with possible
retroactive effect;
o This discussion does not deal with holders that may be subject to
special tax rules, including:
o insurance companies,
o tax-exempt organizations,
o financial institutions,
o dealers in securities or currencies,
o holders whose functional currency is not the U.S. dollar, and
o holders who will hold the Securities as a hedge against currency
risks or as part of a straddle, synthetic security, conversion
transaction or other integrated investment comprised of the Securities
and one or more other investments;
o The summary is applicable only to purchasers that acquire the
Securities at the initial offering price and who will hold the Securities
as capital assets within the meaning of Section 1221 of the Internal
Revenue Code;
o The summary is for general information only and does not address all
aspects of United States federal income taxation that may be relevant to
holders of the Securities in light of their particular circumstances; and
o The summary does not address any tax consequences arising under the
laws of any state, local or foreign taxing jurisdiction.
Accordingly prospective holders should consult their own tax advisors as to the
particular tax consequences to them of acquiring, holding or disposing of the
Securities.
As used in this discussion, the term "United States holder" means a
beneficial owner of a Security that is (1) a citizen or resident of the United
States for U.S. federal income tax purposes, (2) a corporation created or
organized under the laws of the United States, any State or the District of
Columbia, (3) an estate the income of which is subject to United States federal
income tax without regard to its source or (4) a trust if a court within the
United States is able to exercise primary supervision over the administration
of the trust and one or more United States persons have the authority to
control all substantial decisions of the trust. A "non-United States holder" is
any beneficial holder of a Security that is not a United States holder.
INCOME TAX CONSIDERATIONS FOR UNITED STATES HOLDERS
TAX CONSEQUENCES OF THE EXCHANGE OFFER
The exchange of an old Security for a new Security in the exchange offer
will not constitute a "significant modification" of the old Security for United
States federal income tax purposes and, accordingly, the new Security will be
treated as a continuation of the old Security in the hands of the holder. As a
result, there will be no United States federal income tax consequences to a
United States holder who exchanges an old Security for the new Security in the
exchange offer and the holder will have the same adjusted tax basis and holding
period in the new Security as it had in the old Security immediately before the
exchange.
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ORIGINAL ISSUE DISCOUNT AND PAYMENTS OF INTEREST
The old Securities were not, and the new Securities will not be, issued
with more than a
de minimis amount of original issue discount. Accordingly, interest on a
Security generally will be taxable to a United States holder as ordinary income
at the time it accrues or is received in accordance with the United States
holder's method of accounting for U.S. federal income tax purposes.
DISPOSITION OF SECURITIES
Upon the sale, exchange, redemption, retirement or other disposition of a
Security, a United States holder generally will recognize gain or loss equal to
the difference between (1) the amount realized upon the sale, exchange,
redemption, retirement or other disposition (not including amounts attributable
to accrued but unpaid interest, which will be taxable as such) and (2) the
holder's adjusted tax basis in the Security. A United States holder's tax basis
in a Security will, in general, be the United States holder's cost for the
Security. The gain or loss will be capital gain or loss. Capital gain
recognized by an individual investor upon a disposition of a Security that has
been held for more than 12 months will generally be subject to a maximum tax
rate of 20% or, in the case of a Security that has been held for 12 months or
less, will be subject to tax at ordinary income tax rates.
INCOME TAX CONSIDERATIONS FOR NON-UNITED STATES HOLDERS
PAYMENTS OF PRINCIPAL AND INTEREST
Under present U.S. federal income tax law, subject to the discussion of
backup withholding and information reporting below, payments of principal of
and interest on the Securities to any non-United States holder will not be
subject to U.S. federal income or withholding tax so long as the following
conditions are satisfied:
o the non-United States holder does not actually or constructively own
10% or more of the total combined voting power of all classes of our
membership interests entitled to vote;
o the non-United States holder is not a bank receiving interest under a
loan agreement entered into in the ordinary course of its trade or
business;
o the non-United States holder is not a controlled foreign corporation
that is related to us (directly or indirectly) through equity ownership;
o the interest payments are not effectively connected with a United
States trade or business; and
o the following certification requirements are met:
o the beneficial owner of the Security certifies on IRS Form W-8 or a
substantially similar substitute form, under penalties of perjury,
that it is not a United States person and provides its name and
address, and
o (a) the beneficial owner files the form with the withholding agent or
(b) in the case of a Security held by a securities clearing
organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business
and holds the Security, the financial institution certifies to us or
our agent under penalties of perjury that the statement has been
received from the beneficial owner by it or by a financial institution
between it and the beneficial owner and furnishes the withholding
agent with a copy of the certification.
DISPOSITION OF SECURITIES
Under present U.S. federal income tax law, subject to the discussion of
backup withholding and information reporting below, a non-United States holder
will not be subject to U.S. federal income tax on gain realized on the sale,
exchange, redemption, retirement or other disposition of a Security, unless (1)
the gain is effectively connected with a trade or business carried on by the
holder within the United States or, if a treaty applies, is generally
attributable to a United States permanent
125
<PAGE>
establishment maintained by the holder, or (2) the holder is an individual who
is present in the United States for 183 days or more in the taxable year of
disposition and other requirements are met.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, payments of interest and the proceeds of the sale, exchange,
redemption, retirement or other disposition of the Securities payable by a U.S.
paying agent or other U.S. intermediary will be subject to information
reporting. In addition, backup withholding at a rate of 31% will apply to these
payments if the holder fails to provide an accurate taxpayer identification
number in the case of a United States holder or the certification described
above (in the case of a non-United States holder) or other evidence of exempt
status or fails to report all interest and dividends required to be shown on
its U.S. federal income tax returns. Some categories of United States Holders
(including, among others, corporations) and non-United States holders that
comply with certification requirements are not subject to backup withholding.
Any amount paid as backup withholding will be creditable against the holder's
U.S. federal income tax liability, so long as the required information is
timely furnished to the Internal Revenue Service. Holders of Securities should
consult their tax advisors as to their qualification for exemption from backup
withholding and the procedure for obtaining an exemption. On October 6, 1997,
new Treasury Regulations were issued that generally modify the information
reporting and backup withholding rules applicable to certain payments made
after December 31, 1999. In general, the new regulations would not
significantly alter the present rules discussed above.
LEGAL MATTERS
The validity of the new Securities will be passed upon for us by Latham &
Watkins, 885 Third Avenue, Suite 1000, New York, New York 10022.
EXPERTS
Our consolidated financial statements as of December 31, 1998 and 1997,
and the related consolidated statements of operations and cash flows for each
of the three years in the period ended December 31, 1998, included in this
prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing in this prospectus, and are included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
POWER GENERATION PROJECTS INDEPENDENT ENGINEER
Fluor Daniel, Inc. prepared the power generation projects independent
engineer's report dated February 24, 1999, which is included as Appendix A to
this prospectus. Fluor Daniel's report has been included in this prospectus in
reliance upon the conclusions of Fluor Daniel and upon the firm's experience in
preparing independent engineer's reports for power projects.
NATURAL GAS PROJECTS INDEPENDENT ENGINEER
R.W. Beck, Inc. prepared the natural gas projects independent engineer's
report dated February 24, 1999, which is included as Appendix B to this
prospectus. R.W. Beck's report has been included in this prospectus in reliance
upon the conclusions of R.W. Beck and upon the firm's experience in preparing
independent engineer's reports for natural gas-fired power projects.
GEOTHERMAL PROJECTS INDEPENDENT ENGINEER
Fluor Daniel also prepared the geothermal projects independent engineer's
report dated February 17, 1999, which is included as Appendix C to this
prospectus. Fluor Daniel's report has been included in this prospectus in
reliance upon the conclusions of Fluor Daniel and upon the firm's experience in
preparing independent engineer's reports for geothermal power projects.
126
<PAGE>
CONSULTANTS' REPORTS
Henwood Energy Services has prepared the power market consultant's report
dated February 11, 1999 included as Appendix D to this prospectus. You should
read this report in its entirety for information with respect to industry and
regulatory matters affecting the sales of electricity by some of the projects
and the related subjects discussed in the report. Henwood's report has been
included in this prospectus in reliance upon the conclusions of Henwood and
upon the firm's experience in providing business advisory and other services
and market forecasts in electricity and gas to international firms and public
authorities.
GeothermEx, Inc. prepared the geothermal resource consultant's report
dated February 1999 included as Appendix E to this prospectus. You should read
this report in its entirety for information on the sufficiency of the
geothermal resources available for use and for conversion to electrical power
by the Imperial Valley projects and the related subjects discussed in the
report. GeothermEx's report has been included in this prospectus in reliance
upon the conclusions of GeothermEx and upon the firm's experience in preparing
consultant's reports for geothermal projects.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-4 with the Securities and
Exchange Commission under the Securities Act with respect to our offering of
the new Securities. This prospectus does not contain all of the information in
the registration statement. You will find additional information about us and
the new Securities in the registration statement. Any statement made in this
prospectus concerning the provisions of legal documents are not necessarily
complete and you should read the documents that are filed as exhibits to the
registration statement.
We are subject to the informational requirements of the Exchange Act and
file periodic reports, registration statements, proxy statements and other
information with the Securities and Exchange Commission. You may inspect and
copy the registration statement, including exhibits, and our periodic reports,
registration statements, proxy statements and other information we file with
the Securities and Exchange Commission at the Public Reference Section of the
Securities and Exchange Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Securities and Exchange Commission located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of this material can be obtained from the
Public Reference Section of the Securities and Exchange Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Securities and Exchange Commission maintains a web site
that contains reports, proxy and information statements and other materials
that are filed through the Securities and Exchange Commission's Electronic Data
Gathering, Analysis and Retrieval (EDGAR) system. This Web site can be accessed
at http://www.sec.gov.
127
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Consolidated Financial Statements:
Independent Auditors' Report .......................................... F-2
Consolidated Balance Sheets as of December 31, 1998 and 1997 ......... F-3
Consolidated Statements of Operations for the Three Years Ended
December 31, 1998, 1997 and 1996 ................................... F-4
Consolidated Statements of Cash Flows for the Three Years Ended
December 31, 1998, 1997 and 1996 ................................... F-5
Notes to Consolidated Financial Statements ........................... F-6 - F-25
</TABLE>
<TABLE>
<S> <C>
Interim Consolidated Financial Statements:
Consolidated Balance Sheets as of September 30, 1999
and December 31, 1998 ........................................ F-26
Consolidated Statements of Operations for the Nine
Months Ended September 30, 1999 and 1998 ..................... F-27
Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1999 and 1998 ..................... F-28
Notes to Consolidated Financial Statements ..................... F-29 - F-31
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
CE Generation, LLC
We have audited the accompanying consolidated balance sheets of CE
Generation, LLC as of December 31, 1998 and 1997, and the related consolidated
statements of operations and cash flows for each of the three years in the
period ended December 31, 1998. These financial statements are the
responsibility of the Company'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, such consolidated financial statements present fairly, in
all material respects, the financial position of CE Generation, LLC as of
December 31, 1998 and 1997 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
January 28, 1999 (February 22, 1999 as to the first paragraph in Note 1
and March 3, 1999 as to Note 15)
* * * * *
F-2
<PAGE>
CE GENERATION, LLC
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents .......................................... $ 25,774 $ 23,684
Restricted cash .................................................... 128,553 6,907
Accounts receivable ................................................ 67,629 53,072
Properties, plants, contracts and equipment, net ................... 893,492 932,207
Equity investments ................................................. 125,036 131,207
Excess of cost over fair value of net assets acquired, net ......... 310,700 322,581
Note receivable from related party (Note 7) ........................ 140,520 --
Deferred financing charges and other assets ........................ 58,928 58,318
---------- ----------
Total assets .................................................... $1,750,632 $1,527,976
========== ==========
LIABILITIES AND EQUITY
LIABILITIES:
Accounts payable and other accrued liabilities ..................... $ 39,810 $ 48,943
Project loan ....................................................... 90,529 103,334
Salton Sea notes and bonds ......................................... 626,816 448,754
Notes payable to related party ..................................... 247,681 247,812
Deferred income taxes .............................................. 208,849 214,993
---------- ----------
Total liabilities ............................................... 1,213,685 1,063,836
Commitments and contingencies (Notes 9 and 12)
Net investment and advances ........................................ 536,947 464,140
---------- ----------
Total liabilities and equity ....................................... $1,750,632 $1,527,976
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
CE GENERATION, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUE:
Sales of electricity and steam .................. $395,560 $381,458 $281,307
Equity earnings in subsidiaries ................. 10,732 14,542 4,263
Interest and other income ....................... 29,883 11,138 19,273
-------- -------- --------
Total revenues ................................ 436,175 407,138 304,843
-------- -------- --------
COST AND EXPENSES:
Plant operations ................................ 114,092 119,973 94,245
General and admininstration ..................... 4,963 4,380 3,503
Depreciation and amortization ................... 96,818 88,504 72,533
Interest expense ................................ 74,653 80,907 77,669
Less interest capitalized ....................... (347) -- (4,805)
-------- -------- --------
Total expenses ................................ 290,179 293,764 243,145
-------- -------- --------
Income before provision for income taxes ......... 145,996 113,374 61,698
Provision for income taxes ....................... 52,218 43,378 15,487
-------- -------- --------
Net income ....................................... $ 93,778 $ 69,996 $ 46,211
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
CE GENERATION, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................. $ 93,778 $ 69,996 $ 46,211
ADJUSTMENTS TO RECONCILE CASH FLOWS FROM OPERATING
ACTIVITIES:
Depreciation and amortization ............................... 96,818 88,504 72,533
Provision for deferred income taxes ......................... (6,144) 4,280 3,874
Equity earnings in subsidiaries ............................. (10,732) (14,542) (4,263)
CHANGES IN OTHER ITEMS:
Accounts receivable ....................................... (14,557) (2,005) (1,112)
Accounts payable and other accrued liabilities ............ (9,133) 4,837 (26,540)
---------- ---------- ----------
Net cash flows from operating activities ............... 150,030 151,070 90,703
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ........................................ (46,222) (21,676) (90,734)
Purchase of Falcon Seaboard and Partnership
Interest, net of cash acquired ............................ -- -- (264,324)
Distributions from equity investments ....................... 16,903 23,960 8,295
Decrease (increase) in other assets ......................... (610) (3,961) 16,248
Decrease (increase) in restricted cash ...................... (121,646) 15,023 68,701
---------- ---------- ----------
Net cash flows from investing activities ............... (151,575) 13,346 (261,814)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Salton Sea notes and bonds ..................... (106,938) (90,228) (48,106)
Proceeds from Salton Sea notes and bonds .................... 285,000 -- 135,000
Note receivable from related party .......................... (140,520) -- --
Repayment of note payable to related party .................. (131) -- (480)
Repayment of project loans .................................. (12,805) (11,237) (107,906)
Advances (to) from MEHC, net ................................ (20,971) (60,759) 175,267
---------- ---------- ----------
Net cash flows from financing activities ............... 3,635 (162,224) 153,775
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents ......... 2,090 2,192 (17,336)
Cash and cash equivalents at beginning of year ............... 23,684 21,492 38,828
---------- ---------- ----------
Cash and cash equivalents at end of year ..................... $ 25,774 $ 23,684 $ 21,492
========== ========== ==========
SUPPLEMENTAL DISCLOSURE:
Interest paid ............................................... $ 73,283 $ 72,846 $ 64,244
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
CE GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(AMOUNTS IN THOUSANDS)
1. BUSINESS
MidAmerican Energy Holdings Company ("MEHC" and formerly CalEnergy
Company, Inc.) completed a strategic restructuring in conjunction with its
acquisition of MidAmerican Energy Holdings Company in which MEHC's common stock
interests in Magma Power Company, Falcon Seaboard Resources, Inc. and
California Energy Development Corporation, and their subsidiaries (which own
the geothermal and natural gas-fired combined cycle cogeneration facilities
described below), were contributed by MEHC to the newly created CE Generation,
LLC (the Company). This restructuring was completed in February 1999.
BASIS OF PRESENTATION--These consolidated financial statements of CE
Generation, LLC reflect the consolidated financial statements of Magma Power
Company and subsidiaries (excluding wholly-owned subsidiaries retained by
MEHC), Falcon Seaboard Resources, Inc. and subsidiaries and Yuma Cogeneration
Associates, each a wholly-owned subsidiary. The consolidated financial
statements present the financial position, results of operations and cash flows
of the Company as if the Company was a separate legal entity for all periods
presented. The Company's basis in assets and liabilities have been carried over
from MEHC. All material intercompany transactions and balances have been
eliminated in consolidation.
GENERAL--The Company is engaged in the independent power business. The
following table sets out information concerning Company's projects:
<TABLE>
<CAPTION>
COMMERCIAL
PROJECT FUEL OPERATION CAPACITY LOCATION
------------------ ------------ ----------- ---------- -------------
<S> <C> <C> <C> <C>
Vulcan Geothermal 1986 34 MW California
Del Ranch Geothermal 1989 38 MW California
Elmore Geothermal 1989 38 MW California
Leathers Geothermal 1990 38 MW California
Salton Sea I Geothermal 1987 10 MW California
Salton Sea II Geothermal 1990 20 MW California
Salton Sea III Geothermal 1989 49.8 MW California
Salton Sea IV Geothermal 1996 39.6 MW California
Salton Sea V Geothermal 2000 49 MW California
CE Turbo Geothermal 2000 10 MW California
PRI Gas 1988 200 MW Texas
Yuma Gas 1994 50 MW Arizona
Saranac Gas 1994 240 MW New York
Norcon Gas 1992 80 MW Pennsylvania
</TABLE>
Vulcan, Del Ranch, Elmore, Leathers and CE Turbo are referred to as the
Partnership Projects. Salton Sea I, II, III, IV and V are referred as the
Salton Sea Projects. The Partnership Projects and the Salton Sea Projects are
collectively referred to as the Imperial Valley Projects. PRI, Yuma, Saranac
and Norcon are referred to as the Gas Projects.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS--The Company considers all investment instruments
purchased with an original maturity of three months or less to be cash
equivalents. Restricted cash is not considered a cash equivalent.
F-6
<PAGE>
CE GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (CONTINUED)
(AMOUNTS IN THOUSANDS)
RESTRICTED CASH--The restricted cash balance is composed of restricted
accounts for debt service, capital expenditures and major maintenance
expenditures. The debt service funds are legally restricted as to their use and
require the maintenance of specific minimum balances equal to the next debt
service payment.
The capital expenditure funds are restricted for use in the construction
of Salton Sea V, the CE Turbo Project and the construction of new brine
facilities at the Imperial Valley Projects, which resulted from the sale on
October 13, 1998 by Salton Sea Funding Corporation of $285,000 aggregate amount
of 7.475% Senior Secured Series F Bonds due November 30, 2018 (see Note 7).
WELL, RESOURCE DEVELOPMENT AND EXPLORATION COSTS--The Company follows the
full cost method of accounting for costs incurred in connection with the
exploration and development of geothermal resources. All such costs, which
include dry hole costs and the cost of drilling and equipping production wells
and other direct costs, are capitalized and amortized on a straight-line basis
over their estimated useful lives when production commences. The estimated
useful lives of production wells are twenty years.
DEFERRED WELL AND REWORK COSTS--Geothermal well rework costs are deferred
and amortized over the estimated period between reworks ranging from 18 months
to 24 months. These deferred costs, net of accumulated amortization, are $6,709
and $4,811 at December 31, 1998 and 1997, respectively, and are included in
other assets.
PROPERTIES, PLANTS, CONTRACTS, EQUIPMENT AND DEPRECIATION--The cost of
major additions and betterments are capitalized, while replacements,
maintenance, and repairs that do not improve or extend the lives of the
respective assets are expensed.
Depreciation of the operating power plant costs, net of salvage value if
applicable, is computed on the straight line method over the estimated useful
life of 30 years. Depreciation of furniture, fixtures and equipment is computed
on the straight line method over the estimated useful lives of the related
assets, which range from 3 to 10 years.
The acquisitions of Magma Power Company, Falcon Seaboard Resources, Inc.
and Edison Mission Energy's partnership interests by the Company have been
accounted for as purchase business combinations. All identifiable assets
acquired and liabilities assumed were assigned a portion of the cost of
acquiring the respective companies equal to their values at the date of the
acquisition and includes power sales agreements which are amortized separately
on a straight-line basis over (1) for the Edison Partnership interests and Magma
acquisitions, the remaining portion of the scheduled price periods of the power
sales agreements which range from 1 to 5 years, (2) for the Edison Partnership
interests and Magma acquisitions, the 20 year avoided cost periods of the power
sales agreements and (3) over the remaining contract periods which range from 7
to 30 years.
EQUITY INVESTMENTS--The Company's investments in Saranac and Norcon are
accounted for using the equity method of accounting since the Company has the
ability to exercise significant influence over the investees' operating and
financial policies through its managing general partnership interests. At
December 31, 1998 and 1997, the carrying amount of the Company's investment in
Saranac differs from its underlying equity in net assets of Saranac by $108,788
(net of accumulated amortization of $24,824) and $119,060 (net of accumulated
amortization of $14,552), respectively. This difference, which represents the
adjustment to record the fair value of the investment at the date of
acquisition, is being amortized on a straight-line basis over approximately 13
years, the remaining portion of the power sales agreement at the date of
acquisition.
EXCESS OF COST OVER FAIR VALUE--Total acquisition costs in excess of the
fair values assigned to the net assets acquired are amortized over a 40 year
period for the Magma acquisition and a 25 year period for the Falcon Seaboard
acquisition, both using the straight line method. Accumulated amortization was
$32,857 and $22,985 at December 31, 1998 and 1997, respectively.
F-7
<PAGE>
CE GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (CONTINUED)
(AMOUNTS IN THOUSANDS)
MAINTENANCE AND REPAIR RESERVES--Major maintenance and repair reserves are
recorded monthly based on the Company's long-term scheduled major maintenance
plans for the Gas Projects and included in accrued liabilities. Other
maintenance and repairs are charged to expense as incurred.
CAPITALIZATION OF INTEREST AND DEFERRED FINANCING COSTS--Prior to the
commencement of operations, interest is capitalized on the costs of the plants
and geothermal resource development to the extent incurred. Capitalized
interest and other deferred charges are amortized over the lives of the related
assets.
Deferred financing costs are amortized over the term of the related
financing using the effective interest method.
REVENUE RECOGNITION--Revenues are recorded based upon electricity and
steam delivered to the end of the month. See Note 5 for contractual terms of
power sales agreements. Royalties earned from providing geothermal resources to
power plants operated by other geothermal power producers are recorded when
delivered.
INCOME TAXES--The Company has historically been included in the
consolidated income tax returns of MEHC. The Company's provision for income
taxes is computed on a separate return basis. The Company recognizes deferred
tax assets and liabilities based on the difference between the financial
statement and tax bases of assets and liabilities using estimated tax rates in
effect for the year in which the differences are expected to reverse.
FINANCIAL INSTRUMENTS--The Company utilizes swap agreements to manage
market risks and reduce its exposure resulting from fluctuation in interest
rates. For interest rate swap agreements, the net cash amounts paid or received
on the agreements are accrued and recognized as an adjustment to interest
expense. The Company's practice is not to hold or issue financial instruments
for trading purposes. These instruments are either exchange traded or with
counterparties of high credit quality; therefore, the risk of nonperformance by
the counterparties is considered to be negligible.
Fair values of financial instruments are estimated based on quoted market
prices for debt issues actively traded or on market prices of similar
instruments and/or valuation techniques using market assumptions.
IMPAIRMENT OF LONG-LIVED ASSETS--The Company reviews long-lived assets and
certain identifiable intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. An impairment loss would be recognized whenever evidence exists
that the carrying value is not recoverable.
START-UP COSTS--In 1998, the Company adopted SOP No. 98-5, Reporting on
the Costs of Start-Up Activities, which requires costs of start-up activities
and organization costs be expensed as incurred. Such adoption had no
significant effect on the Company.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
ACCOUNTING PRONOUNCEMENTS--In June 1998, the FASB issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, which established
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. This statement is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. The Company has not yet
determined the impact of this accounting pronouncement.
F-8
<PAGE>
CE GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (CONTINUED)
(AMOUNTS IN THOUSANDS)
3. ACQUISITIONS
On August 7, 1996, MEHC completed the acquisition of Falcon Seaboard
Resources, Inc. (FSRI) for approximately $226,000. The transaction was
accounted for as a purchase business combination. All identifiable assets
acquired and liabilities assumed were assigned a portion of the cost of
acquiring FSRI, equal to the fair values at the date of acquisition.
On April 17, 1996, MEHC completed the acquisition of Edison Mission
Energy's partnership interests (the "Partnership Interest Acquisition") in four
geothermal operating facilities in California for approximately $70,000. The
four projects, Vulcan, Del Ranch, Leathers and Elmore are located in the
Imperial Valley of California. Prior to this transaction, the Company was a 50%
owner of these facilities and consolidated these entities using the
proportional consolidation method. The Partnership Interest Acquisition has
been accounted for as a purchase business combination. All identifiable assets
acquired and liabilities assumed were assigned a portion of the cost of
acquiring the Partnership Interest, equal to their fair values at the date of
the acquisition.
On a pro forma basis for the year ended December 31, 1996, assuming these
transactions were effected January 1, 1996, the Company's revenue and net
income would have been $374,973 and $52,586, respectively.
4. EQUITY INVESTMENTS
The Company indirectly holds noncontrolling general and limited
partnership interests in two partnerships, Saranac Power Partners, L.P.
(Saranac) and Norcon Power Partners, L.P. (Norcon) which were formed to build,
own and operate natural gas fired combined cycle cogeneration facilities. The
lenders to these partnerships have recourse only against these facilities and
the income and revenues therefrom. The Company has a current approximate 45%
economic interest in Saranac and a current 20% economic interest in Norcon. The
Company will have an approximate 80% economic interest in each of these
partnerships after outside limited partners' returns, as defined in the
Partnership Agreements, are achieved. The Saranac outside limited partners, TPC
Saranac and General Electric Capital Company, must achieve after tax returns of
approximately 8.35% and 7.252%, respectively. Norcon's partner, TPC Norcon,
must achieve a pre-tax return of approximately 16.5%.
The following is a summary of aggregated financial information for all
investments owned by the Company which are accounted for under the equity
method at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Assets ............... $ 414,592 $ 434,028
Liabilities .......... 307,047 326,230
Net income ........... 44,438 47,478
</TABLE>
Saranac's total revenue for the years ended December 31, 1998, 1997 and
1996 were $141,876, $146,954 and $140,396, respectively. Norcon's total
revenues for the years ended December 31, 1998, 1997 and 1996 were $52,268,
$50,908 and $44,893, respectively.
Saranac has project financing through a 14 year note payable agreement
with a lender with a principal amount outstanding of $189,282 at December 31,
1998. The note agreement is collateralized by all of the assets of Saranac.
Saranac is restricted by the terms of the payable agreement from making
distributions or withdrawing any capital amounts without the consent of the
lender. Under terms of the note payable agreement, distributions may be made to
the partners in accordance with the terms of the Saranac partnership agreement.
Distributions are made monthly and quarterly to the extent of the partnership's
excess cash balances.
F-9
<PAGE>
CE GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (CONTINUED)
(AMOUNTS IN THOUSANDS)
Each of the Saranac partners has an interest in cash distributions by
Saranac which changes when certain after-tax rates of return are achieved by GE
Capital and the TPC Saranac partners on their contributions to Saranac. The
cash distributions of Saranac are divided into three levels:
(1) distributions in fixed amounts payable during the first 15 years of
operation of the Saranac project, which are applied first to pay debt service
and other amounts due under the Saranac project financing documents and any
refinancing loans, with the remainder paid to GE Capital to enable it to
achieve a certain base rate of return; (2) distributions of the Saranac
available cash remaining after payment of the level 1 distributions during the
first 15 years of operation of the Saranac project: (3) distributions after the
first 15 years of operation of the Saranac project. During the first 15 years
of operation of the Saranac project, Saranac Energy will receive 63.51% of the
level 2 distributions until TPC Saranac partners achieve an 8.35% rate of
return and, after such return is achieved (which we expect to occur in 2000),
Saranac Energy will receive 81.18% of the level 2 distributions. After the
first 15 years of operation of the Saranac project, Saranac Energy will receive
68% of the level 3 distributions until GE Capital achieves a certain
supplemental rate of return and, thereafter, Saranac Energy will receive 76% of
the level 3 distributions.
Norcon has project financing under a note payable comprised of senior and
junior debt with a total principal amount outstanding at December 31, 1998 of
$104,524. The note payable is collateralized by all of Norcon's assets. Under
the terms of the note payable agreement, Norcon is allowed to make
distributions after certain funds have been established; principally, a minimum
of $500 must be maintained in the Project's revenue account. Distributions are
made monthly and quarterly to the extent of the partnership's excess cash
balances.
There were no undistributed earnings in equity investments at December 31,
1998.
5. PROPERTIES, PLANTS, CONTRACTS AND EQUIPMENT
Properties, plants, contracts and equipment comprise the following at
December 31:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Power plants ............................................ $ 678,710 $ 659,369
Wells and resource development .......................... 137,399 124,500
Power sales agreements .................................. 287,653 287,653
Licenses and equipment .................................. 41,671 41,471
--------- ---------
Total operating facilities ........................... 1,145,433 1,112,993
Less accumulated depreciation and amortization .......... (270,244) (184,788)
--------- ---------
Net operating facilities ................................ 875,189 928,205
--------- ---------
Construction in progress:
Other development ...................................... 18,303 4,002
--------- ---------
Total ................................................ $ 893,492 $ 932,207
========= =========
</TABLE>
SIGNIFICANT CUSTOMERS AND CONTRACTS--All of the Company's current sales of
electricity from the Imperial Valley Projects, which comprise approximately 74%
both of 1998 and 1997 electricity and steam revenues, are to Southern
California Edison Company (Edison) and are under long-term power purchase
contracts. Accounts receivable are comprised of uncollateralized receivables
from long-term power purchase contracts described below.
GEOTHERMAL PROJECTS--The current Partnership Projects sell all electricity
generated by the respective plants pursuant to four long-term standard offer
no. 4, or SO4, agreements between the Projects and Edison that are based on
this standard form. These SO4 agreements provide for capacity payments,
capacity bonus payments and energy payments. Edison makes fixed annual capacity
and
F-10
<PAGE>
CE GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (CONTINUED)
(AMOUNTS IN THOUSANDS)
capacity bonus payments to the Projects to the extent that capacity factors
exceed certain benchmarks. The price for capacity and capacity bonus payments
is fixed for the life of the SO4 Agreements. Energy is sold at increasing
scheduled rates for the first ten years after firm operation and thereafter at
a rate which is based on the cost that Southern California Edison avoids by
purchasing energy from the project instead of obtaining the energy from other
sources. Southern California Edison's avoided cost is currently determined by
an approved interim formula which adjusts historic costs by an
inflation/deflation factor representing monthly changes in the cost of natural
gas at the California border and adjustment factors based on the time the day,
week and year in which the energy is delivered. Consequently, under this
methodology, energy payments under the SO4 agreements will fluctuate based on
the time of generation and monthly changes in average fuel costs in the
California energy market. Legislation recently adopted in California
establishes that the price qualifying facilities receive as energy payments
would be modified from the current short-run avoided cost basis to the clearing
price established by the PX once specified conditions are met. As the main
condition, the legislation requires that the California Public Utilities
Commission must first issue an order determining that the PX is functioning
properly for the purposes of determining the short-run avoided cost energy
payments to be made to non-utility power generators. Additionally, a project
company may, upon appropriate notice to Southern California Edison, exercise a
one-time option to elect to thereafter receive energy payments based upon the
clearing price from the PX.
The PX is a nonprofit public benefit corporation formed under California
law to provide a competitive marketplace where buyers and sellers of power,
including utilities, end-use customers, independent power producers and power
marketers, complete wholesale trades through an electronic auction. The PX
currently operates two markets: (1) a day ahead market which is comprised of
twenty-four separate concurrent auctions for each hour of the following day and
(2) an hour ahead market for each hour of each day for which bids are due two
hours before each hour. In each market, the PX receives bids from buyers and
sellers and, based on the bids, establishes the market clearing price for each
hour and schedules deliveries from sellers whose bids did not exceed the market
clearing price to buyers whose bids were not less than the market clearing
price. All trades are executed at the market clearing price.
The scheduled energy price periods of the Partnership Projects SO4
agreements extended until February 1996, December 1998 and December 1998 for
each of the Vulcan, Del Ranch and Elmore Partnerships, respectively, and extend
until December 1999 for the Leathers Partnership. Del Ranch and Elmore
Partnerships' SO4 agreements provided for energy rates of 14.6 cents per kWh in
1998. Leathers Partnership SO4 agreement provides for an energy rate of 14.6
cents per kWh in 1998 and 15.6 cents per kWh in 1999. The weighted average
energy rate for all of the Partnership Projects' SO4 Agreements was 11.7 cents
per kWh in 1998.
Salton Sea I sells electricity to Edison pursuant to a 30-year negotiated
power purchase agreement, as amended (the Salton Sea I PPA), which provides for
capacity and energy payments. The energy payment is calculated using a Base
Price which is subject to quarterly adjustments based on a basket of indices.
The time period weighted average energy payment for Salton Sea I was 5.4 cents
per kWh during 1998. As the Salton Sea I PPA is not an SO4 Agreement, the
energy payments do not revert to Edison's Avoided Cost of Energy. The capacity
payment is approximately $1,100 per annum.
Salton Sea II and Salton Sea III sell electricity to Edison pursuant to
30-year modified SO4 agreements that provide for capacity payments, capacity
bonus payments and energy payments. The price for contract capacity and
contract capacity bonus payments is fixed for the life of the modified SO4
agreements. The energy payments for each of the first ten year periods, which
periods expire in
F-11
<PAGE>
CE GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (CONTINUED)
(AMOUNTS IN THOUSANDS)
April 2000 and February 1999, respectively, are levelized at a time period
weighted average of 10.6 cents per kWh and 9.8 cents per kWh for Salton Sea II
and Salton Sea III, respectively. Thereafter, the monthly energy payments will
be Edison's Avoided Cost of Energy. For Salton Sea II only, Edison is entitled
to receive, at no cost, 5% of all energy delivered in excess of 80% of contract
capacity through September 30, 2004. The annual capacity and bonus payments for
Salton Sea II and Salton Sea III are approximately $3,300 and $9,700,
respectively.
Salton Sea IV sells electricity to Edison pursuant to a modified SO4
agreement which provides for contract capacity payments on 34 MW of capacity at
two different rates based on the respective contract capacities deemed
attributable to the original Salton Sea PPA option (20 MW) and to the original
Fish Lake PPA (14 MW). The capacity payment price for the 20 MW portion adjusts
quarterly based upon specified indices and the capacity payment price for the
14 MW portion is a fixed levelized rate. The energy payment (for deliveries up
to a rate of 39.6 MW) is at a fixed rate for 55.6% of the total energy
delivered by Salton Sea IV and is based on an energy payment schedule for 44.4%
of the total energy delivered by Salton Sea IV. The contract has a 30-year term
but Edison is not required to purchase the 20 MW of capacity and energy
originally attributable to the Salton Sea I PPA option after September 30,
2017, the original termination date of the Salton Sea I PPA.
For the years ended December 31, 1998, 1997 and 1996, Edison's average
Avoided Cost of Energy was 3.0 cents, 3.3 cents and 2.5 cents per kWH,
respectively, which is substantially below the contract energy prices earned
for the year ended December 31, 1998. The Company cannot predict the likely
level of Avoided Cost of Energy or PX prices under the SO4 agreements and the
modified SO4 agreements at the expiration of the scheduled payment periods. The
revenues generated by each of the projects operating under SO4 agreements will
decline significantly after the expiration of the respective scheduled payment
periods.
The Partnership Project pays royalties based on both energy revenues and
total electricity revenues. Del Ranch and Leathers pay royalties of 5% of
energy revenues and 1% of total electricity revenue. Elmore pays royalties of
5% of energy revenues. Vulcan pays royalties of 4.167% of energy revenues.
The Salton Sea Project's weighted average royalty expense in 1998, 1997,
and 1996 was approximately 4.8%, 6.1% and 5.2%, respectively. The royalties are
paid to numerous recipients based on varying percentages of electrical revenue
or steam production multiplied by published indices.
GAS PROJECTS--The Saranac Project sells electricity to New York State
Electric & Gas pursuant to a 15 year negotiated power purchase agreement (the
Saranac PPA), which provides for capacity and energy payments. Capacity
payments, which in 1998 total 2.3 cents per kWh, are received for electricity
produced during "peak hours" as defined in the Saranac PPA and escalate at
approximately 4.1% annually for the remaining term of the contract. Energy
payments, which averaged 6.7 cents per kWh in 1998, escalate at approximately
4.4% annually for the remaining term of the Saranac PPA. The Saranac PPA
expires in June of 2009. Saranac sells steam to Georgia-Pacific and Tenneco
Packaging under long-term steam sales agreements. CE Generation believes that
these agreements will enable Saranac to sell the minimum annual quantity of
steam necessary for the Saranac Project to maintain its qualifying facility
status under PURPA for the term of the Saranac PPA.
The PRI Project sells electricity to Texas Utilities Electric Company
(TUEC) pursuant to a 15 year negotiated power purchase agreement (the Power
Resources PPA), which provides for capacity and energy payments. Capacity
payments and energy payments, which in 1998 are $3,138 per month and 3.0 cents
per kWh, respectively, escalate at 3.5% annually for the remaining term of the
Power Resources PPA. The Power Resources PPA expires in September 2003. PRI
sells steam to Fina Oil
F-12
<PAGE>
CE GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (CONTINUED)
(AMOUNTS IN THOUSANDS)
and Chemical under a 15-year agreement. PRI has agreed to supply Fina with up
to 150,000 pounds per hour of steam. As long as PRI meets its supply
obligations, Fina is required to purchase at least the minimum amount of steam
per year required to allow the PRI Project to maintain its qualifying facility
status under PURPA.
The NorCon Project sells electricity to Niagara Mohawk Power Corporation
(Niagara) pursuant to a 25 year negotiated power purchase agreement (the Norcon
PPA) which provides for energy payments calculated pursuant to an adjusting
formula based on Niagara's ongoing Tariff Avoided Cost and the contractual
Long-Run Avoided Cost. The NorCon PPA term extends through December 2017.
NorCon sells steam to Welch Foods, Inc. under an agreement that expires in
December 2012. Welch is required to purchase at least the minimum amount of
steam per year required to maintain the NorCon Project's qualifying facility
status under the Public Utility Regulatory Policies Act of 1978. If NorCon
fails to deliver steam, it will be liable for liquidated damages, limited to
$10,000 per occurrence. NorCon's aggregate liability over the term of the steam
purchase agreement is subject to an escalating cap, which starts at $2.0
million and increases to $3.2 million by the 20th year of the contract.
Yuma sells electricity to San Diego Gas & Electric Company (SDG&E) under
an existing 30-year power purchase contract. The energy is sold at SDG&E's
Avoided Cost of Energy and the capacity is sold to SDG&E at a fixed price for
the life of the power purchase contract. The power is wheeled to SDG&E over
transmission lines constructed and owned by Arizona Public Service Company
(APS). Yuma sells steam to Queen Carpet, Inc. pursuant to an agreement that
expires on May 1, 2024. Queen Carpet is required to take a minimum of 126,900
MMBtus of steam per year, which is sufficient to permit the Yuma Project to
maintain its qualifying facility status under the Public Utility Regulatory
Policies Act.
ROYALTIES--Royalty expense for the years ended December 31, 1998, 1997 and
1996, which is included in plant operations in the consolidated statements of
operations, comprise the following:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Vulcan ..................... $ 363 $ 326 $ 361
Leathers ................... 2,811 2,694 2,203
Elmore ..................... 2,192 2,213 1,883
Del Ranch .................. 2,870 2,650 2,255
Salton Sea I & II .......... 810 1,206 634
Salton Sea III ............. 1,637 2,439 1,334
Salton Sea IV .............. 2,645 2,815 1,558
-------- -------- --------
Total ..................... $ 13,328 $ 14,343 $ 10,228
======== ======== ========
</TABLE>
The Partnership Project pays royalties based on both energy revenues and
total electricity revenues. Del Ranch and Leathers pay royalties of
approximately 5% of energy revenues and 1% of total electricity revenue. Elmore
pays royalties of approximately 5% of energy revenues. Vulcan pays royalties of
approximately 4.167% of energy revenues.
The Salton Sea Project's weighted average royalty expense in 1998 and 1997
was approximately 4.8% and 6.1%, respectively. The royalties are paid to
numerous recipients based on varying percentages of electrical or steam
production multiplied by published indices.
6. PROJECT LOAN
Each of the Company's direct or indirect subsidiaries is organized as a
legal entity separate and apart from the Company and its other subsidiaries and
MEHC. Pursuant to separate project financing
F-13
<PAGE>
CE GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (CONTINUED)
(AMOUNTS IN THOUSANDS)
agreements, the assets of each subsidiary (excluding Yuma) are pledged or
encumbered to support or otherwise provide the security for their own project
or subsidiary debt. It should not be assumed that any asset of any such
subsidiary will be available to satisfy the obligations of the Company or any
of its other such subsidiaries; provided, however, that unrestricted cash or
other assets which are available for distribution may, subject to applicable
law and the terms of financing arrangements for such parties, be advanced,
loaned, paid as dividends or otherwise distributed or contributed to the
Company or affiliates thereof. "Subsidiaries" means all of the Company's direct
or indirect subsidiaries (1) owning interests in the Imperial Valley projects
(including the Salton Sea projects and the Partnership projects), the Saranac
project, NorCon project or PRI project or (2) owning interests in the
subsidiaries that own interests in the foregoing projects.
PRI has project financing debt with a consortium of banks with interest
and principal due quarterly over a 15-year period, beginning March 31, 1989.
The original principal carried a variable interest rate based on the London
Interbank Offer Rate ("LIBOR") with a .85% interest margin through the 5th
anniversary of the loan, a 1.00% interest margin from the 5th anniversary
through the 12th anniversary of the loan and a 1.25% interest margin from the
12th anniversary through the end of the loan. The loan is collateralized by an
assignment of all revenues received by PRI, a lien on substantially all of its
real and personal property and a pledge of its capital stock.
Effective June 5, 1989, PRI entered into an interest rate swap agreement
with the lender as a means of hedging floating interest rate exposure related
to its 15-year term loan. The swap agreement was for initial notional amounts
of $55,000 and $110,000, declining in correspondence with the principal
balances, and effectively fixed the interest rates at 9.385% and 9.625%,
respectively, excluding the interest margin. PRI would be exposed to credit
loss in the event of nonperformance by the lender under the interest rate swap
agreement. However, PRI does not anticipate nonperformance by the lender. The
estimated cost to terminate the interest rate swap agreement, based on
termination values obtained from the lender, was $9,904 and $10,550 at December
31, 1998 and 1997, respectively.
The interest rate can be increased by payments under a Compensation
Agreement included in PRI's term loan. The Compensation Agreement, which
entitles two of the term lenders to receive quarterly payments equivalent to a
percentage of PRI's discretionary cash flow (DCF) as separately defined in the
agreement, become effective initially for a 13-year period ending December 31,
2003. Under certain conditions relating to the amount of PRI's cash flow and
the restrictions on cash distributions, PRI has the option to replace the
payment obligation in a quarter with a payment to be calculated in a future
quarter and added to the end of the initial term of the agreement. The
Compensation Agreement entitles the lenders to payments totaling 10% of DCF for
the first ten years, 7.5% of DCF for the next three years and 10% of DCF for
each quarter added to the initial term of the agreement. PRI recorded
additional interest expense of $1,176 and $1,091 for the years ended December
31, 1998 and 1997, respectively, and $319 and $585 for the periods from August
7, 1996 through December 31, 1996 related to amounts owed under the
Compensation Agreement.
Scheduled maturities of project financing debt for the year ending
December 31 are as follows:
<TABLE>
<S> <C>
1999 .......... $ 14,268
2000 .......... 16,087
2001 .......... 18,119
2002 .......... 20,312
2003 .......... 21,743
--------
Total ......... $ 90,529
========
</TABLE>
F-14
<PAGE>
CE GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (CONTINUED)
(AMOUNTS IN THOUSANDS)
Under PRI's term loan agreement, certain covenants and conditions must be
met before cash distributions can be made, the most significant of which is the
maintenance of a historical quarterly debt service coverage ratio of at least
1.20:1.00 in order to permit all available cash to be distributed. PRI was in
compliance with these requirements at December 31, 1998.
7. SALTON SEA NOTES AND BONDS
The Salton Sea Funding Corporation (the "Funding Corporation"), a
wholly-owned indirect subsidiary of the Company, debt securities are as
follows:
<TABLE>
<CAPTION>
SENIOR FINAL DECEMBER 31,
SECURED MATURITY -------------------------
ISSUED DATE SERIES DATE RATE 1998 1997
-------------------------- --------- ------------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
July 21, 1995 ............ A Notes May 30, 2000 6.69% $ 48,436 $ 97,354
July 21, 1995 ............ B Bonds May 30, 2005 7.37% 106,980 133,000
July 21, 1995 ............ C Bonds May 30, 2010 7.84% 109,250 109,250
June 20, 1996 ............ D Notes May 30, 2000 7.02% 12,150 44,150
June 20, 1996 ............ E Bonds May 30, 2011 8.30% 65,000 65,000
October 13, 1998 ......... F Bonds November 30, 2018 7.48% 285,000 --
--------- ---------
$ 626,816 $ 448,754
========= =========
</TABLE>
Principal and interest payments are made in semi-annual installments. The
Salton Sea Notes and Bonds are non-recourse to the Company.
On October 13, 1998 the Funding Corporation completed a sale to
institutional investors of $285,000 aggregate amount of 7.475% Senior Secured
Series F Bonds due November 30, 2018. The proceeds of $144,480 from the
offering are being used to partially fund construction of two new geothermal
projects at the Salton Sea and other capital improvements at the existing
Salton Sea projects. The remaining amount of $140,520 is being used to fund the
cost of construction of, and was advanced to, the Zinc Recovery Project, which
is indirectly 100% owned by Salton Sea Minerals Corp., a MEHC affiliate not
owned by the Company.
The net revenues, equity distributions and royalties from the Partnership
Projects are used to pay principal and interest payments on outstanding senior
secured bonds issued by the Funding Corporation, the final series of which is
scheduled to mature in November 2018. The Funding Corporation Debt is
guaranteed by certain subsidiaries of Magma and secured by the capital stock of
the Funding Corporation. The proceeds of the Funding Corporation Debt were
loaned by the Funding Corporation pursuant to loan agreements and notes (the
"Imperial Valley Project Loans") to certain subsidiaries of Magma and used for
construction of certain Imperial Valley Projects, refinancing of certain
indebtedness and other purposes. Debt service on the Imperial Valley Project
Loans is used to repay debt service on the Funding Corporation Debt. The
Imperial Valley Project Loans and the guarantees of the Funding Corporation
Debt are secured by substantially all of the assets of the guarantors,
including the Imperial Valley Projects, and by the equity interests in the
guarantors.
The proceeds of Series F of the Funding Corporation debt are being used in
part to construct the Zinc Facility, and the direct and indirect owners of the
Zinc Facility (the "Zinc Guarantors", which will include Salton Sea Minerals
Corp. and Minerals LLC), are among the guarantors of the Funding Corporation
debt. In connection with the Divestiture, MEHC will guarantee the payment by
the Zinc Guarantors of a specified portion of the scheduled debt service on the
Imperial Valley Project Loans, including the current principal amount of
$140,520 and associated interest.
F-15
<PAGE>
CE GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (CONTINUED)
(AMOUNTS IN THOUSANDS)
Pursuant to a depository agreement, Funding Corporation established a debt
service reserve fund in the form of a letter of credit in the amount of $42,457
from which scheduled interest and principal payments can be made.
Annual repayments of the Salton Sea Notes and Bonds for the years
beginning January 1, 1999 and thereafter are as follows:
<TABLE>
<S> <C>
1999 ............... $ 57,836
2000 ............... 25,072
2001 ............... 24,514
2002 ............... 27,148
2003 ............... 28,086
Thereafter ......... 464,160
---------
$ 626,816
=========
</TABLE>
The Company's ability to obtain distributions from its investment in the
Salton Sea Projects and Partnership Projects is subject to the following
conditions:
o the depositary accounts for the Salton Sea Notes and Bonds must be fully
funded;
o there cannot have occurred any default or event of default under the
Salton Sea Notes and Bonds;
o the historical debt service coverage ratio of Salton Sea Funding
Corporation for the prior four fiscal quarters must be at least 1.4 to
1.0, if the distribution occurs prior to 2000, or 1.5 to 1.0, if the
distribution occurs during or after 2000;
o there must be sufficient geothermal reources to operate the Salton Sea
projects at their required levels; and
o each Salton Sea project under construction cannot have failed to be
complete by its guaranteed substantial completion date, unless a
sufficient portion of the Salton Sea Notes and Bonds have been redeemed
or a ratings confirmation has been obtained.
8. NOTES PAYABLE TO RELATED PARTY
On July 21, 1995, MEHC issued $200,000 of 9.875% Limited Recourse Senior
Secured Notes Due 2003 (the "Notes"). The Notes are secured by an assignment
and pledge of 100% of the outstanding capital stock of Magma and are recourse
only to such Magma capital stock. The proceeds of Notes Offering were provided
by MEHC to Magma and Magma issued an intercompany note to MEHC in the amount of
$200,000. Interest on the intercompany note is at 9.875%. See Note 15.
Yuma Cogeneration Associates has outstanding a note payable to MEHC with a
principal balance at December 31, 1998 and 1997 of $47,681 and $47,812,
respectively, and bearing interest at a fixed rate of 10.25%. The terms of the
note require semiannual principal and interest payments. Annual repayment of
the note for each year beginning January 1, 1999 through 2003 is $4,755 with
$23,906 due thereafter.
9. COMMITMENTS AND CONTINGENCIES
PRI has contracted to purchase natural gas for its cogeneration facility
under two separate agreements, an 8-year agreement for up to 40,000 MMBTU per
day which expires in December 2003
F-16
<PAGE>
CE GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (CONTINUED)
(AMOUNTS IN THOUSANDS)
and a 15-year agreement for 3,600 MMBTU per day which expires in June 2003.
These agreements include annual price adjustments, and the 15-year agreement
includes a provision which allows the seller to terminate the agreement with a
two-year written notice. As of December 31, 1998, the seller had not elected to
terminate this agreement; therefore, the minimum volumes under the 15-year and
8-year agreements for the years ending December 31, are included in the future
minimum payments under these contracts as follows:
<TABLE>
<S> <C>
1999 ........... $ 22,611
2000 ........... 23,308
2001 ........... 23,608
2002 ........... 24,285
2003 ........... 24,854
---------
Total ......... $ 118,666
=========
</TABLE>
The Company's geothermal and cogeneration facilities are qualifying
facilities under the Public Utility Regulatory Policies Act of 1978 (PURPA) and
their contracts for the sale of electricity are subject to regulations under
PURPA. In order to promote open competition in the industry, legislation has
been proposed in the U.S. Congress that calls for either a repeal of PURPA on a
prospective basis or the significant restructuring of the regulations governing
the electric industry, including sections of the Public Utility Regulatory
Policies Act. Current federal legislative proposals would not abrogate, amend,
or modify existing contracts with electric utilities. The ultimate outcome of
any proposed legislation is unknown at this time.
Saranac has contracted to purchase natural gas from a third party, for its
cogeneration facility for a period of 15 years for an amount up to 51,000
MMBTU's per day. The price for such deliveries is a stated rate, escalated
annually at a rate of 4%.
Salton Sea Unit V is obligated to supply the electricity demands of the
Zinc Recovery Project at the price available to Salton Sea Unit V from the PX
less the wheeling costs to the PX.
Salton Sea Power, L.L.C., one of our indirect wholly-owned subsidiaries,
is constructing Salton Sea Unit V. Salton Sea Unit V will be a 49 net megawatt
geothermal power plant which will sell approximately one-third of its net
output to the zinc facility, which will be retained by MidAmerican. The
remainder will be sold through the California power exchange.
Salton Sea Unit V is being constructed pursuant to a date certain, fixed
price, turnkey engineering, procurement and construction contract by Stone &
Webster Engineering Corporation. Salton Sea Unit V is scheduled to commence
commercial operation in mid-2000. Total project costs of Salton Sea Unit V are
expected to be approximately $119,067 which will be funded by $76,281 of debt
from Salton Sea Funding Corporation and $42,786 from equity contributions.
CE Turbo LLC, one of our indirect wholly-owned subsidiaries, is
constructing the CE Turbo project. The CE Turbo project will have a capacity of
10 net megawatts. The net output of the CE Turbo project will be sold to the
zinc facility or sold through the California power exchange.
The partnership projects are upgrading the geothermal brine processing
facilities at the Vulcan and Del Ranch projects with the region 2 brine
facilities construction.
The CE Turbo project and the region 2 brine facilities construction are
being constructed by Stone & Webster pursuant to a date certain, fixed price,
turnkey engineering, procurement and construction contract. The obligations of
Stone & Webster are guaranteed by Stone & Webster,
F-17
<PAGE>
CE GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (CONTINUED)
(AMOUNTS IN THOUSANDS)
Incorporated. The CE Turbo project is scheduled to commence initial operations
in early-2000 and the region 2 brine facilities construction is scheduled to be
completed in early-2000. Total project costs for both the CE Turbo project and
the region 2 brine facilities construction are expected to be approximately
$63,747 which will be funded by $55,602 of debt from Salton Sea Funding
Corporation and $8,145 from equity contributions.
10. INCOME TAXES
Provision for income tax is comprised of the following at December 31:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ---------- ----------
<S> <C> <C> <C>
Currently payable:
State ........... $ 11,099 $ 8,451 $ 3,586
Federal ......... 47,263 30,647 8,027
-------- -------- --------
58,362 39,098 11,613
-------- -------- --------
Deferred:
State ........... (836) 1,057 1,280
Federal ......... (5,308) 3,223 2,594
-------- -------- --------
(6,144) 4,280 3,874
-------- -------- --------
Total ......... $ 52,218 $ 43,378 $ 15,487
======== ======== ========
</TABLE>
A reconciliation of the federal statutory tax rate to the effective tax
rate applicable to income before provision for income taxes follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -------------
<S> <C> <C> <C>
Federal statutory rate .................................... 35.00% 35.00% 35.00%
Percentage depletion in excess of cost depletion .......... (4.36)% (4.59)% ( 7.31)%
Investment and energy tax credits ......................... (2.52)% (0.90)% (17.45)%
Goodwill amortization ..................................... 3.06% 3.58% 5.29%
State taxes, net of federal benefit ....................... 4.59% 5.18% 5.44%
Other ..................................................... -- (0.01)% 4.13%
----- ----- ------
Effective tax rate ........................................ 35.77% 38.26% 25.10%
===== ===== ======
</TABLE>
F-18
<PAGE>
CE GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (CONTINUED)
(AMOUNTS IN THOUSANDS)
Deferred tax liabilities (assets) are comprised of the following at
December 31:
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Depreciation and amortization, net .......................... $ 240,602 $ 247,891
--------- ---------
Accruals not currently deductible for tax purposes .......... (3,218) (3,628)
General business tax credits ................................ (8,891) (12,094)
Alternative minimum tax credits ............................. (16,333) (16,333)
Other ....................................................... (3,311) (843)
--------- ---------
(31,753) (32,898)
--------- ---------
Net deferred taxes .......................................... $ 208,849 $ 214,993
========= =========
</TABLE>
The Company has unused general business tax credit carryforwards of
approximately $8,891 expiring between 2004 and 2018. The Company also has
approximately $16,333 of alternative minimum tax credit carryforwards which
have no expiration date.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced sale or liquidation. Although management uses its best
judgment in estimating the fair value of these financial instruments, there are
inherent limitations in any estimation technique. Therefore, the fair value
estimates presented herein are not necessarily indicative of the amounts which
the Company could realize in a current transaction.
The fair value of all debt issues listed on exchanges, including the note
payable to related party which is based on a debt issue listed on an exchange,
has been estimated based on the quoted market prices. The remaining note
payable to related party, which is not based on market prices, and the project
loan are estimated to have a fair value equal to the carrying value.
The carrying amounts in the table below are included in the consolidated
balance sheets under the indicated captions:
<TABLE>
<CAPTION>
1998 ESTIMATED 1997 ESTIMATED
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
---------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Project loan ........................... $ 90,529 $ 90,529 $ 103,334 $ 103,334
Salton Sea notes and bonds ............. 626,816 646,397 448,754 463,720
Notes payable to related party ......... 247,681 265,581 247,812 265,641
</TABLE>
12. LITIGATION
NYSEG--On February 14, 1995, NYSEG filed with the FERC a Petition for a
Declaratory Order, Complaint, and Request for Modification of Rates in Power
Purchase Agreements Imposed Pursuant to the Public Utility Regulatory Policies
Act of 1978 (Petition) seeking FERC (i) to declare that the rates NYSEG pays
under the Saranac PPA, which was approved by the New York Public Service
Commission (the PSC) were in excess of the level permitted under PURPA and (ii)
to authorize the PSC to reform the Saranac PPA.
F-19
<PAGE>
CE GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (CONTINUED)
(AMOUNTS IN THOUSANDS)
On March 14, 1995, Saranac intervened in opposition to the Petition
asserting, inter alia, that the Saranac PPA fully complied with PURPA, that
NYSEG's action was untimely and that the FERC lacked authority to modify the
Saranac PPA. On March 15, 1995, the Company intervened also in opposition to
the Petition and asserted similar arguments. On April 12, 1995, the FERC by a
unanimous (5-0) decision issued an order denying the various forms of relief
requested by NYSEG and finding that the rates rquired under the Saranac PPA
were consistent with PURPA and the FERC's regulations. On May 11, 1995, NYSEG
requested rehearing of the order and, by order issued July 19, 1995, the FERC
unanimously (5-0) denied NYSEG's request. On June 14, 1995, NYSEG petitioned
the United States Court of Appeals for the District of Columbia Circuit (the
Court of Appeals) for review of FERC's April 12, 1995 order. FERC moved to
dismiss NYSEG's petition for review of July 28, 1995. On July 11, 1997, the
Court of Appeals dismissed NYSEG's appeal from FERC's denial of the petition on
jurisdictional grounds.
On August 7, 1997, NYSEG filed a complaint in the U.S. District Court for
the Northern District of New York against the FERC, the PSC (and the Chairman,
Deputy Chairman and the Commissioners of the PSC as individuals in their
official capacity), Saranac and Lockport Energy Associations, L.P. (Lockport)
concerning the power purchase agreements that NYSEG entered into with Saranac
and Lockport.
NYSEG's suit asserts that the PSC and the FERC improperly implemented
PURPA in authorizing the pricing terms that NYSEG, Saranac and Lockport agreed
to in those contracts. The action raises similar legal arguments to those
rejected by the FERC in its April and July 1995 orders. NYSEG in addition asks
for retroactive reformation of the contracts as of the date of commercial
operation and seeks a refund of $281 million from Saranac. Saranac and other
parties have filed motions to dismiss and oral arguments on those motions were
heard on March 2, 1998. The case was recently reassigned to a new judge and new
oral arguments have been scheduled for March 3, 1999. Saranac believes that
NYSEG's claims are without merit for, among other reasons, the same reasons
described in the FERC's orders.
NIAGARA--In March 1994, NorCon Power commenced an action against Niagara
in the Southern District of New York. In its complaint, NorCon requested a
declaratory judgment that Niagara has no right to demand additional security or
"adequate assurances" from Niagara of NorCon's future performance under a power
purchase agreement (the "Agreement") between the parties on the basis of a
demand letter dated February 4, 1994 from Niagara (the "Demand Letter") and a
permanent injunction enjoining Niagara from terminating or attempting to
terminate the Agreement for the reasons set forth in the Demand Letter. Niagara
filed a counterclaim for a declaratory judgment that Niagara had a right to
demand adequate assurances of NorCon's future performance under the Agreement,
Niagara properly exercised its right to demand "adequate assurances," and
NorCon's failure to provide "adequate assurances" constituted a repudiation of
the Agreement, and by reason of NorCon's repudiation, Niagara was relieved of
its obligations under the Agreement. On or about November 7, 1994, NorCon moved
for summary judgment. In a decision dated February 7, 1996, the Court granted
summary judgement in NorCon's favor, granting NorCon its requested declaratory
and injunctive relief and dismissing Niagara's counterclaim. On March 6, 1996,
Niagara filed a Notice of Appeal of the Court's decision (the "Appeal").
Judgment was entered in NorCon's favor on March 21, 1996. The Federal appellate
court certified a state law question of law to the New York Court of Appeals on
March 26, 1997. The state court has since issued its ruling that in appropriate
circumstances adequate assurance may be requested. On December 31, 1998, the
case was remanded to the trial court for further proceedings. The Company
believes that NorCon will not be required to provide additional security beyond
that currently provided under the Agreement and intends to vigorously defend
this action against Niagara.
F-20
<PAGE>
CE GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (CONTINUED)
(AMOUNTS IN THOUSANDS)
EDISON--In February 1998, Del Ranch and Elmore ("plaintiffs") filed an
action for breach of contract, fraud and unlawful discrimination relating to
the long-term contracts between plaintiffs and Edison for purchase and sale of
geothermal power. Among other claims, plaintiffs contend that Edison failed to
pay the correct "forecast" price for energy purchased from plaintiffs during
1998. Plantiffs seek compensatory damages of about $6 million and additional
punitive damages. Edison's demurrer to the frauds claim was recently overruled
by the Superior Court. Both sides are engaged in early discovery proceedings
and no trial date has yet been set. Plantiff's intend to pursue this action
vigorously. Plantiffs further believe there are good grounds to support their
claims, and that they should ultimately prevail on the merits at trial.
13. TRANSACTIONS WITH MEHC
MEHC provides certain administrative services to the Company, and MEHC's
executive, financial, legal, tax and other corporate staff departments perform
certain services for the Company. Expenses incurred by MEHC and allocated to
the Company are estimated based on the individual services and expense items
provided. Management believes that such estimate of expense allocations are
reasonable. It is not practicable to estimate the expenses that would have been
incurred by the Company if it had been operated on a stand-alone basis.
Allocated expenses totaled approximately $3,000 for each of 1998, 1997, and
1996, and are included in General and Administration expenses.
An analysis of the Company's net investment and advances is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------- -----------
<S> <C> <C> <C>
Balance, beginning of year .................................. $ 464,140 $ 454,903 $ 233,425
Net income ................................................. 93,778 69,996 46,211
Purchase and contribution of FSRI stock from MEHC .......... -- -- 232,500
Distribution to MEHC, net of advances ...................... (20,971) (60,759) (57,233)
--------- --------- ---------
Balance, end of year ........................................ $ 536,947 $ 464,140 $ 454,903
========= ========= =========
</TABLE>
14. ADDITIONAL CASH FLOW INFORMATION
In conjunction with the acquisition of FSRI and Partnership Interest
Acquisition, liabilities were assumed as follows:
<TABLE>
<S> <C>
Fair value of assets .................... $ 546,377
Cash paid, net of cash acquired ......... (264,324)
----------
Liabilities assumed ..................... $ 282,053
==========
</TABLE>
Approximately $207,000 of the cash paid represents MEHC's acquisition of
FSRI, net of cash acquired, which was simultaneously pushed down to the
Company. For cash flow purposes, the acquisition is reflected as an acquisition
by the Company and as advances from MEHC.
15. SUBSEQUENT EVENTS
On March 2, 1999, the Company issued $400,000 of 7.416% Senior Secured
Bonds due 2018. The net proceeds from this financing were used for the
following purposes:
o to repay Magma's 9 7/8% Secured Note Due 2003 payable to MEHC in the
aggregate principal amount of $200 million, at a repayment price
(including its premium) equal to approximately $220 million;
F-21
<PAGE>
CE GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (CONTINUED)
(AMOUNTS IN THOUSANDS)
o to make payments to MEHC aggregating approximately $122 million in
return for MEHC's transfer of certain assets to the Company. MEHC will
use these funds to prefund future equity contributions for various
construction projects;
o to repay approximately $49 million outstanding principal and interest
on a promissory note to MEHC;
o to make payments to MEHC aggregating up to approximately $4 million in
return for MEHC's transfers of certain assets to us which related to
MEHC's development costs for Salton Sea Unit V, the CE Turbo project and
the zinc facility; and
o to pay transaction costs and fees associated with the offer and sale
of the old Securities.
These Securities are senior secured debt which rank equally in right of
payment with the Company's other senior secured debt permitted under the
indenture for the Securities, share equally in the collateral with the
Company's other senior secured debt permitted under the indenture for the
Securities, and rank senior to any of the Company's subordinated debt permitted
under the indenture for the Securities. These Securities are effectively
subordinated to the existing project financing debt and all other debt of the
Company's consolidated subsidiaries.
The Senior Secured Bonds are primarily secured by the following
collateral:
o all available cash flow (as defined);
o a pledge of 99% of the equity interests in Salton Sea Power and all of
the Company's equity interests in its other consolidated subsidiaries,
with the exception of Magma Power Company (Magma) and subsidiaries;
o upon the redemption of, or earlier release of security interests under,
Magma's 9 7/8% promissory notes, a pledge of all of the capital stock of
Magma;
o a pledge of all of the capital stock of SECI Holding Inc.;
o a grant of a lien on and security interest in the depository accounts;
and
o a grant of a lien on and security interest in all of our other tangible
and intangible property, to the extent assignable (other than the capital
stock of Magma, which will be pledged upon the redemption of, or earlier
release of security interests under, Magma's 9 7/8% promissory notes).
o to the extent assignable, a grant of a lien on and security interest in
all of the Company's other tangible and intangible property (other than
the capital stock of Magma which will be pledged upon the redemption of,
or earlier release of security interests under, Magma's 9 7/8% promissory
notes).
MEHC's obligation to make payments on Magma's 9 7/8% promissory notes is
secured by a pledge of the capital stock of Magma and a lien on dividends and
distributions in respect of such Magma stock. On March 3, 1999, MEHC
repurchased $195.8 million in aggregate principal amount of its 9 7/8% Notes in
connection with a tender offer for a repurchase price (including premium) of
$215.4 million. In connection with the corresponding reduction of $195.8
million of the principal outstanding under Magma's 9 7/8% promissory notes,
$215.4 million of the proceeds of the old Securities were paid to MEHC. As a
result of the 9 7/8% note repurchase offer, the outstanding principal amount of
Magma's 9 7/8% promissory notes was reduced from $200 million to approximately
$4.2 million. MEHC intends to redeem the remaining outstanding Magma 9 7/8%
promissory notes on June 30, 2000, which is the first day upon which an
optional redemption is permitted under the trust indenture for Magma's 9 7/8%
promissory notes. A portion of the net proceeds of these securities, in the
amount of approximately
F-22
<PAGE>
CE GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (CONTINUED)
(AMOUNTS IN THOUSANDS)
$4.2 million, has been paid to MidAmerican and placed into a restricted account
held by the depository bank which is maintained solely for the purpose of paying
the remaining amounts due to the secured parties. These proceeds are being used
to pay interest on, and effect the redemption (or the earlier repurchase) of the
remaining outstanding principal of, Magma's 9 7/8% promissory notes. At the time
of this redemption, the collateral agent is expected to obtain a pledge of all
of Magma's capital stock.
Condensed consolidating financial statements for Magma and the Company's
other consolidated subsidiaries as of December 31, 1998 and 1997 and the three
years ended December 31, 1998 are presented below:
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CE GENERATION FALCON AND CE
PARENT MAGMA YUMA ELIMINATIONS GENERATION
--------------- ------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents .............. $ -- $ 13,930 $ 11,844 $ -- $ 25,774
Restricted cash ........................ -- 121,329 7,224 -- 128,553
Accounts receivable .................... -- 56,182 11,447 -- 67,629
Properties, plants, contracts and
equipment, net ........................ -- 702,700 190,972 -- 893,492
Equity investments ..................... 536,947 -- 125,036 (536,947) 125,036
Excess of cost over fair value of net
assets acquired, net .................. -- 218,181 92,519 -- 310,700
Note receivable from related party ..... -- 140,520 -- -- 140,520
Deferred financing charges and other
assets ................................ -- 51,689 7,239 -- 58,928
-------- ---------- -------- ---------- ----------
Total assets ......................... $536,947 $1,304,531 $446,101 $ (536,947) $1,750,632
======== ========== ======== ========== ==========
LIABILITIES AND EQUITY
Accounts payable and other accrued
liabilities ........................... $ -- $ 28,440 $ 11,370 $ -- $ 39,810
Project loan ........................... -- -- 90,529 -- 90,529
Salton Sea notes and bonds ............. -- 626,816 -- -- 626,816
Notes payable to related party ......... -- 200,000 47,681 -- 247,681
Deferred income taxes .................. -- 122,416 86,433 -- 208,849
-------- ---------- -------- ---------- ----------
Total liabilities .................... -- 977,672 236,013 -- 1,213,685
Equity, net investment and advances..... 536,947 326,859 210,088 (536,947) 536,947
-------- ---------- -------- ---------- ----------
Total liabilities and equity ......... $536,947 $1,304,531 $446,101 $ (536,947) $1,750,632
======== ========== ======== ========== ==========
</TABLE>
F-23
<PAGE>
CE GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (CONTINUED)
(AMOUNTS IN THOUSANDS)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CE GENERATION FALCON AND
PARENT MAGMA YUMA ELIMINATIONS CE GENERATION
--------------- ----------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Sales of electricity and steam .......... $ -- $293,778 $101,782 $ -- $395,560
Equity earnings in subsidiaries ......... 106,404 -- 10,732 (106,404) 10,732
Interest and other income ............... -- 26,171 3,712 -- 29,883
-------- -------- -------- --------- --------
Total revenue .......................... 106,404 319,949 116,226 (106,404) 436,175
COST AND EXPENSES:
Plant operations ........................ -- 63,371 50,721 -- 114,092
General and administration .............. 3,000 1,963 -- -- 4,963
Depreciation and amortization ........... -- 78,217 18,601 -- 96,818
Interest expense ........................ -- 57,513 17,140 -- 74,653
Less interest capitalized ............... -- (347) -- -- (347)
-------- -------- -------- --------- --------
Total expenses ......................... 3,000 200,717 86,462 -- 290,179
-------- -------- --------- --------
Income before provision for income
taxes ................................... 103,404 119,232 29,764 (106,404) 145,996
Provision for income taxes ............... 9,626 30,872 11,720 -- 52,218
-------- -------- -------- --------- --------
Net income ............................... $ 93,778 $ 88,360 $ 18,044 $(106,404) $ 93,778
======== ======== ======== ========= ========
</TABLE>
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CE GENERATION FALCON AND
PARENT MAGMA YUMA ELIMINATIONS CE GENERATION
--------------- ------------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents ............... $ -- $ 13,744 $ 9,940 $ -- $ 23,684
Restricted cash ......................... -- -- 6,907 -- 6,907
Accounts receivable ..................... -- 42,759 10,313 -- 53,072
Properties, plants, contracts and
equipment, net ......................... -- 729,271 202,936 -- 932,207
Equity investments ...................... 464,140 -- 131,207 (464,140) 131,207
Excess of cost over fair value of net
assets acquired, net ................... -- 228,329 94,252 -- 322,581
Deferred financing charges and other
assets ................................. -- 47,495 10,823 -- 58,318
-------- ---------- -------- ---------- ----------
Total assets .......................... $464,140 $1,061,598 $466,378 $ (464,140) $1,527,976
======== ========== ======== ========== ==========
LIABILITIES AND EQUITY
Accounts payable and other accrued
liabilities ............................ $ -- $ 29,430 $ 19,513 $ -- $ 48,943
Project loan ............................ -- -- 103,334 -- 103,334
Salton Sea notes and bonds .............. -- 448,754 -- -- 448,754
Notes payable to related party .......... -- 200,000 47,812 -- 247,812
Deferred income taxes ................... -- 125,531 89,462 -- 214,993
-------- ---------- -------- ---------- ----------
Total liabilities ..................... -- 803,715 260,121 -- 1,063,836
Equity, net investment and advances...... 464,140 257,883 206,257 (464,140) 464,140
-------- ---------- -------- ---------- ----------
Total liabilities and equity .......... $464,140 $1,061,598 $466,378 $ (464,140) $1,527,976
======== ========== ======== ========== ==========
</TABLE>
F-24
<PAGE>
CE GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (CONTINUED)
(AMOUNTS IN THOUSANDS)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CE GENERATION FALCON AND
PARENT MAGMA YUMA ELIMINATIONS CE GENERATION
--------------- ----------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Sales of electricity and steam .......... $ -- $282,623 $ 98,835 $ -- $381,458
Equity earnings in subsidiaries ......... 77,981 -- 14,542 (77,981) 14,542
Interest and other income ............... -- 6,804 4,334 -- 11,138
-------- -------- -------- -------- --------
Total revenue .......................... 77,981 289,427 117,711 (77,981) 407,138
COST AND EXPENSES:
Plant operations ........................ -- 66,661 53,312 -- 119,973
General and administration .............. 3,000 1,380 -- -- 4,380
Depreciation and amortization ........... -- 71,081 17,423 -- 88,504
Interest expense ........................ -- 62,447 18,460 -- 80,907
Less interest capitalized ............... -- -- -- -- --
-------- -------- -------- -------- --------
Total expenses ......................... 3,000 201,569 89,195 -- 293,764
-------- -------- -------- -------- --------
Income before provision for income
taxes ................................... 74,981 87,858 28,516 (77,981) 113,374
Provision for income taxes ............... 4,985 26,401 11,992 -- 43,378
-------- -------- -------- -------- --------
Net income ............................... $ 69,996 $ 61,457 $ 16,524 $(77,981) $ 69,996
======== ======== ======== ======== ========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CE GENERATION FALCON AND
PARENT MAGMA YUMA ELIMINATIONS CE GENERATION
--------------- ----------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Sales of electricity and steam .......... $ -- $235,659 $45,648 $ -- $281,307
Equity earnings in subsidiaries ......... 48,321 -- 4,263 (48,321) 4,263
Interest and other income ............... -- 16,555 2,718 -- 19,273
-------- -------- ------- -------- --------
Total revenue .......................... 48,321 252,214 52,629 (48,321) 304,843
COST AND EXPENSES:
Plant operations ........................ -- 66,166 28,079 -- 94,245
General and administration .............. 3,000 503 -- -- 3,503
Depreciation and amortization ........... -- 64,377 8,156 -- 72,533
Interest expense ........................ -- 66,576 11,093 -- 77,669
Less interest capitalized ............... -- (4,805) -- -- (4,805)
-------- -------- ------- -------- --------
Total expenses ......................... 3,000 192,817 47,328 -- 243,145
-------- -------- ------- -------- --------
Income before provision for income
taxes ................................... 45,321 59,397 5,301 (48,321) 61,698
Provision for income taxes ............... (890) 13,558 2,819 -- 15,487
-------- -------- ------- -------- --------
Net income ............................... 46,211 45,839 $ 2,482 $(48,321) $ 46,211
======== ======== ======= ======== ========
</TABLE>
F-25
<PAGE>
CE GENERATION, LLC
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
---------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents .......................................... $ 83,981 $ 25,774
Restricted cash .................................................... 52,811 128,553
Accounts receivable ................................................ 61,971 67,629
Properties, plants, contracts and equipment, net ................... 982,258 893,492
Equity investments ................................................. 119,913 125,036
Excess of cost over fair value of net assets acquired, net ......... 288,286 310,700
Note receivable from related party ................................. 140,520 140,520
Deferred financing charges and other assets ........................ 43,113 58,928
---------- ----------
Total assets .................................................... $1,772,853 $1,750,632
========== ==========
LIABILITIES AND EQUITY
LIABILITIES:
Accounts payable and other accrued liabilities ..................... $ 60,357 $ 39,810
Project loan ....................................................... 79,828 90,529
Salton Sea notes and bonds ......................................... 597,898 626,816
Senior secured bonds ............................................... 400,000 --
Notes payable to related party ..................................... -- 247,681
Deferred income taxes .............................................. 255,303 208,849
---------- ----------
Total liabilities ............................................... 1,393,386 1,213,685
Member's Equity .................................................... 379,467 --
Net Investment and advances ........................................ -- 536,947
---------- ----------
379,467 536,947
---------- ----------
Total liabilities and equity ....................................... $1,772,853 $1,750,632
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
CE GENERATION, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
REVENUE:
Sales of electricity and steam .................. $ 231,613 $293,485
Equity earnings in subsidiaries ................. 17,718 8,635
Interest and other income ....................... 17,665 21,823
--------- --------
Total revenues ............................... 266,996 323,943
--------- --------
COST AND EXPENSES:
Plant operations ................................ 84,848 84,100
General and administration ...................... 3,333 3,814
Depreciation and amortization ................... 43,400 71,901
Interest expense ................................ 58,343 54,784
Less interest capitalized ....................... (2,614) --
--------- --------
Total expenses ............................... 187,310 214,599
--------- --------
Income before provision for income taxes ......... 79,686 109,344
Provision for income taxes ....................... 30,520 39,364
--------- --------
Net income before extraordinary item ............. 49,166 69,980
Extraordinary item, net of tax ................... (17,478) --
--------- --------
Net income ....................................... $ 31,688 $ 69,980
========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
CE GENERATION, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................... $ 31,688 $ 69,980
ADJUSTMENTS TO RECONCILE CASH FLOWS FROM OPERATING
ACTIVITIES:
Depreciation and amortization ................................ 43,400 71,901
Provision for deferred income taxes .......................... 21,395 (4,609)
Equity earnings in subsidiaries .............................. (17,718) (8,635)
CHANGES IN OTHER ITEMS:
Accounts receivable ........................................ 5,658 (28,096)
Accounts payable and other accrued liabilities ............. 20,547 11,627
---------- ---------
Net cash flows from operating activities ................. 104,970 112,168
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ....................................... (119,322) (28,471)
Distributions from equity investments ...................... 22,841 13,455
Decrease (increase) in other assets ........................ 25,385 126
Decrease (increase) in restricted cash ..................... 49,666 (1,024)
---------- ---------
Net cash flows from investing activities ................. (21,430) (15,914)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Salton Sea notes and bonds .................... (28,918) (53,469)
Proceeds from Senior Secured Notes ......................... 400,000 --
Repayment of project loans ................................. (10,701) (9,603)
Repayment of note payable to related party ................. (247,681) (131)
Advances (to) from MidAmerican Energy Holdings Company,
net ....................................................... (164,109) 13,465
---------- ---------
Net cash flows from financing activities ................. (51,409) (49,738)
---------- ---------
Net increase (decrease) in cash and cash equivalents ......... 32,131 46,516
Cash and cash equivalents at beginning of year ............... 25,774 23,684
---------- ---------
Cash and cash equivalents at end of year ..................... $ 57,905 $ 70,200
========== =========
SUPPLEMENTAL DISCLOSURE:
Interest paid .............................................. $ 37,620 $ 45,186
========== =========
Income taxes paid .......................................... $ 9,125 $ 1,001
========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE>
CE GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. FORMATION
On February 8, 1999, MidAmerican Energy Holdings Company (formerly
CalEnergy Company, Inc.) ("MEHC") created a new subsidiary, CE Generation, LLC
(the "Company"), and subsequently transferred its interest in MEHC's power
generation assets of the Imperial Valley Projects and the Gas Projects to the
Company.
On March 3, 1999, MEHC closed the sale of 50% of its ownership interests
in the Company to an affiliate of El Paso Energy Corporation.
B. GENERAL
The September 30, 1999 and 1998 consolidated financial statements included
herein have been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. In the opinion of the Company,
all adjustments (consisting only of normal recurring accruals) have been made
to present fairly the financial position, the results of operations and the
changes in cash flows for the periods presented. Although the Company believes
that the disclosures are adequate to make the information presented not
misleading, it is suggested that these financial statements be read in
conjunction with the December 31, 1998 consolidated financial statements and
the notes thereto included elsewhere herein.
C. EXTRAORDINARY ITEM
On January 29, 1999, MEHC commenced a cash offer for all of its
outstanding 9-7/8% Limited Recourse Senior Secured Notes Due 2003. MEHC
received tenders from holders of an aggregate of approximately $195.8 million
principal which were paid on March 3, 1999, at a redemption price of 110.025%
plus accrued interest. The intercompany note to MidAmerican Energy Holdings
Company, including the redemption premium, was repaid by the Company, resulting
in an extraordinary loss of approximately $17.5 million, net of tax.
D. SENIOR SECURED BONDS
On March 2, 1999, the Company closed the sale of $400 million aggregate
principal amount of its 7.416% Senior Secured Bonds due 2018 and distributed
the proceeds to MEHC. Annual repayments of the bonds are $0, $10.4 million,
$12.6 million, $20.6 million, and $18 million for 1999 through 2003,
respectively, and $338.4 million thereafter. The estimated fair value of the
Senior Secured Bonds is $363.4 million at September 30, 1999.
The Senior Secured Bonds are secured by the following collateral:
o all available cash flow of the Subsidiaries deposited with the
depositary bank;
o a pledge of 99% of the equity interests in Salton Sea Power Company and
all of the equity interests in CE Texas Gas LLC, the Subsidiaries (other
than Magma Power Company) and California Energy Yuma Corporation;
o upon the redemption of, or earlier release of security interests under,
Magma's 9 7/8% promissory notes, a pledge of all of the capital stock of
Magma;
o a pledge of all of the capital stock of SECI Holdings Inc.;
o a grant of a lien on and security interest in the depositary accounts;
and
o a grant of a lien on and security interest in all of the Company's
other tangible and intangible property.
F-29
<PAGE>
CE GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company is required to maintain a balance in the debt service reserve
account equal to the maximum semiannual principal and interest payment on the
Senior Secured Bonds. The Company can fulfill this requirement by depositing
cash into the debt service reserve account and/or posting a letter of credit
for the debt service reserve account. On March 2, 1999, the Company posted a
letter of credit issued by Credit Suisse First Boston in the amount of
approximately $24 million to satisfy its debt service reserve obligations.
Monies on deposit in the debt service reserve account and drawings on debt
service reserve letters of credit will be used to make principal and interest
payments on the Senior Secured Bonds and debt service reserve bonds and
interest payments on debt service reserve letter of credit loans.
The Company is permitted to redeem all or any portion of the Senior
Secured Bonds at any time prior to maturity at a redemption price equal to:
o 100% of the principal amount of the Senior Secured Bonds being
redeemed; plus
o accrued and unpaid interest on the Senior Secured Bonds being
redeemed; plus
o a yield maintenance premium which is based on the rates of comparable
treasury securities plus 50 basis points.
The Company is obligated to redeem Senior Secured Bonds at par plus
accrued interest plus a yield maintenance premium in the following
circumstances:
o if any Subsidiary receives more than $15,000,000 of available cash flow
representing refinancing proceeds or asset sale proceeds;
o if the Company receives more than $15,000,000 of proceeds from the sale
of its interest in a Subsidiary and the sale was not specifically
permitted under the indenture for the Senior Secured Bonds; or
o if any Subsidiary receives more than $15,000,000 of proceeds from the
sale of its interest in a project company and the sale was not
specifically permitted under the indenture.
However, the Company may not have to use all of the proceeds to redeem Senior
Secured Bonds in the foregoing circumstances if the rating agencies confirm the
ratings for the Senior Secured Bonds.
The Company is obligated to redeem Senior Secured Bonds at par plus
accrued interest if any Subsidiary receives more than $15,000,000 of available
cash flow representing insurance proceeds, eminent domain proceeds, title
insurance proceeds or proceeds from the buy-out of a power purchase agreement.
However, the Company may not have to use all available cash flow representing
buy-out proceeds to redeem Senior Secured Bonds if the rating agencies confirm
the ratings for the Senior Secured Bonds.
E. INCOME TAXES
The Company has elected to be taxed as a "C" Corporation for federal
income tax reporting purposes.
F. MEMBERS' EQUITY
At February 8, 1999, the Company was created by MEHC and the balance of
net investments and advances and earnings through February 8, 1999, were
contributed to the Company in exchange for full ownership. Prior to MEHC's sale
of 50% of the Company's membership, the Company disbursed, net of additional
contributions, approximately $182.6 million to MEHC.
F-30
<PAGE>
CE GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Members' equity comprised the following at September 30, 1999 (in
thousands):
<TABLE>
<S> <C>
Net investment and advances, beginning of year ........................ $536,947
Distribution to MEHC, net of advances ................................. (6,575)
Net income through February 8, 1999 ................................... 6,526
--------
Capital contribution by MEHC at February 8, 1999 .................... 536,898
Distribution to MEHC, net of contributions ............................ 182,593
Members' net income from February 9, 1999 to September 30, 1999 ....... 25,162
--------
Members' equity, September 30, 1999 ................................. $379,467
========
</TABLE>
G. SUBSEQUENT EVENT
In October 1999, the Company's indirect subsidiary, NorCon Power Partners,
L.P. reached an agreement with Niagara Mohawk Power Corporation, the Norcon
power purchaser, General Electric Capital Corporation, the NorCon project
lender, and Louis Dreyfus Natural Gas Corporation, the gas supplier for the
NorCon project, to settle the outstanding litigation between NorCon and Niagara
Mohawk, to terminate NorCon's power purchase agreement with Niagara Mohawk and
gas purchase agreement with Louis Dreyfus, to transfer the NorCon project to
General Electric Capital and to provide for General Electric Capital to assume
responsibility for third party claims related to the NorCon project. Upon the
closing of these terminations and transfers, NorCon expects that it will not
have any further rights, interests, profits, costs or losses with respect to the
NorCon project.
F-31
<PAGE>
APPENDIX A
POWER GENERATION PROJECTS
INDEPENDENT ENGINEER'S REPORT
CE GENERATION CONSOLIDATED PROFORMA ANALYSIS
PREPARED FOR
CE GENERATION, LLC
FEBRUARY 24, 1999
FLUOR DANIEL, INC.
IRVINE, CALIFORNIA
A-1
<PAGE>
SECTION 1.0
OVERVIEW
Fluor Daniel, Inc. (Fluor Daniel) has reviewed information related to the
CE Generation (CEG) Projects and has prepared a summary of resulting debt
coverage ratios for both a Base Case and selected sensitivity cases as
hereinafter defined. The CEG projects for which financial results are presented
consist of the following:
o The Imperial Valley Projects: Salton Sea Unit I, Unit II, Unit III,
Unit IV, Vulcan, Del Ranch, Elmore, and Leathers which are presently
in operation. Also included are two units under construction, Salton
Sea Unit V and CE Turbo, as well as additional Magma Royalties.
o The Gas-Fired Projects: Yuma, PRI, and Saranac.
o Falcon Seaboard Gas Company
o Falcon Power Operating Company
Fluor Daniel completed a review of the Consolidated Financial Model
created by CEG and used to compute consolidated debt coverage ratios. The
Consolidated Financial Model incorporates financial results of four detailed
project-specific financial models: Imperial, Yuma, PRI, and Saranac.
Fluor Daniel initially reviewed the Imperial financial model in October
1998 and has again reviewed this model as well as a model, for Magma Royalties.
R.W. Beck has independently generated financial results for the Gas-Fired
Projects and Falcon Power Operating Company. C.C. Pace provided the cash flow
forecasts for Falcon Seaboard Gas Company that have also been incorporated into
the Consolidated Financial Model.
SECTION 2.0
CONCLUSIONS
After a review of the Consolidated Financial Model and an examination of
the supporting financial models, Fluor Daniel concludes:
o The Consolidated Financial Model, prepared by CEG, accurately
represents the results of the four project-specific models that
contain the detailed project assumptions
o The Consolidated Financial Model, that is based on the Base Case
assumptions recommended by CE Generation and R.W. Beck, indicates that
revenues appear to be adequate to provide sufficient cash flow for
debt service, with Base Case debt service coverage ratios calculated
from 1999 through 2018 of 2.59 minimum and 3.08 average.
o The financial projections remain stable across a defined range of
sensitivities and avoided cost assumptions, specified further below.
SECTION 3.0
CONSOLIDATED FINANCIAL PROJECTIONS AND DEBT COVERAGE RATIOS
3.1 BASE CASE RESULTS
Fluor Daniel has reviewed the Consolidated Financial Model and has
analyzed the ability of CEG to pay anticipated debt service on the securities
over the next 20 years. The results are summarized in the table of debt
coverage ratios presented below. In addition, Fluor Daniel has performed a
series of selected sensitivity analyses that are also listed on the table and
described in more detail in the next section.
A-2
<PAGE>
SUMMARY OF DEBT COVERAGE RATIOS
<TABLE>
<CAPTION>
SCENARIO MINIMUM COVERAGE AVERAGE COVERAGE
-------- ---------------- ----------------
<S> <C> <C>
Base Case ...................... 2.59 3.08
Higher O&M ..................... 2.43 2.82
Increased Heat Rate ............ 2.48 3.02
Reduced Availability ........... 2.13 2.73
Low Power Price 1 .............. 2.56 2.94
Low Power Price 2 .............. 2.46 2.78
SCE Low Avoided Cost ........... 2.64 3.14
SCE Mid Avoided Cost ........... 2.69 3.52
SCE High Avoided Cost .......... 2.89 4.98
</TABLE>
The Consolidated Financial Model used to compute debt coverages contains a
twenty year projection of cash flow items beginning in year 1999. These items
include revenues, expenses, initial and long term capital expenditures,
royalties, and financing cash flows. The consolidated model brings forward the
relevant cash flow items from the detailed project models and consolidates the
results for measuring aggregate debt service coverage.
Specifically, as directed by CEG, the debt coverage ratios are calculated
by bringing forward revenues and expenses from the Imperial Valley, PRI, and
Yuma projects and then determining operating income by subtraction. From this
result, all capital expenditures from Imperial Valley, PRI and Yuma and net
construction cash flows from the respective projects are subtracted. Subtracted
next are all project-level debt service payments for Imperial Valley and PRI.
An adjustment is made for additions and releases of funds from PRI. Next, cash
flows from Saranac, Falcon Power Operating Company and Falcon Seaboard Gas
Company are added to operating income. Finally, LOC and trustee fees are
substracted resulting in cash available for debt service. The debt coverage
ratio is the ratio of cash available for debt service to total CE Generation
debt service.
The Base Case Consolidated Financial Model, shown as Exhibit 1, indicates
that cash flows from the CEG Projects are reasonable and should be sufficient
to cover the projected annual operating expenses, post-completion capital
expenditures, and debt service for the Securities. Base Case average debt
coverage is 3.08 and minimum debt coverage is 2.59.
3.2 BASE CASE ASSUMPTIONS
Among the many assumptions used for the analysis, CEG provided the
assumptions regarding the pricing, term, and amortization of principal for the
new Securities. The Securities will be long term bonds priced at an assumed
annual interest rate of 7.42 percent. The final maturity is 20 years from
issuance with an average life of approximately 11.9 years.
Henwood Energy Services prepared the forecasts of spot electricity prices
used for the Imperial Valley and Yuma Projects. CC Pace projected natural gas
prices for Saranac and PRI. Based upon representations of CEG and/or R.W. Beck,
regarding specific elements of geothermal and gas projects, Operations and
Maintenance (O&M) escalation was assumed to be 2.5% per year for the geothermal
projects and 2.7% per year for the Gas-Fired projects.
SECTION 4.0
SENSITIVITY ANALYSIS
Fluor Daniel, in conjunction with R.W. Beck, created and modeled certain
sensitivity cases under CEG's direction to analyze the ability of the project
to maintain debt coverage levels under several different scenarios. The four
variables adjusted for this analysis are increased O&M expense, reduced fuel
efficiency, reduced plant availability, reduced fuel efficiency for the
Gas-Fired plants, increased fuel cost for the Gas-Fired projects, and power
price sensitivities for Imperial Valley and Yuma. The results of this analysis
are presented below.
A-3
<PAGE>
4.1 HIGHER O&M
To test the sensitivity of CEG debt coverage ratios to changes in project
operating costs, the level of O&M costs for all projects was raised by 10%.
This sensitivity resulted in average debt coverage of 2.82 and minimum debt
coverage of 2.43.
4.2 INCREASED HEAT RATE
As a further sensitivity, the fuel efficiency in the gas-fired power
plants was reduced through a 5% increase in the plant heat rate. The increased
heat rate reduced average debt coverage to 3.02 and minimum coverage to 2.48.
4.3 REDUCED AVAILABILITY
The impact of reduced availability on project debt coverage ratios was
tested by reducing the annual availability of all projects from their existing
Base Case level by 5%. This sensitivity resulted in average debt coverage of
2.73 and minimum debt coverage of 2.13.
4.4 POWER PRICE
Henwood Energy Services prepared the forecast of future spot-market
electric energy prices used in the financial projections for the Imperial
Valley and Yuma projects. As a downside case, Henwood also prepared two cases
based on assumptions of lower natural gas prices (10 or 15 percent). The lower
natural gas forecasts were used by Henwood to forecast the corresponding lower
electrical energy prices.
Use of the low power price 1 (10% lower gas price) forecast reduced the
average CEG debt coverage to 2.94 and minimum coverage to 2.56. The low power
price 2 case (15% lower gas price) resulted in an average coverage of 2.78 and
minimum coverage of 2.46.
Three more power price scenarios were run to test debt coverages using
projections of avoided costs made by Southern California Edison in 1995. The
first scenario, SCE Low, resulted in an average debt coverage ratio of 3.14 and
minimum coverage of 2.64. The SCE Mid price scenario produced an average
coverage of 3.52 and minimum of 2.69. Finally, the SCE High scenario resulted
in average debt coverage of 4.98 and minimum coverage of 2.89.
A-4
<PAGE>
4.5 BREAKEVEN ANALYSIS
The following table presents the Power Exchange electric price that
maintains project debt service at a level of 1.0 or higher.
<TABLE>
<CAPTION>
BREAKEVEN (CENTS/KWH)
---------------------
YEAR NOMINAL 1999 BASE
---- ------- ---------
<S> <C> <C>
1999 ............................................... 0.00 0.00
2000 ............................................... 0.00 0.00
2001 ............................................... 0.00 0.00
2002 ............................................... 0.22 0.20
2003 ............................................... 0.63 0.57
2004 ............................................... 1.01 0.89
2005 ............................................... 1.32 1.14
2006 ............................................... 1.16 0.97
2007 ............................................... 1.39 1.14
2008 ............................................... 0.95 0.76
2009 ............................................... 1.36 1.06
2010 ............................................... 2.32 1.77
2011 ............................................... 2.13 1.58
2012 ............................................... 1.77 1.29
2013 ............................................... 2.18 1.54
2014 ............................................... 1.82 1.25
2015 ............................................... 2.06 1.39
2016 ............................................... 2.05 1.35
2017 ............................................... 2.28 1.46
2018 ............................................... 2.09 1.31
</TABLE>
A-5
<PAGE>
ASSUMPTIONS, QUALIFICATIONS AND REVIEW DOCUMENTS
THIS REPORT WAS PREPARED BY FLUOR DANIEL, INC. EXPRESSLY FOR USE BY CE
GENERATION. IT IS FLUOR DANIEL'S UNDERSTANDING THAT THIS REPORT WILL BE INCLUDED
IN THE PUBLIC OFFERING MEMORANDUM AND SUBSEQUENT PROSPECTUS FOR THE OFFERING OF
THE BONDS, AS DESCRIBED HEREIN. NEITHER FLUOR DANIEL NOR ANY PERSON ACTING IN
ITS BEHALF, MAKES ANY WARRANTY, EXPRESS OR IMPLIED, OR ASSUMES ANY LIABILITY
WITH RESPECT TO THE USE OF ANY INFORMATION, TECHNOLOGY, ENGINEERING, OR METHODS
DISCLOSED IN THIS REPORT.
In the preparation of this Report and the opinions contained therein,
Fluor Daniel has 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 exclusively upon the information specified
below. Neither CE Generation nor Fluor Daniel Inc. has made an analysis,
verified, or rendered an independent judgment of the validity of the
information provided by others. While it is believed that the information
contained herein will be reliable under the conditions and subject to the
limitations set forth herein, neither CE Generation nor Fluor Daniel, Inc.
guarantee the accuracy thereof. Further, 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 forecast. Except for the
sensitivity analyses presented herein, no other sensitivities were performed.
This Report summarizes our work up to 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 assumptions and considerations utilized by Fluor Daniel in
developing the results and conclusions presented in this report include the
following:
o The projected interest rates on the Securities, reinvestment rates,
cost of arranging the financing and the amortization schedule of the
Securities used in the debt service coverage analysis have been
provided to Fluor Daniel.
o CE Generation provided 1998 financial statements for the CE Generation
and other cost accounting information as well as future projections of
cost, expenses, prices, and other key assumptions.
o Brine quantities and depletion rates were provided by GeothermEx.
o The electricity pricing forecast was provided by Henwood Energy
Services.
o Fluor Daniel has not undertaken an independent review with all
regulatory agencies which could under any circumstances have
jurisdictions over or interests pertaining to the project
REVIEW DOCUMENTS
DOCUMENT
DATE DOCUMENT
---- --------
9/21/98 Proforma Cost Report
7/18/95 Salton Sea Funding Corporation Confidential Offering Circular
6/17/96 Salton Sea Funding Corporation Confidential Offering Circular
3/31/93 Technology Transfer Agreement -- Units I, II, & III
7/28/98 Second Amended and Restated Waste Disposal Agreement --
Units I, II, III, & IV
11/24/93 Ground Lease -- Units I & II
9/25/90 Plant Connection Agreement -- Unit II
A-6
<PAGE>
DOCUMENT
DATE DOCUMENT
---- --------
7/20/88 Plant Connection Agreement -- Unit III
3/31/93 Ground Lease -- Units III & IV
7/14/95 Plant Connection Agreement -- Unit IV
6/9/88 Plant Connection Agreement -- Del Ranch, L.P.
3/14/88 Ground Lease -- Del Ranch, L.P.
3/14/88 Technology Transfer Agreement -- Del Ranch, L.P.
6/9/88 Plant Connection Agreement -- Elmore, L.P.
3/14/88 Ground Lease -- Elmore, L.P.
3/14/88 Technology Transfer Agreement -- Elmore, L.P.
9/25/89 Plant Connection Agreement -- Leathers, L.P.
10/26/88 Ground Lease -- Leathers, L.P.
8/15/88 Technology Transfer Agreement -- Leathers, L.P.
12/6/88 Plant Connection Agreement -- Vulcan Power Company
4/14/98 IID Construction Agreement -- Salton Sea Unit V
4/1/98 IID Plant Connection Agreement -- Salton Sea Unit V
4/14/98 IID Transmission Services Agreement -- Salton Sea Unit V
7/30/98 Lump Sum Cost Proposal -- Salton Sea Unit V Project Schedule
8/5/98 Imperial Valley Operating Statistics
8/98 GeothermEx Report -- Assessment of the Resource Supply
8/5/98 BHP Royalty Agreement and Amendment
8/5/98 California Energy Commission, State of California Energy Resources
Conservation and Development Commission Clearance/Acknowledgement
that the Desert Valley/Salton Sea Unit V Project is not subject to
the Commission's jurisdiction.
9/2/98 Salton Sea Unit V Engineering, Procurement, and Construction Contract
9/11/98 Region II Upgrade Engineering, Procurement, and Construction Contract
8/12/98 Amendments to Power Purchase Agreement
3/31/98 Securities and Exchange Commission Form 10-Q
12/31/97 Securities and Exchange Commission Form 10-K
1/26/99 Consolidated and Project-Specific financial models
2/10/99 Mammoth Royalties Agreements
2/12/99 Responses to Fluor Daniel Data Requests
2/8/99 Excerpts from CalEnergy Operating Company 10 Year Plan
A-7
<PAGE>
EXHIBIT 1
CE GENERATION, LLC
Pro Forma Financial Projections ($'000s)
Base Case
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 2004
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $ 222,320 $ 168,258 $ 163,615 $ 175,747 $ 180,487 $ 185,522
PRI 83,498 86,128 88,997 91,887 71,866 --
Yuma 20,817 21,140 19,782 22,079 22,579 22,248
------------------------------------------------------------------------
Total Revenues 326,635 275,526 272,394 289,713 274,932 207,770
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 55,448 49,737 50,462 52,366 51,852 51,319
PRI 51,081 51,687 53,094 54,503 42,015 --
Yuma 13,731 16,472 13,797 14,230 16,725 14,432
------------------------------------------------------------------------
Total Expenses 120,260 117,896 117,353 121,099 110,592 65,751
OPERATING INCOME FROM CONSOLIDATED PROJECTS 206,376 157,630 155,040 168,614 164,340 142,019
LESS: CAPITAL EXPENDITURES
Imperial Valley 21,525 21,159 17,305 7,334 17,779 15,598
PRI 1,409 1,002 715 516 351 --
Yuma 179 9 6 23 40 40
------------------------------------------------------------------------
Total Capital Expenditures 23,113 22,170 18,026 7,873 18,170 15,638
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures (142,812) (23,546) -- -- -- --
Proceeds from Financing 118,681 -- -- -- -- --
Equity Contributions 24,131 23,546 -- -- -- --
------------------------------------------------------------------------
Total Imperial Valley Construction -- -- -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 82,740 51,546 53,451 55,115 53,349 53,433
PRI 21,561 23,381 23,796 23,975 23,188 --
------------------------------------------------------------------------
Total Project Debt Service 104,301 74,927 77,247 79,090 76,537 53,433
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) (85) (128) (67) 183 12,328 --
------------------------------------------------------------------------
Total Releases (85) (128) (67) 183 12,328 --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) 23,810 30,031 34,951 34,791 36,563 38,304
Falcon Power Operating Company 3,271 3,361 3,452 3,547 3,317 2,399
Falcon Seaboard Gas Company (3) 8,959 9,226 9,530 9,847 3,435 --
------------------------------------------------------------------------
Total Other Revenues 36,040 42,618 47,933 48,185 43,315 40,703
LESS: LOC / TRUSTEE FEES 299 447 460 528 488 442
TOTAL CASH AVAILABLE FOR DEBT SERVICE 114,618 102,576 107,174 129,490 124,788 113,210
CE GENERATING DEBT SERVICE
Interest 24,869 29,278 28,426 27,194 25,763 24,554
Principal Repayment -- 10,400 12,600 20,600 18,000 14,600
------------------------------------------------------------------------
Total Debt Service 24,869 39,678 41,026 47,794 43,763 39,154
CE GENERATING DEBT COVERAGE 4.61 2.59 2.61 2.71 2.85 2.89
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2005 2006 2007 2008
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $ 190,156 $ 183,391 $ 181,318 $ 187,934
PRI -- -- -- --
Yuma 23,459 23,408 23,531 24,590
---------------------------------------------
Total Revenues 213,615 206,799 204,849 212,524
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 52,997 52,726 53,260 54,305
PRI -- -- -- --
Yuma 14,880 15,118 19,613 16,310
---------------------------------------------
Total Expenses 67,877 67,844 72,873 70,615
OPERATING INCOME FROM CONSOLIDATED PROJECTS 145,738 138,955 131,975 141,909
LESS: CAPITAL EXPENDITURES
Imperial Valley 26,092 14,562 16,215 7,609
PRI -- -- -- --
Yuma 40 40 40 40
---------------------------------------------
Total Capital Expenditures 26,132 14,602 16,255 7,649
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures -- -- -- --
Proceeds from Financing -- -- -- --
Equity Contributions -- -- -- --
---------------------------------------------
Total Imperial Valley Construction -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 50,654 46,226 43,378 44,323
PRI -- -- -- --
---------------------------------------------
Total Project Debt Service 50,654 46,226 43,378 44,323
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) -- -- -- --
---------------------------------------------
Total Releases -- -- -- --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) 40,549 41,525 40,605 49,062
Falcon Power Operating Company 2,464 2,531 2,599 2,669
Falcon Seaboard Gas Company (3) -- -- -- --
---------------------------------------------
Total Other Revenues 43,013 44,056 43,204 51,731
LESS: LOC / TRUSTEE FEES 433 464 438 523
TOTAL CASH AVAILABLE FOR DEBT SERVICE 111,532 121,719 115,108 141,145
CE GENERATING DEBT SERVICE
Interest 23,464 22,204 20,824 19,111
Principal Repayment 14,800 19,200 18,000 28,200
---------------------------------------------
Total Debt Service 38,264 41,404 38,824 47,311
CE GENERATING DEBT COVERAGE 2.91 2.94 2.96 2.98
</TABLE>
Minimum DCR (1999 - 2018) 2.59
Average DCR (1999 - 2018) 3.08
(1) Changes in accounts held at PRI related to PRI debt (final year data
provided by CEG)
(2) Saranac cash flow based on partnership allocations after capital
expenditures and debt service
(3) Data provided by CC Pace
A-8
<PAGE>
EXHIBIT 1
CE GENERATION, LLC
Pro Forma Financial Projections ($'000s)
Base Case
<TABLE>
<CAPTION>
2009 2010 2011 2012 2013 2014
-------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $185,550 $189,055 $ 188,223 $188,701 $194,037 $197,086
PRI -- -- -- -- -- --
Yuma 24,238 22,959 22,978 22,927 23,735 23,818
---------------------------------------------------------------
Total Revenues 209,788 212,014 211,201 211,628 217,772 220,904
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 52,804 55,109 55,556 55,087 58,568 58,332
PRI -- -- -- -- -- --
Yuma 16,817 15,971 19,020 16,993 17,531 17,817
---------------------------------------------------------------
Total Expenses 69,621 71,080 74,576 72,080 76,099 76,149
OPERATING INCOME FROM CONSOLIDATED PROJECTS 140,167 140,934 136,625 139,548 141,672 144,754
LESS: CAPITAL EXPENDITURES
Imperial Valley 17,666 10,456 14,570 8,944 18,198 7,529
PRI -- -- -- -- -- --
Yuma 40 40 40 40 40 40
---------------------------------------------------------------
Total Capital Expenditures 17,706 10,496 14,610 8,984 18,238 7,569
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures -- -- -- -- -- --
Proceeds from Financing -- -- -- -- -- --
Equity Contributions -- -- -- -- -- --
---------------------------------------------------------------
Total Imperial Valley Construction -- -- -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 40,294 38,551 29,749 25,106 21,951 23,477
PRI
---------------------------------------------------------------
Total Project Debt Service 40,294 38,551 29,749 25,106 21,951 23,477
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) -- -- -- -- -- --
---------------------------------------------------------------
Total Releases -- -- -- -- -- --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) 43,219 -- -- -- -- --
Falcon Power Operating Company 1,371 -- -- -- -- --
Falcon Seaboard Gas Company (3) -- -- -- -- -- --
---------------------------------------------------------------
Total Other Revenues 44,590 -- -- -- -- --
LESS: LOC / TRUSTEE FEES 468 349 348 388 372 409
TOTAL CASH AVAILABLE FOR DEBT SERVICE 126,289 91,538 91,918 105,070 101,111 113,300
CE GENERATING DEBT SERVICE
Interest 17,153 15,715 14,624 13,301 11,786 10,072
Principal Repayment 24,600 14,200 15,200 20,480 20,400 25,800
---------------------------------------------------------------
Total Debt Service 41,753 29,915 29,824 33,781 32,186 35,872
CE GENERATING DEBT COVERAGE 3.02 3.06 3.08 3.11 3.14 3.16
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2015 2016 2017 2018
------- ------- -------- --------
<S> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $ 200,915 $ 200,536 $197,715 $197,521
PRI -- -- -- --
Yuma 24,365 24,476 24,940 25,336
------------------------------------------
Total Revenues 225,280 225,012 222,655 222,857
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 59,839 59,145 60,019 60,035
PRI -- -- -- --
Yuma 22,643 19,254 19,864 20,464
------------------------------------------
Total Expenses 82,482 78,399 79,883 80,499
OPERATING INCOME FROM CONSOLIDATED PROJECTS 142,798 146,613 142,772 142,358
LESS: CAPITAL EXPENDITURES
Imperial Valley 6,427 8,828 10,036 8,315
PRI -- -- -- --
Yuma 40 40 40 40
------------------------------------------
Total Capital Expenditures 6,467 8,868 10,076 8,355
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures -- -- -- --
Proceeds from Financing -- -- -- --
Equity Contributions -- -- -- --
------------------------------------------
Total Imperial Valley Construction -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 23,740 23,743 21,725 10,528
PRI -- -- -- --
------------------------------------------
Total Project Debt Service 23,740 23,743 21,725 10,528
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) -- -- -- --
------------------------------------------
Total Releases -- -- -- --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) -- -- -- --
Falcon Power Operating Company -- -- -- --
Falcon Seaboard Gas Company (3)
------------------------------------------
Total Other Revenues -- -- -- --
LESS: LOC / TRUSTEE FEES 402 403 391 427
TOTAL CASH AVAILABLE FOR DEBT SERVICE 112,190 113,598 110,580 123,047
CE GENERATING DEBT SERVICE
Interest 8,113 6,025 3,818 1,348
Principal Repayment 27,040 29,280 30,240 36,360
------------------------------------------
Total Debt Service 35,153 35,305 34,058 37,708
CE GENERATING DEBT COVERAGE 3.19 3.22 3.25 3.26
</TABLE>
Minimum DCR (1999 - 2018) 2.59
Average DCR (1999 - 2018) 3.08
(1) Changes in accounts held at PRI related to PRI debt (final year data
provided by CEG)
(2) Saranac cash flow based on partnership allocations after capital
expenditures and debt service
(3) Data provided by CC Pace
A-9
<PAGE>
EXHIBIT 1
CE GENERATION, LLC
Pro Forma Financial Projections ($'000s)
Higher O&M Case
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 2004
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $ 222,222 $ 168,172 $ 163,528 $ 175,656 $ 180,396 $ 185,449
PRI 83,498 86,128 88,997 91,887 71,866 --
Yuma 20,817 21,140 19,782 22,079 22,579 22,248
---------------------------------------------------------------------------
Total Revenues 326,537 275,440 272,307 289,622 274,841 207,697
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 58,490 52,567 53,311 55,324 54,835 54,330
PRI 52,198 52,763 54,205 55,639 42,890 --
Yuma 14,195 17,179 14,201 14,644 17,353 14,863
---------------------------------------------------------------------------
Total Expenses 124,883 122,509 121,717 125,607 115,078 69,193
OPERATING INCOME FROM CONSOLIDATED PROJECTS 201,655 152,931 150,590 164,015 159,763 138,504
LESS: CAPITAL EXPENDITURES
Imperial Valley 21,525 21,159 17,305 7,334 17,779 15,598
PRI 1,550 1,102 787 568 386 --
Yuma 197 10 7 25 44 44
---------------------------------------------------------------------------
Total Capital Expenditures 23,272 22,271 18,099 7,927 18,209 15,642
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures (142,812) (23,546) -- -- -- --
Proceeds from Financing 118,681 -- -- -- -- --
Equity Contributions 24,131 23,546 -- -- -- --
---------------------------------------------------------------------------
Total Imperial Valley Construction -- -- -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 82,740 51,546 53,451 55,115 53,349 53,433
PRI 21,561 23,381 23,796 23,975 23,188 --
---------------------------------------------------------------------------
Total Project Debt Service 104,301 74,927 77,247 79,090 76,537 53,433
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) (85) (128) (67) 183 12,328 --
---------------------------------------------------------------------------
Total Releases (85) (128) (67) 183 12,328 --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) 22,424 28,305 33,068 32,849 34,556 36,234
Falcon Power Operating Company 3,598 3,696 3,797 3,901 3,649 2,639
Falcon Seaboard Gas Company (3) 8,959 9,226 9,530 9,847 3,435 --
---------------------------------------------------------------------------
Total Other Revenues 34,981 41,227 46,395 46,597 41,640 38,873
LESS: LOC / TRUSTEE FEES 299 447 460 528 488 442
TOTAL CASH AVAILABLE FOR DEBT SERVICE 108,679 96,385 101,112 123,249 118,497 107,861
CE GENERATING DEBT SERVICE
Interest 24,869 29,278 28,426 27,194 25,763 24,554
Principal Repayment -- 10,400 12,600 20,600 18,000 14,600
---------------------------------------------------------------------------
Total Debt Service 24,869 39,678 41,026 47,794 43,763 39,154
CE GENERATING DEBT COVERAGE 4.37 2.43 2.46 2.58 2.71 2.75
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2005 2006 2007 2008
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $ 190,051 $ 183,287 $ 181,191 $ 187,778
PRI -- -- -- --
Yuma 23,459 23,408 23,531 24,590
-----------------------------------------------
Total Revenues 213,510 206,695 204,722 212,368
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 56,422 56,651 57,760 59,455
PRI -- -- -- --
Yuma 15,320 15,546 20,443 16,778
-----------------------------------------------
Total Expenses 71,742 72,197 78,203 76,233
OPERATING INCOME FROM CONSOLIDATED PROJECTS 141,769 134,498 126,519 136,134
LESS: CAPITAL EXPENDITURES
Imperial Valley 26,092 14,562 16,215 7,609
PRI -- -- -- --
Yuma 44 44 44 44
-----------------------------------------------
Total Capital Expenditures 26,136 14,606 16,259 7,653
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures -- -- -- --
Proceeds from Financing -- -- -- --
Equity Contributions -- -- -- --
-----------------------------------------------
Total Imperial Valley Construction -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 50,654 46,226 43,378 44,323
PRI -- -- -- --
-----------------------------------------------
Total Project Debt Service 50,654 46,226 43,378 44,323
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) -- -- -- --
-----------------------------------------------
Total Releases -- -- -- --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) 38,414 39,318 38,326 46,720
Falcon Power Operating Company 2,710 2,784 2,859 2,936
Falcon Seaboard Gas Company (3) -- -- -- --
-----------------------------------------------
Total Other Revenues 41,124 42,102 41,185 49,656
LESS: LOC / TRUSTEE FEES 433 464 438 523
TOTAL CASH AVAILABLE FOR DEBT SERVICE 105,670 115,304 107,628 133,291
CE GENERATING DEBT SERVICE
Interest 23,464 22,204 20,824 19,111
Principal Repayment 14,800 19,200 18,000 28,200
-----------------------------------------------
Total Debt Service 38,264 41,404 38,824 47,311
CE GENERATING DEBT COVERAGE 2.76 2.78 2.77 2.82
</TABLE>
Minimum DCR (1999 - 2018) 2.43
Average DCR (1999 - 2018) 2.82
(1) Changes in accounts held at PRI related to PRI debt (final year data
provided by CEG)
(2) Saranac cash flow based on partnership allocations after capital
expenditures and debt service
(3) Data provided by CC Pace
A-10
<PAGE>
EXHIBIT 1
CE GENERATION, LLC
Pro Forma Financial Projections ($'000s)
Higher O&M Case
<TABLE>
<CAPTION>
2009 2010 2011 2012 2013 2014
-------- --------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $185,384 $ 188,860 $ 188,004 $ 188,454 $193,753 $ 196,767
PRI -- -- -- -- -- --
Yuma 24,238 22,959 22,978 22,927 23,735 23,818
-----------------------------------------------------------------
Total Revenues 209,622 211,819 210,982 211,381 217,488 220,585
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 58,492 61,745 63,108 63,647 68,557 69,560
PRI -- -- -- -- -- --
Yuma 17,294 16,462 19,775 17,505 18,054 18,323
-----------------------------------------------------------------
Total Expenses 75,786 78,207 82,883 81,152 86,611 87,883
OPERATING INCOME FROM CONSOLIDATED PROJECTS 133,836 133,612 128,099 130,229 130,877 132,702
LESS: CAPITAL EXPENDITURES
Imperial Valley 17,666 10,456 14,570 8,944 18,198 7,529
PRI -- -- -- -- -- --
Yuma 44 44 44 44 44 44
-----------------------------------------------------------------
Total Capital Expenditures 17,710 10,500 14,614 8,988 18,242 7,573
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures -- -- -- -- -- --
Proceeds from Financing -- -- -- -- -- --
Equity Contributions -- -- -- -- -- --
-----------------------------------------------------------------
Total Imperial Valley Construction -- -- -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 40,294 38,551 29,749 25,106 21,951 23,477
PRI -- -- -- -- -- --
-----------------------------------------------------------------
Total Project Debt Service 40,294 38,551 29,749 25,106 21,951 23,477
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) -- -- -- -- -- --
-----------------------------------------------------------------
Total Releases -- -- -- -- -- --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) 42,017 -- -- -- -- --
Falcon Power Operating Company 1,508 -- -- -- -- --
Falcon Seaboard Gas Company (3) -- -- -- -- -- --
-----------------------------------------------------------------
Total Other Revenues 43,525 -- -- -- -- --
LESS: LOC / TRUSTEE FEES 468 349 348 388 372 409
TOTAL CASH AVAILABLE FOR DEBT SERVICE 118,889 84,213 83,388 95,747 90,312 101,243
CE GENERATING DEBT SERVICE
Interest 17,153 15,715 14,624 13,301 11,786 10,072
Principal Repayment 24,600 14,200 15,200 20,480 20,400 25,800
-----------------------------------------------------------------
Total Debt Service 41,753 29,915 29,824 33,781 32,186 35,872
CE GENERATING DEBT COVERAGE 2.85 2.82 2.80 2.83 2.81 2.82
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2015 2016 2017 2018
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $200,551 $200,129 $197,254 $197,003
PRI -- -- -- --
Yuma 24,365 24,476 24,940 25,336
-------------------------------------------
Total Revenues 224,916 224,605 222,194 222,339
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 72,643 73,494 76,344 78,479
PRI -- -- -- --
Yuma 23,649 19,811 20,433 21,047
-------------------------------------------
Total Expenses 96,292 93,305 96,777 99,526
OPERATING INCOME FROM CONSOLIDATED PROJECTS 128,625 131,300 125,416 122,813
LESS: CAPITAL EXPENDITURES
Imperial Valley 6,427 8,828 10,036 8,315
PRI -- -- -- --
Yuma 44 44 44 44
-------------------------------------------
Total Capital Expenditures 6,471 8,872 10,080 8,359
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures -- -- -- --
Proceeds from Financing -- -- -- --
Equity Contributions -- -- -- --
-------------------------------------------
Total Imperial Valley Construction -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 23,740 23,743 21,725 10,528
PRI -- -- -- --
-------------------------------------------
Total Project Debt Service 23,740 23,743 21,725 10,528
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) -- -- -- --
-------------------------------------------
Total Releases -- -- -- --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) -- -- -- --
Falcon Power Operating Company -- -- -- --
Falcon Seaboard Gas Company (3) -- -- -- --
-------------------------------------------
Total Other Revenues -- -- -- --
LESS: LOC / TRUSTEE FEES 402 403 391 427
TOTAL CASH AVAILABLE FOR DEBT SERVICE 98,012 98,281 93,220 103,498
CE GENERATING DEBT SERVICE
Interest 8,113 6,025 3,818 1,348
Principal Repayment 27,040 29,280 30,240 36,360
-------------------------------------------
Total Debt Service 35,153 35,305 34,058 37,708
CE GENERATING DEBT COVERAGE 2.79 2.78 2.74 2.74
</TABLE>
Minimum DCR (1999 - 2018) 2.43
Average DCR (1999 - 2018) 2.82
(1) Changes in accounts held at PRI related to PRI debt (final year data
provided by CEG)
(2) Saranac cash flow based on partnership allocations after capital
expenditures and debt service
(3) Data provided by CC Pace
A-11
<PAGE>
EXHIBIT I
CE GENERATION, LLC
Pro Forma Financial Projections ($'000s)
Increased Heat Rate Case
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 2004
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $ 222,320 $ 168,258 $ 163,615 $ 175,747 $ 180,487 $ 185,522
PRI 83,498 86,128 88,997 91,887 71,866 --
Yuma 20,817 21,140 19,782 22,079 22,579 22,248
--------------------------------------------------------------------------
Total Revenues 326,635 275,526 272,394 289,713 274,932 207,770
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 55,448 49,737 50,462 52,366 51,852 51,319
PRI 52,537 53,153 54,582 56,014 43,183 --
Yuma 14,175 16,931 14,272 14,723 17,236 14,927
--------------------------------------------------------------------------
Total Expenses 122,160 119,821 119,316 123,103 112,271 66,246
OPERATING INCOME FROM CONSOLIDATED PROJECTS 204,476 155,705 153,077 166,610 162,661 141,524
LESS: CAPITAL EXPENDITURES
Imperial Valley 21,525 21,159 17,305 7,334 17,779 15,598
PRI 1,409 1,002 715 516 351 --
Yuma 179 9 6 23 40 40
--------------------------------------------------------------------------
Total Capital Expenditures 23,113 22,170 18,026 7,873 18,170 15,638
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures (142,812) (23,546) -- -- -- --
Proceeds from Financing 118,681 -- -- -- -- --
Equity Contributions 24,131 23,546 -- -- -- --
--------------------------------------------------------------------------
Total Imperial Valley Construction -- -- -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 82,740 51,546 53,451 55,115 53,349 53,433
PRI 21,561 23,381 23,796 23,975 23,188 --
--------------------------------------------------------------------------
Total Project Debt Service 104,301 74,927 77,247 79,090 76,537 53,433
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) (85) (128) (67) 183 12,328 --
--------------------------------------------------------------------------
Total Releases (85) (128) (67) 183 12,328 --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) 22,061 27,824 32,511 32,246 33,904 35,530
Falcon Power Operating Company 3,271 3,361 3,452 3,547 3,317 2,399
Falcon Seaboard Gas Company (3) 8,959 9,226 9,530 9,847 3,435 --
--------------------------------------------------------------------------
Total Other Revenues 34,291 40,411 45,493 45,640 40,656 37,929
LESS: LOC / TRUSTEE FEES 299 447 460 528 488 442
TOTAL CASH AVAILABLE FOR DEBT SERVICE 110,969 98,444 102,771 124,941 120,450 109,941
CE GENERATING DEBT SERVICE
Interest 24,869 29,278 28,426 27,194 25,763 24,554
Principal Repayment -- 10,400 12,600 20,600 18,000 14,600
--------------------------------------------------------------------------
Total Debt Service 24,869 39,678 41,026 47,794 43,763 39,154
CE GENERATING DEBT COVERAGE 4.46 2.48 2.51 2.61 2.75 2.81
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2005 2006 2007 2008
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $ 190,156 $ 183,391 $ 181,318 $ 187,934
PRI -- -- -- --
Yuma 23,459 23,408 23,531 24,590
-----------------------------------------------
Total Revenues 213,615 206,799 204,849 212,524
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 52,997 52,726 53,260 54,305
PRI -- -- -- --
Yuma 15,393 15,649 20,166 16,879
-----------------------------------------------
Total Expenses 68,390 68,375 73,426 71,184
OPERATING INCOME FROM CONSOLIDATED PROJECTS 145,225 138,424 131,422 141,340
LESS: CAPITAL EXPENDITURES
Imperial Valley 26,092 14,562 16,215 7,609
PRI -- -- -- --
Yuma 40 40 40 40
-----------------------------------------------
Total Capital Expenditures 26,132 14,602 16,255 7,649
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures -- -- -- --
Proceeds from Financing -- -- -- --
Equity Contributions -- -- -- --
-----------------------------------------------
Total Imperial Valley Construction -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 50,654 46,226 43,378 44,323
PRI -- -- -- --
-----------------------------------------------
Total Project Debt Service 50,654 46,226 43,378 44,323
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) -- -- -- --
-----------------------------------------------
Total Releases -- -- -- --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) 37,653 38,505 37,453 45,774
Falcon Power Operating Company 2,464 2,531 2,599 2,669
Falcon Seaboard Gas Company (3) -- -- -- --
-----------------------------------------------
Total Other Revenues 40,117 41,036 40,052 48,443
LESS: LOC / TRUSTEE FEES 433 464 438 523
TOTAL CASH AVAILABLE FOR DEBT SERVICE 108,123 118,168 111,403 137,288
CE GENERATING DEBT SERVICE
Interest 23,464 22,204 20,824 19,111
Principal Repayment 14,800 19,200 18,000 28,200
-----------------------------------------------
Total Debt Service 38,264 41,404 38,824 47,311
CE GENERATING DEBT COVERAGE 2.83 2.85 2.87 2.90
</TABLE>
Minimum DCR (1999 - 2018) 2.48
Average DCR (1999 - 2018) 3.02
(1) Changes in accounts held at PRI related to PRI debt (final year data
provided by CEG)
(2) Saranac cash flow based on partnership allocations after capital
expenditures and debt service
(3) Data provided by CC Pace
A-12
<PAGE>
Exhibit I
CE GENERATION, LLC
Pro Forma Financial Projections ($'000s)
Increased Heat Rate Case
<TABLE>
<CAPTION>
2009 2010 2011 2012 2013 2014
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $185,550 $189,055 $188,223 $188,701 $194,037 $197,086
PRI -- -- -- -- -- --
Yuma 24,238 22,959 22,978 22,927 23,735 23,818
----------------------------------------------------------------
Total Revenues 209,788 212,014 211,201 211,628 217,772 220,904
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 52,804 55,109 55,556 55,087 58,568 58,332
PRI -- -- -- --
Yuma 17,407 16,509 19,578 17,571 18,131 18,438
----------------------------------------------------------------
Total Expenses 70,211 71,618 75,134 72,658 76,699 76,770
OPERATING INCOME FROM CONSOLIDATED PROJECTS 139,577 140,396 136,067 138,970 141,072 144,133
LESS: CAPITAL EXPENDITURES
Imperial Valley 17,666 10,456 14,570 8,944 18,198 7,529
PRI -- -- -- -- -- --
Yuma 40 40 40 40 40 40
----------------------------------------------------------------
Total Capital Expenditures 17,706 10,496 14,610 8,984 18,238 7,569
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures -- -- -- -- -- --
Proceeds from Financing -- -- -- -- -- --
Equity Contributions -- -- -- -- -- --
----------------------------------------------------------------
Total Imperial Valley Construction -- -- -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 40,294 38,551 29,749 25,106 21,951 23,477
PRI -- -- -- -- -- --
----------------------------------------------------------------
Total Project Debt Service 40,294 38,551 29,749 25,106 21,951 23,477
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) -- -- -- -- -- --
----------------------------------------------------------------
Total Releases -- -- -- -- -- --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) 41,516 -- -- -- -- --
Falcon Power Operating Company 1,371 -- -- -- -- --
Falcon Seaboard Gas Company (3) -- -- -- -- -- --
----------------------------------------------------------------
Total Other Revenues 42,887 -- -- -- -- --
LESS: LOC / TRUSTEE FEES 468 349 348 388 372 409
TOTAL CASH AVAILABLE FOR DEBT SERVICE 123,996 91,000 91,360 104,492 100,511 112,679
CE GENERATING DEBT SERVICE
Interest 17,153 15,715 14,624 13,301 11,786 10,072
Principal Repayment 24,600 14,200 15,200 20,480 20,400 25,800
----------------------------------------------------------------
Total Debt Service 41,753 29,915 29,824 33,781 32,186 35,872
CE GENERATING DEBT COVERAGE 2.97 3.04 3.06 3.09 3.12 3.14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2015 2016 2017 2018
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $200,915 $200,536 $197,715 $197,521
PRI -- -- -- --
Yuma 24,365 24,476 24,940 25,336
------------------------------------------
Total Revenues 225,280 225,012 222,655 222,857
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 59,839 59,145 60,019 60,035
PRI -- -- -- --
Yuma 23,256 19,919 20,554 21,177
------------------------------------------
Total Expenses 83,095 79,064 80,573 81,212
OPERATING INCOME FROM CONSOLIDATED PROJECTS 142,185 145,948 142,082 141,645
LESS: CAPITAL EXPENDITURES
Imperial Valley 6,427 8,828 10,036 8,315
PRI -- -- -- --
Yuma 40 40 40 40
------------------------------------------
Total Capital Expenditures 6,467 8,868 10,076 8,355
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures -- -- -- --
Proceeds from Financing -- -- -- --
Equity Contributions -- -- -- --
------------------------------------------
Total Imperial Valley Construction -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 23,740 23,743 21,725 10,528
PRI -- -- -- --
------------------------------------------
Total Project Debt Service 23,740 23,743 21,725 10,528
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) -- -- -- --
------------------------------------------
Total Releases -- -- -- --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) -- -- -- --
Falcon Power Operating Company -- -- -- --
Falcon Seaboard Gas Company (3) -- -- -- --
------------------------------------------
Total Other Revenues -- -- -- --
LESS: LOC / TRUSTEE FEES 402 403 391 427
TOTAL CASH AVAILABLE FOR DEBT SERVICE 111,577 112,933 109,890 122,334
CE GENERATING DEBT SERVICE
Interest 8,113 6,025 3,818 1,348
Principal Repayment 27,040 29,280 30,240 36,360
------------------------------------------
Total Debt Service 35,153 35,305 34,058 37,708
CE GENERATING DEBT COVERAGE 3.17 3.20 3.23 3.24
</TABLE>
Minimum DCR (1999 - 2018) 2.48
Average DCR (1999 - 2018) 3.02
(1) Changes in accounts held at PRI related to PRI debt (final year data
provided by CEG)
(2) Saranac cash flow based on partnership allocations after capital
expenditures and debt service
(3) Data provided by CC Pace
A-13
<PAGE>
EXHIBIT I
CE GENERATION, LLC
Pro Forma Financial Projections ($'000s)
Reduced Availability Case
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 2004
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $ 213,742 $ 162,354 $ 157,889 $ 169,453 $ 173,918 $ 178,717
PRI 80,887 83,442 86,223 89,026 69,649 --
Yuma 19,748 20,056 18,770 20,949 21,423 21,106
--------------------------------------------------------------------------
Total Revenues 314,377 265,852 262,882 279,428 264,990 199,823
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 55,031 49,460 50,173 52,045 51,520 50,974
PRI 48,627 49,172 50,511 51,851 39,969 --
Yuma 13,085 15,992 13,300 13,517 14,135 16,027
--------------------------------------------------------------------------
Total Expenses 116,743 114,624 113,984 117,413 105,624 67,001
OPERATING INCOME FROM CONSOLIDATED PROJECTS 197,634 151,227 148,898 162,015 159,366 132,822
LESS: CAPITAL EXPENDITURES
Imperial Valley 21,525 21,159 17,305 7,334 17,779 15,598
PRI 1,409 1,002 715 516 351 --
Yuma 179 9 6 23 40 40
--------------------------------------------------------------------------
Total Capital Expenditures 23,113 22,170 18,026 7,873 18,170 15,638
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures (142,812) (23,546) -- -- -- --
Proceeds from Financing 118,681 -- -- -- -- --
Equity Contributions 24,131 23,546 -- -- -- --
--------------------------------------------------------------------------
Total Imperial Valley Construction -- -- -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 82,740 51,546 53,451 55,115 53,349 53,433
PRI 21,561 23,381 23,796 23,975 23,188 --
--------------------------------------------------------------------------
Total Project Debt Service 104,301 74,927 77,247 79,090 76,537 53,433
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) (85) (128) (67) 183 12,328 --
--------------------------------------------------------------------------
Total Releases (85) (128) (67) 183 12,328 --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) 16,981 18,964 25,479 24,923 26,265 27,573
Falcon Power Operating Company 3,271 3,361 3,452 3,547 3,317 2,399
Falcon Seaboard Gas Company (3) 8,448 8,697 8,983 9,282 2,998 --
--------------------------------------------------------------------------
Total Other Revenues 28,700 31,022 37,914 37,752 32,580 29,972
LESS: LOC / TRUSTEE FEES 299 447 460 528 488 442
TOTAL CASH AVAILABLE FOR DEBT SERVICE 98,536 84,577 91,013 112,457 109,080 93,281
CE GENERATING DEBT SERVICE
Interest 24,869 29,278 28,426 27,194 25,763 24,554
Principal Repayment -- 10,400 12,600 20,600 18,000 14,600
--------------------------------------------------------------------------
Total Debt Service 24,869 39,678 41,026 47,794 43,763 39,154
CE GENERATING DEBT COVERAGE 3.96 2.13 2.22 2.35 2.49 2.38
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2005 2006 2007 2008
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $ 184,433 $ 176,997 $ 174,725 $ 181,025
PRI -- -- -- --
Yuma 22,254 22,208 22,323 23,329
-----------------------------------------------
Total Revenues 206,687 199,205 197,048 204,354
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 52,631 52,382 52,916 53,941
PRI -- -- -- --
Yuma 14,344 14,784 19,034 15,714
-----------------------------------------------
Total Expenses 66,975 67,166 71,950 69,655
OPERATING INCOME FROM CONSOLIDATED PROJECTS 139,712 132,039 125,099 134,699
LESS: CAPITAL EXPENDITURES
Imperial Valley 26,092 14,562 16,215 7,609
PRI -- -- -- --
Yuma 40 40 40 40
-----------------------------------------------
Total Capital Expenditures 26,132 14,602 16,255 7,649
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures -- -- -- --
Proceeds from Financing -- -- -- --
Equity Contributions -- -- -- --
-----------------------------------------------
Total Imperial Valley Construction -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 50,654 46,226 43,378 44,323
PRI -- -- -- --
-----------------------------------------------
Total Project Debt Service 50,654 46,226 43,378 44,323
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) -- -- -- --
-----------------------------------------------
Total Releases -- -- -- --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) 29,361 29,864 28,438 36,373
Falcon Power Operating Company 2,464 2,531 2,599 2,669
Falcon Seaboard Gas Company (3) -- -- -- --
-----------------------------------------------
Total Other Revenues 31,825 32,395 31,037 39,042
LESS: LOC / TRUSTEE FEES 433 464 438 523
TOTAL CASH AVAILABLE FOR DEBT SERVICE 94,318 103,142 96,064 121,246
CE GENERATING DEBT SERVICE
Interest 23,464 22,204 20,824 19,111
Principal Repayment 14,800 19,200 18,000 28,200
-----------------------------------------------
Total Debt Service 38,264 41,404 38,824 47,311
CE GENERATING DEBT COVERAGE 2.46 2.49 2.47 2.56
</TABLE>
Minimum DCR (1999 - 2018) 2.13
Average DCR (1999 - 2018) 2.73
(1) Changes in accounts held at PRI related to PRI debt (final year data
provided by CEG)
(2) Saranac cash flow based on partnership allocations after capital
expenditures and debt service
(3) Data provided by CC Pace
A-14
<PAGE>
EXHIBIT 1
CE GENERATION, LLC
Pro Forma Financial Projections ($'000s)
Reduced Availability Case
<TABLE>
<CAPTION>
2009 2010 2011 2012 2013 2014
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $178,760 $182,128 $181,309 $181,781 $186,836 $189,782
PRI -- -- -- -- -- --
Yuma 22,997 21,767 21,786 21,738 22,505 22,584
-----------------------------------------------------------------
Total Revenues 201,757 203,895 203,095 203,519 209,341 212,366
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 52,442 54,720 55,173 54,711 58,190 57,962
PRI -- -- -- -- -- --
Yuma 16,200 15,401 18,177 16,382 16,898 17,433
-----------------------------------------------------------------
Total Expenses 68,642 70,121 73,350 71,093 75,088 75,395
OPERATING INCOME FROM CONSOLIDATED PROJECTS 133,115 133,774 129,745 132,426 134,253 136,971
LESS: CAPITAL EXPENDITURES
Imperial Valley 17,666 10,456 14,570 8,944 18,198 7,529
PRI -- -- -- -- -- --
Yuma 40 40 40 40 40 40
-----------------------------------------------------------------
Total Capital Expenditures 17,706 10,496 14,610 8,984 18,238 7,569
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures -- -- -- -- -- --
Proceeds from Financing -- -- -- -- -- --
Equity Contributions -- -- -- -- -- --
-----------------------------------------------------------------
Total Imperial Valley Construction -- -- -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 40,294 38,551 29,749 25,106 21,951 23,477
PRI -- -- -- -- -- --
-----------------------------------------------------------------
Total Project Debt Service 40,294 38,551 29,749 25,106 21,951 23,477
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) -- -- -- -- -- --
-----------------------------------------------------------------
Total Releases -- -- -- -- -- --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) 36,583 -- -- -- -- --
Falcon Power Operating Company 1,371 -- -- -- -- --
Falcon Seaboard Gas Company (3) -- -- -- -- -- --
-----------------------------------------------------------------
Total Other Revenues 37,954 -- -- -- -- --
LESS: LOC / TRUSTEE FEES 468 349 348 388 372 409
TOTAL CASH AVAILABLE FOR DEBT SERVICE 112,601 84,379 85,037 97,948 93,692 105,516
CE GENERATING DEBT SERVICE
Interest 17,153 15,715 14,624 13,301 11,786 10,072
Principal Repayment 24,600 14,200 15,200 20,480 20,400 25,800
-----------------------------------------------------------------
Total Debt Service 41,753 29,915 29,824 33,781 32,186 35,872
CE GENERATING DEBT COVERAGE 2.70 2.82 2.85 2.90 2.91 2.94
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2015 2016 2017 2018
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $193,391 $192,903 $189,976 $189,676
PRI -- -- -- --
Yuma 23,101 23,209 23,650 24,025
------------------------------------------
Total Revenues 216,492 216,112 213,626 213,701
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 59,458 58,756 59,628 59,632
PRI -- -- -- --
Yuma 17,109 23,281 19,134 19,709
------------------------------------------
Total Expenses 76,567 82,037 78,762 79,341
OPERATING INCOME FROM CONSOLIDATED PROJECTS 139,925 134,076 134,863 134,360
LESS: CAPITAL EXPENDITURES
Imperial Valley 6,427 8,828 10,036 8,315
PRI -- -- -- --
Yuma 40 40 40 40
------------------------------------------
Total Capital Expenditures 6,467 8,868 10,076 8,355
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures -- -- -- --
Proceeds from Financing -- -- -- --
Equity Contributions -- -- -- --
------------------------------------------
Total Imperial Valley Construction -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 23,740 23,743 21,725 10,528
PRI -- -- -- --
------------------------------------------
Total Project Debt Service 23,740 23,743 21,725 10,528
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) -- -- -- --
------------------------------------------
Total Releases -- -- -- --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) -- -- -- --
Falcon Power Operating Company -- -- -- --
Falcon Seaboard Gas Company (3) -- -- -- --
------------------------------------------
Total Other Revenues -- -- -- --
LESS: LOC / TRUSTEE FEES 402 403 391 427
TOTAL CASH AVAILABLE FOR DEBT SERVICE 109,316 101,061 102,671 115,049
CE GENERATING DEBT SERVICE
Interest 8,113 6,025 3,818 1,348
Principal Repayment 27,040 29,280 30,240 36,360
------------------------------------------
Total Debt Service 35,153 35,305 34,058 37,708
CE GENERATING DEBT COVERAGE 3.11 2.86 3.01 3.05
</TABLE>
Minimum DCR (1999 - 2018) 2.13
Average DCR (1999 - 2018) 2.73
(1) Changes in accounts held at PRI related to PRI debt (final year data
provided by CEG)
(2) Saranac cash flow based on partnership allocations after capital
expenditures and debt service
(3) Data provided by CC Pace
A-15
<PAGE>
EXHIBIT 1
CE GENERATION, LLC
Pro Forma Financial Projections ($'000s)
Low Power Price 2 Case
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 2004
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $ 222,320 $ 167,959 $ 162,755 $ 164,637 $ 169,543 $ 176,429
PRI 83,498 86,128 88,997 91,887 71,866 --
Yuma 20,817 21,130 19,108 20,009 20,669 20,486
--------------------------------------------------------------------------
Total Revenues 326,635 275,217 270,860 276,533 262,078 196,915
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 55,448 49,721 50,420 51,716 51,332 50,882
PRI 51,081 51,687 53,094 54,503 42,015 --
Yuma 13,731 16,220 13,276 13,420 15,609 13,080
--------------------------------------------------------------------------
Total Expenses 120,260 117,628 116,790 119,639 108,956 63,962
OPERATING INCOME FROM CONSOLIDATED PROJECTS 206,376 157,589 154,070 156,894 153,122 132,953
LESS: CAPITAL EXPENDITURES
Imperial Valley 21,525 21,159 17,305 7,334 17,779 15,598
PRI 1,409 1,002 715 516 351 --
Yuma 179 9 6 23 40 40
--------------------------------------------------------------------------
Total Capital Expenditures 23,113 22,170 18,026 7,873 18,170 15,638
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures (142,812) (23,546) -- -- -- --
Proceeds from Financing 118,681 -- -- -- -- --
Equity Contributions 24,131 23,546 -- -- -- --
--------------------------------------------------------------------------
Total Imperial Valley Construction -- -- -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 82,740 51,546 53,451 55,115 53,349 53,433
PRI 21,561 23,381 23,796 23,975 23,188 --
--------------------------------------------------------------------------
Total Project Debt Service 104,301 74,927 77,247 79,090 76,537 53,433
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) (85) (128) (67) 183 12,328 --
--------------------------------------------------------------------------
Total Releases (85) (128) (67) 183 12,328 --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) 23,810 30,031 34,951 34,791 36,563 38,304
Falcon Power Operating Company 3,271 3,361 3,452 3,547 3,317 2,399
Falcon Seaboard Gas Company (3) 8,959 9,226 9,530 9,847 3,435 --
--------------------------------------------------------------------------
Total Other Revenues 36,040 42,618 47,933 48,185 43,315 40,703
LESS: LOC / TRUSTEE FEES 299 447 460 528 488 442
TOTAL CASH AVAILABLE FOR DEBT SERVICE 114,618 102,536 106,204 117,770 113,570 104,143
CE GENERATING DEBT SERVICE
Interest 24,869 29,278 28,426 27,194 25,763 24,554
Principal Repayment -- 10,400 12,600 20,600 18,000 14,600
--------------------------------------------------------------------------
Total Debt Service 24,869 39,678 41,026 47,794 43,763 39,154
CE GENERATING DEBT COVERAGE 4.61 2.58 2.59 2.46 2.60 2.66
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2005 2006 2007 2008
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $ 179,294 $ 173,202 $ 172,030 $ 173,653
PRI -- -- -- --
Yuma 21,778 22,003 22,231 22,456
-----------------------------------------------
Total Revenues 201,072 195,205 194,261 196,109
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 52,439 52,227 52,803 53,541
PRI -- -- -- --
Yuma 13,479 13,664 18,097 14,751
-----------------------------------------------
Total Expenses 65,918 65,891 70,900 68,292
OPERATING INCOME FROM CONSOLIDATED PROJECTS 135,154 129,314 123,361 127,817
LESS: CAPITAL EXPENDITURES
Imperial Valley 26,092 14,562 16,215 7,609
PRI -- -- -- --
Yuma 40 40 40 40
-----------------------------------------------
Total Capital Expenditures 26,132 14,602 16,255 7,649
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures -- -- -- --
Proceeds from Financing -- -- -- --
Equity Contributions -- -- -- --
-----------------------------------------------
Total Imperial Valley Construction -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 50,654 46,226 43,378 44,323
PRI -- -- -- --
-----------------------------------------------
Total Project Debt Service 50,654 46,226 43,378 44,323
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) -- -- -- --
-----------------------------------------------
Total Releases -- -- -- --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) 40,549 41,525 40,605 49,062
Falcon Power Operating Company 2,464 2,531 2,599 2,669
Falcon Seaboard Gas Company (3) -- -- -- --
-----------------------------------------------
Total Other Revenues 43,013 44,056 43,204 51,731
LESS: LOC / TRUSTEE FEES 433 464 438 523
TOTAL CASH AVAILABLE FOR DEBT SERVICE 100,948 112,078 106,494 127,053
CE GENERATING DEBT SERVICE
Interest 23,464 22,204 20,824 19,111
Principal Repayment 14,800 19,200 18,000 28,200
-----------------------------------------------
Total Debt Service 38,264 41,404 38,824 47,311
CE GENERATING DEBT COVERAGE 2.64 2.71 2.74 2.69
</TABLE>
Minimum DCR (1999 - 2018) 2.46
Average DCR (1999 - 2018) 2.78
(1) Changes in accounts held at PRI related to PRI debt (final year data
provided by CEG)
(2) Saranac cash flow based on partnership allocations after capital
expenditures and debt service
(3) Data provided by CC Pace
A-16
<PAGE>
EXHIBIT I
CE GENERATION, LLC
Pro Forma Financial Projections ($'000s)
Low Power Price 2 Case
<TABLE>
<CAPTION>
2009 2010 2011 2012 2013 2014
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $173,813 $176,093 $175,760 $177,681 $178,750 $181,259
PRI -- -- -- -- -- --
Yuma 22,684 21,298 21,436 21,576 21,717 21,859
----------------------------------------------------------------
Total Revenues 196,497 197,391 197,196 199,257 200,467 203,118
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 52,244 54,417 54,927 54,536 57,757 57,555
PRI -- -- -- -- -- --
Yuma 15,199 14,483 17,476 15,392 15,872 16,095
----------------------------------------------------------------
Total Expenses 67,443 68,900 72,403 69,928 73,629 73,650
OPERATING INCOME FROM CONSOLIDATED PROJECTS 129,054 128,491 124,793 129,329 126,837 129,468
LESS: CAPITAL EXPENDITURES
Imperial Valley 17,666 10,456 14,570 8,944 18,198 7,529
PRI -- -- -- -- -- --
Yuma 40 40 40 40 40 40
----------------------------------------------------------------
Total Capital Expenditures 17,706 10,496 14,610 8,984 18,238 7,569
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures -- -- -- -- -- --
Proceeds from Financing -- -- -- -- -- --
Equity Contributions -- -- -- -- -- --
----------------------------------------------------------------
Total Imperial Valley Construction -- -- -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 40,294 38,551 29,749 25,106 21,951 23,477
PRI -- -- -- -- -- --
----------------------------------------------------------------
Total Project Debt Service 40,294 38,551 29,749 25,106 21,951 23,477
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) -- -- -- -- -- --
----------------------------------------------------------------
Total Releases -- -- -- -- -- --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) 43,219 -- -- -- -- --
Falcon Power Operating Company 1,371 -- -- -- -- --
Falcon Seaboard Gas Company (3) -- -- -- -- -- --
----------------------------------------------------------------
Total Other Revenues 44,590 -- -- -- -- --
LESS: LOC / TRUSTEE FEES 468 349 348 388 372 409
TOTAL CASH AVAILABLE FOR DEBT SERVICE 115,176 79,095 80,086 94,851 86,277 98,014
CE GENERATING DEBT SERVICE
Interest 17,153 15,715 14,624 13,301 11,786 10,072
Principal Repayment 24,600 14,200 15,200 20,480 20,400 25,800
----------------------------------------------------------------
Total Debt Service 41,753 29,915 29,824 33,781 32,186 35,872
CE GENERATING DEBT COVERAGE 2.76 2.64 2.69 2.81 2.68 2.73
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2015 2016 2017 2018
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $183,359 $183,751 $179,898 $178,317
PRI -- -- -- --
Yuma 22,132 22,436 22,728 23,017
------------------------------------------
Total Revenues 205,491 206,187 202,626 201,334
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 58,955 58,329 59,128 59,074
PRI -- -- -- --
Yuma 20,950 17,401 17,946 18,477
------------------------------------------
Total Expenses 79,905 75,730 77,074 77,551
OPERATING INCOME FROM CONSOLIDATED PROJECTS 125,585 130,457 125,553 123,783
LESS: CAPITAL EXPENDITURES
Imperial Valley 6,427 8,828 10,036 8,315
PRI -- -- -- --
Yuma 40 40 40 40
------------------------------------------
Total Capital Expenditures 6,467 8,868 10,076 8,355
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures -- -- -- --
Proceeds from Financing -- -- -- --
Equity Contributions -- -- -- --
------------------------------------------
Total Imperial Valley Construction -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 23,740 23,743 21,725 10,528
PRI -- -- -- --
------------------------------------------
Total Project Debt Service 23,740 23,743 21,725 10,528
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) -- -- -- --
------------------------------------------
Total Releases -- -- -- --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) -- -- -- --
Falcon Power Operating Company -- -- -- --
Falcon Seaboard Gas Company (3) -- -- -- --
------------------------------------------
Total Other Revenues -- -- -- --
LESS: LOC / TRUSTEE FEES 402 403 391 427
TOTAL CASH AVAILABLE FOR DEBT SERVICE 94,977 97,443 93,360 104,473
CE GENERATING DEBT SERVICE
Interest 8,113 6,025 3,818 1,348
Principal Repayment 27,040 29,280 30,240 36,360
------------------------------------------
Total Debt Service 35,153 35,305 34,058 37,708
CE GENERATING DEBT COVERAGE 2.70 2.76 2.74 2.77
</TABLE>
Minimum DCR (1999 - 2018) 2.46
Average DCR (1999 - 2018) 2.78
(1) Changes in accounts held at PRI related to PRI debt (final year data
provided by CEG)
(2) Saranac cash flow based on partnership allocations after capital
expenditures and debt service
(3) Data provided by CC Pace
A-17
<PAGE>
EXHIBIT 1
CE GENERATION, LLC
Pro Forma Financial Projections ($'000s)
SCE Low Case
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 2004
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $ 222,318 $ 170,790 $ 171,231 $ 177,615 $ 180,513 $ 184,216
PRI 83,498 86,128 88,997 91,887 71,866 --
Yuma 20,006 20,794 21,546 22,025 22,427 21,888
--------------------------------------------------------------------------
Total Revenues 325,822 277,712 281,774 291,527 274,806 206,104
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 55,448 49,886 50,879 52,392 51,848 51,242
PRI 51,081 51,687 53,094 54,503 42,015 --
Yuma 13,731 16,472 13,797 14,230 16,725 14,432
--------------------------------------------------------------------------
Total Expenses 120,260 118,045 117,770 121,125 110,588 65,674
OPERATING INCOME FROM CONSOLIDATED PROJECTS 205,563 159,667 164,004 170,402 164,218 140,431
LESS: CAPITAL EXPENDITURES
Imperial Valley 21,525 21,159 17,305 7,334 17,779 15,598
PRI 1,409 1,002 715 516 351 --
Yuma 179 9 6 23 40 40
--------------------------------------------------------------------------
Total Capital Expenditures 23,113 22,170 18,026 7,873 18,170 15,638
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures (142,812) (23,546) -- -- -- --
Proceeds from Financing 118,681 -- -- -- -- --
Equity Contributions 24,131 23,546 -- -- -- --
--------------------------------------------------------------------------
Total Imperial Valley Construction -- -- -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 82,740 51,546 53,451 55,115 53,349 53,433
PRI 21,561 23,381 23,796 23,975 23,188 --
--------------------------------------------------------------------------
Total Project Debt Service 104,301 74,927 77,247 79,090 76,537 53,433
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) (85) (128) (67) 183 12,328 --
--------------------------------------------------------------------------
Total Releases (85) (128) (67) 183 12,328 --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) 23,810 30,031 34,951 34,791 36,563 38,304
Falcon Power Operating Company 3,271 3,361 3,452 3,547 3,317 2,399
Falcon Seaboard Gas Company (3) 8,959 9,226 9,530 9,847 3,435 --
--------------------------------------------------------------------------
Total Other Revenues 36,040 42,618 47,933 48,185 43,315 40,703
LESS: LOC / TRUSTEE FEES 299 447 460 528 488 442
TOTAL CASH AVAILABLE FOR DEBT SERVICE 113,805 104,613 116,138 131,278 124,666 111,621
CE GENERATING DEBT SERVICE
Interest 24,869 29,278 28,426 27,194 25,763 24,554
Principal Repayment -- 10,400 12,600 20,600 18,000 14,600
--------------------------------------------------------------------------
Total Debt Service 24,869 39,678 41,026 47,794 43,763 39,154
CE GENERATING DEBT COVERAGE 4.58 2.64 2.83 2.75 2.85 2.85
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2005 2006 2007 2008
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $ 183,879 $ 178,620 $ 179,076 $ 182,181
PRI -- -- -- --
Yuma 22,266 22,679 23,132 23,544
-----------------------------------------------
Total Revenues 206,145 201,299 202,208 205,725
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 52,640 52,512 53,169 53,979
PRI -- -- -- --
Yuma 14,880 15,118 19,613 16,310
-----------------------------------------------
Total Expenses 67,520 67,630 72,782 70,289
OPERATING INCOME FROM CONSOLIDATED PROJECTS 138,625 133,669 129,426 135,437
LESS: CAPITAL EXPENDITURES
Imperial Valley 26,092 14,562 16,215 7,609
PRI -- -- -- --
Yuma 40 40 40 40
-----------------------------------------------
Total Capital Expenditures 26,132 14,602 16,255 7,649
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures -- -- -- --
Proceeds from Financing -- -- -- --
Equity Contributions -- -- -- --
-----------------------------------------------
Total Imperial Valley Construction -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 50,654 46,226 43,378 44,323
PRI -- -- -- --
-----------------------------------------------
Total Project Debt Service 50,654 46,226 43,378 44,323
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) -- -- -- --
-----------------------------------------------
Total Releases -- -- -- --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) 40,549 41,525 40,605 49,062
Falcon Power Operating Company 2,464 2,531 2,599 2,669
Falcon Seaboard Gas Company (3) -- -- -- --
-----------------------------------------------
Total Other Revenues 43,013 44,056 43,204 51,731
LESS: LOC / TRUSTEE FEES 433 464 438 523
TOTAL CASH AVAILABLE FOR DEBT SERVICE 104,419 116,433 112,559 134,673
CE GENERATING DEBT SERVICE
Interest 23,464 22,204 20,824 19,111
Principal Repayment 14,800 19,200 18,000 28,200
-----------------------------------------------
Total Debt Service 38,264 41,404 38,824 47,311
CE GENERATING DEBT COVERAGE 2.73 2.81 2.90 2,85
</TABLE>
Minimum DCR (1999 - 2018) 2.64
Average DCR (1999 - 2018) 3.14
(1) Changes in accounts held at PRI related to PRI debt (final year data
provided by CEG)
(2) Saranac cash flow based on partnership allocations after capital
expenditures and debt service
(3) Data provided by CC Pace
A- 18
<PAGE>
EXHIBIT 1
CE GENERATION, LLC
Pro Forma Financial Projections ($'000s)
SCE Low Case
<TABLE>
<CAPTION>
2009 2010 2011 2012 2013 2014
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $183,925 $188,105 $189,866 $194,486 $198,002 $203,235
PRI -- -- -- -- -- --
Yuma 23,996 22,695 23,098 23,565 24,000 24,470
------------------------------------------------------------------
Total Revenues 207,921 210,800 212,964 218,051 222,002 227,705
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 52,771 55,057 55,668 55,420 58,745 58,675
PRI -- -- -- -- -- --
Yuma 16,817 15,971 19,020 16,993 17,531 17,817
------------------------------------------------------------------
Total Expenses 69,588 71,028 74,688 72,413 76,276 76,492
OPERATING INCOME FROM CONSOLIDATED PROJECTS 138,333 139,773 138,276 145,639 145,726 151,213
LESS: CAPITAL EXPENDITURES
Imperial Valley 17,666 10,456 14,570 8,944 18,198 7,529
PRI -- -- -- -- -- --
Yuma 40 40 40 40 40 40
------------------------------------------------------------------
Total Capital Expenditures 17,706 10,496 14,610 8,984 18,238 7,569
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures -- -- -- -- -- --
Proceeds from Financing -- -- -- -- -- --
Equity Contributions -- -- -- -- -- --
------------------------------------------------------------------
Total Imperial Valley Construction -- -- -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 40,294 38,551 29,749 25,106 21,951 23,477
PRI -- -- -- -- -- --
------------------------------------------------------------------
Total Project Debt Service 40,294 38,551 29,749 25,106 21,951 23,477
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) -- -- -- -- -- --
------------------------------------------------------------------
Total Releases -- -- -- -- -- --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) 43,219 -- -- -- -- --
Falcon Power Operating Company 1,371
Falcon Seaboard Gas Company (3) -- -- -- -- -- --
------------------------------------------------------------------
Total Other Revenues 44,590 -- -- -- -- --
LESS: LOC / TRUSTEE FEES 468 349 348 388 372 409
TOTAL CASH AVAILABLE FOR DEBT SERVICE 124,455 90,377 93,569 111,160 105,165 119,758
CE GENERATING DEBT SERVICE
Interest 17,153 15,715 14,624 13,301 11,786 10,072
Principal Repayment 24,600 14,200 15,200 20,480 20,400 25,800
------------------------------------------------------------------
Total Debt Service 41,753 29,915 29,824 33,781 32,186 35,872
CE GENERATING DEBT COVERAGE 2.98 3.02 3.14 3.29 3.27 3.34
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2015 2016 2017 2018
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CASH FROM PROJECTS
REVENUES FROM CONSOLIDATED PROJECTS
Imperial Valley $207,181 $209,662 $207,850 $208,974
PRI -- -- -- --
Yuma 24,953 25,425 25,890 26,368
------------------------------------------
Total Revenues 232,134 235,087 233,740 235,342
LESS: EXPENSES FROM CONSOLIDATED PROJECTS
Imperial Valley 60,144 59,624 60,523 60,615
PRI -- -- -- --
Yuma 22,643 19,254 19,864 20,464
------------------------------------------
Total Expenses 82,787 78,878 80,387 81,079
OPERATING INCOME FROM CONSOLIDATED PROJECTS 149,347 156,209 153,353 154,263
LESS: CAPITAL EXPENDITURES
Imperial Valley 6,427 8,828 10,036 8,315
PRI -- -- -- --
Yuma 40 40 40 40
------------------------------------------
Total Capital Expenditures 6,467 8,868 10,076 8,355
LESS: IMPERIAL VALLEY CONSTRUCTION CASH FLOWS
Construction Expenditures -- -- -- --
Proceeds from Financing -- -- -- --
Equity Contributions -- -- -- --
------------------------------------------
Total Imperial Valley Construction -- -- -- --
LESS: CONSOLIDATED PROJECT LEVEL DEBT SERVICE
Imperial Valley 23,740 23,743 21,725 10,528
PRI -- -- -- --
------------------------------------------
Total Project Debt Service 23,740 23,743 21,725 10,528
PLUS: RELEASE/(ADDITION) OF RESTRICTED FUNDS
PRI (1) -- -- -- --
------------------------------------------
Total Releases -- -- -- --
PLUS: OTHER REVENUE CASH FLOWS
Saranac (2) -- -- -- --
Falcon Power Operating Company
Falcon Seaboard Gas Company (3) -- -- -- --
------------------------------------------
Total Other Revenues -- -- -- --
LESS: LOC / TRUSTEE FEES 402 403 391 427
TOTAL CASH AVAILABLE FOR DEBT SERVICE 118,739 123,194 121,161 134,952
CE GENERATING DEBT SERVICE
Interest 8,113 6,025 3,818 1,348
Principal Repayment 27,040 29,280 30,240 36,360
------------------------------------------
Total Debt Service 35,153 35,305 34,058 37,708
CE GENERATING DEBT COVERAGE 3.38 3.49 3.56 3.58
</TABLE>
Minimum DCR (1999 - 2018) 2.64
Average DCR (1999 - 2018) 3.14
(1) Changes in accounts held at PRI related to PRI debt (final year data
provided by CEG)
(2) Saranac cash flow based on partnership allocations after capital
expenditures and debt service
(3) Data provided by CC Pace
A-19
<PAGE>
APPENDIX B
INDEPENDENT ENGINEER'S REPORT
CE GENERATION LLC
NATURAL GAS PROJECTS
[R.W. Beck LOGO]
<PAGE>
[THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]
<PAGE>
APPENDIX B
INDEPENDENT ENGINEER'S REPORT
CE GENERATION LLC NATURAL GAS PROJECTS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PRI PROJECT.....................................................................................................B-4
Project Operator.............................................................................................B-4
The Project..................................................................................................B-4
The Project Site..........................................................................................B-4
Environmental Site Conditions.............................................................................B-4
Description of the Project................................................................................B-5
Review of Technology......................................................................................B-8
Reliability and Availability..............................................................................B-8
Status of Permits and Approvals...........................................................................B-8
Operating History............................................................................................B-9
Performance History.......................................................................................B-9
Operating Programs and Procedures........................................................................B-10
Regulatory Compliance....................................................................................B-10
Projected Operating Results.................................................................................B-12
Annual Operating Revenues................................................................................B-12
Annual Operating Expenses................................................................................B-13
Senior Debt Service......................................................................................B-14
Distributions to CE Generation...........................................................................B-14
SARANAC PROJECT................................................................................................B-14
Project Operator............................................................................................B-14
The Project.................................................................................................B-14
The Project Site.........................................................................................B-14
Environmental Site Conditions............................................................................B-15
Description of the Project...............................................................................B-15
Review of Technology.....................................................................................B-18
Reliability and Availability.............................................................................B-18
Status of Permits and Approvals..........................................................................B-18
Operating History...........................................................................................B-19
Performance History......................................................................................B-19
Operating Programs and Procedures........................................................................B-20
Regulatory Compliance....................................................................................B-20
Projected Operating Results.................................................................................B-22
Annual Operating Revenues................................................................................B-22
Annual Operating Expenses................................................................................B-23
Senior Debt Service......................................................................................B-24
Distributions to CE Generation...........................................................................B-24
YUMA PROJECT...................................................................................................B-24
Project Operator............................................................................................B-25
The Project.................................................................................................B-25
The Project Site.........................................................................................B-25
Environmental Site Conditions............................................................................B-25
Description of the Project...............................................................................B-25
Review of Technology.....................................................................................B-28
Reliability and Availability.............................................................................B-28
</TABLE>
B-i
<PAGE>
APPENDIX B
INDEPENDENT ENGINEER'S REPORT
CE GENERATION LLC NATURAL GAS PROJECTS
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Status of Permits and Approvals..........................................................................B-28
Operating History...........................................................................................B-29
Performance History......................................................................................B-29
Operating Programs and Procedures........................................................................B-30
Regulatory Compliance....................................................................................B-30
Projected Operating Results.................................................................................B-32
Annual Operating Revenues................................................................................B-32
Annual Operating Expenses................................................................................B-34
Distributions to CE Generation...........................................................................B-34
NORCON PROJECT.................................................................................................B-34
Project Operator............................................................................................B-35
The Project.................................................................................................B-35
The Project Site.........................................................................................B-35
Environmental Site Conditions............................................................................B-35
Description of the Project...............................................................................B-36
Review of Technology.....................................................................................B-38
Status of Permits and Approvals..........................................................................B-38
Regulatory Compliance.......................................................................................B-39
Projected Operating Results.................................................................................B-40
SUMMARY PROJECTED OPERATING RESULTS............................................................................B-41
Distributions from the Natural Gas Projects.................................................................B-41
Sensitivity Analyses........................................................................................B-41
Summary Comparison of Projected Operating Results...........................................................B-41
PRINCIPAL CONSIDERATIONS AND ASSUMPTIONS
USED IN THE PROJECTION OF OPERATING RESULTS....................................................................B-42
CONCLUSIONS....................................................................................................B-43
EXHIBITS
EXHIBIT B-1 Base Case Projected Operating Results...........................................................B-46
EXHIBIT B-2 Sensitivity A - Increased Operating Expenses....................................................B-52
EXHIBIT B-3 Sensitivity B - Increased Heat Rate.............................................................B-57
EXHIBIT B-4 Sensitivity C - Reduced Availability............................................................B-62
EXHIBIT B-5 Sensitivity D - Yuma Low Gas 1..................................................................B-67
EXHIBIT B-6 Sensitivity E - Yuma Low Gas 2..................................................................B-70
EXHIBIT B-7 Sensitivity F - Yuma SCE Low SRAC...............................................................B-73
EXHIBIT B-8 Sensitivity G - Yuma SCE Median SRAC............................................................B-76
EXHIBIT B-9 Sensitivity H - Yuma SCE High SRAC..............................................................B-79
EXHIBIT B-10 Sensitivity I - Yuma Breakeven Electricity Price.................................................B-82
</TABLE>
Copyright (C)1999 R. W. Beck, Inc.
All rights reserved.
B-ii
<PAGE>
[R.W. Beck LOGO]
February 24, 1999
CE Generation LLC
302 South 36th Street
Suite 400
Omaha, Nebraska 68131
Subject: INDEPENDENT ENGINEER'S REPORT ON THE
CE GENERATION LLC NATURAL GAS PROJECTS
Ladies and Gentlemen:
Presented herein is the report (the "Report") of our review
and analyses of the Saranac Power Partners, L.P. Project located in Plattsburgh,
New York (the "Saranac Project"), the Yuma Cogeneration Associates Project
located in Yuma, Arizona (the "Yuma Project"), the Power Resources Inc. ("PRI")
Project located in Big Spring, Texas (the "PRI Project") and the NorCon Power
Partners, L.P. ("NorCon") Project located in Erie, Pennsylvania (the "NorCon
Project" and, collectively with the Saranac, Yuma and PRI Projects, the "Natural
Gas Projects"). The PRI, Saranac, and NorCon Projects are operated by Falcon
Power Operating Company ("FPOC"), a wholly-owned subsidiary of CE Generation.
The Natural Gas Projects are gas-fired combined-cycle electric generating
facilities currently in operation.
This Report has been prepared in connection with the issuance
by CE Generation LLC ("CE Generation") of approximately $400,000,000 principal
amount of 7.416% Senior Secured Bonds Due December 15, 2018 (the "Securities").
CE Generation is wholly-owned by CalEnergy Company, Inc. ("CalEnergy").
The PRI Project is a nominal 200 megawatt ("MW")
combined-cycle cogeneration facility located in Big Spring, Texas. The PRI
Project consists of two General Electric ("GE") Frame 7EA combustion turbine
generators ("CTGs") exhausting into individual heat recovery steam generators
("HRSGs") which provide steam to a single steam turbine generator ("STG") and to
Fina as process steam. Fina has a standby boiler which operates as the backup
steam source for process steam supply. The PRI Project is a Qualifying Facility
("QF") in accordance with Federal Energy Regulatory Commission ("FERC")
requirements and has been in operation since June 1988. The PRI Project sells
electric energy and capacity on a dispatchable basis to Texas Utilities Electric
Company ("TUEC") pursuant to the PRI Power Purchase Agreement dated July 30,
1986 (the "PRI PPA"), which has a term ending in September 2003. The PRI Project
sells steam to the adjacent Fina Oil and Chemical Company ("Fina") under a
Purchase and Steam Sales Agreement between PRI and Fina dated November 21, 1986
(the "PRI Steam Sales Agreement"), which has an initial term ending in September
2003. The PRI Project is operated by FPOC (the "PRI Operator") pursuant to the
PRI Operations and Maintenance Agreement between PRI and FPOC dated September 1,
1988 (the "PRI O&M Agreement"), which expires in January 2004.
The PRI Project has several fuel contracts in place. The PRI
Project has a fuel purchase agreement in place with Fina dated November 21, 1986
under which it is obligated to purchase an average of 3,600 million Btu per day
("MMBtu/day") of refinery gas (the "PRI Refinery Gas Contract"). The PRI
Refinery Gas Contract terminates on September 30, 2003, with the provision that
the PRI Refinery Gas Contract can be extended for a period of two years.
-----------------------------------------------------------------------------
1125 Seventeenth Street, Suite 1900 Denver, CO 80202-2615
Phone (303) 299-5200 Fax (303) 297-2811
B-1
<PAGE>
Additional natural gas is delivered to the PRI Project
pursuant to a Gas Supply Agreement with Falcon Seaboard Gas Company ("FSGC")
dated December 30, 1988 (the "PRI Gas Supply Agreement"). FSGC is a wholly-owned
subsidiary of CE Generation. FSGC has a gas contract with Louis Dreyfus Natural
Gas Corporation ("Louis Dreyfus") dated December 1, 1988 (the "Louis Dreyfus Gas
Contract"), which expires October 1, 2003. The Louis Dreyfus Gas Contract
provides for FSGC to receive gas on a firm basis in accordance with a tiered
arrangement with Louis Dreyfus. FSGC has two Gas Transportation Contracts with
Westar, formerly Cabot Gas Supply, for interstate and intrastate transportation
dated December 1, 1988, as amended, (the "FSGC Gas Transportation Contracts").
The FSGC Gas Transportation Contracts expire on September 30, 2003.
The Saranac Project is a nominal 240 MW combined-cycle
cogeneration facility located in Plattsburgh, New York. The Saranac Project
consists of two GE Frame 7EA CTGs exhausting into individual HRSGs which provide
steam to a single STG and to the steam customers as process steam. A single
auxiliary boiler operates as the backup steam source for process steam supply.
It is a QF and has been in operation since June 1994. The Saranac Project sells
electric energy and capacity to New York State Electric and Gas Corporation
("NYSEG") pursuant to the Saranac Power Purchase Agreement, as amended, dated
April 27, 1990 (the "Saranac PPA"), which has a term ending in June 2009. The
Saranac Project sells steam to Georgia-Pacific under a 15-year steam sales
agreement dated December 21, 1992 (the "Georgia-Pacific Steam Sales Agreement")
and Tenneco Packaging ("Tenneco") under a steam sales agreement dated February
27, 1996 (the "Tenneco Steam Sales Agreement") which ends in June 2009. The
Saranac Project is operated by FPOC (the "Saranac Operator") pursuant to the
Saranac O&M Agreement dated September 30, 1994, as amended,(the "Saranac O&M
Agreement"). Natural gas is delivered to the Saranac Project pursuant to the
Saranac Gas Supply Agreement with Shell Canada dated May 20, 1992, as amended
(the "Saranac Gas Supply Agreement"), which expires in June 2009 and the
TransCanada Saranac Gas Transportation Agreement with TransCanada dated December
24, 1992 (the "Saranac Gas Transportation Agreement").
The Yuma Project is a nominal 50 MW combined-cycle
cogeneration facility located in Yuma, Arizona. It is a QF and has been in
operation since May 28, 1994. The Yuma Project consists of a single dual fuel
capable GE model 6B CTG, exhausting to a single Nooter-Eriksen three-pressure
HRSG which provides steam to a GE STG for additional electric generation, as
well as process steam and chiller steam to Queen Carpet, Inc. ("Queen Carpet").
One gas-fired auxiliary boiler is operated to provide process steam to Queen
Carpet when the HRSG is not operating. The Yuma Project sells electric energy
and capacity on a dispatchable basis to San Diego Gas and Electric ("SDG&E")
under the Yuma Standard Offer No. 2 Power Purchase Agreement dated March 7,
1990, as amended, (the "Yuma PPA"), which expires May 1, 2024. The Yuma Project
also sells process and chiller steam to Queen Carpet under two energy services
agreements. Process steam is sold under the Energy Services Agreement between
America-West Industries, Inc. and Yuma Cogeneration Associates dated April 2,
1993 (the "Yuma Process ESA"). Chiller steam is sold under the Energy Services
Agreement (Absorption Chiller Steam) between America-West Industries, Inc. and
Yuma Cogeneration Associates dated May 3, 1993 (the "Yuma Chiller ESA"). The
Yuma Process ESA and the Yuma Chiller ESA each have an initial term ending May
1, 2024. The Yuma Project is operated by Yuma Cogeneration Associates (the "Yuma
Operator"), a wholly-owned subsidiary of CE Generation.
Natural gas is supplied to the Yuma Project pursuant to the
Gas Supply and Transportation Services Master Agreement between Yuma
Cogeneration Associates and Southwest Gas Corporation ("SWG") dated November 21,
1992 (the "SWG Gas Supply and Transportation Agreement"). The initial term of
the SWG Gas Supply and Transportation Agreement expires December 31, 2008. Fuel
oil is purchased on a spot market basis.
The NorCon Project is a nominal 80 MW combined-cycle
cogeneration facility located near Erie, Pennsylvania. The NorCon Project
utilizes two GE LM5000 CTGs, each one exhausting to a Deltak HRSG which provides
steam for one Elliott STG. Each HRSG has a carbon monoxide ("CO") catalyst to
reduce CO emissions and each CTG uses steam injection to reduce nitrogen oxides
("NOx") emissions. Process steam is extracted from the STG and sent to the
facility owned by Welch Foods Inc. ("Welch") adjacent to the NorCon Project.
Additional steam is extracted and sent to an ammonia refrigeration plant ("ARP")
which cools ammonia for use as a
B-2
<PAGE>
refrigerant in the Welch facility. The NorCon Project has an auxiliary boiler
that can supply back-up process steam while Welch maintains its own centrifugal
refrigeration unit to back up the ARP. It is a QF and has been in operation
since December 1992. The NorCon Project sells electric energy and capacity to
Niagara Mohawk Power Corporation ("Niagara Mohawk") pursuant to the Power
Purchase Agreement dated April 28, 1989 (the "NorCon PPA"), which has an initial
term ending December 2017, and steam to Welch pursuant to the NorCon Thermal
Energy Purchase Agreement dated July 31, 1991 (the "NorCon Thermal Energy
Agreement"), which has an initial term ending in July 2011. The NorCon Project
is operated and maintained by FPOC (the "NorCon Operator"), a wholly-owned
subsidiary of CE Generation, pursuant to the Amended and Restated Operations and
Maintenance Agreement dated June 1, 1991 (the "NorCon O&M Agreement").
The NorCon Project's base fuel requirement of 16,480 MMBtu/day
is purchased from Louis Dreyfus pursuant to the Gas Sale and Purchase Agreement
dated January 29, 1992 (the "NorCon Gas Supply Agreement"), which has an initial
term ending in 2007. Small amounts of spot market gas are supplied either by
Louis Dreyfus or local suppliers. Natural gas is transported by National Fuel
Gas Supply Corporation pursuant to the Gas Transportation Letter Agreement dated
November 19, 1991 (the "NorCon Gas Transportation Agreement"), which has an
initial term ending in 2011.
During the preparation of this Report, we have reviewed the
various agreements related to the development of the Natural Gas Projects. These
agreements set forth the obligations of each of the parties with respect to the
operation of those Natural Gas Projects. 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.
During the course of our review, we have visited and made
general field observations of the Natural Gas Project sites as described later
herein (collectively, the "Natural Gas Project Sites"). The general field
observations were visual, above-ground examinations of selected areas, which we
deemed adequate to comment on the existing condition of those Natural Gas
Projects and the Natural Gas Project Sites and which were not in the detail
which would be necessary to reveal conditions with respect to safety, geological
or environmental conditions, the internal physical condition of any equipment,
or the conformance with agreements, codes, permits, rules, or regulations of any
party having jurisdiction with respect to the Natural Gas Projects or the
Natural Gas Project Sites.
In addition, with the exception of the NorCon Project, we have
reviewed: (1) the status of permits and approvals for the Natural Gas Projects
and compliance with those permits; (2) the historic and projected levels of
production of the Natural Gas Projects; (3) the historic and projected O&M
expenses of the Natural Gas Projects; (4) the historic and projected revenues of
the Natural Gas Projects; and (5) historical operating records of the Natural
Gas Projects. Based on our review, we have prepared a series of projections of
net operating revenue of the Natural Gas Projects and distributions to CE
Generation, which are attached as Exhibit B-1 to this Report (the "Projected
Operating Results"). The Projected Operating Results are based on the
assumptions described in this Report and the footnotes to Exhibits B-1. With
respect to the NorCon Project, we have reviewed only the status of permits and
compliance with those permits.
Certain analyses and projections relied upon for the purposes
of this Report were prepared by others. In developing the Projected Operating
Results, we have relied upon projections market prices for the Yuma Project
prepared by Henwood Energy Services, Inc. ("Henwood"), whose report is included
as Appendix E to the Confidential Offering Circular (the "Henwood Report"), and
a review of fuel supply and transportation contracts and projections of fuel
commodity and transportation costs for the Natural Gas Projects performed by
C.C. Pace Consulting, L.L.C. ("C.C. Pace"). In addition, Fluor Daniel, Inc.
("Fluor Daniel") has prepared a projection of sensitivity case electricity
pricing for the Yuma Project for one of the sensitivity cases. Based on their
experience in developing similar projections and performing similar reviews, we
believe it is reasonable to rely upon the review and projections prepared by
Henwood, C.C. Pace, and Fluor Daniel.
B-3
<PAGE>
PRI PROJECT
The PRI Project is a nominal 200 MW combined-cycle
cogeneration facility which commenced commercial operation in June 1988. The PRI
Project sells electric energy and capacity to TUEC pursuant to the PRI PPA while
selling process steam to Fina under the PRI Steam Sales Agreement.
The PRI Project consists of two dual fuel fired GE Frame 7EA
CTGs exhausting to separate HRSGs. The PRI Project uses natural gas as the
primary fuel. One CTG has been up-rated from a firing temperature of 2,020
degrees Fahrenheit ("(degree)F") to a firing temperature of 2,035(degree)F, and
the remaining Unit will be upgraded during its next major maintenance outage.
The two pressure level HRSGs produce high pressure ("HP") and low pressure
("LP") steam which is directed to a single STG for additional power generation.
Low pressure steam is extracted from the steam turbine for process steam to Fina
and for use in a common feedwater deaerator. HP steam is also injected into the
CTGs for NOx emissions control. Duct firing of the HRSGs is provided to generate
additional steam. Some jet "A" liquid fuel is stored on site for CTG backup
operation, testing, and diesel generator use. Jet "A" is produced in the Fina
steam host facility adjacent to the PRI Project.
PROJECT OPERATOR
The PRI Project is operated under the PRI O&M Agreement by the
PRI Operator. The PRI Operator commenced commercial operation and maintenance of
the PRI Project in June 1988.
THE PROJECT
THE PROJECT SITE
The PRI Project is located on 5.74 acres leased from Fina near
Big Spring, Texas adjacent to the existing Fina plant (the "PRI Project Site")
(see Figure B-1, PRI Project Site Plan). The PRI Project also owns approximately
20 acres adjacent to the leased site. The other wastewater disposal well is
located on a 4-acre tract about 4 miles away. The general area is industrial in
nature with the Sid Richardson, Ltd. carbon plant located nearby. The PRI
Project Site is easily accessible from Interstate 20 and the site elevation is
approximately 2,500 feet above sea level. The PRI Project Site is part of an
Industrial District Agreement with the City of Big Spring whereby the city
agrees not to annex the PRI Project Site and the PRI Project makes payments to
the city in lieu of annexation. The term of the Industrial District Agreement
expires on December 31, 2003.
ENVIRONMENTAL SITE CONDITIONS
We have not reviewed any reports of previous or recent
environmental investigations regarding the potential for site contamination
issues at the PRI Project Site. Because we did not conduct or review such
environmental reports, we can offer no opinion with respect to potential site
contamination at the PRI Project Site or potential future remediation costs
should contamination be found.
As of February 1999, the PRI Project was not listed on United
States Environmental Protection Agency's ("USEPA's") National Priorities List of
Superfund Sites or USEPA's Comprehensive Environmental Response Compensation
Liability Information System ("CERCLIS") List.
Visual inspections during our PRI Project Site visit of
January 28, 1999 indicated that the PRI Operator is following "good
housekeeping" procedures. We did not observe any unusual stained or soiled areas
and the PRI Operator maintains spill cleanup kits at various locations on the
PRI Project Site. The transformers, acid, and caustic tanks all have adequate
secondary containment.
We are not aware of any groundwater or soil contamination. The
PRI Operator stated that there are no soil or groundwater monitoring
requirements for the PRI Project Site, however, Fina has installed, monitors and
operates a number of groundwater monitoring wells in the area. There are two
groundwater monitoring wells near the PRI Project Site close to the north and
south leased boundaries.
B-4
<PAGE>
DESCRIPTION OF THE PROJECT
MECHANICAL EQUIPMENT AND SYSTEMS
The PRI Project utilizes two GE Frame 7EA CTGs firing natural
gas, steam injection to control NOx emissions and a blend of refinery off gas
produced by Fina. The generator is totally enclosed water air-cooled. The CTGs
are capable of firing jet "A" liquid fuel. The CTGs are supplied by GE with
auxiliary equipment required for an indoor installation.
Each CTG exhausts to a dedicated Deltak two-pressure level HRSG.
Each HRSG incorporates a Coen natural gas-fired duct burner to supplement steam
production during hot ambient temperatures or when one CTG is shut down. The PRI
Project delivers up to 150,000 pounds per hour ("pph") of steam at 650 pounds
per square inch, absolute ("psia") and 770(degree)F to Fina. No steam condensate
is returned by Fina to the PRI Project. TrEated water is returned for cooling
tower makeup.
The Hitachi-supplied STG is an induction/extraction condensing
unit capable of generating 75,000 kilowatts ("kW") at a throttle pressure of
1,200 pounds per square inch-gauge ("psig") and 940(Degree)F. The STG exhaust
steam is condensed in a water-cooled condenser located under the steam turbine.
Cooling water is provided by a three-cell induced draft cooling tower, and three
50 percent capacity circulating water pumps.
ENVIRONMENTAL CONTROL SYSTEMS
Steam injection is utilized in the CTGs to limit NOx emissions
to the permitted levels. No other emissions reduction equipment is utilized or
required.
The PRI Project wastewater, including boiler and cooling tower
blowdown, demineralizer wastes, and water recovered from the oily water
separation system, discharges to the west holding pond before being injected
into one of two underground formations with deepwell injection pumps.
Non-contaminated stormwater and reverse osmosis reject discharges to the east
holding pond for use as cooling tower makeup. Facility floor drains discharge to
oil/water separators and then to the west holding pond. PRI signed a water
transfer agreement with the Sid Richardson, Ltd. carbon plant dated April 28,
1997 (the "PRI Water Transfer Agreement") to take a specified amount of
wastewater from the PRI Project. This water is rarely supplied and when it is
supplied, the water flows into the east holding pond which is used for cooling
tower makeup. The PRI Water Transfer Agreement expires in April 2007.
ELECTRICAL AND CONTROL SYSTEMS
The electrical interface with the electric transmission grid
is at the substation located on the PRI Project Site. The generator outputs are
stepped up by 138 kV via step-up transformers located near the generators and
the 138 kV transformers are connected to a 345 kV switchyard located on the PRI
Project Site switchyard. The PRI Project output is connected to the TUEC system
on the high side of the 345 kV transformers.
The PRI Project has two diesel generators, one rated 1,350 kW
for "black start" capability, connected to the 4,160 volt switchgear and a
smaller maintenance generator connected to the 480 volt motor control center.
The 480 volt generator is used for emergency backup and startup. Jet "A" fuel
for the diesels is obtained from Fina.
The instrumentation and control system is a Foxboro Spectrum
Multistation distributed control system ("DCS") and is budgeted for replacement
with the Foxboro IA system beginning in April 1999 with completion scheduled in
October 1999. The existing Hitachi, HISEC 04-M dual processing unit, steam
turbine control system will be replaced and integrated into the new Foxboro IA
system. The CTGs are controlled by GE Mark IV speedtronic control systems. Water
Plant controls are Modicon programmable logic controllers ("PLCs"), which are
micoprocessor based with math functions.
B-5
<PAGE>
Figure B-1
PRI PROJECT
SITE PLAN
[GRAPHIC SHOWING SITE PLAN OF THE PRI PROJECT OMITTED]
B-6
<PAGE>
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").
The Y2K Issue occurs when computers or processors which use two-digit years
misinterpret the year 2000 to be "00," zero, 1900, or some other erroneous date.
The Y2K Issue has the potential to impact organizations like those of the
Natural Gas Projects in several different ways. First, it could impact the
instruments and controls within the major operating facilities such as the
Natural Gas Projects. 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
operational facilities are significant as is the effort required to identify and
correct the problems.
Evaluation of the actual status of the Natural Gas Projects,
as well as other entities with whom the Natural Gas Projects have business or
operational relations, relative to the Y2K Issue is beyond the scope of this
Report. We 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 Natural Gas Projects.
Additionally, the Y2K Issue has the potential to affect
organizations other than those of the Natural Gas Projects, the continued
performance of which is also critical to continued operation of the Natural Gas
Projects. These other organizations may be located either up or downstream of
the Natural Gas Projects in the production or transmission of electrical power.
The PRI Operator stated that that it believes that the Y2K
deficiencies with the plant DCS system will be resolved with the installation of
the new Foxboro IA control system. The PRI Operator has prepared a "Year 2000
Contingency Planning and Preparations Guide" Draft Version 2.0 dated January 7,
1998, and plans to use this document to make and implement their preparations
for all other Y2K issues at the PRI Project.
This plan calls for complete implementation by July 31, 1999.
OFF-SITE REQUIREMENTS
Makeup water for the PRI Project is supplied from two local
lakes under a contract with the Colorado River Municipal Water District which
expires on September 30, 2003. Water from the lakes is clarified on site and
filtered before being utilized by the plant demineralized water equipment and
cooling tower makeup. Potable water for plant general use is supplied by Fina as
part of the site lease agreement, however the plant utilizes bottled water for
drinking water. A septic tank located near the warehouse handles the PRI Project
sanitary waste.
The 345 kV electric transmission lines extend approximately 7
miles from the PRI Project Site to the TUEC transmission system.
Natural gas is obtained from FSGC, a wholly owned subsidiary
of CE Generation, via pipeline into the PRI Project Site. Refinery gas is
obtained from the Fina refinery adjacent to the PRI Project Site. Jet "A" fuel
is obtained from Fina.
Based on C.C. Pace's review of the PRI Gas Supply Agreement,
the FSGC Gas Transportation Contracts, the Louis Dreyfus Gas Contract, the PRI
Refinery Gas Contract, C.C. Pace's fuel cost projections, and our estimate of
the fuel requirements of the PRI Project, we are of the opinion that the PRI
Project possesses sufficient contract or spot natural gas commodity supplies to
meet the requirements of the PRI PPA and that its contracted natural gas
transportation capacity is adequate to deliver the natural gas supply
requirements over the term of the PRI PPA.
B-7
<PAGE>
REVIEW OF TECHNOLOGY
The GE Frame 7EA is proven technology and in general has
exhibited the qualities of a reliable mature gas turbine technology.
GE has issued Technical Information Letters ("TILs") with
recommendations for the 17-stage compressor for the CTG. The PRI Project
implemented the GE-recommended 17th stage compressor revisions prior to any
failure at the PRI Project and, according to the PRI Operator, has kept up to
date with TILs issued by GE.
In June 1998 CTG No. 1 experienced a field failure. The
failure was caused by thermal expansion and contraction of the generator rotor
bars which obstructed the cooling holes resulting in inadequate cooling. The
generator rotor failure was repaired, however, according to the PRI Operator, GE
has not issued a TIL to address the cause of this failure.
During the June 1998 generator repair, the PRI Project decided
to proceed with the latest turbine up-rate for unit No. 1, which increased the
turbine firing temperature from 2,020(degree)F to 2,035(degree)F. The plant made
the decision to up-rate the turbine to decrease the use of the HRSG duct burner
during peak periods, thus achieving fuel savings due to improved over all plant
heat rate. CTG No. 2 is to be up-rated to the new firing temperature during the
outage scheduled in October 1999.
Based on our review, we are of the opinion that the PRI
Project utilizes sound technology and proven methods of electric and thermal
generation and has generally been designed and constructed in accordance with
generally accepted industry practices. If operated and maintained consistent
with generally accepted industry practices, the PRI Project should be capable of
meeting the requirements of the PRI PPA, the PRI Steam Sales Agreement and
current environmental permits throughout the term of the PRI PPA. Further, the
PRI Project has adequately provided for all off-site requirements, including
fuel, water supply, wastewater disposal and electrical interconnections.
RELIABILITY AND AVAILABILITY
Based on historical performance, review of O&M procedures and
general observation of the PRI Project, we are of the opinion that the PRI
Project is capable of maintaining an annual average availability, inclusive of
curtailed hours, of 92 percent throughout the term of the PRI PPA. This
availability includes the average annual "backdown", or curtailment, hours since
the PRI Project must be available to run during all curtailment periods. The
average capacity factor, which reflects the actual amount of generation, has
been assumed to be 80 percent for the purposes of the Projected Operating
Results, based on the allowed amount of curtailment. The stipulated annual
average capacity factor is the projected average over the term of the PRI PPA.
There may be years when the capacity factor is either above or below the
projected annual average.
STATUS OF PERMITS AND APPROVALS
All of the major permits and approvals required to operate the
PRI Project have been obtained. With respect to its Operating Permit, a new
requirement under Title V of the Clean Air Act, has been applied for with the
Texas Natural Resources Conservation Commission ("TNRCC"). While most of the
permits required for operation must be renewed periodically, we know of no
technical reason that such renewals would not be obtainable. Table 1 summarizes
the status of the major permits and approvals issued for the PRI Project.
B-8
<PAGE>
TABLE 1
PRI PROJECT
STATUS OF KEY PERMITS AND APPROVALS
<TABLE>
<CAPTION>
PERMIT OR APPROVAL RESPONSIBLE AGENCY STATUS COMMENTS
------------------ ------------------ ------ --------
<S> <C> <C> <C>
FEDERAL
QF Status FERC In compliance Noticed 12/29/88
Prevention of Significant USEPA Approved October 14, The PRI Project submitted an
Deterioration ("PSD") Permit 1986 application for amendments to
the Air Quality Permit and the
PSD Permit to the TNRCC on
October 8, 1998
NPDES Storm Water Permit USEPA Approved 11/17/97
STATE
Air Quality Permit TNRCC Approved September 29, Permit No. 17411
1986
Federal Operating Permit TNRCC
Permit Application
Approval Pending
Underground Injection Permits TNRCC Approved 08/29/89 Permit No. WDW-280
Amended 06/23/95 Permit No. WDW-281
Expires: 08/29/99
Solid Waste Registration TNRCC Expires: 11/17/02
</TABLE>
OPERATING HISTORY
PERFORMANCE HISTORY
The PRI Project's historical operating results have been
compiled from data reports provided by the PRI Operator. The PRI Project has
been in full commercial operation since June 1988 and has been operating at an
average availability of 92.3 percent since full commercial operation. The PRI
Project originally operated for a few months in simple-cycle mode until the
HRSGs, steam turbine and other ancillary components were installed for full
combined-cycle operation. The operating history since commercial operation is
summarized in Table 2. Availability shown in Table 2 is defined as the sum of
the total energy delivered to TUEC plus curtailment energy credited by TUEC
divided by the product of the demonstrated capacity of 200 MW times the number
of hours in a year.
TABLE 2
PRI PROJECT OPERATING HISTORY
<TABLE>
<CAPTION>
PRI PPA FUEL STEAM SALES AVAILABILITY(1) CAPACITY
YEAR CAPACITY (MW) NET MWh (MMBtu) (Mlb) (%) FACTOR (%)
---- ------------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
1998 200 1,341,719 12,469,848 716,224 93.7 82.3
1997 200 1,305,333 12,396,779 944,902 91.2 79.7
1996 200 1,286,959 12,208,578 753,783 88.7 77.0
1995 200 1,406,121 13,396,194 847,122 97.4 85.9
1994 200 1,292,641 12,312,121 780,237 91.0 79.5
</TABLE>
(1) The source of the data and calculations in the above table was the TUEC and
PRI monthly reports and the Fina invoices for refinery fuel and steam
sales.
B-9
<PAGE>
Based upon the operating history of the PRI Project and with
an allowance for future degradation, we are of the opinion that, for the purpose
of developing the Projected Operating Results, the PRI Project is capable of
delivering net electrical capability of 200 MW at an annual average heat rate of
approximately 9,500 Btu per kWh on a higher heating value ("HHV") basis and an
availability, inclusive of curtailed hours, of 92 percent for the term of the
PRI PPA.
OPERATING PROGRAMS AND PROCEDURES
We have reviewed with the PRI Operator the various operations
and maintenance programs and procedures, training programs and performance
monitoring systems. We did not review all aspects of these plans and procedures.
However, we verified that the PRI Operator had in place all of the usual and
necessary plans, procedures and documentation normally required to operate
facilities of this type.
The PRI Operator has implemented computer-based maintenance
management systems at the PRI Project which schedule and track regularly
scheduled preventive maintenance activities. The PRI Operator reported that
equipment vendor maintenance recommendations were followed when setting up the
maintenance management systems. These systems are also used to track corrective
and emergency work orders and to keep equipment-specific records of maintenance
activities, parts use, and labor requirements. All but minor maintenance on the
CTGs is subcontracted to GE. The PRI Operator utilizes the computer software
program Mainsaver(R) to assist it in its preventive and corrective maintenance
programs.
We did not review in detail the operations and maintenance
procedures for major equipment and systems. However, the plant does have in
place operating and procedural manuals.
Spare parts are stored in both the in-plant warehouse area and
a separate yard warehouse. Items stored on the PRI Project Site are those items
requiring climatized storage. Items stored in the warehouse adjacent to the PRI
Project Site are items not requiring climatized storage and large bulky items.
Items are referenced by computer storage number in accordance with the software
program Mainsaver(R).
The PRI Operator's training programs provide an initial
two-year employee training, however, refresher training is not currently
provided.
We have reviewed the organizational structure for the
operation and maintenance for the PRI Project. There is a total of 24 operation
and maintenance personnel.
REGULATORY COMPLIANCE
The PRI Project is subject to various permits and approvals
issued by the TNRCC, USEPA, FERC. These permits and approvals establish design
criteria, performance standards, monitoring, recordkeeping and reporting
requirements for the CTGs, HRSGs, and ancillary equipment at the PRI Project.
Although we did not conduct a detailed environmental audit,
the following describes our understanding of the status of the PRI Project with
respect to requirements set forth in its permits and approvals, pending
regulations, and applicable environmental management laws and regulations based
on review of documents provided for our on-site review and discussions with the
PRI Operator. Based on our review, we are of the opinion, the PRI Project
appears to be operating in general compliance with applicable environmental
permits, approvals, laws, rules and regulations.
AIR QUALITY PERMITS
Before initiating construction on the PRI Project, PRI
obtained an Air Quality Permit from the TNRCC and a PSD Permit from the USEPA.
These permits specify design criteria, emission limitations and compliance
monitoring requirements for the CTGs, HRSGs, and emergency diesel generators.
On October 8, 1998, the PRI Project submitted an application
for amendments to the Air Quality and PSD permits previously approved by the
TNRCC. The amendments were necessitated as a result of the CTG
B-10
<PAGE>
up-rate which increased the output and firing temperature on CTG No. 1. As a
result, the PRI Project must amend the previously approved permits to reflect
the attendant increase in potential emissions. The increase in potential
emissions, however, will not constitute a major modification under the PSD
Rules.
Based on the initial stack tests, the CTGs and HRSGs comply
with the emission limitations specified in the Air Quality and PSD Permits. The
last four quarterly reports submitted for the CTGs also demonstrated general
compliance with the operating criteria specified in the permits.
FEDERAL OPERATING PERMIT
The PRI Project submitted an administratively complete
application for a Federal Operating Permit to the TNRCC by the deadline
specified in 30 TAC ss.122.130. The permit application cites the emission
limitations and monitoring, recordkeeping and reporting requirements stipulated
in the previously approved Air Quality and PSD Permits. If the application is
approved as submitted to the TNRCC, no new requirements will be imposed on the
CTGs, HRSGs, or emergency diesel generators in the Federal Operating Permit.
NEW SOURCE PERFORMANCE STANDARDS
Because the CTGs and HRSG duct burners have maximum heat input
greater than 100 MMBtu per hour ("MMBtu/hr"), they are subject to the New Source
Performance Standards ("NSPS") for Stationary Gas Turbines (40 CFR, Subpart GG)
and Industrial Steam Generating Units (40 CFR, Subpart Db). Immediately after
startup, the PRI Project was required to conduct stack test to demonstrate
compliance with the NSPS. The PRI Project is also required to continuously
record the electrical generation, fuel consumption, and steam-to-fuel ratio in
each CTG and to report excess emissions from the CTGs quarterly to the USEPA.
Based on the initial stack tests, the CTGs and HRSGs were
shown to readily comply with the emission limitations specified in the
applicable NSPS. The last four quarterly reports submitted for the gas turbines
also demonstrated general compliance with the applicable standards.
UNDERGROUND INJECTION PERMITS
The PRI Project disposes of industrial wastewater, including
regenerative wastes and cooling tower blowdown, in two injection wells located
near the PRI Project Site. The TNRCC issued the original permits to conduct
Class I underground injection for the two disposal wells on August 29, 1989. The
PRI Project applied for amended permits before expiration of the original
permits on August 29, 1994. The amended permits were issued on January 3, 1995
and will expire on August 29, 1999.
HAZARDOUS AND SOLID WASTE REGISTRATION
In accordance with 30 TAC 331, the PRI Project reports and, as
necessary, updates solid waste generation at the PRI Project on Notice of
Registration ("NOR") Forms submitted to the TNRCC. An annual report documenting
the generation, transportation, disposal and recycling of both hazardous and
Class I non-hazardous waste is also filed with the TNRCC. Based on the annual
waste summary, a waste generation fee is assessed on the waste stored on site or
disposed of off site at the end of each reporting year by the TNRCC. Waste that
is recycled is exempt from the waste generation fee.
STORMWATER PERMIT
The PRI Project previously operated under an NPDES baseline
general permit for stormwater discharges associated with industrial activities
issued by the USEPA on September 25, 1992. Before expiration of the NPDES
baseline general permit on September 25, 1997, the PRI Project submitted a
Notice of Intent ("NOI") for coverage under the NPDES multi-sector general
permit associated with industrial activities to the USEPA. The USEPA
subsequently issued a notice of coverage under the NPDES multi-sector general
permit to the PRI Project on November 17, 1997.
B-11
<PAGE>
QF STATUS
The PRI Project is required by the PRI PPA to be a QF. On
December 29, 1988, the PRI Project filed a notice with FERC of the qualifying
status as a cogeneration facility for the PRI Project. Actual average Operating
Standards and Efficiency Standards required for a QF, as provided by the PRI
Operator, are listed in Table 3.
TABLE 3
PRI PROJECT QF STATISTICS
<TABLE>
<CAPTION>
OPERATING EFFICIENCY
YEAR STANDARD (%) STANDARD (%)
---- ------------ ------------
<S> <C> <C>
1998 18.91 49.22
1997 20.24 43.95
1996 20.27 48.74
1995 19.04 49.05
</TABLE>
PROJECTED OPERATING RESULTS
We have reviewed the historical operating information,
estimates and projections of electrical generating capacity, steam generation
capacity, fuel consumption, and operating costs of the PRI Project made
available to us by CE Generation. On the basis of such data, we have prepared
the Projected Operating Results. The Projected Operating Results are presented
for each calendar year beginning January 1, 1999, representing the beginning of
the quarterly distributions which will be available to CE Generation, through
September 30, 2003, the expiration date of the PRI PPA. Revenues for the PRI
Project are derived primarily from the sale of electricity to TUEC and steam to
Fina. Expenses consist of the cost of fuel, including transportation, as
estimated by C.C. Pace, and operating and maintenance expenses, based on the
information provided by CE Generation, and existing senior debt service, as
provided by CE Generation. Projected sources of revenues and expenses have been
set for the PRI Project in the Projected Operating Results presented in Exhibit
B-1. 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 and in the footnotes to Exhibit B-1.
ANNUAL OPERATING REVENUES
REVENUES FROM THE SALE OF ELECTRICITY
The PRI PPA with TUEC expires September 30, 2003. TUEC is
required to purchase all of the output from the PRI Project up to 200 MW per
hour except when they elect to curtail the PRI Project down to a minimum of 79
MW. In any 12 consecutive months, the aggregate amount of all curtailments
cannot be of such magnitude as to jeopardize the PRI Project's QF status. TUEC
history of curtailments has not exceeded 300,000 MWh for any 12-month period.
The PRI PPA specifies pricing for capacity and energy
delivered to TUEC. The capacity payment is based on a firm capacity of 200 MW
with an annual capacity factor greater than 65 percent. If the annual capacity
factor falls below 65 percent, the capacity payment is zero. In addition,
capacity billing adjustments can occur if the peak month capacity factor is less
than 75 percent or if the peak period capacity factor is less than 82 percent.
For the purposes of the Projected Operating Results, we have assumed that the
PRI Project will achieve a peak period capacity factor such that no adjustments
to the capacity payments will be made. Based on the maximum level of curtailment
allowed under the PRI PPA, for the purposes of the Projected Operating Results,
we have assumed an annual average capacity factor of 80 percent over the term of
the PRI PPA.
The PRI PPA specifies energy rates for energy produced under a
72.5 percent capacity factor. When the PRI Project has a monthly capacity factor
at or above 72.5 percent, the energy rate is equal to 99 percent of TUEC's
Weighted Average Cost of Gas ("WACOG"). The WACOG is determined using a heat
rate of
B-12
<PAGE>
10,300 Btu per kWh and TUEC's average cost of gas for the applicable month,
which has been estimated by C.C. Pace. The capacity and energy pricing for
energy produced under a 72.5 percent capacity factor pursuant to the PRI PPA are
presented in Table 4.
TABLE 4
PRI PPA CAPACITY AND ENERGY PRICES
<TABLE>
<CAPTION>
CAPACITY PRICE ENERGY PRICE
YEAR ($/KW-MO) ($/MWH)
---- -------------- ------------
<S> <C> <C>
1999 $16.24 $31.70
2000 16.81 32.80
2001 17.40 34.00
2002 18.00 35.20
2003 18.63 36.40
</TABLE>
REVENUE FROM THE SALE OF STEAM
The PRI Project has entered into the PRI Steam Sales Agreement
for the sale of steam to Fina expiring September 30, 2003. The volume of steam
Fina is required to purchase must be sufficient to allow the PRI Project to
maintain its QF status under PURPA. The steam capacity available to Fina is
between 51,000 pph and 115,000 pph. The minimum capacity Fina is required to
purchase is 440,000 Mlb of steam annually. For the purposes of the Projected
Operating Results, we have assumed that Fina will purchase 830,000 Mlb of steam
per year, as estimated by CE Generation. Under the terms of the PRI Steam Sales
Agreement, the price of steam is equal to $2.45 in 1991 dollars, escalating at a
rate of 2.0 percent each June 1 beginning June 1, 1992.
INTEREST INCOME
We have included interest income on the senior debt service
reserve and major maintenance reserve funds required under the Restated Term
Loan Agreement dated December 30, 1988. CE Generation reports that the debt
service reserve fund requirement is currently funded at $5,917,000 and is
required to be maintained at a level equal to the next quarter's debt service
payment. The major maintenance reserve fund has a minimum requirement, which we
have assumed, of $1,000,000. CE Generation has estimated interest income on
these reserve funds at a rate of 5.5 percent per year. The debt service reserve
fund is assumed to be distributed to CE Generation upon the final payment of the
term loan.
ANNUAL OPERATING EXPENSES
FUEL COSTS
The PRI Refinery Gas Contract obligates the purchase of an
average of 3,600 MMBtu/day of refinery gas. The PRI Refinery Gas Contract
terminates on September 30, 2003 with the provision that it can be extended for
a period of two years. For the purposes of the Projected Operating Results, we
have assumed that the PRI Project will use approximately 1,051,000 MMBtu year.
Under the terms of the PRI Refinery Gas Contract, the price of refinery gas is
equal to $2.20 per MMBtu in 1987 dollars and escalates each January 1 at a rate
of 2 percent annually.
Natural gas is delivered to the PRI Project pursuant to the
PRI Gas Supply Agreement with FSGC. FSGC provides gas through a separate
contract with Louis Dreyfus, which expires October 1, 2003. The contractual
rates under the Louis Dreyfus Gas Contract are fixed at $2.81 per MMBtu, which
escalates by 3 percent per year each June 1 beginning June 1, 1997. Portions of
the gas supplied under the Louis Dreyfus Gas Contract are priced on a spot
basis. For the purpose of the Projected Operating Results, we have assumed a
spot price of gas to the PRI Project as estimated by C.C. Pace. An annual
reservation fee of $547,500, which is escalated at 3 percent per year starting
in July 1, 1996, is also applied.
B-13
<PAGE>
Under the PRI Gas Supply Agreement, the PRI Project pays
$0.075 per MMBtu in transportation charges. For deliveries above 25,000
MMBtu/day, an additional $0.06 per MMBtu is charged.
OPERATION AND MAINTENANCE EXPENSES
The PRI Project is operated by FPOC, a wholly-owned subsidiary
of CE Generation, (the "PRI Operator") in accordance with the PRI O&M Agreement,
which expires January 2004. The PRI Operator is reimbursed for direct costs for
operations and maintenance and receives payment for an operator fee, management
fee, operator's incentive fee, and any applicable sales or use tax. Pursuant to
the PRI O&M Agreement, the annual PRI Operator's fee is $660,000 in 1989 dollars
and escalates each January 1 at a rate of 3.5 percent and the annual management
fee is fixed at $240,000. The PRI Operator's incentive fee is equal to 1.125
percent of gross revenue if the PRI Project operates at an annual capacity
factor in excess of 82 percent. Base on the assumed capacity factor of 80
percent in the Projected Operating Results, the PRI Operator would not receive
an incentive fee.
SENIOR DEBT SERVICE
Based on information provided by CE Generation, we have
included a senior debt service payment based on the term loan principal amount
of $90,529,000 as of January 1, 1999 and an interest rate of 10.385 percent per
year in 1999 and 2000 and 10.635 percent per year from 2001 through 2003. The
remaining balance of the term loan is payable in quarterly installments and
matures on December 31, 2003.
DISTRIBUTIONS TO CE GENERATION
CE Generation indirectly owns 100 percent of the PRI Project
and therefore it has been assumed that 100 percent of the cash available for
distributions will be available to CE Generation.
SARANAC PROJECT
The Saranac Project is a nominal 240 MW combined-cycle
cogeneration facility which commenced commercial operation in June 1994. The
Saranac Project sells electric energy and capacity to NYSEG pursuant to the
Saranac PPA while selling process steam to Georgia-Pacific and Tenneco.
The Saranac Project consists of two natural gas-fired GE Frame
7EA CTGs exhausting to separate HRSGs. The HRSGs produce HP steam which is
directed to a single STG for additional power generation, IP steam as process
steam and STG admission, and LP steam for use in the integral HRSG deaerators.
Duct firing of the HRSGs is provided to generate additional steam. Propane is
stored on site for use when natural gas is unavailable.
PROJECT OPERATOR
The Saranac Project is operated under the Saranac O&M
Agreement by FPOC (the "Saranac Operator"). The Saranac Operator commenced
operation and maintenance of its first combined-cycle cogeneration facility in
1987.
THE PROJECT
THE PROJECT SITE
The Saranac Project is located in the Town of Plattsburgh, New
York near the existing Georgia-Pacific tissue plant and adjacent to the D&H
railroad (the "Saranac Project Site") (see Figure B-2, Saranac Project Site
Plan). The general area is industrial in nature with Tenneco and Georgia-Pacific
being the closest neighbors to the Saranac Project Site. The Saranac Project
Site is easily accessible from highway I-87.
B-14
<PAGE>
ENVIRONMENTAL SITE CONDITIONS
We have not reviewed any reports of previous or recent
environmental investigations regarding the potential for site contamination
issues at the Saranac Project Site. Because we did not conduct or review such
environmental reports, we can offer no opinion with respect to potential site
contamination at the Saranac Project Site or potential future remediation costs
should contamination be found.
As of February 1999, the Saranac Project was not listed on
USEPA's National Priorities List of Superfund Sites or USEPA's CERCLIS List. The
Saranac Project is not listed on the Inactive Hazardous Waste Disposal Sites
list, dated April 1998, published by NYSDEC.
The Saranac Operator reported that there have been three
relatively minor reportable spills over the last three years of operation. As
required, NYSDEC was notified in all cases and the Saranac Operator took
appropriate remedial action. NYSDEC has not required any further action.
Visual inspections during our Saranac Project Site visit of
February 4, 1999 indicated that the Saranac Operator is following "good
housekeeping" procedures. We did not observe any unusual stained or soiled areas
and the Saranac Operator maintains spill cleanup kits at various locations on
the Saranac Project Site. The transformers, acid, caustic and ammonia storage
tanks all have adequate secondary containment.
We are not aware of any potential groundwater or soil
contamination. The Saranac Operator stated that there are no soil or groundwater
monitoring requirements for the Saranac Project Site.
DESCRIPTION OF THE PROJECT
MECHANICAL EQUIPMENT AND SYSTEMS
The Saranac Project utilizes two dry low NOx ("DLN") GE Frame
7EA CTGs firing natural gas with a hydrogen-cooled generator. The CTGs are
supplied by GE with auxiliary equipment required for an indoor installation.
Each CTG exhausts to a dedicated Deltak three pressure level
HRSG with an integral deaerator and feedwater heater. Each HRSG incorporates a
natural gas fired duct burner to supplement steam production. The Saranac
Project delivers up to 144,000 pph of steam at 250 psia and 450(degree)F to
Georgia-Pacific.
The GE-supplied STG is a single automatic extraction
condensing unit with a controlled automatic induction/extraction, capable of
generating 77,614 kW at an inlet steam flow rate of 549,400 pph of 1,265 psia
and 925(Degree)F steam and a back pressure of 2 inches of mercury ("in. HgA").
The STG exhaust steam is condensed in an air-cooled condenser
located to the north of the main facility building. A 3,000 psi water wash
system has been added for once-a-year high pressure spray type washing to clear
springtime poplar seed strings and other airborne fouling items.
The A frame, all galvanized fin and tube air-cooled condenser
is manufactured by GEA Power Cooling Systems, Inc. The air-cooled condenser
package includes required air removal equipment (two 100 percent redundant steam
jet air ejectors and one hogging ejector), fans with two speed motor drives, a
condenser support structure, a condensate collection tank, an exhaust duct,
certain piping and controls.
ENVIRONMENTAL CONTROL SYSTEMS
A DLN combustor system is utilized in the CTGs to limit NOx
emissions. A selective catalytic reduction ("SCR") and a CO catalyst are
installed in the HRSG to meet the air permit emission limits. SCR controls the
NOx emissions from the CTGs and the duct burners to below 9 parts per million
("ppm"). The production of CO is controlled by the use of a CO catalyst.
B-15
<PAGE>
The Saranac Project wastewater, including boiler and cooling
tower blowdown, discharges to the Town of Plattsburgh wastewater treatment
facility after on-site pretreatment as required, which consists of automatic pH
adjustment. Stormwater discharges to a swale running alongside the Saranac
Project Site and subsequently to Scomotion Creek.
Facility floor drains discharge to oil/water separators and
then to the Town of Plattsburgh sanitary system. Drains in the acid/caustic tank
area flow to a neutralization tank prior to discharge to the oil/water
separators and to the town of Plattsburgh sanitary system.
ELECTRICAL AND CONTROL SYSTEMS
The electrical interface with the electric transmission grid
is at the substation located approximately two miles from the Saranac Project
Site. The connecting 115 kV underground cable is run in a connected duct and the
SF-6 breakers are inspected every time the unit is down for a maintenance
outage.
The Saranac Project has two 1,500 kW gas-fired standby
generators, one in the main powerhouse and one in the auxiliary boiler building.
There is also a 1,500 kW No. 2 oil-fired emergency diesel generator. These
generators are capable of black-starting the Saranac Project. An additional 400
kW No. 2 oil-fired generator is available for emergency lighting and other
emergency/maintenance requirements.
The instrumentation and control system is a Foxboro DCS and
provides for custom graphics, system diagnostics, historical trending and report
generation. Redundant multi-loop and microprocessors are provided for process
protection, control and monitoring.
We have reviewed the Y2K Issue with the Saranac Operator. The
Saranac Operator reports that its Y2K compliance review is approximately 80
percent complete. The balance of the review is scheduled for completion by late
March 1999. For a description of the Y2K Issue and the scope of our review
relative to the Y2K Issue, please refer to the corresponding subsection of the
PRI Project section of this Report.
OFF-SITE REQUIREMENTS
The Saranac Project utilizes the Town of Plattsburgh water
supply and wastewater disposal systems. Both process and sanitary wastewater
discharge to the Town of Plattsburgh sewer system.
The 115 kV electric transmission lines extend from the Saranac
Project Site to the NYSEG Northend substation. One 115 kV transmission line
continues on to the NYPA Plattsburgh substation and the other continues on to
the proposed NYSEG Ashley Road substation.
The gas pipeline route is 22 miles long and extends from the
Canadian border near the town of Chazy, where the line pressure is approximately
1,000 psi, to the Saranac Project Site. The route generally parallels highway
I-87; however, only a small portion directly abuts the right-of-way of I-87.
Based on C.C. Pace's review of the Saranac Gas Supply
Agreement, the Saranac Gas Transportation Contracts, C.C. Pace's fuel cost
projections, and our estimate of the fuel requirements of the Saranac Project,
we are of the opinion that the Saranac Project possesses sufficient firm
contract natural gas commodity supplies to meet the requirements of the Saranac
PPA and that its contracted firm natural gas transportation capacity is adequate
to deliver the natural gas supply requirements over the term of the Saranac PPA.
B-16
<PAGE>
FIGURE B-2
SARANAC PROJECT
SITE PLAN
[Graphic Showing Site Plan of the Saranac Project Omitted]
B-17
<PAGE>
REVIEW OF TECHNOLOGY
While the operating experience of the GE Frame 7EA CTG is
extensive, it has experienced some problems recently at facilities similar to
the Saranac Project. These problems have been addressed at the Saranac Project
and solutions have been incorporated as follows:
o The GE Frame 7EA electric generators have been found to have out-of-phase
vibration which over time has caused fatigue failure at certain stress
points within the generator. The Saranac Project's electric generators Nos.
1 and 2 have been upgraded by GE and this problem has not occurred.
o An apparent manufacturing defect has been found in certain electric
generators regarding an inadequate number of side ripple springs. The
insufficient number of ripple springs could lead over time to the
degradation of the electric generator insulation and cause generator bar
stator default. The Saranac Project's electric generators have had the
generator wedges reglazed and this problem is not expected to occur.
o The combustion turbines 17th stage compressor vanes failed and caused
limited compressor and combustor damage in previous units of this
generation. GE corrected this situation with an upgrade and the problem is
not expected to occur at the Saranac Project.
o Risk of potential damage to first stage compressor blades due to icing.
Potential icing conditions are understood and watched for by the Saranac
Operator. An air inlet icing situation has not been reported to have
occurred at the Saranac Project.
Based on our review, we are of the opinion that the Saranac
Project utilizes sound technology and proven methods of electric and thermal
generation and has generally been designed and constructed in accordance with
generally accepted industry practices. If operated and maintained consistently
with generally accepted industry practices, the Saranac Project should be
capable of meeting the requirements of the Saranac PPA, the Georgia-Pacific
Steam Sales Agreement, the Tenneco Steam Sales Agreement, and current
environmental permits throughout the term of the Saranac PPA. Further, the
Saranac Project has adequately provided for all off-site requirements, including
fuel, water supply, wastewater disposal and electrical interconnections.
RELIABILITY AND AVAILABILITY
Based on historical performance, review of O&M practices and
procedures and general observation of the Saranac Project, we are of the opinion
that the Saranac Project is capable of maintaining an annual average
availability of 94 percent. The stipulated annual average capacity factor is the
projected average over the term of the Saranac PPA. There will be years when the
availability is either above or below the projected annual average.
STATUS OF PERMITS AND APPROVALS
All of the major permits and approvals required to operate the
Saranac Project have been obtained. While most of the permits required for
operation must be renewed periodically, we know of no technical reason that such
renewals would not be obtainable.
A draft Title V Operating Permit was issued by NYSDEC on
January 15, 1999. After the 30-day public comment period, the NYSDEC has another
45 days to comment and, assuming no problems arise, issue a final permit. The
draft permit does not contain any new or more restrictive conditions or
limitations, and essentially duplicates the conditions and limitations found in
the PSD Permit Modification dated October 6, 1998, as described later herein.
B-18
<PAGE>
A list of key permits and approvals required for operation,
and a summary of their status, is provided in Table 5. This represents our
understanding based on our Saranac Project Site visit, discussions with the
Saranac Operator, and a brief review of selected documents.
TABLE 5
SARANAC PROJECT
STATUS OF KEY PERMITS AND APPROVALS
<TABLE>
<CAPTION>
PERMIT OR APPROVAL RESPONSIBLE AGENCY STATUS COMMENTS
------------------ ------------------ ------ --------
<S> <C> <C> <C>
FEDERAL
QF Status FERC In compliance Refer to text
Wetlands Permit U.S. Corps of Obtained prior to Compensatory wetlands
Engineers (joint construction monitoring has been
with NYSDEC) completed
STATE
Air Quality Certificate to Operate NYSDEC Issued: December 20, 1994
Expires: December 20, 1999
Title V Operating Permit NYSDEC Received draft permit Currently in 30-day public
January 15, 1999 comment period
State Pollution Discharge NYSDEC Issued: November 1, 1998 A general permit for
Elimination System ("SPDES") stormwater discharge
LOCAL
Wastewater Discharge Permit for Town of Plattsburgh Issued: November 1, 1996 Revised July 1, 1997
discharge to Town of Plattsburgh Expires: October 31, 2001 Requires weekly, monthly,
sewer system quarterly monitoring and
reporting
</TABLE>
OPERATING HISTORY
PERFORMANCE HISTORY
The Saranac Project's historical operating results have been
compiled from monthly operating reports provided by CE Generation. The Saranac
Project has been in commercial operation since June 1994 and has been operating
at an average availability of 94.9 percent since commercial operation. The
operating history since commercial operation is summarized in Table 6.
TABLE 6
SARANAC PROJECT OPERATING HISTORY
<TABLE>
<CAPTION>
FUEL STEAM SALES AVAILABILITY CAPACITY
YEAR AVERAGE MW NET MWh (MMBtu) (Mlb) (%) FACTOR (%)
---- ---------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
1998 207 1,680,912 14,563,522 778,039 92.8 85.4
1997 223 1,855,184 15,890,597 742,698 97.7 95.0
1996 227 1,886,894 15,869,553 628,175 95.2 97.0
1995 237 1,971,795 16,419,574 499,237 98.4 95.1
1994 235 937,931 7,964,336 128,792 90.7 89.4
</TABLE>
Based upon the operating history of the Saranac Project and
with an allowance for future degradation, we are of the opinion that, for the
purpose of developing the Projected Operating Results, the Saranac
B-19
<PAGE>
Project is capable of delivering net electrical capability of 240 MW at an
annual average heat rate of approximately 8,550 Btu per kWh (HHV) and an
availability of 94 percent for the term of the Saranac PPA.
OPERATING PROGRAMS AND PROCEDURES
We have reviewed with the Saranac Operator the various
operations and maintenance programs and procedures, training programs and
performance monitoring systems. We did not review all aspects of these plans and
procedures. However, we verified that the Saranac Operator had in place all of
the usual and necessary plans, procedures and documentation normally required to
operate facilities of this type. Specific documents reviewed included: Standard
Operating Guidelines, Technician Qualification Program, Plant Start-up/Shut-down
Checklist, and Control Room Operator Qualification.
The Saranac Operator has implemented computer-based
maintenance management systems at the Saranac Project which schedule and track
regularly scheduled preventive maintenance activities. The Saranac Operator
reported that equipment vendor maintenance recommendations were followed when
setting up the maintenance management systems. These systems are also used to
track corrective and emergency work orders and to keep equipment-specific
records of maintenance activities, parts use, and labor requirements. All but
minor maintenance is subcontracted to GE. The Saranac Operator utilizes the
computer software program Mainsaver(R) to assist it in its preventive and
corrective maintenance programs.
We reviewed operations and maintenance procedures for major
equipment and systems. The procedures appeared complete and included drawings
and vendor manuals as well as step-by-step operating instructions and
maintenance schedules. Normal daily maintenance is performed by the Saranac
Operator's on-site personnel.
Spare parts are stored in both the in-plant warehouse area and
a separate yard warehouse. Items are stored by computer storage number in
accordance with the software program Mainsaver(R). Larger items requiring a fork
lift are stored in the yard warehouse, a five-level rack storage facility.
The Saranac Operator's training programs provide initial
employee training as well as periodic training to maintain competency of the
Saranac Operator's on-site personnel.
We have reviewed the organizational structure for the
operation and maintenance for the Saranac Project. There is a total of 24
operation and maintenance personnel.
REGULATORY COMPLIANCE
The Saranac Project must be operated in accordance with all
applicable environmental permits, approvals, laws, rules and regulations.
Although we did not conduct a detailed environmental audit, the following
describes our understanding of the status of the Saranac Project with respect to
requirements set forth in its permits and approvals, pending regulations, and
applicable environmental management laws and regulations based on review of
documents provided for our on-site review and discussions with NYSDEC. Based on
our review, we are of the opinion that the Saranac Project appears to be
operating in general compliance with applicable environmental permits,
approvals, laws, rules and regulations with the exceptions noted below.
AIR PERMIT
Review of the last four quarterly summary reports for the
Saranac Project indicates that it has demonstrated satisfactory compliance with
permitted emission limits and that monitoring systems are being properly
maintained.
Saranac performed emissions testing to demonstrate compliance
with all applicable emissions requirements at low load operation. A PSD Permit
Modification was issued by NYSDEC on October 6, 1998, which allows for gas
turbine operation as low as 43 MW at 50(Degree)F, down from the original
operating limit of 64.5 MW at 50(Degree)F. The draft Title V Operating Permit
contains the same restrictions with respect to gas turbine
B-20
<PAGE>
operation to 50 percent load, defined as 43 MW at 50(Degree)F. Further, both the
PSD Permit Modification and the draft Title V Operating Permit extend the
allowable startup/shutdown time from 3 to 6 hours.
QF STATUS
The Saranac Project is required by the Saranac PPA to be a QF.
Actual average Operating Standards and Efficiency Standards as provided by the
Saranac Operator are listed in Table 7.
TABLE 7
SARANAC PROJECT QF STATISTICS
<TABLE>
<CAPTION>
OPERATING EFFICIENCY
YEAR STANDARD (%) STANDARD (%)
---- ------------ ------------
<S> <C> <C>
1998 12.43 46.72
1997 11.98 46.92
1996 7.47 46.77
1995 6.35 47.63
</TABLE>
NOx BUDGET RULE
As a further measure to bring all areas of the State of New
York into compliance with the National Air Quality Standard for ozone, NYSDEC
developed a NOx Budget Rule 6NYCRR27-3 that set up a NOx cap, allowance and
trading system similar, on a state level, to the Federal SO2 allowance program
under Title IV of the Clean Air Act Amendments of 1990. Each facility in
operation by 1997 was allocated a certain number of allowances. If, in a given
year's ozone season beginning in 1999, a facility emits more than its available
allowances, it will have to purchase further allowances from other sources at
market prices. If a facility emits less than its allowances, it may sell the
excess allowances on the open market. The Saranac Project was allocated 177 tons
per year of NOx allowance for the ozone season. Saranac submitted a plan to
NYSDEC in December 1998 to modify their CEMS data acquisition system to support
NOx trading. The Saranac Project is awaiting approval before implementing the
modifications.
WASTEWATER AND STORMWATER DISCHARGE
Documents reviewed indicate that the Saranac Project has been
operating in compliance with requirements of the wastewater and stormwater
permits. As required under the wastewater discharge permit, the Saranac Operator
submits weekly, monthly and quarterly reports to the Town of Plattsburgh. Review
of these documents indicated they are comprehensive and demonstrate the Saranac
Project's compliance with applicable limits. The Saranac Operator reports there
have been no exceedances of wastewater limits during 1996, 1997, and 1998.
WETLANDS
The Saranac Project is required to monitor a wetlands
mitigation area the size of 1.5 times the area of wetlands disturbed by the
Saranac Project for 5 years after commercial operation. This monitoring was
completed in November 1999.
GENERAL COMPLIANCE
Although we did not conduct a detailed environmental audit,
the following observations are based on our review of related documentation and
a Saranac Project Site visit and walkover conducted in February 1999. In
general, the Saranac Project appeared to be using good housekeeping procedures
and appropriate handling practices.
B-21
<PAGE>
The Saranac Operator reported that a noise monitoring survey,
performed in 1994, did not reveal any significant problems. Two public
complaints during the summer of 1997 have been resolved. A nearby facility, and
not the Saranac Project, was determined to be the source of excessive noise.
According to the Saranac Operator, there have been no further noise complaints
since then.
As required by the SPDES permit, the Saranac Operator
maintains a Spill Prevention Countermeasure and Control ("SPCC") plan detailing
spill cleanup procedures and appropriate plant personnel responsible for
completing such procedures. CE Generation reported that the SPCC plan was
completed on March 30, 1998.
We understand that the Saranac Project is classified as a
"small quantity generator" of hazardous waste under the applicable regulations.
The Saranac Operator maintains a log of all manifests for hazardous materials
shipped from the Saranac Project Site. Review of these manifests indicates
shipments consist primarily of oily rags, used oil, and cleanup material from
the three spills: sulfuric acid, polyethylene and ethylene glycol.
A review of Saranac Project logs indicates the Saranac
Operator has submitted the appropriate Superfund Amendments and Reauthorization
Act of 1986 ("SARA") Title II notifications, as required under the Emergency
Planning and Community Right-to-Know Act ("EPCRA") regarding hazardous materials
on-site, to the Town of Plattsburgh and other appropriate parties.
The Saranac Operator reported that internal environmental
audits have been performed in recent years, but these were not made available
for our review.
PROJECTED OPERATING RESULTS
We have reviewed the historical operating information,
estimates and projections of electrical generating capacity, steam generation
capacity, fuel consumption, and operating costs of the Saranac Project made
available to us by CE Generation. On the basis of such data, we have prepared
the Projected Operating Results. The Projected Operating Results are presented
for each calendar year beginning January 1, 1999, representing the beginning of
the quarterly distributions which will be available to CE Generation, through
June 30, 2009, based on the term of the Saranac PPA. Revenues for the Saranac
Project are derived primarily from the sale of electricity to NYSEG and steam to
Georgia-Pacific and Tenneco. Expenses consist of the cost of fuel, including
transportation, as estimated by C.C. Pace, and operating and maintenance
expenses, based on information provided by CE Generation, and existing senior
debt service, as provided by CE Generation. Projected sources of revenues and
expenses have been set forth in the Projected Operating Results presented in
Exhibit B-1. 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 and in the footnotes to Exhibit B-1.
ANNUAL OPERATING REVENUES
REVENUES FROM THE SALE OF ELECTRICITY
The Saranac PPA with NYSEG expires in June 2009. NYSEG is
required to purchase all of the output from the Saranac Project up to 240 MW per
hour except for limited curtailment rights. The Saranac PPA specifies annual
on-peak and off-peak variable capacity and energy prices for actual energy
delivered. On-peak hours extend from 7:00 a.m. to 10:00 p.m. weekdays except for
holidays. There is also a price for generation that is available but not
delivered, which is equal to the variable energy rate plus the variable capacity
component less 95 percent of the lesser of (1) 105 percent of sum of the
variable energy rate plus the variable capacity component, or (2) the price of
natural gas times the estimated heat rate. The effective Saranac PPA on-peak and
off-peak prices, excluding the available generation rate, are presented in
Table 8.
B-22
<PAGE>
TABLE 8
SARANAC PPA ELECTRICITY PRICE
($/MWH)
<TABLE>
<CAPTION>
YEAR ON-PEAK PRICE(1) OFF-PEAK PRICE
---- ------------- --------------
<S> <C> <C>
1999 $103.4 $60.9
2000 107.9 63.6
2001 112.5 66.4
2002 117.4 69.3
2003 122.5 72.5
2004 127.9 75.6
2005 133.4 79.0
2006 139.1 82.5
2007 145.3 86.1
2008 151.6 89.9
2009 158.2 93.9
</TABLE>
(1) Includes variable capacity component of electricity price.
REVENUE FROM THE SALE OF STEAM
The Saranac Project has entered into the Georgia-Pacific Steam
Sales Agreement and the Tenneco Steam Sales Agreement for the sale of steam,
both expiring in June 2009. The volume of steam required to be purchased is
sufficient to allow the Saranac Project to maintain its QF status under PURPA.
The total amount of steam assumed to be purchased under these contracts is
713,000 Mlb of steam per year. The average steam price is equal to $3.04 per Mlb
in 1998 dollars and escalates at 4 percent per year thereafter.
INTEREST INCOME
We have included interest income on the debt service reserve
required under the term loan agreement. The debt service reserve fund
requirement is equal to $7,000,000. CE Generation has estimated interest income
on the debt service reserve fund at a rate of 5.5 percent per year. The debt
service reserve fund is assumed to be distributed to CE Generation upon the
final payment of the term loan.
ANNUAL OPERATING EXPENSES
FUEL COSTS
The Saranac Project has entered into the Saranac Gas
Transportation Agreement for the delivery of up to 51,000 MMBtu/day of natural
gas on a firm basis along TransCanada's system. The total contract price for the
gas is fixed in the Saranac Gas Supply Agreement, but is separated into
transportation and commodity components. The transportation component has been
assumed to be equal to approximately $0.88 per MMBtu and the remaining portion
of the contract price is used as the commodity component. The transportation
component is paid for the full 51,000 MMBtu/day at all times (excluding cost
mitigation provided for in the Saranac Gas Supply Agreement). The commodity
component is paid for the actual quantity of gas consumed. The total contract
price is set at $2.97 per MMBtu through October 31, 1994, escalating by 4
percent on each subsequent November 1. The Saranac Project is required to
purchase a minimum annual quantity equal to the annual aggregate of 80 percent
of the maximum daily quantity. To the extent that the Saranac Project uses less
than 51,000 MMBtu/day, certain rebates are made. These price of these rebates
vary monthly, but have been assumed to be equal to approximately $0.56 per MMBtu
and applied to the gas in excess of the average daily consumption.
Under the Gas Transportation Agreement dated December 18, 1992
between North Country Gas Pipeline Corporation ("North Country") and Saranac
(the "North Country Gas Transportation Agreement"), the
B-23
<PAGE>
Saranac Project has contracted with North Country to transport the gas from the
TransCanada system at the Canada- U.S. border to the Saranac Project. Saranac
pays demand charges to North Country; however, North Country is a wholly-owned
subsidiary of Saranac. North Country also receives revenue from other pipeline
customers. For the purposes of the Projected Operating Results, we have included
a credit to the cost of gas transportation for the Saranac Project equal to the
estimated net operating revenue of North Country, as estimated by C.C. Pace.
OPERATION AND MAINTENANCE EXPENSES
Pursuant to the Saranac O&M Agreement, the Saranac Operator
will be compensated for its operations and maintenance services on both a
monthly management fee basis plus reimbursement for its direct costs of
performance. The monthly management fee is adjusted by the Employment Cost Index
for Private Industry White Collar Wages and Salaries. Amendment No. 1 to the
Saranac O&M Agreement agrees to a plan for reduction or increase in the
management fee based on annual availability and heat rate of the Saranac
Project.
The operation and maintenance projections are derived from
operating history provided by the Saranac Operator. Operation and maintenance
expenses are assumed to escalate at inflation with the exception of property
taxes, which have been assumed to remain flat, and labor costs, which have been
assumed to escalate at a rate 2.0 percent above inflation, as estimated by CE
Generation.
SENIOR DEBT SERVICE
Based on information provided by CE Generation, we have
included a senior debt service payment based on the term loan principal amount
of $189,288,000 as of January 1, 1999 and an interest rate of 8.185 percent per
year, as reported by CE Generation. The term loan is payable in quarterly
installments and matures on March 31, 2008. The senior debt service is paid out
of the level 1 distributions and therefore has not been deducted in the
Projected Operating Results from the cash available for distributions.
DISTRIBUTIONS TO CE GENERATION
Saranac's distributable cash flow has two levels of
distribution. The level 1 distribution is paid on a pre-determined schedule. The
level 2 distribution is the remaining portion of distributable cash flow after
the level 1 distribution has been satisfied. Of the level 1 distribution, 99
percent is distributed to General Electric Capital Corporation ("GE Capital")
and 0.3585 percent is available for distribution to a Tomen Power Corporation
subsidiary ("TPC Saranac"). TPC Saranac receives 35.49 percent of the level 2
distributions prior to achieving an 8.35 percent after-tax return. After
achieving an 8.35 percent after-tax return, TPC Saranac's share of the level 2
distributions is reduced to 17.82 percent. GE Capital receives 1 percent of the
level 2 distributions. CE Generation receives all remaining level 1 and level 2
distributions. The TPC Saranac's historic internal rate of return and the
calculation of TPC Saranac's after-tax income have been based on tax and
depreciation assumptions provided by CE Generation.
YUMA PROJECT
The Yuma Project is a nominal 50 MW combined-cycle
cogeneration facility which commenced commercial operation under the Yuma PPA on
May 28, 1994, under which the Yuma Project sells electric energy and capacity to
SDG&E. The Yuma Project sells process steam and steam for chilled water to Queen
Carpet, formerly American-West Industries, Inc., under the Yuma Process ESA and
the Yuma Chiller ESA.
The Yuma Project consists of one dual fuel (natural gas and
fuel oil) Frame 6B CTG exhausting to a separate Nooter-Eriksen three-pressure
HRSG. The HRSG produce HP steam which is directed to a single STG for additional
power generation, IP steam as process steam, CTG for NOx control and auxiliary
boiler heating, and LP steam for use in the integral HRSG deaerators and chiller
steam. Natural gas duct firing of the HRSG is provided to generate additional
steam. Fuel oil is stored on site for use when natural gas is unavailable. The
fuel oil tank capacity is 535,000 gallons or approximately 14 days at full load.
B-24
<PAGE>
PROJECT OPERATOR
The Yuma Project is operated by the Yuma Operator utilizing
Yuma Cogeneration Associates ("YCA") employees without an O&M agreement. YCA is
a wholly-owned, indirect subsidiary of CE Generation. The Yuma Operator has been
operating and maintaining the Yuma Project since 1994.
THE PROJECT
THE PROJECT SITE
The 42.5-acre Yuma Project is located on the northwest
boundary of Yuma, Arizona near the existing Queen Carpet plant and adjacent to
the Santa Clara By-Pass Canal (the "Yuma Project Site") (see Figure C-3, Yuma
Project Site Plan). The Yuma Project Site is located at First Street just west
of B Avenue with the Colorado River to the north. The Yuma Project Site is owned
by YCA. The general area is industrial in nature with some agricultural areas.
The Yuma Project Site is easily accessible by highway.
ENVIRONMENTAL SITE CONDITIONS
We have not reviewed any reports of previous or recent
environmental investigations regarding the potential for site contamination
issues at the Yuma Project Site. Because we did not conduct or review such
environmental reports, we can offer no opinion with respect to potential site
contamination at the Yuma Project Site or potential future remediation costs
should contamination be found.
Visual inspections during our Yuma Project Site visit of
January 28, 1999 indicated that the Yuma Operator is following "good
housekeeping" procedures. We did not observe any unusual stained or soiled areas
and the Yuma Operator maintains spill cleanup kits at the Yuma Project Site. The
transformers, fuel oil, acid, caustic and ammonia storage tanks all have
adequate secondary containment.
As of February 1999, the Yuma Project was not listed on the
USEPA's National Priorities List of Superfund Sites or USEPA's CERCLIS List.
We are not aware of any potential groundwater or soil
contamination. The Yuma Operator stated that there are no soil or groundwater
monitoring requirements for the Yuma Project Site.
DESCRIPTION OF THE PROJECT
MECHANICAL EQUIPMENT AND SYSTEMS
The Yuma Project utilizes a GE Frame 6 PG8541B CTG firing
either natural gas or fuel oil capable of generating approximately 37 MW (gross)
at design conditions (110(degree)F and 23 percent relative humidity). The
combustion turbine is in the process of being "up-rated" to increase firing
temperature which in turn may increase efficiency. The CTG package was
manufactured by GE with the auxiliary equipment required for outdoor operation
but is located in a sound enclosure. An evaporative cooler is included to
increase CTG performance.
The CTG exhausts to a Nooter-Eriksen three-pressure HRSG
integral deaerator and feedwater heater. The HRSG includes a natural gas fired
duct burner to supplement steam-generating capabilities. The HP steam system
delivers HP steam to the STG at conditions discussed below. The HRSG IP steam
system is designed to supply 23,580 pph of CTG NOx control steam at a pressure
of 330 psig and 545(degree)F plus process steam to Queen Carpet (15,000 pph, 130
psig, 375(degree)F). The LP steam system delivers 35,000 pph of LP steam to the
chiller at a pressure of 28 psig and 259(degree)F.
The STG was manufactured by GE and is a dual extraction,
bottom exhaust, condensing unit capable of generating approximately 18 MW
(gross) at a HP steam flow of 158,990 pph at 1,250 psig and 950(degree)F and
back pressure of 2.9 in. HgA. The STG is also located in a sound enclosure and
mounted above the Type 304 stainless steel, single shell, two-pass condenser.
B-25
<PAGE>
The cooling tower supplies the condenser with cooling water at
a design temperature of 91(degree)F. The cooling tower utilizes make-up water
directly from the Colorado River or from the City of Yuma sewage treatment plant
effluent. The cooling tower is a two-cell wooden structure (with PVC fill),
induced mechanical draft, counter flow, evaporative tower.
The chiller system is made up of two steam absorption type
liquid chillers with a respective cooling capacity of 800 tons and 1,100 tons of
refrigeration in the form of chilled water. The chiller system utilizes LP steam
from the Yuma Project and returns the steam in the form of condensate. The
chiller system is owned by Queen Carpet but is operated and maintained by the
Yuma Operator.
The auxiliary boiler provides process steam to Queen Carpet
during SDG&E curtailments and CTG outages. The auxiliary boiler is maintained in
a hot standby condition with steam from the process steam supply header. The
auxiliary boiler system is a stand alone system with its own dedicated
deaerator, feedwater pumps, blowdown separator, and hot water heat exchanger.
The auxiliary boiler has a design steam flow rate of 17,000 pph at 125 psig and
353(degree)F. The auxiliary boiler is designed to operate on natural gas only.
ENVIRONMENTAL CONTROL SYSTEMS
A steam injected CTG system is utilized to limit NOx
emissions. No SCR nor CO catalyst is installed in the HRSG to meet the air
permit emission limits. Steam injection controls the NOx emissions from the CTGs
and the duct burners to below 25 ppm on natural gas and 42 ppm while burning
fuel oil.
The Yuma Project utilizes raw water from the Colorado River
for boiler/steam cycle make-up and evaporative cooling. Potable water is
supplied by the City of Yuma.
In compliance with environmental permits, the Yuma Project
wastewater, including boiler blowdown, cooling tower blowdown, and neutralized
water treatment wastewater is discharged to the Main Outlet Drain Extension
("MODE") canal. Stormwater run-off is discharged to an unlined evaporation
retention pond. The Yuma Project floor and equipment drains also discharge into
the retention pond. The Yuma Project does not include an oily water separator.
Sanitary sewage is discharged to the City of Yuma sewer system.
ELECTRICAL AND CONTROL SYSTEMS
The electrical interface with the electrical transmission grid
occurs at the Arizona Public service ("APS") Riverside 69 kV substation. The
substation located approximately 500 yards from the Yuma Project property
boundary and is connected by an overhead 69 kV transmission line to the Yuma
Project switchyard. Electricity generated by the CTG and STG flows through a
13.8 switchgear to dedicated step-up transformers feeding the switchyard. The
switchyard consists of a dead-end structure with two 69 kV circuit switches and
two 69 kV air break disconnect switches. Yuma Project auxiliary power is taken
from the 13.8 switchgear to feed 4,160 volt and 480 volt station service
transformers which in turn feed 4,160 volt and 480 volt motor control centers.
During curtailment periods, the Yuma Project receives backfeed power from APS
through the step-up transformers. The Yuma Project has no "black-start"
capabilities.
Control for the Yuma Project is provided by a Bailey Controls
INFI 90 microprocessor DCS. The DCS performs/controls plant regulatory systems,
motor systems, monitoring, alarms, operations trending, and events data
recording. The DCS also provides interface with the combustion turbine, CTG,
steam turbine, STG, and HRSG.
We have reviewed the Y2K Issue with the Yuma Operator. The
Yuma Operator reports it has completed an assessment of Y2K problems and these
are predominantly corrected at the Yuma Project Site. The remaining items will
be corrected this spring during the annual outage. Their inventory included
hand-held instruments and they are actually testing the items after correction.
For a description of the Y2K Issue and the scope of our review relative to the
Y2K Issue, please refer to the corresponding subsection of the PRI Project
section of this Report.
B-26
<PAGE>
FIGURE B-3
YUMA PROJECT
SITE PLAN
[GRAPHIC SHOWING SITE PLAN OF THE YUMA PROJECT OMITTED]
B-27
<PAGE>
OFF SITE REQUIREMENTS
The Yuma Project's primary source water is from the Colorado
River as arranged with the City of Yuma. A secondary source is available to the
Yuma Project by taking the tertiary discharge from an adjacent wastewater clean
up facility. The primary source is 300 acre feet per year with an additional 500
acre feet per year available. The option on the additional volume is renewed
every five years.
Natural gas is obtained from SWG via a pipeline into the Yuma
Project Site. Fuel oil is purchased on a spot market basis.
Based on C.C. Pace's review of the SWG Gas Supply and
Agreement, C.C. Pace's fuel cost projections, and our estimate of the fuel
requirements of the Yuma Project, we are of the opinion that the Yuma Project
possesses sufficient contract natural gas commodity supplies to meet the
requirements of the Yuma PPA and that its contracted natural gas transportation
capacity is adequate to deliver the natural gas supply requirements over the
term of the Securities.
REVIEW OF TECHNOLOGY
GE originally developed the Frame 6B as a heavy-duty gas
turbine in 1978. Since its inception, 450 units have been placed in service
worldwide. Problems to date with Frame 6B include premature failure of a limited
number of first stage turbine blades. These failures were blamed on high
temperature deformation in combination with local corrosion. In 1993, GE
developed a new metallurgical process to reduce blade deformation. The Yuma
Project replaced the original first stage turbine blades with the
metallurgically improved blades in 1997.
Based on our review, we are of the opinion the Yuma Project
utilizes sound technology and proven methods of electric and thermal generation
and has been generally designed and constructed in accordance with generally
accepted industry practices. If operated and maintained consistently with
generally accepted industry practices, the Yuma Project should be capable of
meeting the requirements of the Yuma PPA, the Yuma Chiller ESA, the Yuma Process
ESA, and current environmental permits throughout the term of the Securities.
Further, the Yuma Project has adequately provided for all off-site requirements,
including fuel, water supply, wastewater disposal and electrical
interconnections.
RELIABILITY AND AVAILABILITY
Based on historical performance, review of O&M practices and
procedures and general observation of the Yuma Project, we are of the opinion
that the Yuma Project is capable of maintaining an annual average contract
availability of 96 percent. The contract availability is based on the Yuma PPA
which allows major outage type maintenance to occur during the "block" periods
of curtailment. The Yuma PPA specifically prohibits maintenance from occurring
during the "flexible" curtailment periods. Block periods of curtailment are
allocated in either 200 or 400 hour increments. The flexible curtailment periods
are 8 to 10 continuous hour increments. The stipulated annual average capacity
factor is the projected average over the term of the Securities. There will be
years when the availability is either above or below the projected annual
average.
STATUS OF PERMITS AND APPROVALS
All of the major permits and approvals required to operate the
Yuma Project have been obtained. While most of the permits required for
operation must be renewed periodically, we know of no technical reason that such
renewals would not be obtainable.
A list of key permits and approvals required for operation,
and a summary of their status, is provided in Table 9. This represents our
understanding based on our Yuma Project Site visit, discussions with the Yuma
Operator, and a brief review of selected documents.
B-28
<PAGE>
TABLE 9
YUMA PROJECT
STATUS OF KEY PERMITS AND APPROVALS
<TABLE>
<CAPTION>
PERMIT OR APPROVAL RESPONSIBLE AGENCY STATUS COMMENTS
------------------ ------------------ ------ --------
<S> <C> <C> <C>
FEDERAL
QF Status FERC In compliance Refer to text
Waste Water Discharge Permit U.S. Department of Issued March 6, 1993 Does not require renewal
the Interior, Bureau
of Land Reclamation
STATE
Air Permit Arizona Department Issued October 13, 1993 Superseded by Title V
of Environmental Revised September 15, 1995 Operating Permit
Quality ("ADEQ")
Title V Operating Permit ADEQ Draft Permit Issued in Public Notice February
February 1999 1999, expect issuance of
Final April 1999
Aquifer Protection Permit ADEQ Issued September 18, 1996; Backup permit for
valid for the life of the wastewater discharge when
project MODE is out of service
LOCAL
Conditional Use Permit City of Yuma Issued December 12, 1990 Valid for life of
Amended October 14, 1992 project. Covers sanitary
and August 11, 1993 wastewater discharges
Discharge Permit No. 0010 City of Yuma Issued June 13, 1990 Backup for wastewater
Modified June 3, 1994 discharge when MODE is out
of service. Has been
allowed to expire.
</TABLE>
OPERATING HISTORY
PERFORMANCE HISTORY
The Yuma Project's historical operating results have been
compiled from monthly or annual operating reports provided by CE Generation. The
Yuma Project has been in commercial operation since June 1994 and has been
operating at an average contract availability of 96.7 percent since commercial
operation. The operating history since commercial operation is summarized in
Table 10.
TABLE 10
YUMA PROJECT OPERATING HISTORY
<TABLE>
<CAPTION>
FUEL STEAM SALES AVAILABILITY(1) CAPACITY(2)
YEAR AVERAGE MW NET MWh (MMBtu) (Mlb) (%) FACTOR (%)
---- ---------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
1998 54.5 406,765 3,578,741 214,339 96.0 93.0
1997 50.1 373,626 3,357,027 195,098 96.2 85.3
1996 50.8 378,715 3,316,320 159,963 97.0 86.5
1995 53.4 398,442 3,437,576 206,076 97.8 91.0
</TABLE>
(1) Based on total hours out of service and not during a curtailments.
(2) Based on 7,460 non-curtailed hours in a year and 50 MW.
B-29
<PAGE>
Based upon the operating history of the Yuma Project and with
an allowance for future degradation, we are of the opinion that, for the purpose
of developing the Projected Operating Results the Yuma Project is capable of
delivering net electrical capability of 56.5 MW at an annual average heat rate
of approximately 8,830 Btu per kWh (HHV) and a contract availability of 96
percent (assuming current curtailment practices continue) for the term of the
Securities.
OPERATING PROGRAMS AND PROCEDURES
We have reviewed with the Yuma Operator the various operations
and maintenance programs and procedures, training programs and performance
monitoring systems. We did not review all aspects of these plans and procedures.
However, we verified that the Yuma Operator had in place all of the usual and
necessary plans, procedures and documentation normally required to operate
facilities of this type. Specific documents reviewed included: Standard
Operating Guidelines, Technician Qualification Program, Operator Training
Programs, and Control Room Operator Qualification.
The Yuma Operator has implemented computer-based maintenance
management systems at the Yuma Project which schedule and track regularly
scheduled preventive maintenance activities. CE Generation reported that
equipment vendor maintenance recommendations were followed when setting up the
maintenance management systems, plus utilizing their own experiences. These
systems are also used to track corrective and emergency work orders and to keep
equipment-specific records of maintenance activities, parts use, and labor
requirements. The Yuma Operator utilizes the computer software program
Mainsaver(R) to assist it in its preventive and corrective maintenance programs.
We reviewed operations and maintenance procedures for major
equipment and systems. The procedures appeared complete and included drawings
and vendor manuals as well as step-by-step operating instructions and
maintenance schedules. Normal daily maintenance is performed by the Yuma
Operator's on-site personnel.
Spare parts are stored in both the in-plant warehouse area
and a separate yard shipping containers. Items are stored by computer storage
number in accordance with the software program Mainsaver(R). The warehouse and
maintenance shop are fork lift accessible.
The Yuma Operator's training programs provide initial employee
training as well as periodic training to maintain competency of the Yuma
Operator's on-site personnel. The core training program was designed and is
maintained by the Yuma Operator and consists of ten modules. Specific special
training is addressed based on needs.
We have reviewed the organizational structure for the
operation and maintenance for the Yuma Project. There is a total of 15 operation
and maintenance personnel.
REGULATORY COMPLIANCE
The Yuma Project must be operated in accordance with all
applicable environmental permits, approvals, laws, rules and regulations.
Although we did not conduct a detailed environmental audit, the following
describes our understanding of the status of the Yuma Project with respect to
requirements set forth in its permits and approvals, pending regulations, and
applicable environmental management laws and regulations based on review of
documents provided for our review and discussions with the Yuma Operator. Based
on our review, we are of the opinion that the Yuma Project appears to be
operating in general compliance with applicable environmental permits,
approvals, laws, rules and regulations.
AIR PERMIT
The Yuma Project is currently operating under ADEQ Permit,
dated October 13, 1993, as revised via Minor Permit Revision, dated September
15, 1995. The Yuma Project has recently received a Draft Title V Operating
Permit which is scheduled for Public Comment notice on February 18, 1999. The
Public Comment
B-30
<PAGE>
period will expire by the end of March 1999, and a final permit is anticipated
to be issued by the end of April 1999. The Draft Title V Permit essentially
duplicates the original air permit, with all operating, emissions, monitoring
and recordkeeping requirements remaining the same as in the existing permit.
QF STATUS
The Yuma Project is required by the Yuma PPA to be a QF.
Actual operating results provided by the Yuma Operator indicate that the Yuma
Project is achieving average Operating Standards and Efficiency Standards
required for QF status as listed in Table 11.
TABLE 11
YUMA PROJECT QF STATISTICS
<TABLE>
<CAPTION>
OPERATING EFFICIENCY
YEAR STANDARD (%) STANDARD (%)
---- ------------ ------------
<S> <C> <C>
1998 13.4 46.5
1997 13.0 46.9
1996 10.9 46.5
1995 13.3 47.4
</TABLE>
WASTEWATER AND STORMWATER DISCHARGE PERMITS
Plant wastewater is discharged to the Bureau of Land
Reclamation's MODE under a permit with the Bureau of Land Reclamation, which
requires wastewater sampling and analysis to be performed every 6 months.
Documents reviewed containing the results of this ongoing sampling and analysis
indicate that the Yuma Project has been operating in compliance with its
wastewater discharge permit. The Yuma Project also has an evaporation pond which
serves as a backup in the event the MODE is unavailable for discharge due to
scheduled service requirements. The evaporation pond, which has never been used,
has an Aquifer Protection Permit from the ADEQ.
Sanitary wastes from the Yuma Project are discharged to the
City of Yuma publicly-owned treatment works in accordance with the City of Yuma
Conditional Approval, dated June 13, 1990.
The Yuma Project's stormwater is collected in a
retention/evaporation pond. Since the stormwater is not discharged to waters of
the United States, the stormwater system does not require a discharge permit.
GENERAL COMPLIANCE
Although we did not conduct a detailed environmental audit,
the following observations are based on our review of related documentation and
a site visit on January 28, 1999. In general, the Yuma Project appeared to be
using good housekeeping procedures and appropriate materials handling practices.
The SPCC Plan was up to date and covered the appropriate areas
expected to be addressed in this type of document for these types of plants.
There have been no reportable spills documented for the entire operating history
of the project.
The Yuma Project is classified as a Small Quantity Generator
of Hazardous Wastes under applicable regulations. The Yuma Project maintains a
log of all manifests for hazardous wastes shipped from the site. There were two
manifests in 1997; one for lab packs of expired chemicals; and one for 4,000
pounds of soil contaminated with sulfuric acid. There were no manifests for
1998.
B-31
<PAGE>
A review of the Yuma Project documentation indicates that the
appropriate SARA Tier II Reports and notifications under EPCRA regarding
hazardous materials stored on-site have been submitted to the City of Yuma and
the other appropriate parties.
PROJECTED OPERATING RESULTS
We have reviewed the historical operating information,
estimates and projections of electrical generating capacity, steam generation
capacity, fuel consumption, and operating costs of the Yuma Project made
available to us. On the basis of such data, we have prepared the Projected
Operating Results. The Projected Operating Results are presented for each
calendar year beginning January 1, 1999, representing the beginning of the
quarterly distributions which will be available to CE Generation, through
December 31, 2018. Although the Securities have a final maturity of December 15,
2018, CE Generation has stated that a full year of revenues will be available to
pay the debt service on the Securities in 2018. Revenues for the Yuma Project
are derived primarily from the sale of electricity and steam. Expenses consist
of the cost of fuel, including transportation, as estimated by C.C. Pace, and
operating and maintenance expenses, based on information provided by CE
Generation. Projected sources of revenues and expenses have been set forth in
the Projected Operating Results presented in Exhibit B-1. 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 and in the footnotes to Exhibit B-1.
ANNUAL OPERATING REVENUES
REVENUES FROM THE SALE OF ELECTRICITY
The Yuma Project sells capacity and energy to SDG&E under the
terms of the Yuma PPA. The term of the Yuma PPA is for 30 years from the firm
capacity operation date, and thus expires May 1, 2024. Under the Yuma PPA, the
Yuma Project sells 50 MW of firm capacity to SDG&E at the fixed (unescalated)
rate of $140.00 per kW-year. In addition, the Yuma Project is entitled to a
capacity bonus if it delivers firm capacity during the on-peak hours (11 a.m. to
6 p.m., weekdays) of the peak months (May to September) at a capacity factor of
85 percent or greater. Based on historical operating data and projections by CE
Generation, for the purposes of the Projected Operating Results, we have assumed
the on-peak availability factor to be 92 percent.
Under the terms of the Yuma PPA, SDG&E purchases energy at
their schedule of time-differentiated payments and conditions for purchase of
energy from QFs. These energy prices are derived from SDG&E's full avoided
operating costs. For the purpose of the Projected Operating Results, we have
assumed the energy prices projected by Henwood. Henwood has projected that
energy prices will be equal to SDG&E's short-run avoided costs in 1999 and 2000
and thereafter will be equal to the California Power Exchange ("PX") prices. It
should be noted that the prices projected by Henwood range from 1.3 percent to
17.4 percent higher than those projected by the California Energy Commission
("CEC"). On average, Henwood's projected PX prices are approximately 10 percent
higher than those projected by CEC.
Under Amendment Two to the Yuma PPA, SDG&E will accept up to
56.5 MW of energy from the Yuma Project. However, SDG&E has the option to
schedule a block curtailment of one 400 hour block or two 200 hour blocks with
not less then three weeks notice. In addition, in years one through nine of the
Yuma PPA, SDG&E may schedule up to 900 hours of flexible curtailment with at
least two hours notice. Each flexible curtailment period has a duration of no
less than eight consecutive hours, and the maximum number of these curtailments
in a calendar year is 125. In years 10 through 15 of the contract (i.e., May 1,
2004 to April 30, 2010), the number of flexible curtailment hours is increased
to 1,400 per year. After May 1, 2010, the flexible curtailment hours is
increased to 2,200 per year with the maximum number of curtailments increased to
150. For the purposes of the Projected Operating Results, we have assumed that
SDG&E schedules the maximum number of curtailment hours it is entitled to in any
year. Based on historical operating results and the amount of curtailment
allowed in the Yuma PPA, we have assumed energy delivered to SDG&E to be 387,400
MWh in years one to nine, 361,400 MWh in years 10 to 16, and 319,900 MWh
thereafter.
B-32
<PAGE>
REVENUE FROM THE SALE OF STEAM
ABSORPTION CHILLER STEAM. The Yuma Project sells absorption
chiller steam to Queen Carpet under the terms of the Yuma Chiller ESA. The term
of the Yuma Chiller ESA is for 30 years from the firm capacity availability
date, and thus expires May 1, 2024. Under the Yuma Chiller ESA, the Yuma Project
delivers to Queen Carpet sufficient steam to operate their equipment, up to a
maximum of 35,000 pph. Chiller steam deliveries are not required when the Yuma
Project is curtailed or otherwise on outage. Based on CE Generation's 1998
budget, we have assumed the chiller steam deliveries to be 116,540,000 pounds
per year.
The Yuma Chiller ESA sets the purchase price of the chiller
steam at 60 percent of the equivalent cost to Queen Carpet of producing chilled
water at the electrical energy price per Arizona Public Service's ("APS") tariff
E-34. The chiller steam price is based on 60 percent of Queen Carpet's avoided
cost of operating its own chillers. Its avoided cost is calculated in the Yuma
Chiller ESA as the product of the assumed steam absorption chiller efficiency of
47.62 and the sum of the avoided electricity and operating and maintenance cost.
The electricity cost is calculated based on Queen Carpet's chiller efficiency
constant of 0.78 kW/ton-hour and APS's rate E-34, which was reported by CE
Generation to be $40.00 per MWh in 1998 and which we have assumed to escalate
with the PX price. Queen Carpet's avoided cost of operation and maintenance for
its chillers is defined as $0.0130 per ton in 1993 and adjusted each January 1
by the U.S City Average Consumers Price Index for All Urban Consumers ("CPI").
At the end of each year, Queen Carpet pays CE Generation a
true up amount in addition to the above purchase price. The true up steam is all
steam above the minimum thermal usage, defined in the Yuma Chiller ESA to be an
annual average during actual operation of 10,731 pph of steam delivered. The
true up steam price is 25 percent of the chiller steam price.
PROCESS STEAM. The Yuma Project sells process steam to Queen
Carpet under the terms of the Yuma Process ESA. The term of the Yuma Process ESA
is for 30 years from the firm capacity availability date, and thus expires May
1, 2024. Under the Yuma Process ESA, the Yuma Project delivers to Queen Carpet
sufficient steam to operate their equipment, up to a maximum of 15,000 pph.
Process steam deliveries are required when the Yuma Project is curtailed or
otherwise on outage. Such steam is produced in the standby boilers and is
referred to as supplemental steam. Based on projections prepared by CE
Generation, we have assumed the process steam deliveries to be 49,500 Mlb per
year (an average of 6,911 pph while operating), and the supplemental steam
deliveries to be 9,200 Mlb per year (an average of 5,735 pph while curtailed or
on outage).
The Yuma Process ESA sets the purchase price of the process
steam at 75 percent of net avoided cost to Queen Carpet of producing process
steam at the price of natural gas purchased from the nearest available gas
utility by an industrial customer. The process steam price is calculated as 75
percent of Queen Carpet's avoided cost of process steam. The avoided cost of
process steam is calculated as the sum of the nearest available gas utility
price of natural gas in dollars per MMBtu for large industrial users divided by
the efficiency of Queen Carpet's existing standby boilers of 63 percent and the
operation and maintenance costs of existing standby boilers, multiplied by the
difference in the enthalpy of the steam delivered and the condensate returned.
The cost of gas was reported by CE Generation to be $4.02 per MMBtu in 1998 and
has been assumed to escalate with the Yuma Project price of natural gas. The
operation and maintenance costs of existing standby boilers is set contractually
at $1.41 per Mlb of steam in 1992, adjusted each January 1 by the CPI. The
enthalpy of the steam delivered is estimated by CE Generation to be 1,197 Btu
per pound ("Btu/lb") and the condensate return is estimated to be zero.
The price paid for supplemental steam is the lesser of (i) CE
Generation's actual cost of producing the supplemental steam, or (ii) 100
percent of Queen Carpet's avoided cost of process steam, as described above.
B-33
<PAGE>
ANNUAL OPERATING EXPENSES
FUEL COSTS
YCA has entered into a Gas Supply and Transportation Services
Master Agreement with SWG. The master agreement combines several earlier
agreements (including a supply agreement and a transportation agreement) into
one agreement with common terms and conditions. The primary term of the
agreement is to December 31, 2008, and continues year to year thereafter. The
maximum daily quantity under the agreement is 20,000 MMBtu per day.
Under the agreement, YCA pays a monthly service charge which
is currently $15,000 per month, and which we have assumed to escalate at half
the rate of inflation. The rate per MMBtu of the delivered gas is based on SWG's
average cost of gas plus $0.25 per MMBtu. For the purposes of our Projected
Operating Results, we have used the natural gas commodity prices as projected by
Henwood and reviewed by C.C. Pace and transportation cost as projected by C.C
Pace. We have also included use and sales taxes, which include county, state,
city, and Arizona energy assessment taxes, of 7.86 percent, as estimated by CE
Generation.
OPERATION AND MAINTENANCE EXPENSES
The operation and maintenance projections are derived from
historical data and 1999 projections provided by CE Generation. Operation and
maintenance expenses are assumed to escalate at the rate of general inflation.
The schedule of major maintenance expenses has been projected by CE Generation.
YCA has entered into a Firm Transmission Service Agreement
with APS and SDG&E dated February 4, 1993 (the "Yuma Firm Transmission Service
Agreement") for the transmission of 50.85 MW of electricity from the Yuma
Project to SDG&E. The wheeling cost is $1.52 per kW-month, unescalated. Under
the terms of the Yuma Firm Transmission Service Agreement, the Yuma Project
delivers one percent of the scheduled capacity and associated energy to APS as
reimbursement for electrical losses on APS' electric system. The term of the
Yuma Firm Transmission Service Agreement is from the initial operation date of
the Yuma Project through December 31, 2024.
YCA has also entered into an Interruptible Transmission
Service Agreement with APS dated June 15, 1994 (the "YCA Interruptible
Transmission Service Agreement") for the transmission of energy above the firm
transmission capacity. The wheeling cost is $2.082 per MWh, which does not
escalate. Under the terms of the YCA Interruptible Transmission Service
Agreement, the Yuma Project delivers one percent of the scheduled energy
delivered to APS as reimbursement for electrical losses on APS' electric system.
The term of the YCA Interruptible Transmission Service Agreement is concurrent
with the term of the YCA Firm Transmission Service Agreement.
OTHER EXPENSES
Other expenses, including operating fees, water, audit, legal,
finance, insurance, and property and other taxes, are as estimated by CE
Generation for 1999 and are assumed to escalate at the rate of general
inflation.
DISTRIBUTIONS TO CE GENERATION
CE Generation owns 100 percent of the Yuma Project and
therefore it has been assumed that 100 percent of the cash available for
distributions will be available to CE Generation.
NORCON PROJECT
The NorCon Project is a nominal 80 MW combined-cycle
cogeneration facility which began commercial operation in December, 1992. The
NorCon Project sells electric energy to Niagara Mohawk pursuant
B-34
<PAGE>
to the NorCon PPA while selling process steam and chilled ammonia to Welch under
the NorCon Steam Agreement.
The NorCon Project consists of two natural gas-fired GE LM5000
CTGs exhausting to separate HRSGs. The HRSGs produce HP steam, which is sent to
either the CTG's combustors to control NOx emissions or to a single STG for
additional power generation; IP steam, which is used as process steam and STG
admission; and LP steam for use in the integral HRSG deaerators. Duct firing of
the HRSGs is provided to generate additional steam when needed.
PROJECT OPERATOR
The NorCon Project is operated under the NorCon O&M Agreement
by the NorCon Operator. The NorCon Operator commenced operation and maintenance
of its first combined-cycle cogeneration facility in 1987.
THE PROJECT
THE PROJECT SITE
The NorCon Project is located in the Township of North East
approximately 13 miles northeast of Erie, Pennsylvania (the "NorCon Project
Site") (see Figure B-4, NorCon Project Site Plan). The NorCon Project facilities
are located on 12.1 acres in an industrial zone adjacent to Welch property and
about 2.5 miles south of downtown North East.
ENVIRONMENTAL SITE CONDITIONS
We have reviewed two reports prepared by others for CE
Generation regarding the NorCon Project Site investigations at the subject
property including: (1) the Phase I Environmental Site Assessment (June 1991)
prepared by Hill Engineering for Northern Consolidated Power, Inc.; and (2) the
Phase I Environmental Site Assessment for NorCon Cogeneration Plant and Related
Properties (August 1996) prepared by Black & Veatch, Inc. ("Black & Veatch") for
CE Generation. These assessments identified prior NorCon Project Site uses
including agricultural/orchard production, a dairy farm, and a small portion of
the property previously used to store junked automobiles. The Hill Phase I ESA
identified "no obvious signs of conditions that would suggest the presence of
hazardous wastes at the site." Limited soil sampling by Hill did not identify
any concerns. Black & Veatch's Phase I ESA addressed the NorCon Project Site,
the ARP plant, a 3.84-acre parcel (currently in grape production) adjacent to
the plant site, and the 9.5-acre Ripley substation site located approximately
four miles to the east. Black & Veatch concluded that their investigation
"revealed no evidence of recognized environmental conditions in connection with
these properties."
In addition, we conducted a site reconnaissance of the NorCon
Project Site, the ARP site and the substation site on February 2, 1999. The
NorCon Project maintains a 4,200-gallon aboveground diesel fuel storage tank and
four 30,000-gallon propane tanks at the NorCon Project Site. We observed no
on-site spills, stains or other evidence of potential site contamination issues.
Further, we did not observe any off-site areas that would appear to present a
significant contamination potential to the NorCon Project. The NorCon Project is
not listed on any current state or federal database that typically list
contaminated sites or hazardous waste sites, including the National Priorities
List of Superfund Sites or the CERCLIS List dated January 26, 1999, prepared by
the USEPA and the Hazardous Sites Cleanup Act Site List dated November 3, 1998,
prepared by the Pennsylvania Department of Environmental Protection ("PDEP").
Further, there are no off-site areas documented on the above lists that would
have any impact upon the NorCon Project Site. The NorCon Operator stated that no
significant spills had ever occurred at the property, and that there are no soil
or groundwater monitoring requirements for the NorCon Project. This is
consistent with our review of files at the PDEP Regional Office on February 3,
1999 that did not identify any significant spills or potential site
contamination issues at the NorCon Project Site resulting from on-site
operations or off-site sources. In our opinion the likelihood of significant
contamination impacts to the subject property is extremely low.
B-35
<PAGE>
DESCRIPTION OF THE PROJECT
MECHANICAL EQUIPMENT AND SYSTEMS
The NorCon Project utilizes two GE LM5000 PC CTGs firing
natural gas. The CTGs were supplied by Stewart & Stevenson, Inc. and GE with all
auxiliary equipment required for an indoor installation. The electric generators
were manufactured by Brush and are air-cooled.
Each CTG exhausts to a dedicated Deltak three pressure level
HRSG with an integral deaerator and feedwater heater. Each HRSG incorporates a
natural gas-fired duct burner to supplement steam production when needed. The
NorCon Project delivers up to 151,000 pph of saturated steam at approximately
135 psig to Welch.
The Elliot STG is a single automatic extraction condensing
unit with a controlled automatic induction/extraction, capable of generating
9,850 kW at an HP inlet steam flow rate of 89,000 pph of 665 psia and
675(degree)F steam, an IP inlet steam flow rate of 61,000 pph of 100 psia,
385(degree)F steam, a process steam extraction of 32,500 pph of 190 psia steam,
and a back-pressure of 2.5 in. HgA.
The STG exhaust steam is condensed in an air-cooled condenser.
A high pressure (3,000 psi) water wash system has been added to reduce fouling
which improves heat transfer, reduces back-pressure on the STG and increases STG
output.
The NorCon Project also includes the 1,200-ton ARP supplied by
Babcock Borsig that uses process steam extracted from the STG to convert low
pressure ammonia vapor from the Welch plant into chilled pressurized ammonia
liquid which is returned to the plant. The ARP replaced a standard centrifugal
refrigeration system which is maintained by Welch in standby and used when the
ARP is out of service.
An auxiliary boiler and a natural gas compression station are
also included in the NorCon Project. The auxiliary boiler can be fired on either
natural gas or propane and is capable of meeting Welch's process steam load when
the CTGs are out of service. The gas compression station is composed of four
motor-driven gas compressors capable of increasing gas pressure from 300 psi to
the 650 psi required by the aeroderivative LM5000 CTGs.
ENVIRONMENTAL CONTROL SYSTEMS
The NorCon Project's air emission sources include two natural
gas-fired combustion turbines, two natural gas-fired duct burners, three
diesel-fired emergency generators, and one natural gas- or propane-fired
auxiliary boiler. A steam injection system in each gas turbine is used to
control emissions of NOx and an oxidation catalyst system is used to reduce
volatile organic compound ("VOC") and CO emissions. The NorCon Project is
required to maintain a continuous emissions monitoring system ("CEMS") for NOx
and CO emissions.
The NorCon Project generates wastewater from demineralization
backwash, boiler blowdown, cooling tower blowdown, plant floor washdowns, and
sanitary wastewaters. The ARP produces cooling tower blowdown. These wastewaters
are discharged to the publicly-owned treatment works owned by the North East
Borough Sewer Authority (the "POTW"). NorCon Project floor drains discharge to
an oil/water separator prior to discharge to the sewer system. The NorCon
Project's process wastewaters are pretreated for pH control prior to discharge.
Stormwater discharges from the cogeneration plant are directed to an on-site
settling basin prior to discharge to an unnamed tributary to Sixteen Mile Creek.
ELECTRICAL AND CONTROL SYSTEMS
The NorCon Project transports electricity to Niagara Mohawk
via a dedicated, 8 mile, 115 kV transmission line to a remote substation located
just over the state line in Ripley, New York, where voltage is increased to 230
kV and fed into Niagara Mohawk's system. The facility also includes a 13.8 kV
feed to the ARP
B-36
<PAGE>
FIGURE B-4
NORCON PROJECT
SITE PLAN
[Graphic Showing Site Plan of the NorCon Project Omitted]
B-37
<PAGE>
at Welch's plant.
The NorCon Project has two 900 kW diesel engine generators
that are capable of black-starting the facility. A 500 kW emergency diesel
generator is also included at the ARP. The NorCon Project also has a 125 volt dc
uninterruptible power supply ("UPS") system.
The two CTGs use a Woodward 501 control system. The plant has
a DCS supplied by Foxboro.
We have reviewed the Y2K Issue with the NorCon Operator. The
NorCon Operator reports that its Y2K compliance review is approximately 80
percent complete, including an extensive evaluation of all Y2K issues associated
with the NorCon Project. The NorCon Operator has contacted all relevant
equipment manufacturers and intends to update the DCS and controllers for the
ARP and STG. The NorCon operator is planning to perform the majority of Y2K
related modifications during the next scheduled major outage in August 1999. The
NorCon Project Y2K compliance program is scheduled to be completed by September
1999. For a description of the Y2K Issue and the scope of our review relative to
the Y2K Issue, please refer to the corresponding subsection of the PRI Project
section of this Report.
OFF-SITE FACILITIES
The NorCon Project includes the following off-site facilities:
an 8-mile, 115 kV power interconnection to Niagara Mohawk at a remote substation
in Ripley, New York; a 13.8 kV power feed to the APR, a process steam line and a
condensate return line between the NorCon Project Site and the Welch plant; a
natural gas distribution line that delivers 300 psi gas to the plant fence; and
North East Township raw water supply and wastewater discharge lines.
REVIEW OF TECHNOLOGY
The LM5000 CTGs used in the NorCon Project were first
introduced by GE in 1988. Several of GE's LM5000s installed since 1988 have
experienced problems that have resulted in extended unit forced outages.
According to the NorCon Operater, Unit No. 2 has experienced two separate blade
failures on the fourth stage of the HP compressor: one in January 1997 and
another in November 1998. However, since the NorCon Project has a lease engine
agreement with GE, the longest downtime due to these blade failures was nine
days. Due to these and other LM5000 CTG failures, GE has developed and highly
recommends an aggressive preventative maintenance program for all its LM5000 CTG
Users including taking each LM5000 off-line every six weeks for preventive
maintenance and adding an updated vibration monitoring system. The NorCon
Operator reported a reduction in spurious trips due to implementation of this
program.
Based on our discussions with the NorCon Operator, we are of
the opinion that the NorCon Project utilizes sound technology and proven methods
of electric and thermal generation and has generally been designed and
constructed in accordance with generally accepted industry practices. Further,
the NorCon Project has adequately provided for all off-site requirements,
including fuel, water supply, wastewater disposal and electrical
interconnections.
STATUS OF PERMITS AND APPROVALS
All of the major permits and approvals required to operate the
NorCon Project have been obtained. The NorCon Project's emissions are permitted
by a Title V Operating Permit issued by the PDEP on June 4, 1998. The Title V
Permit is the only operating air permit required and expires June 30, 2003.
Permitted air contaminants emitted from the NorCon Project include NOx, CO,
particulate matter 10 microns and larger ("PM-10"), SO2 and VOCs.
The NorCon Project's process wastewaters have been authorized
for discharge to the local sewer system by an Industrial Wastewater Discharge
Agreement ("IWDA") between NorCon and the POTW dated
B-38
<PAGE>
September 4, 1991. The NorCon Project has made application for renewal of the
IWDA with the Borough of North East. According to a representative of the
Borough, the new permit will reflect new permit limitations for zinc and copper
that are less restrictive than the current permit. According to the Borough
representative, the new permit is expected to be issued by April 9, 1999.
A list of key permits and approvals required for operation,
and a summary of their status, is provided in Table 12. This represents our
understanding based on a site visit on February 2, 1999, discussions with the
NorCon Operator, an on-site review of NorCon Project documents, and discussions
with the PDEP and North East Borough representatives.
TABLE 12
NORCON PROJECT
STATUS OF KEY PERMITS AND APPROVALS
<TABLE>
<CAPTION>
PERMIT OR APPROVAL RESPONSIBLE AGENCY STATUS COMMENTS
------------------ ------------------ ------ --------
<S> <C> <C> <C>
FEDERAL
QF Status FERC Refer to text
Stormwater Discharge Permit USEPA Issued January 12, 1998 In compliance. General
NPDES Permit for
stormwater discharges
STATE
Title V Operating Permit PDEP Issued June 4, 1998 In compliance
RACT Approval PDEP Issued: September 21, 1995 In compliance
LOCAL
Industrial Wastewater Discharge Borough of North Issued September 4, 1991 In compliance. Permit
Agreement Permit for discharge to East, Pennsylvania renewal anticipated to be
local sewer system issued by April 9, 1999.
</TABLE>
REGULATORY COMPLIANCE
The NorCon Project must be operated in accordance with all
applicable environmental permits, approvals, laws, rules and regulations. The
following describes our understanding of the status of the NorCon Project with
respect to regulatory compliance issues.
AIR PERMIT
Our review of NorCon Project and PDEP files and interviews
with the NorCon Operator and the PDEP indicate that the NorCon Project is in
compliance with its Title V Operating Permit. Our review of 1997-1998 emissions
data indicates that the NorCon Project has had occasional minor excursions of
permit limitations for excess NOx emissions during startup/shutdown and during
normal operations. Based on our discussions with the PDEP, the excursions are
insignificant and do not present a significant long-term environmental concern.
According to the NorCon Operator there have been no notices of violation
("NOVs") issued by the PDEP for these exceedances. The PDEP stated that the
NorCon Project has a good compliance record and expressed no concerns regarding
current NorCon Project management.
NOx RACT RULE
Title I of the Clean Air Act Amendments of 1990 requires state
regulatory agencies to implement Reasonably Available Control Technology
("RACT") to reduce ozone levels. The NorCon Project is located within an area
classified as a moderate nonattainment zone for ozone, since it is located
within the Ozone Transport
B-39
<PAGE>
Region. The NorCon Project is classified as a major stationary source for NOx
and CO emissions, thus RACT must be implemented to reduce NOx emissions. The
NorCon Project has received a RACT Approval, dated September 21, 1995.
NOx BUDGET RULE
In accordance with the September 27, 1994 Memorandum of
Understanding ("MOU") among Northeast Ozone Transport States, the PDEP
promulgated regulations to limit NOx emissions from fossil-fired units. These
regulations are designed to ensure that by May 1, 1999, affected facilities in
the "outer zone" (including the NorCon Project) must reduce their combined rate
of NOx emissions by 55 percent of the 1990 baseline or emit NOx at a rate no
greater than 0.20 pounds per MMBtu. Under the PDEP's current regulations,
beginning in 1999, each affected source must hold by December 31 of each year a
quantity of "NOx allowances" equal to or greater than the total NOx emitted from
the source during the "NOx allowance control period" (May 1 through September
30) for the year. The NorCon Project was allocated an initial allowance of 50
tons per unit. Our review of actual 1997 and 1998 NOx emissions data indicates
that the NorCon Project should meet its NOx emission limits during the
five-3month ozone transport period.
WASTEWATER AND STORMWATER DISCHARGES
Our review of NorCon Project files and interviews with NorCon
Project and North East Borough representatives indicates that the NorCon Project
is in compliance with its IWDA. Our review of 1997-1998 discharge monitoring
reports indicates that the NorCon Project has had occasional non-significant
exceedances of zinc, copper, and oil and grease, relative to permit limitations.
Most of these exceedances were for higher than permitted levels of zinc and
copper in the cooling tower blowdown at the ARP. A discussion with a Borough
representative indicates that the exceedances have not been a concern to the
POTW, and that new permit limitations are expected to become effective for zinc,
copper, and oil and grease when the IWDA renewal is issued in approximately
eight weeks. Our review of NorCon Project discharge monitoring reports indicates
that the NorCon Project would have met all discharge limitations if the
anticipated new permit limitations had been in effect during 1998. The NorCon
Operator stated they will be able to maintain compliance with the wastewater
discharge permit.
GENERAL COMPLIANCE
Although we did not conduct a detailed environmental audit,
the following observations are based on our review of related documentation, our
site visit conducted February 2, 1999, and interviews with the NorCon Operator.
In general, the NorCon Project appeared to be using good housekeeping practices
and appropriate handling procedures for fuels and hazardous chemicals. The
NorCon Operator indicated that no complaints had been received from the public
since construction and initial startup in the early 1990s. The NorCon Project is
registered as a small quantity generator of hazardous waste, and appears to be
in compliance with hazardous waste regulations.
The NorCon Project is aware of their obligations to prepare a
Risk Management Plan per Section 112-R of the Clean Air Act, summarizing the
NorCon Project's accidental release prevention program, and indicated that they
would meet the June 21, 1999 deadline for plan submittal.
PROJECTED OPERATING RESULTS
CE Generation has indicated that the estimated distributions
from the NorCon Project are immaterial in comparison to the total distributions
available to service the debt service associated with the Securities. Therefore,
for the purposes of this Report, we have assumed that no distributions from the
NorCon Project will be made to CE Generation during the term of the Securities.
B-40
<PAGE>
SUMMARY PROJECTED OPERATING RESULTS
DISTRIBUTIONS FROM THE NATURAL GAS PROJECTS
The distributions to CE Generation from the Natural Gas
Projects are presented for the terms of the respective power purchase agreements
in Exhibit B-1. It should be noted that the distributions to CE Generation from
the Natural Gas Projects are dependent primarily on the sale of electricity
under contracts with electric utilities. The Energy Policy Act fundamentally
changed the Federal regulation of the electric utility industry. At this time we
cannot predict what impact changes in legislation, regulation or market
conditions will have on the ability or willingness of the power purchasers to
pay the stipulated capacity costs contained in the Natural Gas Projects' power
purchase agreements. Accordingly, we have therefore assumed that the capacity
pricing provisions contained in the Natural Gas Projects' power purchase
agreements will remain effective throughout their respective terms. For further
discussion of the potential impact of the restructuring of the electric utility
industry on the projected electricity rates and CE Generation, please refer to
the section entitled "Regulatory Matters" contained in the Confidential Offering
Circular.
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. In order to
demonstrate the impact of certain circumstances on the Base Case Projected
Operating Results, certain sensitivity analyses were 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 Natural Gas
Projects.
These sensitivity analyses, labeled as Sensitivity Case A
through I in Exhibits B-2 through B-10, present the Projected Operating Results
assuming, respectively, that (a) operating and maintenance expenses increase by
10 percent over that assumed in the Base Case Projected Operating Results; (b)
the fuel consumption of the Natural Gas Projects increases by 5 percent over
that assumed in the Base Case Projected Operating Results: (c) the
availabilities of the Natural Gas Projects are reduced by 5 percentage points
from that as assumed in the Base Case Projected Operating Results; (d) the
electricity prices and cost of fuel to the Yuma Project increase according to
the "Low Gas 1" case described in the Henwood Report; (e) the electricity prices
and cost of fuel to the Yuma Project increase according to the "Low Gas 2" case
described in the Henwood Report; (f) the electricity prices and cost of fuel to
the Yuma Project increase according to the "SCE Low SRAC" case described in the
Henwood Report; (g) the electricity prices and cost of fuel to the Yuma Project
increase according to the "SCE Median SRAC" case described in the Henwood
Report; (h) the electricity prices and cost of fuel to the Yuma Project increase
according to the "SCE High SRAC" case described in the Henwood Report; and (i)
the electricity prices to the Yuma Project are equal to the level sufficient to
maintain an annual debt service coverage of 1.00 in all years, as projected by
Fluor Daniel. Exhibits B-5 through B-10 contain only the Projected Operating
Results for the Yuma Project. Since the PRI and Saranac Projects are not
impacted by the change in assumptions for these sensitivity cases, the Projected
Operating Results for the PRI and Saranac Projects for these cases are the same
as the Base Case Projected Operating Results.
SUMMARY COMPARISON OF PROJECTED OPERATING RESULTS
The estimated distributions to CE Generation from the Natural
Gas Projects for selected fiscal years of operation for the Base Case and each
sensitivity case are presented in Table 13. The Base Case and each of the
sensitivity cases are presented in Exhibits B-1 through B-10.
B-41
<PAGE>
TABLE 13
PROJECTED NATURAL GAS PROJECT DISTRIBUTIONS
($000)
<TABLE>
<CAPTION>
YUMA
YUMA YUMA YUMA BREAKEVEN
INCREASED INCREASED REDUCED YUMA YUMA SCE LOW SCE MEDIAN SCE HIGH ELECTRICITY
YEAR BASE CASE O&M HEAT RATE AVAILABILITY LOW GAS 1 LOW GAS 2 SRAC SRAC SRAC PRICE
---- --------- --- --------- ------------ --------- --------- ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999 $40,079 $36,952 $36,430 $32,670 $40,079 $40,079 $39,268 $39,578 $40,702 $33,172
2000 44,620 41,010 40,488 32,778 44,908 44,862 44,274 44,700 46,172 39,961
2001 52,255 48,784 47,852 42,077 52,728 52,102 54,019 54,639 56,382 46,276
2002 55,693 52,147 51,144 45,199 55,232 54,433 55,639 56,298 58,390 47,867
2003 54,703 51,154 50,365 45,668 54,631 53,909 54,551 55,326 57,806 48,889
2004 46,080 43,575 42,811 32,612 46,250 45,670 45,720 46,659 49,298 38,304
2005 49,088 46,510 45,679 37,231 49,491 48,808 47,895 49,305 52,015 40,549
2010 6,948 6,454 6,410 6,326 6,869 6,775 6,684 8,539 13,977 233
2015 1,682 672 1,069 5,952 1,591 1,142 2,270 4,733 16,410 0
</TABLE>
PRINCIPAL CONSIDERATIONS AND ASSUMPTIONS
USED IN THE PROJECTION OF OPERATING RESULTS
In the preparation of our Report and the opinions that follow,
we have made certain assumptions with respect to conditions that may exist or
events that may occur in the future. 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 future conditions
differ from those assumed herein or provided to us by others, the actual results
will vary from those forecast. This Report summarizes our work up to the date of
this Report. Thus, changed conditions occurring or becoming known after such
date could affect the material presented based upon the extent of such changes.
The principal considerations and assumptions made by us in
developing the input to the 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 Natural Gas Projects 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. Our review of the design of the Natural Gas Projects was
based on information provided by CE Generation and our visual
observations during our site visits.
3. The operators will maintain the Natural Gas Projects in
accordance with good engineering practice, will perform all required
major maintenance in a timely manner, and will not operate the
equipment to cause it to exceed the equipment manufacturers'
recommended maximum ratings.
4. The operators will employ qualified and competent personnel
and will generally operate the Natural Gas Projects in a sound and
businesslike manner.
B-42
<PAGE>
5. The Natural Gas Projects will identify and implement
solutions to the Y2K Problem in a manner which will not impact the
projected net revenues of the Natural Gas Projects.
6. Inspections, overhauls, repairs and modifications are
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.
7. Proposed restructuring of the electric utility industry
will not significantly impact the projected electricity revenues of the
PRI, Saranac, and Yuma Projects.
8. All licenses, permits and approvals, and permit
modifications necessary to operate the Natural Gas Projects have been,
or will be, obtained on a timely basis and any changes in required
licenses, or permits and approvals will not require reduced operation
of, or increased costs to, the Natural Gas Projects.
9. The CPI and general inflation, used variously to escalate
various revenues and expenses, will increase at an average annual rate
of 2.7 percent.
10. The performance of the PRI, Saranac, and Yuma Projects
will be as assumed in the Projected Operating Results.
11. The price of electricity and natural gas for the Yuma
Project will be as estimated by Henwood.
12. The cost of natural gas to the PRI and Saranac Projects
and the cost of natural gas transportation of the Yuma Project will be
as estimated by C.C. Pace. The Yuma natural gas contracts will be
extended at pricing provision equal to the current agreements through
the term of the Securities.
13. The steam sales to the various steam hosts will be as
assumed in the Projected Operating Results.
14. The non-fuel operating and maintenance expenses, including
the cost of major maintenance, will be consistent with the information
provided by CE Generation, and will increase thereafter at the assumed
change in the general inflation rate, except as noted otherwise in this
Report.
15. The senior debt service requirements and interest income
of the PRI and Saranac Projects will be as reported by CE Generation.
16. There will be no additional capital improvements to the
PRI, Saranac, and Yuma Projects other than those assumed in the
Projected Operating Results.
17. The will be no distributions made to CE Generation from
the Natural Gas Projects after the expiration of the respective power
purchase agreements.
18. There will be no distributions made to CE Generation from
the NorCon Project.
19. A full year of revenues from the Yuma Project will be
available to pay the debt service on the Securities in 2018, as
estimated by CE Generation.
CONCLUSIONS
Set forth below are the principal opinions we have reached
after our review of the Natural Gas Projects. For a complete understanding of
the estimates, assumptions, and calculations upon which these opinions
B-43
<PAGE>
are based, the Report should be read in its entirety. On the basis of our review
and analyses of the Natural Gas Projects and the assumptions set forth in this
Report, we are of the opinion that:
1. The operators of the Natural Gas Projects have demonstrated
the ability to discharge their responsibilities under the respective
O&M agreements.
2. The Natural Gas Project sites are suitable for the
operation of the Natural Gas Projects.
3. The Natural Gas Projects utilize sound technology and
proven methods of electric and thermal generation and have generally
been designed and constructed in accordance with generally accepted
industry practices.
4. The Natural Gas Projects adequately provide for all
off-site requirements, including fuel, water supply, wastewater
disposal and electrical interconnections.
5. The PRI, Saranac, and Yuma Projects possess sufficient
contract or access to spot natural gas commodity supply to meet the
requirements of the respective power purchase agreements and the
contracted natural gas transportation capacity for these projects is
adequate to deliver the natural gas supply requirements.
6. If the PRI, Saranac, and Yuma Projects are operated and
maintained consistent with generally accepted industry practices, these
projects should be capable of meeting the requirements of their
respective power purchase agreements, current environmental permits
and, where applicable, steam sales agreements, throughout the term of
the respective power purchase agreements.
7. If the operators operate the PRI, Saranac, and Yuma
Projects in accordance with generally accepted industry practices,
these projects should have useful lives extending through the final
maturity of the Securities.
8. All of the major permits and approvals required to operate
the Natural Gas Projects have been or are currently in the process of
being obtained. While most operating permits must be renewed
periodically, we know of no technical reason that such renewals would
not be obtainable.
9. Based on the historical performance, operation and
maintenance practices and observed conditions of the PRI, Saranac, and
Yuma Projects, these projects should be capable of achieving the
average annual availabilities, net electrical capabilities, capacity
factors, steam supply requirements and heat rates assumed in the
Projected Operating Results.
10. The operation and maintenance procedures and practices at
the PRI, Saranac, and Yuma Projects are consistent with good
engineering practices and generally accepted industry practices and
take into consideration existing environmental and permit requirements
applicable to these projects. The operators' organizational structures
for these projects are comparable to other facilities using similar
technologies with which we are familiar.
11. The Natural Gas Projects appear to be operating in general
compliance with applicable environmental permits, approvals, laws,
rules and regulations.
12. The basis for the estimates provided by CE Generation of
the costs of operating and maintaining the PRI, Saranac, and Yuma
Projects, including the cost of major maintenance, is reasonable.
Respectfully submitted,
/S/ R. W. BECK, INC.
B-44
<PAGE>
[THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]
B-45
<PAGE>
Exhibit B-1
CE Generation Gas Projects
Projected Operating Results
Base Case
<TABLE>
<CAPTION>
Year Ending December 31, 1999(1) 2000 2001 2002 2003(1)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PRI PROJECT
PERFORMANCE
Contract Capacity (kW)(2) 200,000 200,000 200,000 200,000 200,000
Capacity Factor (%)(3) 80.0% 80.0% 80.0% 80.0% 80.0%
Energy Sales (MWh) 1,401,600 1,401,600 1,401,600 1,401,600 1,051,200
Steam Sales (Mlb)(4) 830,000 830,000 830,000 830,000 830,000
Heat Rate (Btu/Wh)(5) 9,500 9,500 9,500 9,500 9,500
Fuel Consumption (BBtu)(6) 13,315 13,315 13,315 13,315 9,986
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(8) $194.88 201.72 208.80 216.00 223.56
Energy Component
Tier 1 Energy Price ($/MWh)(9) $31.70 32.80 34.00 35.20 36.40
Tier 2 Energy Price ($/MWh)(9) $24.82 25.06 25.52 25.98 26.79
Steam Price ($/Mlb)(10) $2.85 2.90 2.96 3.02 3.08
Natural Gas Price ($/MMBtu)(11) $2.892 2.968 3.050 3.135 3.227
Gas Transportation Cost ($/MMBtu)(12) $0.102 0.102 0.102 0.102 0.102
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Capacity $38,976 40,344 41,760 43,200 33,534
Energy $41,779 42,989 44,386 45,783 35,485
Steam Revenue $2,363 2,410 2,459 2,508 2,558
Interest Income (13) $380 385 392 396 289
---------- ---------- ---------- ---------- ----------
Total Operating Revenues $83,498 86,128 88,997 91,887 71,866
OPERATING EXPENSES ($000)(14)
Fuel Expense $38,510 39,525 40,618 41,741 32,230
Fuel Transportation Expense $1,360 1,360 1,360 1,360 1,020
Auxiliary Fuel $48 30 30 30 23
Operator's Fee $1,171 1,204 1,237 1,272 981
Plant Operations $3,131 3,216 3,302 3,392 2,612
Major Maintenance $3,337 3,427 3,520 3,615 2,784
Other O&M $904 1,014 1,087 1,142 882
Insurance $347 380 405 412 326
Administrative Fees $886 144 148 152 117
Property Taxes $1,387 1,387 1,387 1,387 1,040
Capital Expenditures $1,409 1,002 715 516 351
---------- ---------- ---------- ---------- ----------
Total Operating Expenses $52,490 52,689 53,809 55,019 42,366
NET OPERATING REVENUES ($000) $31,008 33,439 35,188 36,868 29,500
SENIOR DEBT SERVICE (15)
Balance Outstanding (Jan 1) $90,529 76,261 60,174 42,055 21,743
Principal $14,268 16,088 18,119 20,313 21,743
Interest $8,044 8,561 6,940 4,989 1,459
---------- ---------- ---------- ---------- ----------
Total Senior Debt Service $21,561 23,381 23,796 23,975 23,188
Payments into Debt Reserve Fund $85 128 67 (183) (6,014)
Debt Service Reserve Fund Balance (16) $6,002 6,130 6,196 6,014 0
Major Maintenance Reserve Fund Balance (17) $1,000 1,000 1,000 1,000 1,000
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $9,362 9,930 11,325 13,076 12,326
DISTRIBUTIONS TO
CE GENERATION ($000)(18) $9,362 9,930 11,325 13,076 12,326
</TABLE>
B-46
<PAGE>
Exhibit B-1
CE Generation Gas Projects
Projected Operating Results
Base Case
<TABLE>
<CAPTION>
Year Ending December 31, 1999(1) 2000 2001 2002 2003 2004
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
SARANAC PROJECT
PERFORMANCE
Net Plant Capacity (kW)(19) 240,000 240,000 240,000 240,000 240,000 240,000
Availability Factor (%)(20) 94.00% 94.00% 94.00% 94.00% 94.00% 94.00%
Capacity Factor (%)(21) 85.54% 85.54% 85.54% 85.54% 85.54% 85.54%
Energy Sales (MWh)(22) 1,798,400 1,798,400 1,798,400 1,798,400 1,798,400 1,798,400
Available Generation (MWh)(23) 177,900 177,900 177,900 177,900 177,900 177,900
Steam Sales (Mlb)(24) 713,000 713,000 713,000 713,000 713,000 713,000
Heat Rate (Btu/kWh)(25) 8,550 8,550 8,550 8,550 8,550 8,550
Fuel Consumption (BBtu)(26) 15,466 15,466 15,466 15,466 15,466 15,466
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(27) $76.91 80.50 83.76 87.02 90.28 94.51
Energy Price ($/MWh)(28) $68.03 70.96 74.04 77.30 80.81 84.27
Steam Price ($/Mlb)(29) $3.16 3.29 3.42 3.56 3.70 3.85
Natural Gas Price ($/MMBtu)(30) $2.760 2.906 3.057 3.215 3.378 3.548
Gas Transportation Cost ($/MMBtu)(31) $0.977 0.978 0.978 0.979 0.979 0.980
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Capacity $18,459 19,320 20,102 20,884 21,666 22,683
Energy $134,438 140,243 146,328 152,777 159,713 166,545
Steam Revenue $2,256 2,346 2,440 2,538 2,639 2,745
Interest Income (32) $385 385 385 385 385 385
--------- --------- --------- --------- --------- ---------
Total Operating Revenues $155,538 162,294 169,255 176,584 184,403 192,358
OPERATING EXPENSES ($000)(33)
Fuel Expense $42,691 44,942 47,282 49,716 52,248 54,880
Fuel Transportation Expense $15,110 15,120 15,129 15,138 15,146 15,156
Operation & Maintenance $2,376 2,488 2,605 2,727 2,855 2,989
Operator's Fee $2,100 2,157 2,215 2,275 2,336 2,399
Repair & Maintenance $5,930 6,090 6,255 6,424 6,597 6,775
Water & Chemicals $386 396 407 418 429 441
Consumables $476 489 502 516 530 544
State Excise Tax on Steam Revenues (34) $79 82 85 89 92 96
Insurance $767 788 809 831 853 876
Administrative & General $975 1,001 1,028 1,056 1,084 1,114
Property Taxes $3,016 3,016 3,016 3,016 3,016 3,016
Wheeling Charges (35) $5,424 5,695 5,980 6,279 6,593 6,923
Letter-of-Credit Fees $275 282 289 297 304 312
--------- --------- --------- --------- --------- ---------
Total Operating Expenses $79,605 82,546 85,602 88,782 92,083 95,521
NET OPERATING REVENUES ($000) $75,933 79,748 83,653 87,802 92,320 96,837
SENIOR DEBT SERVICE (36)
Balance Outstanding (Jan 1) $189,282 181,097 170,047 156,951 141,399 122,573
Principal $8,185 11,050 13,096 15,552 18,826 22,100
Interest $15,242 14,484 13,516 12,369 10,996 9,354
--------- --------- --------- --------- --------- ---------
Total Senior Debt Service $23,427 25,534 26,612 27,921 29,822 31,454
Payments into Base Reserve Fund $0 0 0 0 0 0
Base Reserve Fund Balance (37) $7,000 7,000 7,000 7,000 7,000 7,000
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $75,933 79,748 83,653 87,802 92,320 96,837
DISTRIBUTIONS TO OTHER PARTNERS (38) $52,123 49,717 48,703 53,011 55,757 58,533
DISTRIBUTIONS TO
CE GENERATION ($000)(38) $23,810 30,031 34,951 34,791 36,563 38,304
<CAPTION>
Year Ending December 31, 2005 2006 2007 2008 2009(1)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
SARANAC PROJECT
PERFORMANCE
Net Plant Capacity (kW)(19) 240,000 240,000 240,000 240,000 240,000
Availability Factor (%)(20) 94.00% 94.00% 94.00% 94.00% 94.00%
Capacity Factor (%)(21) 85.54% 85.54% 85.54% 85.54% 85.54%
Energy Sales (MWh)(22) 1,798,400 1,798,400 1,798,400 1,798,400 899,200
Available Generation (MWh)(23) 177,900 177,900 177,900 177,900 88,900
Steam Sales (Mlb)(24) 713,000 713,000 713,000 713,000 356,600
Heat Rate (Btu/kWh)(25) 8,550 8,550 8,550 8,550 8,550
Fuel Consumption(BBtu)(26) 15,466 15,466 15,466 15,466 7,733
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(27) 97.77 101.68 106.57 110.48 115.38
Energy Price ($/MWh)(28) 88.06 91.91 95.91 100.17 104.59
Steam Price ($/Mlb)(29) 4.00 4.16 4.33 4.50 4.68
Natural Gas Price ($/MMBtu)(30) 3.725 3.910 4.101 4.300 4.472
Gas Transportation Cost ($/MMBtu)(31) 0.981 0.981 0.982 0.982 0.971
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Capacity 23,465 24,404 25,577 26,516 13,845
Energy 174,035 181,647 189,550 197,973 103,343
Steam Revenue 2,855 2,969 3,088 3,211 1,670
Interest Income (32) 385 385 385 385 0
--------- --------- --------- --------- ---------
Total Operating Revenues 200,740 209,405 218,600 228,085 118,858
OPERATING EXPENSES ($000)(33)
Fuel Expense 57,618 60,465 63,427 66,506 34,579
Fuel Transportation Expense 15,165 15,175 15,184 15,193 7,511
Operation & Maintenance 3,130 3,277 3,431 3,592 1,881
Operator's Fee 2,464 2,531 2,599 2,669 1,371
Repair & Maintenance 6,958 7,146 7,339 7,537 3,870
Water & Chemicals 453 465 478 491 252
Consumables 559 574 589 605 311
State Excise Tax on Steam Revenues (34) 100 104 108 112 58
Insurance 900 924 949 975 501
Administrative & General 1,144 1,175 1,206 1,239 636
Property Taxes 3,016 3,016 3,016 3,016 1,508
Wheeling Charges (35) 7,269 7,632 8,014 8,415 4,418
Letter-of-Credit Fees 321 330 339 179 0
--------- --------- --------- --------- ---------
Total Operating Expenses 99,097 102,814 106,679 110,529 56,896
NET OPERATING REVENUES ($000) 101,643 106,591 111,921 117,556 61,962
SENIOR DEBT SERVICE (36)
Balance Outstanding (Jan 1) 100,473 74,281 43,177 8,799 0
Principal 26,193 31,104 34,378 8,799 0
Interest 7,420 5,125 2,479 180 0
--------- --------- --------- --------- ---------
Total Senior Debt Service 33,613 36,229 36,857 8,979 0
Payments into Base Reserve Fund 0 0 0 (7,000) 0
Base Reserve Fund Balance (37) 7,000 7,000 7,000 0 0
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) 101,643 106,591 111,921 124,556 61,962
DISTRIBUTIONS TO OTHER PARTNERS (38) 61,094 65,066 71,316 75,494 18,744
DISTRIBUTIONS TO
CE GENERATION ($000)(38) 40,549 41,525 40,605 49,062 43,219
</TABLE>
B-47
<PAGE>
Exhibit B-1
CE Generation Gas Projects
Projected Operating Results
Base Case
<TABLE>
<CAPTION>
Year Ending December 31, 1999(1) 2000 2001 2002 2003 2004
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000 50,000 50,000
Curtailment Hours (41) 1,300 1,300 1,300 1,300 1,300 1,800
Availability Factor (42) 96.0% 96.0% 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 89.3% 89.3% 89.3% 89.3% 89.3% 83.4%
Energy Generated (MWh)(42) 391,300 391,300 391,300 391,300 391,300 365,100
Transmission Losses (MWh)(45) 3,900 3,900 3,900 3,900 3,900 3,700
Energy Delivered (MWh) 387,400 387,400 387,400 387,400 387,400 361,400
Process Steam Sales (Mlb)(46) 49,500 49,500 49,500 49,500 49,500 46,200
Supplemental Steam Sales (Mlb)(46) 9,200 9,200 9,200 9,200 9,200 11,900
Chilling Steam Demand (Mlb)(46) 116,500 116,500 116,500 116,500 116,500 108,700
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 3,474 3,474 3,474 3,474 3,474 3,248
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) $140.00 140.00 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) $163.92 163.92 163.92 163.92 163.92 163.92
Energy ($/MWh)(50) $30.90 31.70 28.16 33.99 35.23 36.82
Process Steam Price ($/Mlb)(51) $7.81 8.01 8.22 8.44 8.65 8.88
Supplemental Steam Price ($/Mlb)(51) $10.42 10.68 10.96 11.25 11.54 11.84
Chilling Steam Price ($/Mlb)(52) $1.32 1.33 1.34 1.54 1.59 1.65
True-up Steam Price ($/Mlb)(52) $0.33 0.33 0.34 0.38 0.40 0.41
Natural Gas Price ($/MMBtu)(53) $2.15 2.23 2.31 2.40 2.48 2.57
Gas Transportation Cost ($/MMBtu)(53) $0.23 0.23 0.24 0.25 0.25 0.26
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment $7,000 7,000 7,000 7,000 7,000 7,000
Bonus Capacity Payment $1,196 1,196 1,196 1,196 1,196 1,196
Energy Payment $11,971 12,281 10,909 13,168 13,648 13,307
Steam Revenue
Process Steam $387 397 407 418 428 410
Supplemental Steam $96 98 101 103 106 141
Chilling Steam $154 155 156 179 185 179
True-up Steam $13 13 13 15 16 15
-------- -------- -------- -------- -------- --------
Total Operating Revenues $20,817 21,140 19,782 22,079 22,579 22,248
OPERATING EXPENSES ($000)
Natural Gas $8,251 8,546 8,852 9,175 9,498 9,198
Natural Gas Use/Sales Taxes (54) $648 672 696 721 746 723
Natural Gas Service Fees (55) $182 185 187 190 192 195
Operating & Maintenance (56) $1,363 1,400 1,438 1,476 1,516 1,557
Major Maintenance (57) $183 3,278 193 198 2,262 209
Other Operating Fees/Water (56) $443 455 467 480 493 506
Audit, Legal & Finance (56) $762 12 13 13 13 14
Insurance (56) $157 161 166 170 175 179
Property & Other Taxes (56) $779 800 822 844 867 890
Capital Expenditures (56) $179 9 6 23 40 40
Wheeling (58) $963 963 963 963 963 961
-------- -------- -------- -------- -------- --------
Total Operating Expenses $13,910 16,481 13,803 14,253 16,765 14,472
NET OPERATING REVENUES ($000) $6,907 4,659 5,979 7,826 5,814 7,776
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $6,907 4,659 5,979 7,826 5,814 7,776
DISTRIBUTIONS TO
CE GENERATION ($000)(59) $6,907 4,659 5,979 7,826 5,814 7,776
<CAPTION>
Year Ending December 31, 2005 2006 2007 2008 2009
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000 50,000
Curtailment Hours (41) 1,800 1,800 1,800 1,800 1,800
Availability Factor (42) 96.0% 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 83.4% 83.4% 83.4% 83.4% 83.4%
Energy Generated (MWh)(42) 365,100 365,100 365,100 365,100 365,100
Transmission Losses (MWh)(45) 3,700 3,700 3,700 3,700 3,700
Energy Delivered (MWh) 361,400 361,400 361,400 361,400 361,400
Process Steam Sales (Mlb)(46) 46,200 46,200 46,200 46,200 46,200
Supplemental Steam Sales (Mlb)(46) 11,900 11,900 11,900 11,900 11,900
Chilling Steam Demand (Mlb)(46) 108,700 108,700 108,700 108,700 108,700
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 3,248 3,248 3,248 3,248 3,248
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) 140.00 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) 163.92 163.92 163.92 163.92 163.92
Energy ($/MWh)(50) 40.09 39.91 40.19 43.05 42.04
Process Steam Price ($/Mlb)(51) 9.11 9.35 9.63 9.85 10.11
Supplemental Steam Price ($/Mlb)(51) 12.15 12.47 12.84 13.14 13.48
Chilling Steam Price ($/Mlb)(52) 1.77 1.78 1.80 1.90 1.89
True-up Steam Price ($/Mlb)(52) 0.44 0.44 0.45 0.48 0.47
Natural Gas Price ($/MMBtu)(53) 2.67 2.77 2.89 2.97 3.08
Gas Transportation Cost ($/MMBtu)(53) 0.27 0.27 0.28 0.29 0.30
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment 7,000 7,000 7,000 7,000 7,000
Bonus Capacity Payment 1,196 1,196 1,196 1,196 1,196
Energy Payment 14,489 14,423 14,525 15,558 15,193
Steam Revenue
Process Steam 421 432 445 455 467
Supplemental Steam 145 148 153 156 160
Chilling Steam 192 193 195 207 205
True-up Steam 16 16 17 18 17
-------- -------- -------- -------- --------
Total Operating Revenues 23,459 23,408 23,531 24,590 24,238
OPERATING EXPENSES ($000)
Natural Gas 9,526 9,864 10,283 10,579 10,952
Natural Gas Use/Sales Taxes (54) 749 775 808 831 861
Natural Gas Service Fees (55) 198 200 203 206 209
Operating & Maintenance (56) 1,599 1,642 1,687 1,732 1,779
Major Maintenance (57) 215 0 3,950 233 239
Other Operating Fees/Water (56) 520 534 548 563 578
Audit, Legal & Finance (56) 14 14 15 I5 16
Insurance (56) 184 189 194 200 205
Property & Other Taxes (56) 914 939 964 990 1,017
Capital Expenditures (56) 40 40 40 40 40
Wheeling (58) 961 961 961 961 961
-------- -------- -------- -------- --------
Total Operating Expenses 14,920 15,158 19,653 16,350 16.857
NET OPERATING REVENUES ($000) 8,539 8,250 3,878 8,240 7,381
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) 8,539 8,250 3,878 8,240 7,381
DISTRIBUTIONS TO
CE GENERATION ($000)(59) 8,539 8,250 3,878 8,240 7,381
</TABLE>
B-48
<PAGE>
Exhibit B-1
CE Generation Gas Projects
Projected Operating Results
Base Case
<TABLE>
<CAPTION>
Year Ending December 31 2010 2011 2012 2013 2014 2015
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000 50,000 50,000
Curtailment Hours (41) 2,600 2,600 2,600 2,600 2,600 2,600
Availability Factor (42) 96.0% 96.0% 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 73.8% 73.8% 73.8% 73.8% 73.8% 73.8%
Energy Generated (MWh)(42) 323,100 323,100 323,100 323,100 323,100 323,100
Transmission Losses (MWh)(45) 3,200 3,200 3,200 3,200 3,200 3,200
Energy Delivered (MWh) 319,900 319,900 319,900 319,900 319,900 319,900
Process Steam Sales (Mlb)(46) 40,900 40,900 40,900 40,900 40,900 40,900
Supplemental Steam Sales (Mlb)(46) 16,300 16,300 16,300 16,300 16,300 16,300
Chilling Steam Demand (Mlb)(46) 96,200 96,200 96,200 96,200 96,200 96,200
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 2,886 2,886 2,886 2,886 2,886 2,886
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) $140.00 140.00 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) $163.92 163.92 163.92 163.92 163.92 163.92
Energy Rate ($/MWh)(50) $43.48 43.48 43.26 45.70 45.89 47.57
Process Steam Price ($/Mlb)(51) $10.38 10.66 10.95 11.25 11.56 11.59
Supplemental Steam Price ($/Mlb)(51) $13.84 14.21 14.60 15.00 15.41 15.45
Chilling Steam price ($/Mlb)(52) $1.95 1.96 1.97 2.06 2.09 2.16
True-up Steam Price ($/Mlb)(52) $0.49 0.49 0.49 0.52 0.52 0.54
Natural Gas Price ($/MMBtu)(53) $3.19 3.31 3.43 3.56 3.69 3.62
Gas Transportation Cost ($/MMBtu)(53) $0.30 0.31 0.32 0.33 0.34 0.35
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment $7,000 7,000 7,000 7,000 7,000 7,000
Bonus Capacity Payment $1,196 1,196 1,196 1,196 1,196 1,196
Energy Payment $13,909 13,909 13,839 14,619 14,680 15,218
Steam Revenue
Process Steam $425 436 448 460 473 474
Supplemental Steam $226 232 238 244 251 252
Chilling Stream $187 189 190 199 201 207
True-up Steam $16 16 16 17 17 18
-------- -------- -------- -------- -------- --------
Total Operating Revenues $22,959 22,978 22,927 23,735 23,818 24,365
OPERATING EXPENSES ($000)
Natural Gas $10,075 10,439 10,817 11,209 11,616 11,457
Natural Gas Use/Sales Taxes (54) $792 820 850 881 913 900
Natural Gas Service Fees (55) $211 214 217 220 223 226
Operating & Maintenance (56) $1,827 1,876 1,927 1,979 2,033 2,087
Major Maintenance (57) $245 2,799 259 266 0 4,887
Other Operating Fees/Water (56) $594 610 626 643 661 678
Audit, Legal & Finance (56) $16 17 17 17 18 18
Insurance (56) $210 216 222 228 234 240
Property & Other Taxes (56) $1,044 1,072 1,101 1,131 1,162 1,193
Capital Expenditures (56) $40 40 40 40 40 40
Wheeling (58) $957 957 957 957 957 957
-------- -------- -------- -------- -------- --------
Total Operating Expenses $16,011 19,060 17,033 17,571 l7,857 22,683
NET OPERATING REVENUES ($000) $6,948 3,918 5,894 6,164 5,961 1,682
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $6,948 3,918 5,894 6,164 5,961 1,682
DISTRIBUTIONS TO
CE GENERATION ($000)(59) $6,948 3,918 5,894 6,164 5,961 1,682
<CAPTION>
Year Ending December 31 2016 2017 2018
-------- -------- --------
<S> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000
Curtailment Hours (41) 2,600 2,600 2,600
Availability Factor (42) 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 73.8% 73.8% 73.8%
Energy Generated (MWh)(42) 323,100 323,100 323,100
Transmission Losses (MWh)(45) 3,200 3,200 3,200
Energy Delivered (MWh) 319,900 319,900 319,900
Process Steam Sales (Mlb)(46) 40,900 40,900 40,900
Supplemental Steam Sales (Mlb)(46) 16,300 16,300 16,300
Chilling Steam Demand (Mlb)(46) 96,200 96,200 96,200
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 2,886 2,886 2,886
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) 163.92 163.92 163.92
Energy Rate ($/MWh)(50) 47.79 49.16 50.31
Process Steam Price ($/Mlb)(51) 12.20 12.53 12.86
Supplemental Steam Price ($/Mlb)(51) 16.26 16.71 17.15
Chilling Steam price ($/Mlb)(52) 2.18 2.24 2.30
True-up Steam Price ($/Mlb)(52) 0.55 0.56 0.57
Natural Gas Price ($/MMBtu)(53) 3.97 4.11 4.25
Gas Transportation Cost ($/MMBtu)(53) 0.36 0.37 0.38
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment 7,000 7,000 7,000
Bonus Capacity Payment 1,196 1,196 1,196
Energy Payment 15,288 15,726 16,094
Steam Revenue
Process Steam 499 512 526
Supplemental Steam 265 272 280
Chilling Stream 210 216 221
True-up Steam 18 18 19
-------- -------- --------
Total Operating Revenues 24,476 24,940 25,336
OPERATING EXPENSES ($000)
Natural Gas 12,468 12,915 13,351
Natural Gas Use/Sales Taxes(54) 980 1,015 1,049
Natural Gas Service Fees (55) 229 232 235
Operating & Maintenance (56) 2,144 2,202 2,261
Major Maintenance (57) 288 296 304
Other Operating Fees/Water (56) 697 716 735
Audit, Legal & Finance (56) 19 19 20
Insurance (56) 247 254 260
Property & Other Taxes (56) 1,225 1,258 1,292
Capital Expenditures (56) 40 40 40
Wheeling (58) 957 957 957
-------- -------- --------
Total Operating Expenses 19,294 19,904 20,504
NET OPERATING REVENUES ($000) 5,182 5,036 4,832
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) 5,182 5,036 4,832
DISTRIBUTIONS TO
CE GENERATION ($000)(59) 5,182 5,036 4,832
</TABLE>
B-49
<PAGE>
Footnotes to Exhibit B-1
1. Represents twelve months for 1999, representing the beginning of the
quarterly distributions which will be available to CE Generation, and 12
months for 2018, except for the PRI Project and the Saranac Project, for
which no distributions are assumed after the expiration of the PRI PPA and
Saranac PPA on September 30, 2003 and June 30, 2009, respectively.
Although the Securities have a final maturity of December 15, 2018, CE
Generation has stated that a full year of revenues will be available to
pay the debt service on the Securities in 2018.
2. Net plant capacity of 200,000 kW as set forth in the PPI PPA.
3. Capacity factor based on an assumed dispatch factor of 100 percent less
the contractually allowed curtailment during the term of the PRI PPA.
4. Based on the historic level of steam sales to Fina at 830,000 Mlb per
year.
5. As estimated by R.W. Beck based on the historic level of net plant heat
rate.
6. Includes fuel based on the average annual heat rate.
7. Based on projections prepared by Blue Chip Economic Indicators dated
October 10, 1998.
8. Capacity rate as set forth in the PRI PPA.
9. As set forth in the PRI PPA, the energy rate for energy produced monthly
above a 72.5 percent capacity factor is equal to the product of TUEC's
monthly weighted average cost of gas, as estimated by C.C. Pace, the
monthly energy produced above a 72.5 percent capacity factor and 0.99.
Below a 72.5 percent capacity factor, the energy pricing is as set forth
in the PRI PPA.
10. Fina steam price is $2.45 per Mlb of steam beginning in 1991 and escalated
each June 1 beginning June 1, 1992 at 2.0 percent per contract year
thereafter pursuant to the PRI Steam Sales Agreement.
11. As projected by C.C. Pace in accordance with the PRI Gas Supply Agreement.
The reservation fee is equal to $547,500 per year beginning July 1, 1989
and escalates at 3 percent beginning on July 1, 1996. The fuel prices
under the Louis Dreyfus Gas Contract change each June 1. Spot gas pricing
has been projected by C.C. Pace.
12. As set forth in the PRI Gas Supply Agreement.
13. Estimated based on the debt service reserve fund and major maintenance
reserve fund balances required under the Amended and Restated Term Loan
Agreement dated December 30, 1988 and a reinvestment rate of 5.5 percent,
as estimated by CE Generation.
14. Based on information provided by CE Generation. Non-fuel operating
expenses assumed to escalate at the rate of general inflation.
15. As set forth in the PRI Amended and Restated Term Loan Agreement provided
by CE Generation.
16. The debt service reserve fund balance is to be maintained at the next
quarter's debt service payment pursuant to the PRI Amended and Restated
Term Loan Agreement.
17. The maintenance reserve account maintains a $1,000,000 balance in
accordance with the PRI operating budget for periodic overhauls, repairs
and spare parts.
18. One hundred percent of cash available for distribution is distributed to
CE Generation.
19. Net plant capacity of 240,000 kW as set forth in the Saranac PPA.
20. As estimated by R.W. Beck.
21. Capacity factor based on an assumed dispatch factor of 100 percent less
certain contractually allowed curtailment during the term of the Saranac
PPA.
22. Calculated as set forth in the Saranac PPA.
23. Based on the historical energy curtailment by NYSEG under the Saranac PPA.
24. Based on historic level of steam sales. Assumes 520,300 Mlb per year of
steam sales to Georgia-Pacific and 192,700 Mlb per year of steam sales to
Tenneco.
25. As estimated by R.W. Beck.
26. Includes generation fuel based on an average annual beat rate and
auxiliary boiler fuel at a rate of 1,400 Btu/lb of steam.
27. As set forth in the Saranac PPA, capacity rate is equal to the weighted
average of the schedule of on-peak and off-peak variable capacity prices
based on on-peak hours of 3,810 and 4,950 hours per year, respectively.
28. As set forth in the Saranac PPA, energy rate is equal to the weighted
average of the schedule of on-peak and off-peak variable energy prices.
Scheduled pricing based on a commercial operation date of May 1994.
Includes available generation revenue calculated as variable energy rate
plus variable capacity component less 95 percent of the lesser of (1) 105
percent of sum of the variable energy rate plus the variable capacity
component, or (2) the price of natural gas times the estimated heat rate
times the available generation.
29. Represents average steam price under Georgia-Pacific and Tenneco Steam
Sales Agreements. Average steam price is equal to $3.04 per Mlb in 1998
escalated at 4.0 percent per year thereafter.
30. As set forth in the Saranac Gas Arrangements, natural gas price is equal
to a contract price of $2.97 per MMBtu through October 31, 1994 and
escalating by 4.0 percent each November 1 thereafter. Demand component is
based on TransCanada's firm transportation rate and the contract quantity
based on a 100 percent load factor. Commodity charge is the remaining
portion of the contract price and is assessed only for actual fuel burned.
31. As set forth in the Saranac Gas Transportation Agreements.
32. Estimated based on the debt service reserve fund and major maintenance
reserve fund balances and a reinvestment rate of 5 percent, as estimated
by CE Generation.
33. Based on information provided by CE Generation. Non-fuel operating
expenses assumed to escalate at the rate of general inflation, except
where noted.
34. Equal to 3.5 percent of annual steam revenue.
B-50
<PAGE>
Footnotes to Exhibit B-1
(Continued)
35. As set forth in the Saranac PPA, equal to $4,250,000 per year in 1994
dollars escalated at 5.0 percent per year.
36. Based on information provided by CE Generation. Not deducted from cash
available for distributions since senior debt service is paid out of level
1 distributions.
37. As required under senior credit agreement. Based on information provided
by CE Generation.
38. Based on distributions to GE Capital equal to 99 percent of scheduled
level 1 distributions and 1 percent of level 2 distributions and
distributions to TPC Saranac equal to 0.3585 percent of scheduled level 1
distributions plus of 35.49 percent of level 2 distributions until an
after-tax return of 8.35 percent is achieved. After achieving an 8.35
after-tax return, which is projected in the Base Case to occur in the
first quarter of 2000, TPC Saranac's share is reduced from 35.49 to 17.82
percent. CE Generation receives all remaining level 1 and level 2
distributions.
39. Maximum energy deliverable to SDG&E under the Yuma PPA.
40. Contracted firm capacity under the Yuma PPA.
41. Curtailment hours assumed at contract maximums and consist of a block
curtailment of 400 hours plus 900 hours of flexible curtailment through
May 1, 2004, 1,400 hours of flexible curtailment from May 1, 2004 through
May 1, 2009, and 2,200 hours of flexible curtailment each year thereafter.
42. Estimated by R.W. Beck based on historical operating data.
43. Estimated by R.W. Beck based on historical operating data. Peak hours
under the Yuma PPA are defined as 11 A.M. to 6 P.M. weekdays, May through
September.
44. Based on contracted firm capacity.
45. Pursuant to transmission agreements with APS, losses are equal to one
percent of scheduled capacity and associated energy.
46. As estimated by CE Generation.
47. Includes auxiliary boiler.
48. Pursuant to the Yuma PPA.
49. Pursuant to the Yuma PPA. Assumes 92 percent on-peak availability and one
percent losses from the point of delivery to the designated point of
interconnection with SDG&E.
50. As estimated by Henwood.
51. As estimated by C.C. Pace.
52. Calculated pursuant to the Yuma Process ESA. Supplemental steam is steam
produced in the auxiliary boiler.
53. Calculated pursuant to Yuma Chiller ESA. True-up steam is steam in excess
of an annual average of 10,721 pounds per hour.
54. Gas use and sales taxes assumed to be equal to 7.86 percent of gas
expenses, as estimated by CE Generation.
55. SWG special gas procurement tariff is $15,000 per month in 1998, as
provided by CE Generation. Assumed by R.W. Beck to escalate at one half
the general rate of inflation.
56. Estimated for 1999 by CE Generation and assumed to escalate at the assumed
rate of general inflation of 2.7 percent per year thereafter.
57. Major maintenance schedule as estimated by CE Generation.
58. Includes firm and interruptible transmission costs based on firm
transmission service charge of $1.52 per kW-month, and interruptible
transmission service charge of $2.082 per MWh, unescalated pursuant to
transmission agreements with APS.
59. One hundred percent of cash available for distribution is distributed to
CE Generation.
B-51
<PAGE>
Exhibit B-2
CE Generation Gas Projects
Projected Operating Results
Sensitivity A: Increased Operating Expenses
<TABLE>
<CAPTION>
Year Ending December 31, 1999(1) 2000 2001 2002 2003(1)
---------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PRI PROJECT
PERFORMANCE
Contract Capacity (kW)(2) 200,000 200,000 200,000 200,000 200,000
Capacity Factor (%)(3) 80.0% 80.0% 80.0% 80.0% 80.0%
Energy Sales (MWh) 1,401,600 1,401,600 1,401,600 1,401,600 1,051,200
Steam Sales (Mlb)(4) 830,000 830,000 830,000 830,000 830,000
Heat Rate (Btu/kWh)(5) 9,500 9,500 9,500 9,500 9,500
Fuel Consumption (BBtu)(6) 13,315 13,315 13,315 13,315 9,986
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(8) $194.88 201.72 208.80 216.00 223.56
Energy Component
Tier 1 Energy Price ($/MWh)(9) $31.70 32.80 34.00 35.20 36.40
Tier 2 Energy Price ($/MWh)(9) $24.82 25.06 25.52 25.98 26.79
Steam Price ($/Mlb)(10) $2.85 2.90 2.96 3.02 3.08
Natural Gas Price ($/MMBtu)(11) $2.892 2.968 3.050 3.135 3.227
Gas Transportation Cost ($/MMBtu)(12) $0.102 0.102 0.102 0.102 0.102
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Capacity $38,976 40,344 41,760 43,200 33,534
Energy $41,779 42,989 44,386 45,783 35,485
Steam Revenue $2,363 2,410 2,459 2,508 2,558
Interest Income (13) $380 385 392 396 289
---------- --------- --------- ---------- ----------
Total Operating Revenues $83,498 86,128 88,997 91,887 71,866
OPERATING EXPENSES ($000)(14)
Fuel Expense $38,510 39,525 40,618 41,741 32,230
Fuel Transportation Expense $1,360 1,360 1,360 1,360 1,020
Auxiliary Fuel $48 30 30 30 23
Operator's Fee $1,288 1,324 1,361 1,399 1,079
Plant Operations $3,444 3,537 3,633 3,731 2,874
Major Maintenance $3,671 3,770 3,872 3,976 3,063
Other O&M $994 1,115 1,196 1,256 970
Insurance $382 418 446 453 358
Administrative Fees $975 158 163 167 129
Property Taxes $1,526 1,526 1,526 1,526 1,144
Capital Expenditures $1,550 1,102 787 568 386
---------- --------- --------- ---------- ----------
Total Operating Expenses $53,748 53,865 54,992 56,207 43,276
NET OPERATING REVENUES ($000) $29,750 32,263 34,005 35,680 28,590
SENIOR DEBT SERVICE (15)
Balance Outstanding (Jan 1) $90,529 76,261 60,174 42,055 21,743
Principal $14,268 16,088 18,119 20,313 21,743
Interest $8,044 8,561 6,940 4,989 1,459
---------- --------- --------- ---------- ----------
Total Senior Debt Service $21,561 23,381 23,796 23,975 23,188
Payments into Debt Reserve Fund $85 128 67 (183) (6,014)
Debt Service Reserve Fund Balance (16) $6,002 6,130 6,196 6,014 0
Major Maintenance Reserve Fund Balance (17) $1,000 1,000 1,000 1,000 1,000
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $8,104 8,754 10,142 11,888 11,416
DISTRIBUTIONS TO
CE GENERATION ($000)(18) $8,104 8,754 10,142 11,888 11,416
</TABLE>
B-52
<PAGE>
Exhibit B-2
CE Generation Gas Projects
Projected Operating Results
Sensitivity A: Increased Operating Expenses
<TABLE>
<CAPTION>
Year Ending December 31, 1999(1) 2000 2001 2002 2003
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
SARANAC PROJECT
PERFORMANCE
Net Plant Capacity (kW)(19) 240,000 240,000 240,000 240,000 240,000
Availability Factor (%)(20) 94.00% 94.00% 94.00% 94.00% 94.00%
Capacity Factor (%)(21) 85.54% 85.54% 85.54% 85.54% 85.54%
Energy Sales (MWh)(22) 1,798,400 1,798,400 1,798,400 1,798,400 1,798,400
Available Generation (MWh)(23) 177,900 177,900 177,900 177,900 177,900
Steam Sales (Mlb)(24) 713,000 713,000 713,000 713,000 713,000
Heat Rate (Btu/kWh)(25) 8,550 8,550 8,550 8,550 8,550
Fuel Consumption (BBtu)(26) 15,466 15,466 15,466 15,466 15,466
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(27) $76.91 80.50 83.76 87.02 90.28
Energy Price ($/MWh)(28) $68.03 70.96 74.04 77.30 80.81
Steam Price ($/Mlb)(29) $3.16 3.29 3.42 3.56 3.70
Natural Gas Price ($/MMBtu)(30) $2.760 2.906 3.057 3.215 3.378
Gas Transportation Cost ($/MMBtu)(31) $0.977 0.978 0.978 0.979 0.979
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Capacity $18,459 19,320 20,102 20,884 21,666
Energy $134,438 140,243 146,328 152,777 159,713
Steam Revenue $2,256 2,346 2,440 2,538 2,639
Interest Income (32) $385 385 385 385 385
---------- ---------- ---------- ---------- ----------
Total Operating Revenues $155,538 162,294 169,255 176,584 184,403
OPERATING EXPENSES ($000)(33)
Fuel Expense $42,691 44,942 47,282 49,716 52,248
Fuel Transportation Expense $15,110 15,120 15,129 15,138 15,146
Operation & Maintenance $2,614 2,737 2,865 3,000 3,141
Operator's Fee $2,310 2,372 2,436 2,502 2,570
Repair & Maintenance $6,523 6,699 6,880 7,066 7,257
Water & Chemicals $425 436 448 460 472
Consumables $524 538 552 567 582
State Excise Tax on Steam Revenues (34) $87 90 94 98 102
Insurance $844 867 890 914 939
Administrative & General $1,072 1,101 1,131 1,162 1,193
Property Taxes $3,318 3,318 3,318 3,318 3,318
Wheeling Charges (35) $5,967 6,265 6,578 6,907 7,252
Letter-of-Credit Fees $303 310 318 326 335
---------- ---------- ---------- ---------- ----------
Total Operating Expenses $81,788 84,795 87,92l 91,174 94,555
NET OPERATING REVENUES ($000) $73,750 77,499 81,334 85,410 89,848
SENIOR DEBT SERVICE (36)
Balance Outstanding (Jan 1) $189,282 181,097 170,047 156,951 141,399
Principal $8,185 11,050 13,096 15,552 18,826
Interest $15,242 14,484 13,516 12,369 10,996
---------- ---------- ---------- ---------- ----------
Total Senior Debt Service $23,427 25,534 26,612 27,921 29,822
Payments into Base Reserve Fund $0 0 0 0 0
Base Reserve Fund Balance (37) $7,000 7,000 7,000 7,000 7,000
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $73,750 77,499 81,334 85,410 89,848
DISTRIBUTIONS TO OTHER PARTNERS (38) $51,327 49,195 48,266 52,561 55,292
DISTRIBUTIONS TO
CE GENERATION ($000)(38) $22,424 28,305 33,068 32,849 34,556
<CAPTION>
Year Ending December 31, 2004 2005 2006 2007 2008 2009(1)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
SARANAC PROJECT
PERFORMANCE
Net Plant Capacity (kW)(19) 240,000 240,000 240,000 240,000 240,000 240,000
Availability Factor (%)(20) 94.00% 94.00% 94.00% 94.00% 94.00% 94.00%
Capacity Factor (%)(21) 85.54% 85.54% 85.54% 85.54% 85.54% 85.54%
Energy Sales (MWh)(22) 1,798,400 1,798,400 1,798,400 1,798,400 1,798,400 899,200
Available Generation (MWh)(23) 177,900 177,900 177,900 177,900 177,900 88,900
Steam Sales (Mlb)(24) 713,000 713,000 713,000 713,000 713,000 356,600
Heat Rate (Btu/kWh)(25) 8,550 8,550 8,550 8,550 8,550 8,550
Fuel Consumption (BBtu)(26) 15,466 15,466 15,466 15,466 15,466 7,733
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(27) 94.51 97.77 101.68 106.57 110.48 115.38
Energy Price ($/MWh)(28) 84.27 88.06 91.91 95.91 100.17 104.59
Steam Price ($/Mlb)(29) 3.85 4.00 4.16 4.33 4.50 4.68
Natural Gas Price ($/MMBtu)(30) 3.548 3.725 3.910 4.101 4.300 4.472
Gas Transportation Cost ($/MMBtu)(31) 0.980 0.981 0.981 0.982 0.982 0.971
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Capacity 22,683 23,465 24,404 25,577 26,516 13,845
Energy 166,545 174,035 181,647 189,550 197,973 103,343
Steam Revenue 2,745 2,855 2,969 3,088 3,211 1,670
Interest Income (32) 385 385 385 385 385 0
---------- ---------- ---------- ---------- ---------- ----------
Total Operating Revenues 192,358 200,740 209,405 218,600 228,085 118,858
OPERATING EXPENSES ($000)(33)
Fuel Expense 54,880 57,618 60,465 63,427 66,506 34,579
Fuel Transportation Expense 15,156 15,165 15,175 15,184 15,193 7,511
Operation & Maintenance 3,288 3,443 3,605 3,774 3,952 2,069
Operator's Fee 2,639 2,710 2,784 2,859 2,936 1,508
Repair & Maintenance 7,453 7,654 7,861 8,073 8,291 4,257
Water & Chemicals 485 498 512 525 540 277
Consumables 598 614 631 648 665 342
State Excise Tax on Steam Revenues (34) 106 110 114 119 124 64
Insurance 964 990 1,017 1,044 1,073 551
Administrative & General 1,225 1,258 1,292 1,327 1,363 700
Property Taxes 3,318 3,318 3,318 3,318 3,318 1,659
Wheeling Charges (35) 7,615 7,996 8,396 8,815 9,256 4,859
Letter-of-Credit Fees 344 353 363 373 197 0
---------- ---------- ---------- ---------- ---------- ----------
Total Operating Expenses 98,071 101,727 105,533 109,486 113,414 58,376
NET OPERATING REVENUES ($000) 94,287 99,013 103,872 109,114 114,671 60,482
SENIOR DEBT SERVICE (36)
Balance Outstanding (Jan 1) 122,573 100,473 74,281 43,177 8,799 0
Principal 22,100 26,193 31,104 34,378 8,799 0
Interest 9,354 7,420 5,125 2,479 180 0
---------- ---------- ---------- ---------- ---------- ----------
Total Senior Debt Service 31,454 33,613 36,229 36,857 8,979 0
Payments into Base Reserve Fund 0 0 0 0 (7,000) 0
Base Reserve Fund Balance (37) 7,000 7,000 7,000 7,000 0 0
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) 94,287 99,013 103,872 109,114 121,671 60,482
DISTRIBUTIONS TO OTHER PARTNERS (38) 58,053 60,599 64,554 70,788 74,951 18,465
DISTRIBUTIONS TO
CE GENERATION ($000)(38) 36,234 38,414 39,318 38,326 46,720 42,017
</TABLE>
B-53
<PAGE>
Exhibit B-2
CE Generation Gas Projects
Projected Operating Results
Sensitivity A: Increased Operating Expenses
<TABLE>
<CAPTION>
Year Ending December 31, 1999(1) 2000 2001 2002 2003 2004 2005
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Curtailment Hours (41) 1,300 1,300 1,300 1,300 1,300 1,800 1,800
Availability Factor (42) 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 89.3% 89.3% 89.3% 89.3% 89.3% 83.4% 83.4%
Energy Generated (MWh)(42) 391,300 391,300 391,300 391,300 391,300 365,100 365,100
Transmission Losses (MWh)(45) 3,900 3,900 3,900 3,900 3,900 3,700 3,700
Energy Delivered (MWh) 387,400 387,400 387,400 387,400 387,400 361,400 361,400
Process Steam Sales (Mlb)(46) 49,500 49,500 49,500 49,500 49,500 46,200 46,200
Supplemental Steam Sales (Mlb)(46) 9,200 9,200 9,200 9,200 9,200 11,900 11,900
Chilling Steam Demand (Mlb)(46) 116,500 116,500 116,500 116,500 116,500 108,700 108,700
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 3,474 3,474 3,474 3,474 3,474 3,248 3,248
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70 2.70 2.70
Electricity Price $140.00 140.00 140.00 140.00 140.00 140.00 140.00
Capacity Price ($/kW-yr)(48)
Bonus Capacity Price ($/kW-yr)(49) $163.92 163.92 163.92 163.92 163.92 163.92 163.92
Energy Rate ($/MWh)(50) $30.90 31.70 28.16 33.99 35.23 36.82 40.09
Process Steam Price ($/Mlb)(51) $7.81 8.01 8.22 8.44 8.65 8.88 9.11
Supplemental Steam Price ($/Mlb)(51) $10.42 10.68 10.96 11.25 11.54 11.84 12.15
Chilling Steam Price ($/Mlb)(52) $1.32 1.33 1.34 1.54 1.59 1.65 1.77
True-up Steam Price ($/Mlb)(52) $0.33 0.33 0.34 0.38 0.40 0.41 0.44
Natural Gas Price ($/MMBtu)(53) $2.15 2.23 2.31 2.40 2.48 2.57 2.67
Gas Transportation Cost ($/MMBtu)(53) $0.23 0.23 0.24 0.25 0.25 0.26 0.27
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment $7,000 7,000 7,000 7,000 7,000 7,000 7,000
Bonus Capacity Payment $1,196 1,196 1,196 1,196 1,196 1,196 1,196
Energy Payment $11,971 12,281 10,909 13,168 13,648 13,307 14,489
Steam Revenue
Process Steam $387 397 407 418 428 410 421
Supplement Steam $96 98 101 103 106 141 145
Chilling Steam $154 155 156 179 185 179 192
True-up Steam $13 13 13 15 16 15 16
-------- -------- -------- -------- -------- -------- --------
Total Operating Revenues $20,817 21,140 19,782 22,079 22,579 22,248 23,459
OPERATING EXPENSES ($000)
Natural Gas $8,251 8,546 8,852 9,175 9,498 9,198 9,526
Natural Gas Use/Sales Taxes (54) $648 672 696 721 746 723 749
Natural Gas Service Fees (55) $182 185 187 190 192 195 198
Operating & Maintenance (56) $1,499 1,540 1,581 1,624 1,668 1,713 1,759
Major Maintenance (57) $201 3,606 212 218 2,488 230 237
Other Operating Fees/Water (56) $487 500 514 528 542 557 572
Audit, Legal & Finance (56) $838 l4 14 14 15 15 15
Insurance (56) $173 177 182 187 192 197 203
Property & Other Taxes (56) $857 880 904 928 953 979 1,005
Capital Expenditures (56) $197 10 7 25 44 44 44
Wheeling (58) $1,059 1,059 1,059 1,059 1,059 1,056 1,056
-------- -------- -------- -------- -------- -------- --------
Total Operating Expenses $14,392 17,189 14,208 14,669 17,397 14,907 15,364
NET OPERATING REVENUES ($000) $6,425 3,951 5,574 7,410 5,182 7,341 8,096
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $6,425 3,951 5,574 7,410 5,182 7,341 8,096
DISTRIBUTIONS TO
CE GENERATION ($000)(59) $6,425 3,951 5,574 7,410 5,182 7,341 8,096
<CAPTION>
Year Ending December 31, 2006 2007 2008 2009
-------- -------- -------- --------
<S> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000
Curtailment Hours (41) 1,800 1,800 1,800 1,800
Availability Factor (42) 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 83.4% 83.4% 83.4% 83.4%
Energy Generated (MWh)(42) 365,100 365,100 365,100 365,100
Transmission Losses (MWh)(45) 3,700 3,700 3,700 3,700
Energy Delivered (MWh) 361,400 361,400 361,400 361,400
Process Steam Sales (Mlb)(46) 46,200 46,200 46,200 46,200
Supplemental Steam Sales (Mlb)(46) 11,900 11,900 11,900 11,900
Chilling Steam Demand (Mlb)(46) 108,700 108,700 108,700 108,700
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 3,248 3,248 3,248 3,248
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70
Electricity Price 140.00 140.00 140.00 140.00
Capacity Price ($/kW-yr)(48)
Bonus Capacity Price ($/kW-yr)(49) 163.92 163.92 163.92 163.92
Energy Rate ($/MWh)(50) 39.91 40.19 43.05 42.04
Process Steam Price ($/Mlb)(51) 9.35 9.63 9.85 10.11
Supplemental Steam Price ($/Mlb)(51) 12.47 12.84 13.14 13.48
Chilling Steam Price ($/Mlb)(52) 1.78 1.80 1.90 1.89
True-up Steam Price ($/Mlb)(52) 0.44 0.45 0.48 0.47
Natural Gas Price ($/MMBtu)(53) 2.77 2.89 2.97 3.08
Gas Transportation Cost ($/MMBtu)(53) 0.27 0.28 0.29 0.30
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment 7,000 7,000 7,000 7,000
Bonus Capacity Payment 1,196 1,196 1,196 1,196
Energy Payment 14,423 14,525 15,558 15,193
Steam Revenue
Process Steam 432 445 455 467
Supplement Steam 148 153 156 160
Chilling Steam 193 195 207 205
True-up Steam 16 17 18 17
-------- -------- -------- --------
Total Operating Revenues 23,408 23,531 24,590 24,238
OPERATING EXPENSES ($000)
Natural Gas 9,864 10,283 10,579 10,952
Natural Gas Use/Sales Taxes (54) 775 808 831 861
Natural Gas Service Fees (55) 200 203 206 209
Operating & Maintenance (56) 1,807 1,855 1,906 1,957
Major Maintenance (57) 0 4,345 256 263
Other Operating Fees/Water (56) 587 603 619 636
Audit, Legal & Finance (56) 16 16 17 17
Insurance (56) 208 214 219 225
Property & Other Taxes (56) 1,033 1,060 1,089 1,118
Capital Expenditures (56) 44 44 44 44
Wheeling (58) 1,056 1,056 1,056 1,056
-------- -------- -------- --------
Total Operating Expenses 15,590 20,487 16,822 17,338
NET OPERATING REVENUES ($000) 7,818 3,044 7,768 6,900
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) 7,818 3,044 7,768 6,900
DISTRIBUTIONS TO
CE GENERATION ($000)(59) 7,818 3,044 7,768 6,900
</TABLE>
B-54
<PAGE>
Exhibit B-2
CE Generation Gas Projects
Projected Operating Results
Sensitivity A: Increased Operating Expenses
<TABLE>
<CAPTION>
Year Ending December 31, 2010 2011 2012 2013 2014 2015 2016
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Curtailment Hours (41) 2,600 2,600 2,600 2,600 2,600 2,600 2,600
Availability Factor (42) 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 73.8% 73.8% 73.8% 73.8% 73.8% 73.8% 73.8%
Energy Generated (MWh)(42) 323,100 323,100 323,100 323,100 323,100 323,100 323,100
Transmission Losses (MWh)(45) 3,200 3,200 3,200 3,200 3,200 3,200 3,200
Energy Delivered (MWh) 319,900 319,900 319,900 319,900 319,900 319,900 319,900
Process Steam Sales (Mlb)(46) 40,900 40,900 40,900 40,900 40,900 40,900 40,900
Supplemental Steam Sales (Mlb)(46) 16,300 16,300 16,300 16,300 16,300 16,300 16,300
Chilling Steam Demand (Mlb)(46) 96,200 96,200 96,200 96,200 96,200 96,200 96,200
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 2,886 2,886 2,886 2,886 2,886 2,886 2,886
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) $140.00 140.00 140.00 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) $163.92 163.92 163.92 163.92 163.92 163.92 163.92
Energy Rate ($/MWh)(50) $43.48 43.48 43.26 45.70 45.89 47.57 47.79
Process Steam Price ($/Mlb)(51) $10.38 10.66 10.95 11.25 11.56 11.59 12.20
Supplemental Steam Price ($/Mlb)(51) $13.84 14.21 14.60 15.00 15.41 15.45 16.26
Chilling Steam Price($/Mlb)(52) $1.95 1.96 1.97 2.06 2.09 2.16 2.18
True-up Steam Price ($/Mlb)(52) $0.49 0.49 0.49 0.52 0.52 0.54 0.55
Natural Gas Price ($/MMBtu)(53) $3.19 3.31 3.43 3.56 3.69 3.62 3.97
Gas Transportation Cost ($/MMBtu)(53) $0.30 0.31 0.32 0.33 0.34 0.35 0.36
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment $7,000 7,000 7,000 7,000 7,000 7,000 7,000
Bonus Capacity Payment $1,196 1,196 1,196 1,196 1,196 1,196 1,196
Energy Payment $13,909 13,909 13,839 14,619 14,680 15,218 15,288
Steam Revenue
Process Steam $425 436 448 460 473 474 499
Supplemental Steam $226 232 238 244 251 252 265
Chilling Stream $187 189 190 199 201 207 210
True-up Steam $16 16 16 17 17 18 18
-------- -------- -------- -------- -------- -------- --------
Total Operating Revenues $22,959 22,978 22,927 23,735 23,818 24,365 24,476
OPERATING EXPENSES ($000)
Natural Gas $10,075 10,439 10,817 11,209 11,616 11,457 12,468
Natural Gas Use/Sales Taxes (54) $792 820 850 881 913 900 980
Natural Gas Service Fees (55) $211 214 217 220 223 226 229
Operating & Maintenance (56) $2,010 2,064 2,120 2,177 2,236 2,296 2,358
Major Maintenance (57) $270 3,079 285 293 0 5,376 317
Other Operating Fees/Water (56) $653 671 689 708 727 746 766
Audit, Legal & Finance (56) $18 18 19 19 20 20 21
Insurance (56) $232 238 244 251 258 264 272
Property & Other Taxes (56) $1,149 1,180 1,212 1,244 1,278 1,312 1,348
Capital Expenditures (56) $44 44 44 44 44 44 44
Wheeling (58) $1,052 1,052 1,052 1,052 1,052 1,052 1,052
-------- -------- -------- -------- -------- -------- --------
Total Operating Expenses $16,506 19,819 17,549 18,098 18,367 23,693 19,855
NET OPERATING REVENUES ($000) $6,454 3,159 5,378 5,637 5,451 672 4,621
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $6,454 3,159 5,378 5,637 5,451 672 4,621
DISTRIBUTIONS TO
CE GENERATION ($000)(59) $6,454 3,159 5,378 5,637 5,451 672 4,621
<CAPTION>
Year Ending December 31, 2017 2018
-------- --------
<S> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000
Curtailment Hours (41) 2,600 2,600
Availability Factor (42) 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0%
Capacity Factor (%)(44) 73.8% 73.8%
Energy Generated (MWh)(42) 323,100 323,100
Transmission Losses (MWh)(45) 3,200 3,200
Energy Delivered (MWh) 319,900 319,900
Process Steam Sales (Mlb)(46) 40,900 40,900
Supplemental Steam Sales (Mlb)(46) 16,300 16,300
Chilling Steam Demand (Mlb)(46) 96,200 96,200
Heat Rate (Btu/kWh)(42) 8,830 8,830
Fuel Consumption (BBtu)(47) 2,886 2,886
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) 163.92 163.92
Energy Rate ($/MWh)(50) 49.16 50.31
Process Steam Price ($/Mlb)(51) 12.53 12.86
Supplemental Steam Price ($/Mlb)(51) 16.71 17.15
Chilling Steam Price($/Mlb)(52) 2.24 2.30
True-up Steam Price ($/Mlb)(52) 0.56 0.57
Natural Gas Price ($/MMBtu)(53) 4.11 4.25
Gas Transportation Cost ($/MMBtu)(53) 0.37 0.38
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment 7,000 7,000
Bonus Capacity Payment 1,196 1,196
Energy Payment 15,726 16,094
Steam Revenue
Process Steam 512 526
Supplemental Steam 272 280
Chilling Stream 216 221
True-up Steam 18 19
-------- --------
Total Operating Revenues 24,940 25,336
OPERATING EXPENSES ($000)
Natural Gas 12,915 13,351
Natural Gas Use/Sales Taxes (54) 1,015 1,049
Natural Gas Service Fees (55) 232 235
Operating & Maintenance (56) 2,422 2,487
Major Maintenance (57) 326 334
Other Operating Fees/Water (56) 787 808
Audit, Legal & Finance (56) 21 22
Insurance (56) 279 287
Property & Other Taxes (56) 1,384 1,422
Capital Expenditures (56) 44 44
Wheeling (58) 1,052 1,052
-------- --------
Total Operating Expenses 20,477 21,091
NET OPERATING REVENUES ($000) 4,463 4,245
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) 4,463 4,245
DISTRIBUTIONS TO
CE GENERATION ($000)(59) 4,463 4,245
</TABLE>
B-55
<PAGE>
Footnotes to Exhibit B-2
The footnotes to Exhibit B-2 are the same as the footnotes for Exhibit
B-1, except:
14. All non-fuel related operating costs are assumed to be 10 percent higher
than that assumed in the Base Case.
33. All non-fuel related operating costs are assumed to be 10 percent higher
than that assumed in the Base Case.
56. All non-fuel related operating costs are assumed to be 10 percent higher
than that assumed in the Base Case.
B-56
<PAGE>
Exhibit B-3
CE Generation Gas Projects
Projected Operating Results
Sensitivity B: Increased Heat Rate
<TABLE>
<CAPTION>
Year Ending December 31, 1999(1) 2000 2001 2002 2003(1)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PRI PROJECT
PERFORMANCE
Contract Capacity (kW)(2) 200,000 200,000 200,000 200,000 200,000
Capacity Factor (%)(3) 80.0% 80.0% 80.0% 80.0% 80.0%
Energy Sales (MWh) 1,401,600 1,401,600 1,401,600 1,401,600 1,051,200
Steam Sales (Mlb)(4) 830,000 830,000 830,000 830,000 830,000
Heat Rate (Btu/kWh)(5) 9,975 9,975 9,975 9,975 9,975
Fuel Consumption (BBtu)(6) 13,981 13,981 13,981 13,981 10,486
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(8) $194.88 201.72 208.80 216.00 223.56
Energy Component
Tier 1 Energy Price ($/MWh)(9) $31.70 32.80 34.00 35.20 36.40
Tier 2 Energy Price ($/MWh)(9) $24.82 25.06 25.52 25.98 26.79
Steam Price ($/Mlb)(10) $2.85 2.90 2.96 3.02 3.08
Natural Gas Price ($/MMBtu)(11) $2.852 2.926 3.005 3.087 3.179
Gas Transportation Cost ($/MMBtu)(12) $0.104 0.104 0.104 0.104 0.104
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Capacity $38,976 40,344 41,760 43,200 33,534
Energy $41,779 42,989 44,386 45,783 35,485
Steam Revenue $2,363 2,410 2,459 2,508 2,558
Interest Income (13) $380 385 392 396 289
---------- ---------- ---------- ---------- ----------
Total Operating Revenues $83,498 86,128 88,997 91,887 71,866
OPERATING EXPENSES ($000)(14)
Fuel Expense $39,877 40,902 42,017 43,163 33,331
Fuel Transportation Expense $1,449 1,449 1,449 1,449 1,087
Auxiliary Fuel $48 30 30 30 23
Operator's Fee $1,171 1,204 1,237 1,272 981
Plant Operations $3,131 3,216 3,302 3,392 2,612
Major Maintenance $3,337 3,427 3,520 3,615 2,784
Other O&M $904 1,014 1,087 1,142 882
Insurance $347 380 405 412 326
Administrative Fees $886 144 148 152 117
Property Taxes $1,387 1,387 1,387 1,387 1,040
Capital Expenditures $1,409 1,002 715 516 351
---------- ---------- ---------- ---------- ----------
Total Operating Expenses $53,946 54,155 55,297 56,530 43,534
NET OPERATING REVENUES ($000) $29,552 31,973 33,700 35,357 28,332
SENIOR DEBT SERVICE (15)
Balance Outstanding (Jan 1) $90,529 76,261 60,174 42,055 21,743
Principal $14,268 16,088 18,119 20,313 21,743
Interest $8,044 8,561 6,940 4,989 1,459
---------- ---------- ---------- ---------- ----------
Total Senior Debt Service $21,561 23,381 23,796 23,975 23,188
Payments into Debt Reserve Fund $85 128 67 (183) (6,014)
Debt Service Reserve Fund Balance (16) $6,002 6,130 6,196 6,014 0
Major Maintenance Reserve
Fund Balance (17) $1,000 1,000 1,000 1,000 1,000
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $7,906 8,464 9,837 11,565 11,158
DISTRIBUTIONS TO
CE GENERATION ($000)(18) $7,906 8,464 9,837 11,565 11,158
</TABLE>
B-57
<PAGE>
Exhibit B-3
CE Generation Gas Projects
Projected Operating Results
Sensitivity B: Increased Heat Rate
<TABLE>
<CAPTION>
Year Ending December 31 1999(1) 2000 2001 2002 2003 2004
---------- ---------- ---------- ---------- ---------- ----------
SARANAC PROJECT
PERFORMANCE
Net Plant Capacity (kW)(19) 240,000 240,000 240,000 240,000 240,000 240,000
Availability Factor (%)(20) 94.00% 94.00% 94.00% 94.00% 94.00% 94.00%
Capacity Factor (%)(21) 85.54% 85.54% 85.54% 85.54% 85.54% 85.54%
Energy Sales (MWh)(22) 1,798,400 1,798,400 1,798,400 1,798,400 1,798,400 1,798,400
Available Generation (MWh)(23) 177,900 177,900 177,900 177,900 177,900 177,900
Steam Sales (Mlb)(24) 713,000 713,000 713,000 713,000 713,000 713,000
Heart Rate (Btu/kWh)(25) 8,978 8,978 8,978 8,978 8,978 8,978
Fuel Consumption (BBtu)(26) 16,236 16,236 16,236 16,236 16,236 16,236
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(27) $76.91 80.50 83.76 87.02 90.28 94.51
Energy Price ($/MWh)(28) $67.92 70.86 73.93 77.19 80.69 84.14
Steam Price ($/Mlb)(29) $3.16 3.29 3.42 3.56 3.70 3.85
Natural Gas Price ($/MMBtu)(30) $2.760 2.906 3.057 3.215 3.378 3.548
Gas Transportation Cost ($/MMBtu)(31) $0.957 0.958 0.958 0.959 0.959 0.960
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Capacity $18,459 19,320 20,102 20,884 21,666 22,683
Energy $134,239 140,033 146,106 152,546 159,468 166,288
Steam Revenue $2,256 2,346 2,440 2,538 2,639 2,745
Interest Income (32) $385 385 385 385 385 385
---------- ---------- ---------- ---------- ---------- ----------
Total Operating Revenues $155,339 162,084 169,033 176,353 184,158 192,101
OPERATING EXPENSES ($000)(33)
Fuel Expense $44,816 47,178 49,635 52,190 54,848 57,611
Fuel Transportation Expense $15,540 15,550 15,559 15,568 15,576 15,586
Operation & Maintenance $2,376 2,488 2,605 2,727 2,855 2,989
Operator's Fee $2,100 2,157 2,215 2,275 2,336 2,399
Repair & Maintenance $5,930 6,090 6,255 6,424 6,597 6,775
Water & Chemicals $386 396 407 418 429 441
Consumables $476 489 502 516 530 544
State Excise Tax on Steam Revenues (34) $79 82 85 89 92 96
Insurance $767 788 809 831 853 876
Administrative & General $975 1,001 1,028 1,056 1,084 1,114
Property Taxes $3,016 3,016 3,016 3,016 3,016 3,016
Wheeling Charges (35) $5,424 5,695 5,980 6,279 6,593 6,923
Letter-of-Credit Fees $275 282 289 297 304 312
---------- ---------- ---------- ---------- ---------- ----------
Total Operating Expenses $82,160 85,212 88,385 91,686 95,113 98,682
NET OPERATING REVENUES ($000) $73,179 76,872 80,648 84,667 89,045 93,419
SENIOR DEBT SERVICE (36)
Balance Outstanding (Jan 1) $189,282 181,097 170,047 156,951 141,399 122,573
Principal $8,185 11,050 13,096 15,552 18,826 22,100
Interest $15,242 14,484 13,516 12,369 10,996 9,354
---------- ---------- ---------- ---------- ---------- ----------
Total Senior Debt Service $23,427 25,534 26,612 27,921 29,822 31,454
Payments into Base Reserve Fund $0 0 0 0 0 0
Base Reserve Fund Balance (37) $7,000 7,000 7,000 7,000 7,000 7,000
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $73,179 76,872 80,648 84,667 89,045 93,419
DISTRIBUTIONS TO OTHER PARTNERS (38) $51,118 49,049 48,137 52,421 55,141 57,890
DISTRIBUTIONS TO
CE GENERATION ($000)(38) $22,061 27,824 32,511 32,246 33,904 35,530
<CAPTION>
Year Ending December 31 2005 2006 2007 2008 2009(1)
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
SARANAC PROJECT
PERFORMANCE
Net Plant Capacity (kW)(19) 240,000 240,000 240,000 240,000 240,000
Availability Factor (%)(20) 94.00% 94.00% 94.00% 94.00% 94.00%
Capacity Factor (%)(21) 85.54% 85.54% 85.54% 85.54% 85.54%
Energy Sales (MWh)(22) 1,798,400 1,798,400 1,798,400 1,798,400 899,200
Available Generation (MWh)(23) 177,900 177,900 177,900 177,900 88,900
Steam Sales (Mlb)(24) 713,000 713,000 713,000 713,000 356,600
Heart Rate (Btu/kWh)(25) 8,978 8,978 8,978 8,978 8,978
Fuel Consumption (BBtu)(26) 16,236 16,236 16,236 16,236 8,118
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(27) 97.77 101.68 106.57 110.48 115.38
Energy Price ($/MWh)(28) 87.92 91.77 95.76 100.02 104.42
Steam Price ($/Mlb)(29) 4.00 4.16 4.33 4.50 4.68
Natural Gas Price ($/MMBtu)(30) 3.725 3.910 4.101 4.300 4.472
Gas Transportation Cost ($/MMBtu)(31) 0.961 0.961 0.962 0.962 0.952
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Capacity 23,465 24,404 25,577 26,516 13,845
Energy 173,765 181,365 189,253 197,662 103,182
Steam Revenue 2,855 2,969 3,088 3,211 1,670
Interest Income (32) 385 385 385 385 0
---------- ---------- ---------- ---------- --------
Total Operating Revenues 200,470 209,123 218,303 227,774 118,697
OPERATING EXPENSES ($000)(33)
Fuel Expense 60,485 63,474 66,583 69,816 36,299
Fuel Transportation Expense 15,595 15,605 15,614 15,623 7,726
Operation & Maintenance 3,130 3,277 3,431 3,592 1,881
Operator's Fee 2,464 2,531 2,599 2,669 1,371
Repair & Maintenance 6,958 7,146 7,339 7,537 3,870
Water & Chemicals 453 465 478 491 252
Consumables 559 574 589 605 311
State Excise Tax on Steam Revenues (34) 100 104 108 112 58
Insurance 900 924 949 975 501
Administrative & General 1,144 1,175 1,206 1,239 636
Property Taxes 3,016 3,016 3,016 3,016 1,508
Wheeling Charges (35) 7,269 7,632 8,014 8,415 4,418
Letter-of-Credit Fees 321 330 339 179 0
---------- ---------- ---------- ---------- --------
Total Operating Expenses 102,394 106,253 110,265 114,269 58,831
NET OPERATING REVENUES ($000) 98,076 102,870 108,038 113,505 59,866
SENIOR DEBT SERVICE (36)
Balance Outstanding (Jan 1) 100,473 74,281 43,177 8,799 0
Principal 26,193 31,104 34,378 8,799 0
Interest 7,420 5,125 2,479 180 0
---------- ---------- ---------- ---------- --------
Total Senior Debt Service 33,613 36,229 36,857 8,979 0
Payments into Base Reserve Fund 0 0 0 (7,000) 0
Base Reserve Fund Balance (37) 7,000 7,000 7,000 0 0
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) 98,076 102,870 108,038 120,505 59,866
DISTRIBUTIONS TO OTHER PARTNERS (38) 60,422 64,366 70,586 74,731 18,349
DISTRIBUTIONS TO
CE GENERATION ($000)(38) 37,653 38,505 37,453 45,774 41,516
</TABLE>
B-58
<PAGE>
Exhibit B-3
CE Generation Gas Projects
Projected Operating Results
Sensitivity B: Increased Heat Rate
<TABLE>
<CAPTION>
Year Ending December 31 1999(1) 2000 2001 2002 2003 2004 2005
-------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Curtailment Hours (41) 1,300 1,300 1,300 1,300 1,300 1,800 1,800
Availability Factor (42) 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 89.3% 89.3% 89.3% 89.3% 89.3% 83.4% 83.4%
Energy Generated (MWh)(42) 391,300 391,300 391,300 391,300 391,300 365,100 365,100
Transmission Losses (MWh)(45) 3,900 3,900 3,900 3,900 3,900 3,700 3,700
Energy Delivered (MWh) 387,400 387,400 387,400 387,400 387,400 361,400 361,400
Process Steam Sales (Mlb)(46) 49,500 49,500 49,500 49,500 49,500 46,200 46,200
Supplemental Steam Sales (Mlb)(46) 9,200 9,200 9,200 9,200 9,200 11,900 11,900
Chilling Steam Demand (Mlb)(46) 116,500 116,500 116,500 116,500 116,500 108,700 108,700
Heat Rate (Btu/kWh)(42) 9,272 9,272 9,272 9,272 9,272 9,272 9,272
Fuel Consumption (BBtu)(47) 3,647 3,647 3,647 3,647 3,647 3,410 3,410
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) $140.00 140.00 140.00 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) $163.92 163.92 163.92 163.92 163.92 163.92 163.92
Energy Rate ($/MWh)(50) $30.90 31.70 28.16 33.99 35.23 36.82 40.09
Process Steam Price ($/Mlb)(51) $7.81 8.01 8.22 8.44 8.65 8.88 9.11
Supplemental Steam Price ($/Mlb)(51) $10.42 10.68 10.96 11.25 11.54 11.84 12.15
Chilling Steam Price ($/Mlb)(52) $1.32 1.33 1.34 1.54 1.59 1.65 1.77
True-up Steam Price ($/Mlb)(52) $0.33 0.33 0.34 0.38 0.40 0.41 0.44
Natural Gas Price ($/MMBtu)(53) $2.15 2.23 2.31 2.40 2.48 2.57 2.67
Gas Transportation Cost ($/MMBtu)(53) $0.23 0.23 0.24 0.25 0.25 0.26 0.27
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment $7,000 7,000 7,000 7,000 7,000 7,000 7,000
Bonus Capacity Payment $1,196 1,196 1,196 1,196 1,196 1,196 1,196
Energy Payment $11,971 12,281 10,909 13,168 13,648 13,307 14,489
Steam Revenue
Process Steam $387 397 407 418 428 410 421
Supplemental Steam $96 98 101 103 106 141 145
Chilling Steam $154 155 156 179 185 179 192
True-up Steam $13 13 13 15 16 15 16
-------- ------- ------- ------- ------- ------- -------
Total Operating Revenues $20,817 21,140 19,782 22,079 22,579 22,248 23,459
OPERATING EXPENSES ($000)
Natural Gas $8,662 8,972 9,293 9,632 9,971 9,657 10,002
Natural Gas Use/Sales Taxes (54) $681 705 730 757 784 759 786
Natural Gas Service Fees (55) $182 185 187 190 192 195 198
Operating & Maintenance (56) $1,363 1,400 1,438 1,476 1,516 1,557 1,599
Major Maintenance (57) $183 3,278 193 198 2,262 209 215
Other Operating Fees/Water (56) $443 455 467 480 493 506 520
Audit, Legal & Finance (56) $762 12 13 13 13 14 14
Insurance (56) $157 161 166 170 175 179 184
Property & Other Taxes (56) $779 800 822 844 867 890 914
Capital Expenditures (56) $179 9 6 23 40 40 40
Wheeling (58) $963 963 963 963 963 961 961
-------- ------- ------- ------- ------- ------- -------
Total Operating Expenses $14,354 16,940 14,278 14,746 17,276 14,967 15,433
NET OPERATING REVENUES ($000) $6,463 4,200 5,504 7,333 5,303 7,281 8,026
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $6,463 4,200 5,504 7,333 5,303 7,281 8,026
DISTRIBUTIONS TO
CE GENERATION ($000)(59) $6,463 4,200 5,504 7,333 5,303 7,281 8,026
<CAPTION>
Year Ending December 31 2006 2007 2008 2009
-------- ------- ------- -------
<S> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000
Curtailment Hours (41) 1,800 1,800 1,800 1,800
Availability Factor (42) 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 83.4% 83.4% 83.4% 83.4%
Energy Generated (MWh)(42) 365,100 365,100 365,100 365,100
Transmission Losses (MWh)(45) 3,700 3,700 3,700 3,700
Energy Delivered (MWh) 361,400 361,400 361,400 361,400
Process Steam Sales (Mlb)(46) 46,200 46,200 46,200 46,200
Supplemental Steam Sales (Mlb)(46) 11,900 11,900 11,900 11,900
Chilling Steam Demand (Mlb)(46) 108,700 108,700 108,700 108,700
Heat Rate (Btu/kWh)(42) 9,272 9,272 9,272 9,272
Fuel Consumption (BBtu)(47) 3,410 3,410 3,410 3,410
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) 163.92 163.92 163.92 163.92
Energy Rate ($/MWh)(50) 39.91 40.19 43.05 42.04
Process Steam Price ($/Mlb)(51) 9.35 9.63 9.85 10.11
Supplemental Steam Price ($/Mlb)(51) 12.47 12.84 13.14 13.48
Chilling Steam Price ($/Mlb)(52) 1.78 1.80 1.90 1.89
True-up Steam Price ($/Mlb)(52) 0.44 0.45 0.48 0.47
Natural Gas Price ($/MMBtu)(53) 2.77 2.89 2.97 3.08
Gas Transportation Cost ($/MMBtu)(53) 0.27 0.28 0.29 0.30
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment 7,000 7,000 7,000 7,000
Bonus Capacity Payment 1,196 1,196 1,196 1,196
Energy Payment 14,423 14,525 15,558 15,193
Steam Revenue
Process Steam 432 445 455 467
Supplemental Steam 148 153 156 160
Chilling Steam 193 195 207 205
True-up Steam 16 17 18 17
-------- ------- ------- -------
Total Operating Revenues 23,408 23,531 24,590 24,238
OPERATING EXPENSES ($000)
Natural Gas 10,356 10,796 11,106 11,499
Natural Gas Use/Sales Taxes (54) 814 848 873 904
Natural Gas Service Fees (55) 200 203 206 209
Operating & Maintenance (56) 1,642 1,687 1,732 1,779
Major Maintenance (57) 0 3,950 233 239
Other Operating Fees/Water (56) 534 548 563 578
Audit, Legal & Finance (56) 14 15 15 16
Insurance (56) 189 194 200 205
Property & Other Taxes (56) 939 964 990 1,017
Capital Expenditures (56) 40 40 40 40
Wheeling (58) 961 961 961 961
-------- ------- ------- -------
Total Operating Expenses 15,689 20,206 16,919 17,447
NET OPERATING REVENUES ($000) 7,719 3,325 7,671 6,791
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) 7,719 3,325 7,671 6,791
DISTRIBUTIONS TO
CE GENERATION ($000)(59) 7,719 3,325 7,671 6,791
</TABLE>
B-59
<PAGE>
Exhibit B-3
CE Generation Gas Projects
Projected Operating Results
Sensitivity B: Increased Heat Rate
<TABLE>
<CAPTION>
Year Ending December 31 2010 2011 2012 2013 2014 2015 2016
-------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Curtailment Hours (41) 2,600 2,600 2,600 2,600 2,600 2,600 2,600
Availability Factor (42) 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 73.8% 73.8% 73.8% 73.8% 73.8% 73.8% 73.8%
Energy Generated (MWh)(42) 323,100 323,100 323,100 323,100 323,100 323,100 323,100
Transmission Losses (MWh)(45) 3,200 3,200 3,200 3,200 3,200 3,200 3,200
Energy Delivered (MWh) 319,900 319,900 319,900 319,900 319,900 319,900 319,900
Process Steam Sales (Mlb)(46) 40,900 40,900 40,900 40,900 40,900 40,900 40,900
Supplemental Steam Sales (Mlb)(46) 16,300 16,300 16,300 16,300 16,300 16,300 16,300
Chilling Steam Demand (Mlb)(46) 96,200 96,200 96,200 96,200 96,200 96,200 96,200
Heat Rate (Btu/kWh)(42) 9,272 9,272 9,272 9,272 9,272 9,272 9,272
Fuel Consumption (BBtu)(47) 3,029 3,029 3,029 3,029 3,029 3,029 3,029
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) $140.00 140.00 140.00 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) $163.92 163.92 163.92 163.92 163.92 163.92 163.92
Energy Rate ($/MWh)(50) $43.48 43.48 43.26 45.70 45.89 47.57 47.79
Process Steam Price ($/Mlb)(51) $10.38 10.66 10.95 11.25 11.56 11.59 12.20
Supplemental Steam Price ($/Mlb)(51) $13.84 14.21 14.60 15.00 15.41 15.45 16.26
Chilling Steam Price ($/Mlb)(52) $1.95 1.96 1.97 2.06 2.09 2.16 2.18
True-up Steam Price ($/Mlb)(52) $0.49 0.49 0.49 0.52 0.52 0.54 0.55
Natural Gas Price ($/MMBtu)(53) $3.19 3.31 3.43 3.56 3.69 3.62 3.97
Gas Transportation Cost ($/MMBtu)(53) $0.30 0.31 0.32 0.33 0.34 0.35 0.36
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment $7,000 7,000 7,000 7,000 7,000 7,000 7,000
Bonus Capacity Payment $1,196 1,196 1,196 1,196 1,196 1,196 1,196
Energy Payment $13,909 13,909 13,839 14,619 14,680 15,218 15,288
Steam Revenue
Process Steam $425 436 448 460 473 474 499
Supplemental Steam $226 232 238 244 251 252 265
Chilling Steam $187 189 190 199 201 207 210
True-up Steam $16 16 16 17 17 18 18
-------- ------- ------- ------- ------- ------- -------
Total Operating Revenues $22,959 22,978 22,927 23,735 23,818 24,365 24,476
OPERATING EXPENSES ($000)
Natural Gas $10,574 10,956 11,353 11,765 12,192 12,025 13,085
Natural Gas Use/Sales Taxes (54) $831 861 892 925 958 945 1,028
Natural Gas Service Fees (55) $211 214 217 220 223 226 229
Operating & Maintenance (56) $1,827 1,876 1,927 1,979 2,033 2,087 2,144
Major Maintenance (57) $245 2,799 259 266 0 4,887 288
Other Operating Fees/Water (56) $594 610 626 643 661 678 697
Audit, Legal & Finance (56) $16 17 17 17 18 18 19
Insurance (56) $210 216 222 228 234 240 247
Property & Other Taxes (56) $1,044 1,072 1,101 1,131 1,162 1,193 1,225
Capital Expenditures (56) $40 40 40 40 40 40 40
Wheeling (58) $957 957 957 957 957 957 957
-------- ------- ------- ------- ------- ------- -------
Total Operating Expenses $16,549 19,618 17,611 18,171 18,478 23,296 19,959
NET OPERATING REVENUES ($000) $6,410 3,360 5,316 5,564 5,340 1,069 4,517
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $6,410 3,360 5,316 5,564 5,340 1,069 4,517
DISTRIBUTIONS TO
CE GENERATION ($000)(59) $6,410 3,360 5,316 5,564 5,340 1,069 4,517
<CAPTION>
Year Ending December 31 2017 2018
-------- -------
<S> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000
Curtailment Hours (41) 2,600 2,600
Availability Factor (42) 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0%
Capacity Factor (%)(44) 73.8% 73.8%
Energy Generated (MWh)(42) 323,100 323,100
Transmission Losses (MWh)(45) 3,200 3,200
Energy Delivered (MWh) 319,900 319,900
Process Steam Sales (Mlb)(46) 40,900 40,900
Supplemental Steam Sales (Mlb)(46) 16,300 16,300
Chilling Steam Demand (Mlb)(46) 96,200 96,200
Heat Rate (Btu/kWh)(42) 9,272 9,272
Fuel Consumption (BBtu)(47) 3,029 3,029
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) 163.92 163.92
Energy Rate ($/MWh)(50) 49.16 50.31
Process Steam Price ($/Mlb)(51) 12.53 12.86
Supplemental Steam Price ($/Mlb)(51) 16.71 17.15
Chilling Steam Price ($/Mlb)(52) 2.24 2.30
True-up Steam Price ($/Mlb)(52) 0.56 0.57
Natural Gas Price ($/MMBtu)(53) 4.11 4.25
Gas Transportation Cost ($/MMBtu)(53) 0.37 0.38
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment 7,000 7,000
Bonus Capacity Payment 1,196 1,196
Energy Payment 15,726 16,094
Steam Revenue
Process Steam 512 526
Supplemental Steam 272 280
Chilling Steam 216 221
True-up Steam 18 19
-------- -------
Total Operating Revenues 24,940 25,336
OPERATING EXPENSES ($000)
Natural Gas 13,555 14,012
Natural Gas Use/Sales Taxes (54) 1,065 1,101
Natural Gas Service Fees (55) 232 235
Operating & Maintenance (56) 2,202 2,261
Major Maintenance (57) 296 304
Other Operating Fees/Water (56) 716 735
Audit, Legal & Finance (56) 19 20
Insurance (56) 254 260
Property & Other Taxes (56) 1,258 1,292
Capital Expenditures (56) 40 40
Wheeling (58) 957 957
-------- -------
Total Operating Expenses 20,594 21,217
NET OPERATING REVENUES ($000) 4,346 4,119
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) 4,346 4,119
DISTRIBUTIONS TO
CE GENERATION ($000)(59) 4,346 4,119
</TABLE>
B-60
<PAGE>
Footnotes to Exhibit B-3
The footnotes to Exhibit B-3 are the same as the footnotes for Exhibit
B-1, except:
5. Assumes fuel consumption is 5 percent higher than that assumed in the Base
Case.
25. Assumes fuel consumption is 5 percent higher than that assumed in the Base
Case.
42. Assumes fuel consumption is 5 percent higher than that assumed in the Base
Case.
B-61
<PAGE>
Exhibit B-4
CE Generation Gas Projects
Projected Operating Results
Sensitivity C: Reduced Availability
<TABLE>
<CAPTION>
Year Ending December 31, 1999(1) 2000 2001 2002 2003(1)
--------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
PRI PROJECT
PERFORMANCE
Contract Capacity (kW)(2) 200,000 200,000 200,000 200,000 200,000
Capacity Factor (%)(3) 75.0% 75.0% 75.0% 75.0% 75.0%
Energy Sales (MWh) 1,314,000 1,314,000 1,314,000 1,314,000 985,500
Steam Sales (Mlb)(4) 830,000 830,000 830,000 830,000 830,000
Heat Rate (Btu/kWh)(5) 9,500 9,500 9,500 9,500 9,500
Fuel Consumption (BBtu)(6) 12,483 12,483 12,483 12,483 9,362
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(8) $194.88 201.72 208.80 216.00 223.56
Energy Component
Tier 1 Energy Price ($/MWh)(9) $31.70 32.80 34.00 35.20 36.40
Tier 2 Energy Price ($/MWh)(9) $24.82 25.06 25.52 25.98 26.79
Steam Price ($/Mlb)(10) $2.85 2.90 2.96 3.02 3.08
Natural Gas Price ($/MMBtu)(11) $2.895 2.972 3.054 3.138 3.231
Gas Transportation Cost ($/MMBtu)(12) $0.102 0.102 0.102 0.102 0.102
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Capacity $38,976 40,344 41,760 43,200 33,534
Energy $39,168 40,303 41,612 42,922 33,268
Steam Revenue $2,363 2,410 2,459 2,508 2,558
Interest Income (13) $380 385 392 396 289
--------- --------- --------- --------- -------
Total Operating Revenues $80,887 83,442 86,223 89,026 69,649
OPERATING EXPENSES ($000)(14)
Fuel Expense $36,141 37,095 38,120 39,174 30,248
Fuel Transportation Expense $1,275 1,275 1,275 1,275 956
Auxiliary Fuel $48 30 30 30 23
Operator's Fee $1,171 1,204 1,237 1,272 981
Plant Operations $3,131 3,216 3,302 3,392 2,612
Major Maintenance $3,337 3,427 3,520 3,615 2,784
Other O&M $904 1,014 1,087 1,142 882
Insurance $347 380 405 412 326
Administrative Fees $886 144 148 152 117
Property Taxes $1,387 1,387 1,387 1,387 1,040
Capital Expenditures $1,409 1,002 715 516 351
--------- --------- --------- --------- -------
Total Operating Expenses $50,036 50,174 51,226 52,367 40,320
NET OPERATING REVENUES ($000) $30,851 33,268 34,997 36,659 29,329
SENIOR DEBT SERVICE (15)
Balance Outstanding (Jan 1) $90,529 76,261 60,174 42,055 21,743
Principal $14,268 16,088 18,119 20,313 21,743
Interest $8,044 8,561 6,940 4,989 1,459
--------- --------- --------- --------- -------
Total Senior Debt Service $21,561 23,381 23,796 23,975 23,188
Payments into Debt Reserve Fund $85 128 67 (183) (6,014)
Debt Service Reserve Fund Balance (16) $6,002 6,130 6,196 6,014 0
Major Maintenance Reserve Fund Balance (17) $1,000 1,000 1,000 1,000 1,000
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $9,205 9,759 11,134 12,867 12,155
DISTRIBUTIONS TO
CE GENERATION ($000)(18) $9,205 9,759 11,134 12,867 12,155
</TABLE>
B-62
<PAGE>
Exhibit B-4
CE Generation Gas Projects
Projected Operating Results
Sensitivity C: Reduced Availability
<TABLE>
<CAPTION>
Year Ending December 31, 1999(1) 2000 2001 2002 2003 2004
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
SARANAC PROJECT
PERFORMANCE
Net Plant Capacity (kW)(19) 240,000 240,000 240,000 240,000 240,000 240,000
Availability Factor (%)(20) 89.00% 89.00% 89.00% 89.00% 89.00% 89.00%
Capacity Factor (%)(21) 80.99% 80.99% 80.99% 80.99% 80.99% 80.99%
Energy Sales (MWh)(22) 1,702,700 1,702,700 1,702,700 1,702,700 1,702,700 1,702,700
Available Generation (MWh)(23) 74,800 74,800 74,800 74,800 74,800 74,800
Steam Sales (Mlb)(24) 713,000 713,000 713,000 713,000 713,000 713,000
Heat Rate (Btu/kWh)(25) 8,550 8,550 8,550 8,550 8,550 8,550
Fuel Consumption (BBtu)(26) 14,648 14,648 14,648 14,648 14,648 14,648
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(27) $72.82 76.22 79.30 82.39 85.47 89.48
Energy Price ($/MWh)(28) $68.61 71.58 74.70 78.00 81.55 85.05
Steam Price ($/Mlb)(29) $3.16 3.29 3.42 3.56 3.70 3.85
Natural Gas Price ($/MMBtu)(30) $2.760 2.906 3.057 3.215 3.378 3.548
Gas Transportation Cost ($/MMBtu)(31) $1.000 1.001 1.002 1.002 1.003 1.003
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Capacity $17,477 18,292 19,032 19,773 20,513 21,476
Energy $121,952 127,232 132,771 138,644 144,959 151,172
Steam Revenue $2,256 2,346 2,440 2,538 2,639 2,745
Interest Income (32) $385 385 385 385 385 385
--------- --------- --------- --------- --------- ---------
Total Operating Revenues $142,070 148,255 154,628 161,340 168,496 175,778
OPERATING EXPENSES ($000)(33)
Fuel Expense $40,433 42,564 44,780 47,086 49,484 51,977
Fuel Transportation Expense $14,652 14,662 14,671 14,680 14,688 14,698
Operation & Maintenance $2,376 2,488 2,605 2,727 2,855 2,989
Operator's Fee $2,100 2,157 2,215 2,275 2,336 2,399
Repair & Maintenance $5,930 6,090 6,255 6,424 6,597 6,775
Water & Chemicals $386 396 407 418 429 441
Consumables $476 489 502 516 530 544
State Excise Tax on Steam Revenues (34) $79 82 85 89 92 96
Insurance $767 788 809 831 853 876
Administrative & General $975 1,001 1,028 1,056 1,084 1,114
Property Taxes $3,016 3,016 3,016 3,016 3,016 3,016
Wheeling Charges (35) $5,424 5,695 5,980 6,279 6,593 6,923
Letter-of-Credit Fees $275 282 289 297 304 312
--------- --------- --------- --------- --------- ---------
Total Operating Expenses $76,889 79,710 82,642 85,694 88,861 92,160
NET OPERATING REVENUES ($000) $65,181 68,545 71,986 75,646 79,635 83,618
SENIOR DEBT SERVICE (36)
Balance Outstanding (Jan 1) $189,282 181,097 170,047 156,951 141,399 122,573
Principal $8,185 11,050 13,096 15,552 18,826 22,100
Interest $15,242 14,484 13,516 12,369 10,996 9,354
--------- --------- --------- --------- --------- ---------
Total Senior Debt Service $23,427 25,534 26,612 27,921 29,822 31,454
Payments into Base Reserve Fund $0 0 0 0 0 0
Base Reserve Fund Balance (37) $7,000 7,000 7,000 7,000 7,000 7,000
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $65,181 68,545 71,986 75,646 79,635 83,618
DISTRIBUTIONS TO OTHER PARTNERS (38) $48,199 49,581 46,507 50,724 53,370 56,045
DISTRIBUTIONS TO
CE GENERATION ($000)(38) $16,981 18,964 25,479 24,923 26,265 27,573
<CAPTION>
Year Ending December 31, 2005 2006 2007 2008 2009(1)
--------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
SARANAC PROJECT
PERFORMANCE
Net Plant Capacity (kW)(19) 240,000 240,000 240,000 240,000 240,000
Availability Factor (%)(20) 89.00% 89.00% 89.00% 89.00% 89.00%
Capacity Factor (%)(21) 80.99% 80.99% 80.99% 80.99% 80.99%
Energy Sales (MWh)(22) 1,702,700 1,702,700 1,702,700 1,702,700 851,400
Available Generation (MWh)(23) 74,800 74,800 74,800 74,800 37,400
Steam Sales (Mlb)(24) 713,000 713,000 713,000 713,000 356,600
Heat Rate (Btu/kWh)(25) 8,550 8,550 8,550 8,550 8,550
Fuel Consumption (BBtu)(26) 14,648 14,648 14,648 14,648 7,324
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(27) 92.57 96.27 100.90 104.60 109.24
Energy Price ($/MWh)(28) 88.89 92.78 96.83 101.14 105.59
Steam Price ($/Mlb)(29) 4.00 4.16 4.33 4.50 4.68
Natural Gas Price ($/MMBtu)(30) 3.725 3.910 4.101 4.300 4.472
Gas Transportation Cost ($/MMBtu)(31) 1.004 1.005 1.005 1.006 0.994
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Capacity 22,217 23,105 24,216 25,105 13,109
Energy 157,995 164,925 172,110 179,777 93,849
Steam Revenue 2,855 2,969 3,088 3,211 1,670
Interest Income (32) 385 385 385 385 0
--------- --------- --------- --------- -------
Total Operating Revenues 183,452 191,384 199,799 208,478 108,628
OPERATING EXPENSES ($000)(33)
Fuel Expense 54,569 57,266 60,071 62,988 32,751
Fuel Transportation Expense 14,707 14,717 14,726 14,735 7,282
Operation & Maintenance 3,130 3,277 3,431 3,592 1,881
Operator's Fee 2,464 2,531 2,599 2,669 1,371
Repair & Maintenance 6,958 7,146 7,339 7,537 3,870
Water & Chemicals 453 465 478 491 252
Consumables 559 574 589 605 311
State Excise Tax on Steam Revenues (34) 100 104 108 112 58
Insurance 900 924 949 975 501
Administrative & General 1,144 1,175 1,206 1,239 636
Property Taxes 3,016 3,016 3,016 3,016 1,508
Wheeling Charges (35) 7,269 7,632 8,014 8,415 4,418
Letter-of-Credit Fees 321 330 339 179 0
--------- --------- --------- --------- -------
Total Operating Expenses 95,590 99,157 102,865 106,553 54,839
NET OPERATING REVENUES ($000) 87,862 92,227 96,934 101,925 53,789
SENIOR DEBT SERVICE (36)
Balance Outstanding (Jan 1) 100,473 74,281 43,177 8,799 0
Principal 26,193 31,104 34,378 8,799 0
Interest 7,420 5,125 2,479 180 0
--------- --------- --------- --------- -------
Total Senior Debt Service 33,613 36,229 36,857 8,979 0
Payments into Base Reserve Fund 0 0 0 (7,000) 0
Base Reserve Fund Balance (37) 7,000 7,000 7,000 0 0
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) 87,862 92,227 96,934 108,925 53,789
DISTRIBUTIONS TO OTHER PARTNERS (38) 58,500 62,362 68,496 72,552 17,205
DISTRIBUTIONS TO
CE GENERATION ($000)(38) 29,361 29,864 28,438 36,373 36,583
</TABLE>
B-63
<PAGE>
Exhibit B-4
CE Generation Gas Projects
Projected Operating Results
Sensitivity C: Reduced Availability
<TABLE>
<CAPTION>
Year Ending December 31 1999(1) 2000 2001 2002 2003 2004 2005
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Curtailment Hours (41) 1,300 1,300 1,300 1,300 1,300 1,800 1,800
Availability Factor (42) 91.0% 91.0% 91.0% 91.0% 91.0% 91.0% 91.0%
On-Peak Availability Factor (43) 87.0% 87.0% 87.0% 87.0% 87.0% 87.0% 87.0%
Capacity Factor (%)(44) 84.7% 84.7% 84.7% 84.7% 84.7% 79.0% 79.0%
Energy Generated (MWh)(42) 370,900 370,900 370,900 370,900 370,900 346,100 346,100
Transmission Losses (MWh)(45) 3,700 3,700 3,700 3,700 3,700 3,500 3,500
Energy Delivered (MWh) 367,200 367,200 367,200 367,200 367,200 342,600 342,600
Process Steam Sales (Mlb)(46) 49,500 49,500 49,500 49,500 49,500 46,200 46,200
Supplemental Steam Sales (Mlb)(46) 9,200 9,200 9,200 9,200 9,200 11,300 11,300
Chilling Steam Demand (Mlb)(46) 116,500 116,500 116,500 116,500 116,500 108,700 108,700
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 3,294 3,294 3,294 3,294 3,294 3,079 3,079
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) $140.00 140.00 140.00 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) $155.01 155.01 155.01 155.01 155.01 155.01 155.01
Energy Rate ($/MWh)(50) $30.90 31.70 28.16 33.99 35.23 36.82 40.09
Process Steam Price ($/Mlb)(51) $7.81 8.01 8.22 8.44 8.65 8.88 9.11
Supplemental Steam Price ($/Mlb)(51) $10.42 10.68 10.96 11.25 11.54 11.84 12.15
Chilling Steam Price ($/Mlb)(52) $1.32 1.33 1.34 1.54 1.59 1.65 1.77
True-up Steam Price ($/Mlb)(52) $0.33 0.33 0.34 0.38 0.40 0.41 0.44
Natural Gas Price ($/MMBtu)(53) $2.15 2.23 2.31 2.40 2.48 2.57 2.67
Gas Transportation Cost ($/MMBtu)(53) $0.23 0.23 0.24 0.25 0.25 0.26 0.27
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment $7,000 7,000 7,000 7,000 7,000 7,000 7,000
Bonus Capacity Payment $751 751 751 751 751 751 751
Energy Payment $11,346 11,640 10,340 12,481 12,936 12,615 13,735
Steam Revenue
Process Steam $387 397 407 418 428 410 421
Supplemental Steam $96 98 101 103 106 134 137
Chilling Steam $154 155 156 179 185 179 192
True-up Steam $14 15 15 17 17 17 18
------- ------- ------- ------- ------- ------- -------
Total Operating Revenues $19,748 20,056 18,770 20,949 21,423 21,106 22,254
OPERATING EXPENSES ($000)
Natural Gas $7,823 8,103 8,393 8,699 9,006 8,720 9,031
Natural Gas Use/Sales Taxes (54) $615 637 660 684 708 685 710
Natural Gas Service Fees (55) $182 185 187 190 192 195 198
Operating & Maintenance (56) $1,363 1,400 1,438 1,476 1,516 1,557 1,599
Major Maintenance (57) $0 3,278 193 0 204 2,322 215
Other Operating Fees/Water (56) $443 455 467 480 493 506 520
Audit, Legal & Finance (56) $762 12 13 13 13 14 14
Insurance (56) $157 161 166 170 175 179 184
Property & Other Taxes (56) $779 800 822 844 867 890 914
Capital Expenditures (56) $179 9 6 23 40 40 40
Wheeling (58) $961 961 961 961 961 959 959
------- ------- ------- ------- ------- ------- -------
Total Operating Expenses $13,264 16,001 13,306 13,540 14,175 16,067 14,384
NET OPERATING REVENUES ($000) $6,484 4,055 5,464 7,409 7,248 5,039 7,870
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $6,484 4,055 5,464 7,409 7,248 5,039 7,870
DISTRIBUTIONS TO
CE GENERATION ($000)(59) $6,484 4,055 5,464 7,409 7,248 5,039 7,870
<CAPTION>
Year Ending December 31 2006 2007 2008 2009
------- ------- ------- -------
<S> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000
Curtailment Hours (41) 1,800 1,800 1,800 1,800
Availability Factor (42) 91.0% 91.0% 91.0% 91.0%
On-Peak Availability Factor (43) 87.0% 87.0% 87.0% 87.0%
Capacity Factor (%)(44) 79.0% 79.0% 79.0% 79.0%
Energy Generated (MWh)(42) 346,100 346,100 346,100 346,100
Transmission Losses (MWh)(45) 3,500 3,500 3,500 3,500
Energy Delivered (MWh) 342,600 342,600 342,600 342,600
Process Steam Sales (Mlb)(46) 46,200 46,200 46,200 46,200
Supplemental Steam Sales (Mlb)(46) 11,300 11,300 11,300 11,300
Chilling Steam Demand (Mlb)(46) 108,700 108,700 108,700 108,700
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 3,079 3,079 3,079 3,079
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) 155.01 155.01 155.01 155.01
Energy Rate ($/MWh)(50) 39.91 40.19 43.05 42.04
Process Steam Price ($/Mlb)(51) 9.35 9.63 9.85 10.11
Supplemental Steam Price ($/Mlb)(51) 12.47 12.84 13.14 13.48
Chilling Steam Price ($/Mlb)(52) 1.78 1.80 1.90 1.89
True-up Steam Price ($/Mlb)(52) 0.44 0.45 0.48 0.47
Natural Gas Price ($/MMBtu)(53) 2.77 2.89 2.97 3.08
Gas Transportation Cost ($/MMBtu)(53) 0.27 0.28 0.29 0.30
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment 7,000 7,000 7,000 7,000
Bonus Capacity Payment 751 751 751 751
Energy Payment 13,673 13,769 14,749 14,403
Steam Revenue
Process Steam 432 445 455 467
Supplemental Steam 141 145 148 152
Chilling Steam 193 195 207 205
True-up Steam 18 18 19 19
------- ------- ------- -------
Total Operating Revenues 22,208 22,323 23,329 22,997
OPERATING EXPENSES ($000)
Natural Gas 9,351 9,748 10,028 10,382
Natural Gas Use/Sales Taxes (54) 735 766 788 816
Natural Gas Service Fees (55) 200 203 206 209
Operating & Maintenance (56) 1,642 1,687 1,732 1,779
Major Maintenance (57) 221 3,950 233 239
Other Operating Fees/Water (56) 534 548 563 578
Audit, Legal & Finance (56) 14 15 15 16
Insurance (56) 189 194 200 205
Property & Other Taxes (56) 939 964 990 1,017
Capital Expenditures (56) 40 40 40 40
Wheeling (58) 959 959 959 959
------- ------- ------- -------
Total Operating Expenses 14,824 19,074 15,754 16,240
NET OPERATING REVENUES ($000) 7,384 3,249 7,575 6,757
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) 7,384 3,249 7,575 6,757
DISTRIBUTIONS TO
CE GENERATION ($000)(59) 7,384 3,249 7,575 6,757
</TABLE>
B-64
<PAGE>
Exhibit B-4
CE Generation Gas Projects
Projected Operating Results
Sensitivity C: Reduced Availability
<TABLE>
<CAPTION>
Year Ending December 31 2010 2011 2012 2013 2014
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000 50,000
Curtailment Hours (41) 2,600 2,600 2,600 2,600 2,600
Availability Factor (42) 91.0% 91.0% 91.0% 91.0% 91.0%
On-Peak Availability Factor (43) 87.0% 87.0% 87.0% 87.0% 87.0%
Capacity Factor (%)(44) 69.9% 69.9% 69.9% 69.9% 69.9%
Energy Generated (MWh)(42) 306,300 306,300 306,300 306,300 306,300
Transmission Losses (MWh)(45) 3,100 3,100 3,100 3,100 3,100
Energy Delivered (MWh) 303,200 303,200 303,200 303,200 303,200
Process Steam Sales (Mlb)(46) 40,900 40,900 40,900 40,900 40,900
Supplemental Steam Sales (Mlb)(46) 14,700 14,700 14,700 14,700 14,700
Chilling Steam Demand (Mlb)(46) 96,200 96,200 96,200 96,200 96,200
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 2,735 2,735 2,735 2,735 2,735
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) $140.00 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) $155.01 155.01 155.01 155.01 155.01
Energy Rate ($/MWh)(50) $43.48 43.48 43.26 45.70 45.89
Process Steam Price ($/Mlb)(51) $10.38 10.66 10.95 11.25 11.56
Supplemental Steam Price ($/Mlb)(51) $13.84 14.21 14.60 15.00 15.41
Chilling Steam Price ($/Mlb)(52) $1.95 1.96 1.97 2.06 2.09
True-up Steam Price ($/Mlb)(52) $0.49 0.49 0.49 0.52 0.52
Natural Gas Price ($/MMBtu)(53) $3.19 3.31 3.43 3.56 3.69
Gas Transportation Cost ($/MMBtu)(53) $0.30 0.31 0.32 0.33 0.34
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment $7,000 7,000 7,000 7,000 7,000
Bonus Capacity Payment $751 751 751 751 751
Energy Payment $13,183 13,183 13,116 13,856 13,914
Steam Revenue
Process Steam $425 436 448 460 473
Supplemental Steam $203 209 215 220 226
Chilling Steam $187 189 190 199 201
True-up Steam $18 18 18 19 19
------- ------- ------- ------- -------
Total Operating Revenues $21,767 21,786 21,738 22,505 22,584
OPERATING EXPENSES ($000)
Natural Gas $9,548 9,892 10,251 10,623 11,008
Natural Gas Use/Sales Taxes (54) $750 777 806 835 865
Natural Gas Service Fees (55) $211 214 217 220 223
Operating & Maintenance (56) $1,827 1,876 1,927 1,979 2,033
Major Maintenance (57) $245 2,547 259 266 273
Other Operating Fees/Water (56) $594 610 626 643 661
Audit, Legal & Finance (56) $16 17 17 17 18
Insurance (56) $210 216 222 228 234
Property & Other Taxes (56) $1,044 1,072 1,101 1,131 1,162
Capital Expenditures (56) $40 40 40 40 40
Wheeling (58) $956 956 956 956 956
------- ------- ------- ------- -------
Total Operating Expenses $15,441 18,217 16,422 16,938 17,473
NET OPERATING REVENUES ($000) $6,326 3,569 5,316 5,567 5,111
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $6,326 3,569 5,316 5,567 5,111
DISTRIBUTIONS TO
CE GENERATION ($000)(59) $6,326 3,569 5,316 5,567 5,111
<CAPTION>
Year Ending December 31 2015 2016 2017 2018
------- ------- ------- -------
<S> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000
Curtailment Hours (41) 2,600 2,600 2,600 2,600
Availability Factor (42) 91.0% 91.0% 91.0% 91.0%
On-Peak Availability Factor (43) 87.0% 87.0% 87.0% 87.0%
Capacity Factor (%)(44) 69.9% 69.9% 69.9% 69.9%
Energy Generated (MWh)(42) 306,300 306,300 306,300 306,300
Transmission Losses (MWh)(45) 3,100 3,100 3,100 3,100
Energy Delivered (MWh) 303,200 303,200 303,200 303,200
Process Steam Sales (Mlb)(46) 40,900 40,900 40,900 40,900
Supplemental Steam Sales (Mlb)(46) 14,700 14,700 14,700 14,700
Chilling Steam Demand (Mlb)(46) 96,200 96,200 96,200 96,200
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 2,735 2,735 2,735 2,735
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) 155.01 155.01 155.01 155.01
Energy Rate ($/MWh)(50) 47.57 47.79 49.16 50.31
Process Steam Price ($/Mlb)(51) 11.59 12.20 12.53 12.86
Supplemental Steam Price ($/Mlb)(51) 15.45 16.26 16.71 17.15
Chilling Steam Price ($/Mlb)(52) 2.16 2.18 2.24 2.30
True-up Steam Price ($/Mlb)(52) 0.54 0.55 0.56 0.57
Natural Gas Price ($/MMBtu)(53) 3.62 3.97 4.11 4.25
Gas Transportation Cost ($/MMBtu)(53) 0.35 0.36 0.37 0.38
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment 7,000 7,000 7,000 7,000
Bonus Capacity Payment 751 751 751 751
Energy Payment 14,423 14,490 14,905 15,254
Steam Revenue
Process Steam 474 499 512 526
Supplemental Steam 227 239 246 252
Chilling Steam 207 210 216 221
True-up Steam 19 20 20 21
------- ------- ------- -------
Total Operating Revenues 23,101 23,209 23,650 24,025
OPERATING EXPENSES ($000)
Natural Gas 10,858 11,815 12,239 12,652
Natural Gas Use/Sales Taxes (54) 853 929 962 994
Natural Gas Service Fees (55) 226 229 232 235
Operating & Maintenance (56) 2,087 2,144 2,202 2,261
Major Maintenance (57) 0 5,020 296 304
Other Operating Fees/Water (56) 678 697 716 735
Audit, Legal & Finance (56) 18 19 19 20
Insurance (56) 240 247 254 260
Property & Other Taxes (56) 1,193 1,225 1,258 1,292
Capital Expenditures (56) 40 40 40 40
Wheeling (58) 956 956 956 956
------- ------- ------- -------
Total Operating Expenses 17,149 23,321 19,174 19,749
NET OPERATING REVENUES ($000) 5,952 (112) 4,476 4,276
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) 5,952 0 4,476 4,276
DISTRIBUTIONS TO
CE GENERATION ($000)(59) 5,952 0 4,476 4,276
</TABLE>
B-65
<PAGE>
Footnotes to Exhibit B-4
The footnotes to Exhibit B-4 are the same as the footnotes for Exhibit
B-1, except:
3. Assumes availability of the Natural Gas Projects is 5 percent less than
that assumed in the Base Case.
20. Assumes availability of the Natural Gas Projects is 5 percent less than
that assumed in the Base Case.
42. Assumes availability of the Natural Gas Projects is 5 percent less than
that assumed in the Base Case.
B-66
<PAGE>
Exhibit B-5
CE Generation Gas Projects
Projected Operating Results
Sensitivity D: Yuma Low Gas 1
<TABLE>
<CAPTION>
Year Ending December 31 1999(1) 2000 2001 2002 2003 2004 2005
------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Curtailment Hours (41) 1,300 1,300 1,300 1,300 1,300 1,800 1,800
Availability Factor (42) 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 89.3% 89.3% 89.3% 89.3% 89.3% 83.4% 83.4%
Energy Generated (Mwh)(42) 391,300 391,300 391,300 391,300 391,300 365,100 365,100
Transmission Losses (MWh)(45) 3,900 3,900 3,900 3,900 3,900 3,700 3,700
Energy Delivered (MWh) 387,400 387,400 387,400 387,400 387,400 361,400 361,400
Process Steam Sales (Mlb)(46) 49,500 49,500 49,500 49,500 49,500 46,200 46,200
Supplemental Steam Sales (Mlb)(46) 9,200 9,200 9,200 9,200 9,200 11,900 11,900
Chilling Steam Demand (Mlb)(46) 116,500 116,500 116,500 116,500 116,500 108,700 108,700
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 3,474 3,474 3,474 3,474 3,474 3,248 3,248
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) $140.00 l40.00 140.00 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) $163.92 163.92 l63.92 163.92 163.92 163.92 163.92
Energy Rate ($/MWh)(50) $30.90 31.70 27.86 30.57 32.73 34.88 38.70
Process Steam Price ($/Mlb)(51) $7.81 7.90 7.99 8.09 8.30 8.51 8.73
Supplemental Steam Price ($/Mlb)(51) $10.42 10.53 10.65 10.79 11.07 11.35 11.64
Chilling Steam Price ($/Mlb)(52) $1.32 1.32 1.33 1.43 1.51 1.59 1.72
True-up Steam Price ($/Mlb)(52) $0.33 0.33 0.33 0.36 0.38 0.40 0.43
Natural Gas Price ($/MMBtu)(53) $2.15 2.15 2.15 2.16 2.24 2.32 2.40
Gas Transportation Cost ($/MMBtu)(53) $0.23 0.23 0.24 0.25 0.25 0.26 0.27
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment $7,000 7,000 7,000 7,000 7,000 7,000 7,000
Bonus Capacity Payment $1,196 1,196 1,196 1,196 1,196 1,196 1,196
Energy Payment $11,971 12,281 10,793 11,843 12,678 12,606 13.986
Steam Revenue
Process Steam $387 391 396 401 411 393 403
Supplemental Steam $96 97 98 99 102 135 139
Chilling Steam $154 154 155 166 176 173 187
True-up Steam $13 13 13 14 15 15 16
------- ------ ------ ------ ------ ------ ------
Total Operating Revenues $20,817 21,132 19,651 20,719 21,578 21,518 22,927
OPERATING EXPENSES ($000)
Natural Gas $8,251 8,272 8,292 8,341 8,636 8,364 8,659
Natural Gas Use/Sales Taxes (54) $648 650 652 656 679 657 681
Natural Gas Service Fees (55) $182 185 187 190 192 195 198
Operating & Maintenance (56) $1,363 1,400 1,438 1,476 1,516 1,557 1,599
Major Maintenance (57) $183 3,278 193 198 2,262 209 215
Other Operating Fees/Water (56) $443 455 467 480 493 506 520
Audit, Legal & Finance (56) $762 12 13 13 13 14 14
Insurance (56) $157 161 166 170 175 179 184
Property & Other Taxes (56) $779 800 822 844 867 890 914
Capital Expenditures (56) $179 9 6 23 40 40 40
Wheeling (58) $963 963 963 963 963 961 961
------- ------ ------ ------ ------ ------ ------
Total Operating Expenses $13,910 16,185 13,199 13,354 15,836 13,572 13,985
NET OPERATING REVENUES ($000) $6,907 4,947 6,452 7,365 5,742 7,946 8,942
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $6,907 4,947 6,452 7,365 5,742 7,946 8,942
DISTRIBUTIONS TO
CE GENERATION ($000)(59) $6,907 4,947 6,452 7,365 5,742 7,946 8,942
<CAPTION>
Year Ending December 31 2006 2007 2008 2009
---- ---- ---- ----
<S> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000
Curtailment Hours (41) 1,800 1,800 1,800 1,800
Availability Factor (42) 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 83.4% 83.4% 83.4% 83.4%
Energy Generated (Mwh)(42) 365,100 365,100 365,100 365,100
Transmission Losses (MWh)(45) 3,700 3,700 3,700 3,700
Energy Delivered (MWh) 361,400 361,400 361,400 361,400
Process Swam Sales (Mlb)(46) 46,200 46,200 46,200 46,200
Supplemental Steam Sales (Mlb)(46) 11,900 11,900 11,900 11,900
Chilling Steam Demand (Mlb)(46) 108,700 108,700 108,700 108,700
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 3,248 3,248 3,248 3,248
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) 163.92 163.92 163.92 163.92
Energy Rate ($/MWh)(50) 39.01 39.32 39.63 39.94
Process Steam Price ($/Mlb)(51) 8.96 9.22 9.43 9.67
Supplemental Steam Price ($/Mlb)(51) 11.95 12.29 12.57 12.90
Chilling Steam Price ($/Mlb)(52) 1.75 1.77 1.79 1.82
True-up Steam Price ($/Mlb)(52) 0.44 0.44 0.45 0.45
Natural Gas Price ($/MMBtu)(53) 2.49 2.60 2.67 2.77
Gas Transportation Cost ($/MMBtu)(53) 0.27 0.28 0.29 0.30
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment 7,000 7,000 7,000 7,000
Bonus Capacity Payment 1,196 1,196 1,196 1,196
Energy Payment 14,098 14,210 14,322 14,434
Steam Revenue
Process Steam 414 426 436 447
Supplemental Steam 142 146 150 153
Chilling Steam 190 192 195 198
True-up Steam 16 16 17 17
------ ------ ------ ------
Total Operating Revenues 23,056 23,186 23,316 23,445
OPERATING EXPENSES ($000)
Natural Gas 8,968 9,344 9,614 9,952
Natural Gas Use/Sales Taxes (54) 705 734 756 782
Natural Gas Service Fees (55) 200 203 206 209
Operating & Maintenance (56) 1,642 1,687 1,732 1,779
Major Maintenance (57) 0 3,950 233 239
Other Operating Fees/Water (56) 534 548 563 578
Audit, Legal & Finance (56) 14 15 15 16
Insurance (56) 189 194 200 205
Property & Other Taxes (56) 939 964 990 1,017
Capital Expenditures (56) 40 40 40 40
Wheeling (58) 961 961 961 961
------ ------ ------ ------
Total Operating Expenses 14,192 18,640 15,310 15,778
NET OPERATING REVENUES ($000) 8,864 4,546 8,006 7,667
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) 8,864 4,546 8,006 7,667
DISTRIBUTIONS TO
CE GENERATION ($000)(59) 8,864 4,546 8,006 7,667
</TABLE>
B-67
<PAGE>
Exhibit B-5
CE Generation Gas Projects
Projected Operating Results
Sensitivity D: Yuma Low Gas 1
<TABLE>
<CAPTION>
Year Ending December 31 2010 2011 2012 2013 2014
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000 50,000
Curtailment Hours (41) 2,600 2,600 2,600 2,600 2,600
Availability Factor (42) 96.0% 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 73.8% 73.8% 73.8% 73.8% 73.8%
Energy Generated (MWh)(42) 323,100 323,100 323,100 323,100 323,100
Transmission Losses (MWh)(45) 3,200 3,200 3,200 3,200 3,200
Energy Delivered (MWh) 319,900 319,900 319,900 319,900 319,900
Process Steam Sales (Mlb)(46) 40,900 40,900 40,900 40,900 40,900
Supplemental Steam Sales (Mlb)(46) 16,300 l6,300 16,300 16,300 16,300
Chilling Steam Demand (Mlb)(46) 96,200 96,200 96,200 96,200 96,200
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 2,886 2,886 2,886 2,886 2,886
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) $140.00 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) $163.92 163.92 163.92 163.92 163.92
Energy Rate ($MWh)(50) $40.25 40.91 41.57 42.13 42.89
Process Steam Price ($/Mlb)(51) $9.93 10.19 10.46 10.74 11.03
Supplemental Steam Price ($/Mlb)(51) $13.23 13.58 13.95 14.32 14.71
Chilling Steam Price ($/Mlb)(52) $1.84 1.88 1.92 1.95 1.99
True-up Steam Price ($/Mlb)(52) $0.46 0.47 0.48 0.49 0.50
Natural Gas Price ($/MMBtu)(53) $2.87 2.98 3.09 3.20 3.32
Gas Transportation Cost ($/MMBtu)(53) $0.30 0.31 0.32 0.33 0.34
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment $7,000 7,000 7,000 7,000 7,000
Bonus Capacity Payment $1,196 1,196 1,196 1,196 1,196
Energy Payment $12,876 13,087 13,298 13,509 13,721
Steam Revenue
Process Steam $406 417 428 439 451
Supp1ement Steam $216 22l 227 233 240
Chilling Steam $177 181 184 188 192
True-up Steam $15 15 16 16 16
------- ------ ------ ------ ------
Total Operating Revenues $21,886 22,117 22,349 22,581 22,816
OPERATING EXPENSES ($000)
Natural Gas $9,154 9,483 9,827 10,182 10,55l
Natural Gas Use/Sales Taxes (54) $719 745 772 800 829
Natural Gas Service Fees (55) $211 214 217 220 223
Operating & Maintenance (56) $1,827 1,876 1,927 1,979 2,033
Major Maintenance (57) $245 2,799 259 266 0
Other Operating Fees/Water (56) $594 610 626 643 661
Audit, Legal & Finance (56) $16 17 17 17 18
Insurance (56) $210 216 222 228 234
Property & Other Taxes (56) $1,044 1,072 1,101 1,131 1,162
Capital Expenditures (56) $40 40 40 40 40
Wheeling (58) $957 957 957 957 957
------- ------ ------ ------ ------
Total Operating Expenses $15,017 18,029 15,965 16,463 16,708
NET OPERATING REVENUES ($000) $6,869 4,088 6,384 6,118 6,108
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $6,869 4,088 6,384 6,118 6,108
DISTRIBUTIONS TO
CE GENERATION ($000)(59) $6,869 4,088 6,384 6,118 6,108
<CAPTION>
Year Ending December 31 2015 2016 2017 2018
---- ---- ---- ----
<S> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000
Curtailment Hours (41) 2,600 2,600 2,600 2,600
Availability Factor (42) 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 73.8% 73.8% 73.8% 73.8%
Energy Generated (MWh)(42) 323,100 323,100 323,100 323,100
Transmission Losses (MWhx45) 3,200 3,200 3,200 3,200
Energy Delivered (MWh) 319,900 319,900 319,900 319,900
Process Steam Sales (Mlb)(46) 40,900 40,900 40,900 40,900
Supplemental Steam Sales (Mlb)(46) 16,300 16,300 16,300 16,300
Chilling Steam Demand (Mlb)(46) 96,200 96,200 96,200 96,200
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 2,886 2,886 2,886 2,886
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) 140.00 140.00 140.00 140.00
Bonus Capacity Price($/kW-yr)(49) 163.92 163.92 163.92 163.92
Energy Rate ($MWh)(50) 43.91 44.92 45.94 46.95
Process Steam Price ($/Mlb)(51) 11.07 11.63 11.94 12.26
Supplemental Steam Price ($/Mlb)(51) 14.76 15.51 15.93 16.34
Chilling Steam Price ($/Mlb)(52) 2.04 2.09 2.14 2.19
True-up Steam Price ($/Mlb)(52) 0.51 0.52 0.54 0.55
Natural Gas Price ($/MMBtu)(53) 3.26 3.57 3.70 3.83
Gas Transportation Cost ($/MMBtu)(53) 0.35 0.36 0.37 0.38
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment 7,000 7,000 7,000 7,000
Bonus Capacity Payment 1,196 1,196 1,196 1,196
Energy Payment 14,045 14,370 14,695 15,019
Steam Revenue
Process Steam 453 476 489 501
Supp1ement Steam 241 253 260 266
Chilling Steam 196 201 206 211
True-up Steam 17 17 18 18
------ ------ ------ ------
Total Operating Revenues 23,148 23,513 23,864 24,211
OPERATING EXPENSES ($000)
Natural Gas 10,413 11325 11,729 12,124
Natural Gas Use/Sales Taxes (54) 818 890 922 953
Natural Gas Service Fees (55) 226 229 232 235
Operating & Maintenance (56) 2,087 2,144 2,202 2,261
Major Maintenance (57) 4,887 288 296 304
Other Operating Fees/Water (56) 678 697 716 735
Audit, Legal & Finance (56) 18 19 19 20
Insurance (56) 240 247 254 260
Property & Other Taxes (56) 1,193 1,225 1,258 1,292
Capital Expenditures (56) 40 40 40 40
Wheeling (58) 957 957 957 957
------ ------ ------ ------
Total Operating Expenses 21,557 18,061 18,625 19,181
NET OPERATING REVENUES ($000) 1,591 5,452 5,239 5,030
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) 1,591 5,452 5,239 5,030
DISTRIBUTIONS TO
CE GENERATION ($000)(59) 1,591 5,452 5,239 5,030
</TABLE>
B-68
<PAGE>
Footnotes to Exhibit B-5
The footnotes to Exhibit B-5 are the same as the footnotes for Exhibit
B-1, except:
50. Assumes prices consistent with the Low Gas 1 case as described in the
Henwood Report.
53. Assumes prices consistent with the Low Gas 1 case as described in the
Henwood Report.
B-69
<PAGE>
Exhibit B-6
CE Generation Gas Projects
Projected Operating Results
Sensitivity E: Yuma Low Gas 2
<TABLE>
<CAPTION>
Year Ending December 31 1999(1) 2000 2001 2002 2003 2004 2005
------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Curtailment Hours (41) 1,300 1,300 1,300 1,300 1,300 1,800 1,800
Availability Factor (42) 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 89.3% 89.3% 89.3% 89.3% 89.3% 83.4% 83.4%
Energy Generated (Mwh)(42) 391,300 391,300 391,300 391,300 391,300 365,100 365,100
Transmission Losses (MWh)(45) 3,900 3,900 3,900 3,900 3,900 3,700 3,700
Energy Delivered (MWh) 387,400 387,400 387,400 387,400 387,400 361,400 361,400
Process Steam Sales (Mlb)(46) 49,500 49,500 49,500 49,500 49,500 46,200 46,200
Supplemental Steam Sales (Mlb)(46) 9,200 9,200 9,200 9,200 9,200 11,900 11,900
Chilling Steam Demand (Mlb)(46) 116,500 116,500 116,500 116,500 116,500 108,700 108,700
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 3,474 3,474 3,474 3,474 3,474 3,248 3,248
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) $140.00 140.00 140.00 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) $163.92 163.92 163.92 163.92 163.92 163.92 163.92
Energy Rate ($/MWh)(50) $30.90 31.70 26.47 28.75 30.42 32.09 35.58
Process Steam Price ($/Mlb)(51) $7.81 7.92 8.02 8.13 8.23 8.33 8.54
Supplemental Steam Price ($/Mlb)(51) $10.42 10.56 10.70 10.84 10.97 11.11 11.39
Chilling Steam Price ($/Mlb)(52) $1.32 1.30 1.29 1.37 1.44 1.50 1.63
True-up Steam Price ($/Mlb)(52) $0.33 0.32 0.32 0.34 0.36 0.38 0.41
Natural Gas Price ($/MMBtu)(53) $2.15 2.16 2.17 2.18 2.19 2.19 2.27
Gas Transportation Cost ($/MMBtu)(53) $0.23 0.23 0.24 0.25 0.25 0.26 0.27
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment $7,000 7,000 7,000 7,000 7,000 7,000 7,000
Bonus Capacity Payment $1,196 1,196 1,196 1,196 1,196 1,196 1,196
Energy Payment $11,971 12,281 10,254 11,137 11,784 11,596 12,859
Steam Revenue
Process Steam $387 392 397 402 407 385 395
Supplemental Steam $96 97 98 100 101 132 136
Chilling Steam $154 151 150 160 167 163 177
True-up Steam $13 13 13 14 14 14 15
------- ------ ------ ------ ------ ------ ------
Total Operating Revenues $20,817 21,130 19,108 20,009 20,669 20,486 21,778
OPERATING EXPENSES ($000)
Natural Gas $8,251 8,313 8,369 8,424 8,463 7,945 8,227
Natural Gas Use/Sales Taxes (54) $648 653 658 662 665 624 647
Natural Gas Service Fees (55) $182 185 187 190 192 195 198
Operating & Maintenance (56) $1,363 1,400 1,438 1,476 1,516 1,557 1,599
Major Maintenance (57) $183 3,278 193 198 2,262 209 215
Other Operating Fees/Water (56) $443 455 467 480 493 506 520
Audit, Legal & Finance (56) $762 12 13 13 13 14 14
Insurance (56) $157 161 166 170 175 179 184
Property & Other Taxes (56) $779 800 822 844 867 890 914
Capital Expenditures (56) $179 9 6 23 40 40 40
Wheeling (58) $963 963 963 963 963 961 961
------- ------ ------ ------ ------ ------ ------
Total Operating Expenses $13,910 16,229 13,282 13,443 15,649 13,120 13,519
NET OPERATING REVENUES ($000) $6,907 4,901 5,826 6,566 5,020 7,366 8,259
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $6,907 4,901 5,826 6,566 5,020 7,366 8,259
DISTRIBUTIONS TO
CE GENERATION ($000)(59) $6,907 4,901 5,826 6,566 5,020 7,366 8,259
<CAPTION>
Year Ending December 31 2006 2007 2008 2009
---- ---- ---- ----
<S> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000
Curtailment Hours (41) 1,800 1,800 1,800 1,800
Availability Factor (42) 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 83.4% 83.4% 83.4% 83.4%
Energy Generated(Mwh)(42) 365,100 365,100 365,100 365,100
Transmission Losses (MWh(45) 3,700 3,700 3,700 3,700
Energy Delivered (MWh) 361,400 361,400 361,400 361,400
Process Steam Sales (Mlb)(46) 46,200 46,200 46,200 46,200
Supplemental Steam Sales (Mlb)(46) 11,900 11,900 11,900 11,900
Chilling Steam Demand (Mlb)(46) 108,700 108,700 108,700 108,700
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 3,248 3,248 3,248 3,248
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) 163.92 163.92 163.92 163.92
Energy Rate ($/MWh)(50) 36.16 36.74 37.31 37.89
Process Steam Price ($/Mlb)(51) 8.76 9.01 9.22 9.45
Supplemental Steam Price ($/Mlb)(51) 11.68 12.02 12.29 12.61
Chilling Steam Price ($/Mlb)(52) 1.66 1.69 1.72 1.75
True-up Steam Price ($/Mlb)(52) 0.41 0.42 0.43 0.44
Natural Gas Price ($/MMBtu)(53) 2.35 2.45 2.53 2.62
Gas Transportation Cost ($/MMBtu)(53) 0.27 0.28 0.29 0.30
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment 7,000 7,000 7,000 7,000
Bonus Capacity Payment 1,196 1,196 1,196 1,196
Energy Payment 13,068 13,276 13,485 13,694
Steam Revenue
Process Steam 405 416 426 437
Supplemental Steam 139 143 146 150
Chilling Steam 180 184 187 191
True-up Steam 15 16 16 16
------ ------ ------ ------
Total Operating Revenues 22,003 22,231 22,456 22,684
OPERATING EXPENSES ($000)
Natural Gas 8,516 8,877 9,133 9,452
Natural Gas Use/Sales Taxes (54) 669 698 718 743
Natural Gas Service Fees (55) 200 203 206 209
Operating & Maintenance (56) 1,642 1,687 1,732 1,779
Major Maintenance (57) 0 3,950 233 239
Other Operating Fees/Water (56) 534 548 563 578
Audit, Legal & Finance(56) 14 15 15 16
Insurance (56) 189 194 200 205
Property & Other Taxes(56) 939 964 990 1,017
Capital Expenditures (56) 40 40 40 40
Wheeling (58) 961 961 961 961
------ ------ ------ ------
Total Operating Expenses 13,704 18,137 14,791 15,239
NET OPERATING REVENUES ($000) 8,299 4,094 7,665 7,445
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) 8,299 4,094 7,665 7,445
DISTRIBUTIONS TO
CE GENERATION ($000)(59) 8,299 4,094 7,665 7,445
</TABLE>
B-70
<PAGE>
Exhibit B-6
CE Generation Gas Projects
Projected Operating Results
Sensitivity E: Yuma Low Gas 2
<TABLE>
<CAPTION>
Year Ending December 31 2010 2011 2012 2013 2014
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000 50,000
Curtailment Hours (41) 2,600 2,600 2,600 2,600 2,600
Availability Factor (42) 96.0% 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 73.8% 73.8% 73.8% 73.8% 73.8%
Energy Generated (MWh)(42) 323,100 323,100 323,100 323,100 323,100
Transmission Losses (MWh)(45) 3,200 3,200 3,200 3,200 3,200
Energy Delivered (MWh) 319,900 19,900 319,900 319,900 319,900
Process Steam Sales (Mlb)(46) 40,900 40,900 40,900 40,900 40,900
Supplemental Steam Sales (Mlb)(46) 16,300 16,300 16,300 16,300 16,300
Chilling Steam Demand (Mlb)(46) 96,200 96,200 96,200 96,200 96,200
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 2,886 2,886 2,886 2,886 2,886
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) $140.00 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) $163.92 163.92 163.92 163.92 163.92
Energy Rate ($/MWh)(50) $38.47 38.85 39.23 39.60 39.98
Process Steam Price ($/Mlb)(51) $9.70 9.95 10.22 10.49 10.77
Supplemental Steam Price($/Mlb)(51) $12.93 13.27 13.62 13.98 14.36
Chilling Steam Price ($/Mlb)(52) $1.79 1.82 1.84 1.87 1.90
True-up Steam Price ($/Mlb)(52) $0.45 0.45 0.46 0.47 0.48
Natural Gas Price ($/MMBtu)(53) $2.71 2.81 2.92 3.02 3.14
Gas Transportation Cost ($/MMBtu)(53) $0.30 0.31 0.32 0.33 0.34
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment $7,000 7,000 7,000 7,000 7,000
Bonus Capacity Payment $1,196 1,196 1,196 1,196 1,196
Energy Payment $12,307 12,427 12,548 12,669 12,790
Steam Revenue
Process Steam $397 407 418 429 440
Supplement Steam $211 216 222 228 234
Chilling Steam $172 175 177 180 183
True-up Steam $15 15 15 15 16
------- ------ ------ ------ -----
Total Operating Revenues $21,298 21,436 2l,576 21,717 21,859
OPERATING EXPENSES ($000)
Natural Gas $8,696 9,007 9,333 9,671 10,020
Natural Gas Use/Sales Taxes (54) $683 708 733 760 787
Natural Gas Service Fees (55) $211 214 217 220 223
Operating & Maintenance (56) $1,827 1,876 1,927 1,979 2,033
Major Maintenance (57) $245 2,799 259 266 0
Other Operating Fees/Water (56) $594 610 626 643 661
Audit, Legal & Finance (56) $16 17 17 17 18
Insurance (56) $210 216 222 228 234
Property & Other Taxes (56) $1,044 1,072 1,101 1,131 1,162
Capital Expenditures (56) $40 40 40 40 40
Wheeling (58) $957 957 957 957 957
------- ------ ------ ------ -----
Total Operating Expenses $14,523 17,516 15,432 15,912 l6,135
NET OPERATING REVENUES ($000) $6,775 3,920 6,144 5,805 5,724
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $6,775 3,920 6,l44 5,805 5,724
DISTRIBUTIONS TO
CE GENERATION ($000)(59) $6,775 3920 6,144 5,805 5,724
<CAPTION>
Year Ending December 31 2015 2016 2017 2018
---- ---- ---- ----
<S> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000
Curtailment Hours (41) 2,600 2,600 2,600 2,600
Availability Factor (42) 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 73.8% 73.8% 73.8% 73.8%
Energy Generated (MWh)(42) 323,100 323,100 323,100 323,100
Transmission Losses (MWh)(45) 3,200 3,200 3,200 3,200
Energy Delivered (MWh) 319,900 319,900 319,900 319,900
Process Steam Sales (Mlb)(46) 40,900 40,900 40,900 40,900
Supplemental Steam Sales (Mlb)(46) 16,300 16,300 16,300 16,300
Chilling Steam Demand (Mlb)(46) 96,200 96,200 96,200 96,200
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 2,886 2,886 2,886 2,886
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) 163.92 163.92 163.92 163.92
Energy Rate ($/MWh)(50) 40.81 41.65 42.48 43.31
Process Steam Price ($/Mlb)(51) 10.81 11.35 11.65 11.95
Supplemental Steam Price($/Mlb)(51) 14.41 15.13 15.54 15.94
Chilling Steam Price ($/Mlb)(52) 1.94 1.99 2.03 2.08
True-up Steam Price ($/Mlb)(52) 0.49 0.50 0.51 0.52
Natural Gas Price ($/MMBtu)(53) 3.08 3.37 3.49 3.61
Gas Transportation Cost ($/MMBtu)(53) 0.35 0.36 0.37 0.38
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment 7,000 7,000 7,000 7,000
Bonus Capacity Payment 1,196 1,196 1,196 1,196
Energy Payment 13,056 13,322 13,589 13,855
Steam Revenue
Process Steam 442 464 477 489
Supplement Steam 235 247 253 260
Chilling Steam 187 191 196 200
True-up Steam 16 16 17 17
------ ------ ------ ------
Total Operating Revenues 22,132 22,436 22,728 23,017
OPERATING EXPENSES ($000)
Natural Gas 9,887 10,750 11,137 11,509
Natural Gas Use/Sales Taxes (54) 777 845 875 904
Natural Gas Service Fees(55) 226 229 232 235
Operating & Maintenance (56) 2,087 2,144 2,202 2,261
Major Maintenance (57) 4,887 288 296 304
Other Operating Fees/Water (56) 678 697 716 735
Audit, Legal & Finance(56) 18 19 19 20
Insurance (56) 240 247 254 260
Property & Other Taxes (56) 1,193 1,225 1,258 1,292
Capital Expenditures (56) 40 40 40 40
Wheeling (58) 957 957 957 957
------ ------ ------ ------
Total Operating Expenses 20,990 17,441 17,986 18,517
NET OPERATING REVENUES ($000) 1,142 4,995 4,742 4,500
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) l,142 4,995 4,742 4,500
DISTRIBUTIONS TO
CE GENERATION ($000)(59) 1,142 4,995 4,742 4,500
</TABLE>
B-71
<PAGE>
Footnotes to Exhibit B-6
The footnotes to Exhibit B-6 are the same as the footnotes for Exhibit
B-1, except:
50. Assumes prices consistent with the Low Gas 2 case as described in the
Henwood Report.
53. Assumes prices consistent with the Low Gas 2 case as described in the
Henwood Report.
B-72
<PAGE>
Exhibit B-7
CE Generation Gas Projects
Projected Operating Results
Sensitivity F: Yuma SCE Low SRAC
<TABLE>
<CAPTION>
Year Ending December 31 1999(1) 2000 2001 2002 2003 2004 2005
------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Curtailment Hours (41) 1,300 1,300 1,300 1,300 1,300 1,800 1,800
Availability Factor (42) 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 89.3% 89.3% 89.3% 89.3% 89.3% 83.4% 83.4%
Energy Generated (MWh)(42) 391,300 391,300 391,300 391,300 391,300 365,100 365,100
Transmission Losses (MWh)(45) 3,900 3,900 3,900 3,900 3,900 3,700 3,700
Energy Delivered (MWh) 387,400 387,400 387,400 387,400 387,400 361,400 361,400
Process Steam Sales (Mlb)(46) 49,500 49,500 49,500 49,500 49,500 46,200 46,200
Supplemental Steam Sales (Mlb)(46) 9,200 9,200 9,200 9,200 9,200 11,900 11,900
Chilling Steam Demand (MIb)(46) 116,500 116,500 116,500 116,500 116,500 108,700 108,700
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830 8,830 8,830 8,830
Fuel Consumption (BBTu)(47) 3,474 3,474 3,474 3,474 3,474 3,248 3,248
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) $140.00 140.00 140.00 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) $163.92 163.92 163.92 163.92 163.92 163.92 163.92
Energy Rate ($/MWh)(50) $29.10 31.10 33.00 34.20 35.20 36.20 37.20
Process Steam Price ($/Mlb)(51) $7.81 8.01 8.22 8.44 8.65 8.88 9.11
Supplemental Steam Price ($/Mlb)(51) $10.42 10.68 10.96 11.25 11.54 11.84 12.15
Chilling Steam Price ($/Mlb)(52) $0.43 0.44 0.45 0.47 0.48 0.49 0.50
True-up Steam Price ($/Mlb)(52) $0.11 0.11 0.11 0.12 0.12 0.12 0.13
Natural Gas Price ($/MMBtu)(53) $2.15 2.23 2.31 2.40 2.48 2.57 2.67
Gas Transportation Cost ($/MMBtu)(53) $0.23 0.23 0.24 0.25 0.25 0.26 0.27
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment $7,000 7,000 7,000 7,000 7,000 7,000 7,000
Bonus Capacity Payment $1,196 1,196 1,196 1,196 1,196 1,196 1,196
Energy Payment $11,273 12,048 12,784 13,249 13,636 13,083 13,444
Steam Revenue
Process Steam $387 397 407 418 428 410 421
Supplemental Steam $96 98 101 103 106 141 145
Chilling Steam $50 51 53 54 56 53 55
True-up Steam $4 4 5 5 5 5 5
------- ------ ------ ------ ------ ------ ------
Total Operating Revenues $20,006 20,794 21,546 22,025 22,427 21,888 22,266
OPERATING EXPENSES ($000)
Natural Gas $8,251 8,546 8,852 9,175 9,498 9,198 9,526
Natural Gas Use/Sales Taxes (54) $648 672 696 721 746 723 749
Natural Gas Service Fees (55) $182 185 187 190 192 195 198
Operating & Maintenance (56) $1,363 1,400 1,438 1,476 1,516 1,557 1,599
Major Maintenance (57) $183 3,278 193 198 2,262 209 215
Other Operating Fees/Water (56) $443 455 467 480 493 506 520
Audit, Legal & Finance (56) $762 12 13 13 13 14 14
Insurance (56) $157 161 166 170 175 179 184
Property & Other Taxes (56) $779 800 822 844 867 890 914
Capital Expenditures (56) $179 9 6 23 40 40 40
Wheeling (58) $963 963 963 963 963 961 961
------- ------ ------ ------ ------ ------ ------
Total Operating Expenses $13,910 16,481 13,803 14,253 16,765 14,472 14,920
NET OPERATING REVENUES ($000) $6,096 4,313 7,743 7,772 5,662 7,416 7,346
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $6,096 4,313 7,743 7,772 5,662 7,416 7,346
DISTRIBUTIONS TO
CE GENERATION ($000)(59) $6,096 4,313 7,743 7,772 5,662 7,416 7,346
<CAPTION>
Year Ending December 31 2006 2007 2008 2009
---- ---- ---- ----
<S> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000
Curtailment Hours (41) 1,800 1,800 1,800 1,800
Availability Factor (42) 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 83.4% 83.4% 83.4% 83.4%
Energy Generated (MWh)(42) 365,100 365,100 365,100 365,100
Transmission Losses (MWh)(45) 3,700 3,700 3,700 3,700
Energy Delivered (MWh) 361,400 361,400 361,400 361,400
Process Steam Sales (Mlb)(46) 46,200 46,200 46,200 46,200
Supplemental Steam Sales (Mlb)(46) 11,900 11,900 11,900 11,900
Chilling Steam Demand (Mlb)(46) 108,700 108,700 108,700 108,700
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830
Fuel Consumption (BBTu)(47) 3,248 3,248 3,248 3,248
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) 163.92 163.92 163.92 163.92
Energy Rate ($/MWh)(50) 38.30 39.50 40.60 41.80
Process Steam Price ($/Mlb)(51) 9.35 9.63 9.85 10.11
Supplemental Steam Price ($/Mlb)(51) 12.47 12.84 13.14 13.48
Chilling Steam Price ($/Mlb)(52) 0.52 0.53 0.55 0.56
True-up Steam Price ($/Mlb)(52) 0.13 0.13 0.14 0.14
Natural Gas Price ($/MMBtu)(53) 2.77 2.89 2.97 3.08
Gas Transportation Cost ($/MMBtu)(53) 0.27 0.28 0.29 0.30
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment 7,000 7,000 7,000 7,000
Bonus Capacity Payment 1,196 1,196 1,196 1,196
Energy Payment 13,842 14,275 14,673 15,107
Steam Revenue
Process Steam 432 445 455 467
Supplemental Steam 148 153 156 160
Chilling Steam 56 58 59 61
True-up Steam 5 5 5 5
------ ------ ------ ------
Total Operating Revenues 22,679 23,132 23,544 23,996
OPERATING EXPENSES ($000)
Natural Gas 9,864 10,283 10,579 10,952
Natural Gas Use/Sales Taxes (54) 775 808 831 861
Natural Gas Service Fees (55) 200 203 206 209
Operating & Maintenance (56) 1,642 1,687 1,732 1,779
Major Maintenance (57) 0 3,950 233 239
Other Operating Fees/Water (56) 534 548 563 578
Audit, Legal & Finance (56) 14 15 15 16
Insurance (56) 189 194 200 205
Property & Other Taxes (56) 939 964 990 1,017
Capital Expenditures (56) 40 40 40 40
Wheeling (58) 961 961 961 961
------ ------ ------ ------
Total Operating Expenses 15,158 19,653 16,350 16,857
NET OPERATING REVENUES ($000) 7,521 3,479 7,194 7,139
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) 7,521 3,479 7,194 7,139
DISTRIBUTIONS TO
CE GENERATION ($000)(59) 7,521 3,479 7,194 7,139
</TABLE>
B-73
<PAGE>
Exhibit B-7
CE Generation Gas Projects
Projected Operating Results
Sensitivity F: Yuma SCE Low SRAC
<TABLE>
<CAPTION>
Year Ending December 31 2010 2011 2012 2013 2014
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000 50,000
Curtailment Hours (41) 2,600 2,600 2,600 2,600 2,600
Availability Factor (42) 96.0% 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 73.8% 73.8% 73.8% 73.8% 73.8%
Energy Generated (Mwh)(42) 323,100 323,100 323,100 323,100 323,100
Transmission Losses (MWh)(45) 3,200 3,200 3,200 3,200 3,200
Energy Delivered (MWh) 319,900 319,900 319,900 319,900 319,900
Process Steam Sales (Mlb)(46) 40,900 40,900 40,900 40,900 40,900
Supplemental Steam Sales (Mlb)(46) 16,300 16,300 16,300 16,300 16,300
Chilling Steam Demand (Mlb)(46) 96,200 96,200 96,200 96,200 96,200
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 2,886 2,886 2,886 2,886 2,886
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) $140.00 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) $163.92 163.92 163.92 163.92 163.92
Energy Rate ($/MWh)(50) $43.10 44.30 45.70 47.00 48.40
Process Steam Price ($/Mlb)(51) $10.38 10.66 10.95 11.25 11.56
Supplemental Steam Price ($/Mlb)(51) $13.84 14.21 14.60 15.00 15.41
Chilling Steam Price ($/Mlb)(52) $0.58 0.59 0.61 0.62 0.64
True-up Steam Price ($/Mlb)(52) $0.14 0.15 0.15 0.16 0.16
Natural Gas Price ($/MMBtu)(53) $3.19 3.31 3.43 3.56 3.69
Gas Transportation Cost ($/MMBtu)(53) $0.30 0.31 0.32 0.33 0.34
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment $7,000 7,000 7,000 7,000 7,000
Bonus Capacity Payment $1,196 1,196 1,196 1,196 1,196
Energy Payment $13,788 14,172 14,619 15,035 15,483
Steam Revenue
Process Steam $425 436 448 460 473
Supplement Steam $226 232 238 244 251
Chilling Steam $55 57 59 60 62
True-up Steam $5 5 5 5 5
------- ------ ------ ------ ------
Total Operating Revenues $22,695 23,098 23,565 24,000 24,470
OPERATING EXPENSES ($000)
Natural Gas $10,075 10,439 10,817 11,209 11,616
Natural Gas Use/Sales Taxes (54) $792 820 850 881 913
Natural Gas Service Fees (55) $211 214 217 220 223
Operating & Maintenance (56) $1,827 1,876 1,927 1,979 2,033
Major Maintenance (57) $245 2,799 259 266 0
Other Operating Fees/Water (56) $594 610 626 643 661
Audit, Legal & Finance (56) $16 17 17 17 18
Insurance (56) $210 216 222 228 234
Property & Other Taxes (56) $1,044 1,072 1,101 1,131 1,162
Capital Expenditures (56) $40 40 40 40 40
Wheeling (58) $957 957 957 957 957
------- ------ ------ ------ ------
Total Operating Expenses $16,011 19,060 17,033 17,571 17,857
NET OPERATING REVENUES ($000) $6,684 4,038 6,532 6,429 6,613
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $6,684 4,038 6.532 6,429 6,613
DISTRIBUTIONS TO
CE GENERATION ($000)(59) $6,684 4,038 6,532 6,429 6,613
<CAPTION>
Year Ending December 31 2015 2016 2017 2018
---- ---- ---- ----
<S> <C> <C> <C> <C>
YUMA PROJECT
PERFORMANCE
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000
Curtailment Hours (41) 2,600 2,600 2,600 2,600
Availability Factor (42) 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 73.8% 73.8% 73.8% 73.8%
Energy Generated (Mwh)(42) 323,100 323,100 323,100 323,100
Transmission Losses (MWh)(45) 3,200 3,200 3,200 3,200
Energy Delivered (MWh) 319,900 319,900 319,900 319,900
Process Steam Sales (Mlb)(46) 40,900 40,900 40,900 40,900
Supplemental Steam Sales (Mlb)(46) 16,300 16,300 16,300 16,300
Chilling Steam Demand (Mlb)(46) 96,200 96,200 96,200 96,200
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 2,886 2,886 2,886 2,886
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) 163.92 163.92 163.92 163.92
Energy Rate ($/MWh)(50) 49.90 51.25 52.63 54.05
Process Steam Price($/Mlb)(51) 11.59 12.20 12.53 12.86
Supplemental Steam Price ($/Mlb)(51) 15.45 16.26 16.71 17.15
Chilling Steam Price ($/Mlb)(52) 0.66 0.68 0.70 0.71
True-up Steam Price($/Mlb)(52) 0.16 0.17 0.17 0.18
Natural Gas Price ($/MMBtu)(53) 3.62 3.97 4.11 4.25
Gas Transportation Cost ($/MMBtu)(53) 0.35 0.36 0.37 0.38
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment 7,000 7,000 7,000 7,000
Bonus Capacity Payment 1,196 1,196 1,196 1,196
Energy Payment 15,963 16,394 16,837 17,291
Steam Revenue
Process Steam 474 499 512 526
Supplement Steam 252 265 272 280
Chilling Steam 63 65 67 69
True-up Steam 5 6 6 6
------ ------ ------ ------
Total Operating Revenues 24,953 25,425 25,890 26,368
OPERATING EXPENSES ($000)
Natural Gas 11,457 12,468 12,915 13,351
Natural Gas Use/Sales Taxes (54) 900 980 1,015 1,049
Natural Gas Service Fees (55) 226 229 232 235
Operating & Maintenance (56) 2,087 2,144 2,202 2,261
Major Maintenance (57) 4,887 288 296 304
Other Operating Fees/Water (56) 678 697 716 735
Audit, Legal & Finance (56) 18 19 19 20
Insurance (56) 240 247 254 260
Property & Other Taxes (56) 1,193 1,225 1,258 1,292
Capital Expenditures (56) 40 40 40 40
Wheeling (58) 957 957 957 957
------ ------ ------ ------
Total Operating Expenses 22,683 19,294 19,904 20,504
NET OPERATING REVENUES ($000) 2,270 6,131 5,986 5,864
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) 2,270 6,131 5,986 5,864
DISTRIBUTIONS TO
CE GENERATION ($000)(59) 2,270 6,131 5,986 5,864
</TABLE>
B-74
<PAGE>
Footnotes to Exhibit B-7
The footnotes to Exhibit B-7 are the same as the footnotes for Exhibit
B-1, except:
50. Assumes prices consistent with the SCE Low SRAC case as described in the
Henwood Report.
53. Assumes prices consistent with the SCE Low SRAC case as described in the
Henwood Report.
B-75
<PAGE>
Exhibit B-8
CE Generation Gas Projects
Projected Operating Results
Sensitivity G: Yuma SCE Median SRAC
<TABLE>
<CAPTION>
Year Ending December 31 1999(1) 2000 2001 2002 2003 2004 2005 2006 2007
------- ---- ---- ---- ---- ---- ---- ---- ----
YUMA PROJECT
PERFORMANCE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500 56,500 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Curtailment Hours (41) 1,300 1,300 1,300 1,300 1,300 1,800 1,800 1,800 1,800
Availability Factor (42) 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 89.3% 89.3% 89.3% 89.3% 89.3% 83.4% 83.4% 83.4% 83.4%
Energy Generated (MWh)(42) 391,300 391,300 391,300 391,300 391,300 365,100 365,100 365,100 365,100
Transmission Losses (MWh)(45) 3,900 3,900 3,900 3,900 3,900 3,700 3,700 3,700 3,700
Energy Delivered (MWh) 387,400 387,400 387,400 387,400 387,400 361,400 361,400 361,400 361,400
Process Steam Sales (Mlb)(46) 49,500 49,500 49,500 49,500 49,500 46,200 46,200 46,200 46,200
Supplemental Steam Sales (Mlb)(46) 9,200 9,200 9,200 9,200 9,200 11,900 11,900 11,900 11,900
Chilling Steam Demand (Mlb)(46) 116,500 116,500 116,500 116,500 116,500 108,700 108,700 108,700 108,700
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830 8,830 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 3,474 3,474 3,474 3,474 3,474 3,248 3,248 3,248 3,248
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) $140.00 140.00 140.00 140.00 140.00 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) $163.92 163.92 163.92 163.92 163.92 163.92 163.92 163.92 163.92
Energy Rate ($/MWh)(50) $29.90 32.20 34.60 35.90 37.20 38.80 41.10 43.10 44.40
Process Steam Price ($/Mlb)(51) $7.81 8.01 8.22 8.44 8.65 8.88 9.11 9.35 9.63
Supplemental Steam Price ($/Mlb)(51) $10.42 10.68 10.96 11.25 11.54 11.84 12.15 12.47 12.84
Chilling Steam Price ($/Mlb)(52) $0.43 0.44 0.45 0.47 0.48 0.49 0.50 0.52 0.53
True-up Steam Price ($/Mlb)(52) $0.11 0.11 0.11 0.12 0.12 0.12 0.13 0.13 0.13
Natural Gas Price ($/MMBtu)(53) $2.15 2.23 2.31 2.40 2.48 2.57 2.67 2.77 2.89
Gas Transportation Cost ($/MMBtu)(53) $0.23 0.23 0.24 0.25 0.25 0.26 0.27 0.27 0.28
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment $7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000
Bonus Capacity Payment $1,196 1,196 1,196 1,196 1,196 1,196 1,196 1,196 1,196
Energy Payment $11,583 12,474 13,404 13,908 14,411 14,022 14,854 15,576 16,046
Steam Revenue
Process Steam $387 397 407 418 428 410 421 432 445
Supplemental Steam $96 98 101 103 106 141 145 148 153
Chilling Steam $50 51 53 54 56 53 55 56 58
True-up Steam $4 4 5 5 5 5 5 5 5
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Operating Revenues $20,316 21,220 22,166 22,684 23,202 22,827 23,676 24,413 24,903
OPERATING EXPENSES ($000)
Natural Gas $8,251 8,546 8,852 9,175 9,498 9,198 9,526 9,864 10,283
Natural Gas Use/Sales Taxes (54) $648 672 696 721 746 723 749 775 808
Natural Gas Service Fees (55) $182 185 187 190 192 195 198 200 203
Operating & Maintenance (56) $1,363 1,400 1,438 1,476 1,516 1,557 1,599 1,642 1,687
Major Maintenance (57) $183 3,278 193 198 2,262 209 215 0 3,950
Other Operating Fees/Water (56) $443 455 467 480 493 506 520 534 548
Audit, Legal & Finance (56) $762 12 13 13 13 14 14 14 15
Insurance (56) $157 161 166 170 175 179 184 189 194
Property & Other Taxes (56) $779 800 822 844 867 890 914 939 964
Capital Expenditures (56) $179 9 6 23 40 40 40 40 40
Wheeling (58) $963 963 963 963 963 961 961 961 961
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Operating Expenses $13,910 16,481 13,803 14,253 16,765 14,472 14,920 15,158 19,653
NET OPERATING REVENUES ($000) $6,406 4,739 8,363 8,431 6,437 8,355 8,756 9,255 5,250
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $6,406 4.739 8,363 8,431 6,437 8,355 8,756 9,255 5,250
DISTRIBUTIONS TO
CE GENERATION ($000)(59) $6,406 4,739 8,363 8,431 6,437 8,355 8,756 9,255 5,250
Year Ending December 31 2008 2009
---- ----
YUMA PROJECT
PERFORMANCE
<S> <C> <C>
Nameplate Capacity (kW)(39) 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000
Curtailment Hours (41) 1,800 1.800
Availability Factor (42) 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0%
Capacity Factor (%)(44) 83.4% 83.4%
Energy Generated (MWh)(42) 365,100 365,100
Transmission Losses (MWh)(45) 3,700 3,700
Energy Delivered (MWh) 361,400 361,400
Process Steam Sales (Mlb)(46) 46,200 46,200
Supplemental Steam Sales (Mlb)(46) 11,900 11,900
Chilling Steam Demand (Mlb)(46) 108,700 108,700
Heat Rate (Btu/kWh)(42) 8,830 8,830
Fuel Consumption (BBtu)(47) 3,248 3,248
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) 163.92 163.92
Energy Rate ($/MWh)(50) 45.90 47.40
Process Steam Price ($/Mlb)(51) 9.85 10.11
Supplemental Steam Price ($/Mlb)(51) 13.14 13.48
Chilling Steam Price ($/Mlb)(52) 0.55 0.56
True-up Steam Price ($/Mlb)(52) 0.14 0.14
Natural Gas Price ($/MMBtu)(53) 2.97 3.08
Gas Transportation Cost ($/MMBtu)(53) 0.29 0.30
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment 7,000 7,000
Bonus Capacity Payment 1,196 1,196
Energy Payment 16,588 17,130
Steam Revenue
Process Steam 455 467
Supplemental Steam 156 160
Chilling Steam 59 61
True-up Steam 5 5
------ ------
Total Operating Revenues 25,459 26,019
OPERATING EXPENSES ($000)
Natural Gas 10,579 10,952
Natural Gas Use/Sales Taxes (54) 831 861
Natural Gas Service Fees (55) 206 209
Operating & Maintenance (56) 1,732 1,779
Major Maintenance (57) 233 239
Other Operating Fees/Water (56) 563 578
Audit, Legal & Finance (56) 15 16
Insurance (56) 200 205
Property & Other Taxes (56) 990 1,017
Capital Expenditures (56) 40 40
Wheeling (58) 961 961
------ ------
Total Operating Expenses 16,350 16,857
NET OPERATING REVENUES ($000) 9,109 9,162
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) 9,109 9,162
DISTRIBUTIONS TO
CE GENERATION ($000)(59) 9,109 9,162
</TABLE>
B-76
<PAGE>
Exhibit B-8
CE Generation Gas Projects
Projected Operating Results
Sensitivity G: Yuma SCE Median SRAC
<TABLE>
<CAPTION>
Year Ending December 31 2010 2011 2012 2013 2014 2015 2016 2017 2018
---- ---- ---- ---- ---- ---- ---- ---- ----
YUMA PROJECT
PERFORMANCE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500 56,500 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Curtailment Hours (41) 2,600 2,600 2,600 2,600 2,600 2,600 2,600 2,600 2,600
Availability Factor (42) 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 73.8% 73.8% 73.8% 73.8% 73.8% 73.8% 73.8% 73.8% 73.8%
Energy Generated (MWh)(42) 323,100 323,100 323,100 323,100 323,100 323,100 323,100 323,100 323,100
Transmission Losses (MWh)(45) 3,200 3,200 3,200 3,200 3,200 3,200 3,200 3,200 3,200
Energy Delivered (MWh) 319,900 319,900 319,900 319,900 319,900 319,900 319,900 319,900 319,900
Process Steam Sales (Mlb)(46) 40,900 40,900 40,900 40,900 40,900 40,900 40,900 40,900 40,900
Supplemental Steam Sales (Mlb)(46) 16,300 16,300 16,300 16,300 16,300 16,300 16,300 16,300 16,300
Chilling Steam Demand (Mlb)(46) 96,200 96,200 96,200 96,200 96,200 96,200 96,200 96,200 96,200
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830 8,830 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 2,886 2,886 2,886 2,886 2,886 2,886 2,886 2.886 2,886
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) $140.00 140.00 140.00 140.00 140.00 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) $163.92 163.92 163.92 163.92 163.92 163.92 163.92 163.92 163.92
Energy Rate ($/MWh)(50) $48.90 50.60 42.20 54.00 55.80 57.60 59.16 60.75 62.39
Process Steam Price ($/Mlb)(51) $10.38 10.66 10.95 11.25 11.56 11.59 12.20 12.53 12.86
Supplemental Steam Price ($/Mlb)(51) $13.84 14.21 14.60 15.00 15.41 15.45 16.26 16.71 17.15
Chilling Steam Price ($/Mlb)(52) $0.58 0.59 0.61 0.62 0.64 0.66 0.68 0.70 0.71
True-up Steam Price ($/Mlb)(52) $0.14 0.15 0.15 0.16 0.16 0.16 0.17 0.17 0.18
Natural Gas Price ($/MMBtu)(53) $3.19 3.31 3.43 3.56 3.69 3.62 3.97 4.11 4.25
Gas Transportation Cost ($/MMBtu)(53) $0.30 0.31 0.32 0.33 0.34 0.35 0.36 0.37 0.38
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment $7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000
Bonus Capacity Payment $1,196 1,196 1,196 1,196 1,196 1,196 1,196 1,196 1,196
Energy Payment $15,643 16,187 13,500 17,275 17,850 18,426 18,924 19,435 19,959
Steam Revenue
Process Steam $425 436 448 460 473 474 499 512 526
Supplemental Steam $226 232 238 244 251 252 265 272 280
Chilling Steam $55 57 59 60 62 63 65 67 69
True-up Steam $5 5 5 5 5 5 6 6 6
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Operating Revenues $24,550 25,113 22,446 26,240 26,837 27,416 27,955 28,488 29,036
OPERATING EXPENSES ($000)
Natural Gas $10,075 10,439 10,817 11,209 11,616 11,457 12,468 12,915 13,351
Natural Gas Use/Sales Taxes (54) $792 820 850 881 913 900 980 1,015 1,049
Natural Gas Service Fees (55) $211 214 217 220 223 226 229 232 235
Operating & Maintenance (56) $1,827 1,876 1,927 1,979 2,033 2,087 2,144 2,202 2,261
Major Maintenance (57) $245 2,799 259 266 0 4,887 288 296 304
Other Operating Fees/Water (56) $594 610 626 643 661 678 697 716 735
Audit, Legal & Finance (56) $16 17 17 17 18 18 19 19 20
Insurance (56) $210 216 222 228 234 240 247 254 260
Property & Other Taxes (56) $1,044 1,072 1,101 1,131 1,162 1,193 1,225 1,258 1,292
Capital Expenditures (56) $40 40 40 40 40 40 40 40 40
Wheeling (58) $957 957 957 957 957 957 957 957 957
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Operating Expenses $16,011 19,060 17,033 17,571 17,857 22,683 19,294 19,904 20,504
NET OPERATING REVENUES ($000) $8,539 6,053 5,413 8,669 8,980 4,733 8,661 8,584 8,532
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $8,539 6,053 5,413 8,669 8,980 4,733 8,661 8,584 8,532
DISTRIBUTIONS TO
CE GENERATION ($000)(59) $8,539 6,053 5,413 8,669 8,980 4,733 8,661 8,584 8,532
</TABLE>
B-77
<PAGE>
Footnotes to Exhibit B-8
The footnotes to Exhibit B-8 are the same as the footnotes for Exhibit
B-1, except:
50. Assumes prices consistent with the SCE Median SRAC case as described in
the Henwood Report.
53. Assumes prices consistent with the SCE Median SRAC case as described in
the Henwood Report.
B-78
<PAGE>
Exhibit B-9
CE Generation Gas Projects
Projected Operating Results
Sensitivity H: Yuma SCE High SRAC
<TABLE>
<CAPTION>
Year Ending December 31 1999(1) 2000 2001 2002 2003 2004 2005 2006 2007
------- ---- ---- ---- ---- ---- ---- ---- ----
YUMA PROJECT
PERFORMANCE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500 56,500 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Curtailment Hours (41) 1,300 1,300 1,300 1,300 1,300 1,800 1,800 1,800 1,800
Availability Factor (42) 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 89.3% 89.3% 89.3% 89.3% 89.3% 83.4% 83.4% 83.4% 83.4%
Energy Generated (MWh)(42) 391,300 391,300 391,300 391,300 391,300 365,100 365,100 365,100 365,100
Transmission Losses (MWh)(45) 3,900 3,900 3,900 3,900 3,900 3,700 3,700 3,700 3,700
Energy Delivered (MWh) 387,400 387,400 387,400 387,400 387,400 361,400 361,400 361,400 361,400
Process Steam Sales (Mlb)(46) 49,500 49,500 49,500 49,500 49,500 46,200 46,200 46,200 46,200
Supplemental Steam Sales (Mlb)(46) 9,200 9,200 9,200 9,200 9,200 11,900 11,900 11,900 11,900
Chilling Steam Demand (Mlb)(46) 116,500 116,500 116,500 116,500 116,500 108,700 108,700 108,700 108,700
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830 8,830 8,830 8.830 8,830 8,830
Fuel Consumption (BBtu)(47) 3,474 3,474 3,474 3,474 3,474 3,248 3,248 3,248 3,248
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) $140.00 140.00 140.00 140.00 140.00 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) $163.92 163.92 163.92 163.92 163.92 163.92 163.92 163.92 163.92
Energy Rate ($/MWh)(50) $32.80 36.00 39.10 41.30 43.60 46.10 48.60 51.60 54.80
Process Steam Price ($/Mlb)(51) $7.81 8.01 8.22 8.44 8.65 8.88 9.11 9.35 9.63
Supplemental Steam Price ($/Mlb)(51) $10.42 10.68 10.96 11.25 11.54 11.84 12.15 12.47 12.84
Chilling Steam Price ($/Mlb)(52) $0.43 0.44 0.45 0.47 0.48 0.49 0.50 0.52 0.53
True-up Steam Price ($/Mlb)(52) $0.11 0.11 0.11 0.12 0.12 0.12 0.13 0.13 0.13
Natural Gas Price ($/MMBtu)(53) $2.15 2.23 2.31 2.40 2.48 2.57 2.67 2.77 2.89
Gas Transportation Cost ($/MMBtu)(53) $0.23 0.23 0.24 0.25 0.25 0.26 0.27 0.27 0.28
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment $7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000
Bonus Capacity Payment $1,196 1,196 1,196 1,196 1,196 1,196 1,196 1,196 1,196
Energy Payment $12,707 13,946 15,147 16,000 16,891 16,661 17,564 18,648 19,805
Steam Revenue
Process Steam $387 397 407 418 428 410 421 432 445
Supplemental Steam $96 98 101 103 106 141 145 148 153
Chilling Steam $50 51 53 54 56 53 55 56 58
True-up Steam $4 4 5 5 5 5 5 5 5
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Operating Revenues $21,440 22,692 23,909 24,776 25,682 25,466 26,386 27,485 28,662
OPERATING EXPENSES ($000)
Natural Gas $8,251 8,546 8,852 9,175 9,498 9,198 9,526 9,864 10,283
Natural Gas Use/Sales Taxes (54) $648 672 696 721 746 723 749 775 808
Natural Gas Service Fees (55) $182 185 187 190 192 195 198 200 203
Operating & Maintenance (56) $1,363 1,400 1,438 1,476 1,516 1,557 1,599 1,642 1,687
Major Maintenance (57) $183 3,278 193 198 2,262 209 215 0 3,950
Other Operating Fees/Water (56) $443 455 467 480 493 506 520 534 548
Audit, Legal & Finance (56) $762 12 13 13 13 14 14 14 15
Insurance (56) $157 161 166 170 175 179 184 189 194
Property & Other Taxes (56) $779 800 822 844 867 890 914 939 964
Capital Expenditures (56) $179 9 6 23 40 40 40 40 40
Wheeling (58) $963 963 963 963 963 961 961 961 961
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Operating Expenses $13,910 16,481 13,803 14,253 16,765 14,472 14,920 15,158 19,653
NET OPERATING REVENUES ($000) $7,530 6,211 10,106 10,523 8,917 10,994 11,466 12,327 9,009
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $7,530 6,211 10,106 10,523 8,917 10,994 11,466 12,327 9,009
DISTRIBUTIONS TO
CE GENERATION ($000)(59) $7,530 6,211 10,106 10,523 8,917 10,994 11,466 12,327 9,009
Year Ending December 31 2008 2009
---- ----
YUMA PROJECT
PERFORMANCE
<S> <C> <C>
Nameplate Capacity (kW)(39) 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000
Curtailment Hours (41) 1,800 1,800
Availability Factor (42) 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0%
Capacity Factor (%)(44) 83.4% 83.4%
Energy Generated (MWh)(42) 365,100 365,100
Transmission Losses (MWh)(45) 3,700 3,700
Energy Delivered (MWh) 361,400 361,400
Process Steam Sales (Mlb)(46) 46,200 46,200
Supplemental Steam Sales (Mlb)(46) 11,900 11,900
Chilling Steam Demand (Mlb)(46) 108,700 108,700
Heat Rate (Btu/kWh)(42) 8,830 8,830
Fuel Consumption (BBtu)(47) 3,248 3,248
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) 163.92 163.92
Energy Rate ($/MWh)(50) 58.20 61.90
Process Steam Price ($/Mlb)(51) 9.85 10.11
Supplemental Steam Price ($/Mlb)(51) 13.14 13.48
Chilling Steam Price ($/Mlb)(52) 0.55 0.56
True-up Steam Price ($/Mlb)(52) 0.14 0.14
Natural Gas Price ($/MMBtu)(53) 2.97 3.08
Gas Transportation Cost ($/MMBtu)(53) 0.29 0.30
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment 7,000 7,000
Bonus Capacity Payment 1,196 1,196
Energy Payment 21,033 22,371
Steam Revenue
Process Steam 455 467
Supplemental Steam 156 160
Chilling Steam 59 61
True-up Steam 5 5
------ ------
Total Operating Revenues 29,904 31,260
OPERATING EXPENSES ($000)
Natural Gas 10,579 10,952
Natural Gas Use/Sales Taxes (54) 831 861
Natural Gas Service Fees (55) 206 209
Operating & Maintenance (56) 1,732 1,779
Major Maintenance (57) 233 239
Other Operating Fees/Water (56) 563 578
Audit, Legal & Finance (56) 15 16
Insurance (56) 200 205
Property & Other Taxes (56) 990 1,017
Capital Expenditures (56) 40 40
Wheeling (58) 961 961
------ ------
Total Operating Expenses 16,350 16,857
NET OPERATING REVENUES ($000) 13,554 14,403
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) 13,554 14,403
DISTRIBUTIONS TO
CE GENERATION ($000)(59) 13,554 14,403
</TABLE>
B-79
<PAGE>
Exhibit B-9
CE Generation Gas Projects
Projected Operating Results
Sensitivity H: Yuma SCE High SRAC
<TABLE>
<CAPTION>
Year Ending December 31 2010 2011 2012 2013 2014 2015 2016 2017 2018
---- ---- ---- ---- ---- ---- ---- ---- ----
YUMA PROJECT
PERFORMANCE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500 56,500 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Curtailment Hours (41) 2,600 2,600 2,600 2,600 2,600 2,600 2,600 2,600 2,600
Availability Factor (42) 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 73.8% 73.8% 73.8% 73.8% 73.8% 73.8% 73.8% 73.8% 73.8%
Energy Generated (MWh)(42) 323,100 323,100 323,100 323,100 323,100 323,100 323,100 323,100 323,100
Transmission Losses (MWh)(45) 3,200 3,200 3,200 3,200 3,200 3,200 3,200 3,200 3,200
Energy Delivered (MWh) 319,900 319,900 319,900 319,900 319,900 319,900 319,900 319,900 319,900
Process Steam Sales (Mlb)(46) 40,900 40,900 40,900 40,900 40,900 40,900 40,900 40,900 40,900
Supplemental Steam Sales (Mlb)(46) 16,300 16,300 16,300 16,300 16,300 16,300 16,300 16,300 16,300
Chilling Steam Demand (Mlb)(46) 96,200 96,200 96,200 96,200 96,200 96,200 96,200 96,200 96,200
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830 8,830 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 2,886 2,886 2,886 2,886 2,886 2,886 2,886 2,886 2,886
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) $140.00 140.00 140.00 140.00 140.00 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) $163.92 163.92 163.92 163.92 163.92 163.92 163.92 163.92 163.92
Energy Rate ($/MWh)(50) $65.90 70.70 76.00 81.60 87.60 94.10 96.64 99.25 101.93
Process Steam Price ($/Mlb)(51) $10.38 10.66 10.95 11.25 11.56 11.59 12.20 12.53 12.86
Supplemental Steam Price ($/Mlb)(51) $13.84 14.21 14.60 15.00 15.41 15.45 16.26 16.71 17.15
Chilling Steam Price ($/Mlb)(52) $0.58 0.59 0.61 0.62 0.64 0.66 0.68 0.70 0.71
True-up Steam Price ($/Mlb)(52) $0.14 0.15 0.15 0.16 0.16 0.16 0.17 0.17 0.18
Natural Gas Price ($/MMBtu)(53) $3.19 3.31 3.43 3.56 3.69 3.62 3.97 4.11 4.25
Gas Transportation Cost ($/MMBtu)(53) $0.30 0.31 0.32 0.33 0.34 0.35 0.36 0.37 0.38
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment $7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000
Bonus Capacity Payment $1,196 1.196 1,196 1,196 1,196 1,196 1,196 1,196 1,196
Energy Payment $21,081 22,617 24,312 26,104 28,023 30,103 30,915 31,750 32,607
Steam Revenue
Process Steam $425 436 448 460 473 474 499 512 526
Supplemental Steam $226 232 238 244 251 252 265 272 280
Chilling Steam $55 57 59 60 62 63 65 67 69
True-up Steam $5 5 5 5 5 5 6 6 6
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Operating Revenues $29,988 31,543 33,258 35,069 37,010 39,093 39,946 40,803 41,684
OPERATING EXPENSES ($000)
Natural Gas $10,075 10,439 10,817 11,209 11,616 11,457 12,468 12,915 13,351
Natural Gas Use/Sales Taxes (54) $792 820 850 881 913 900 980 1,015 1,049
Natural Gas Service Fees (55) $211 214 217 220 223 226 229 232 235
Operating & Maintenance (56) $1,827 1,876 1,927 1,979 2,033 2,087 2,144 2,202 2,261
Major Maintenance (57) $245 2,799 259 266 0 4,887 288 296 304
Other Operating Fees/Water (56) $594 610 626 643 661 678 697 716 735
Audit, Legal & Finance (56) $16 17 17 17 18 18 19 19 20
Insurance (56) $210 216 222 228 234 240 247 254 260
Property & Other Taxes (56) $1,044 1,072 1,101 1,131 1,162 1,193 1,225 1,258 1,292
Capital Expenditures (56) $40 40 40 40 40 40 40 40 40
Wheeling (58) $957 957 957 957 957 957 957 957 957
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Operating Expenses $16,011 19,060 17,033 17,571 17,857 22,683 19,294 19,904 20,504
NET OPERATING REVENUES ($000) $13,977 12,483 16,225 17,498 19,153 16,410 20,652 20,899 21,180
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $13,977 12,483 16,225 17,498 19,153 16,410 20,652 20,899 21,180
DISTRIBUTIONS TO
CE GENERATION ($000)(59) $13,977 12,483 16,225 17,498 19,153 16,410 20,652 20,899 21,180
</TABLE>
B-80
<PAGE>
Footnotes to Exhibit B-9
The footnotes to Exhibit B-9 are the same as the footnotes for Exhibit
B-1, except:
50. Assumes prices consistent with the SCE High SRAC case as described in the
Henwood Report.
53. Assumes prices consistent with the SCE High SRAC case as described in the
Henwood Report.
B-81
<PAGE>
Exhibit B-10
CE Generation Gas Projects
Projected Operating Results
Sensitivity I: Yuma Breakeven Electricity Price
<TABLE>
<CAPTION>
Year Ending December 31 1999(1) 2000 2001 2002 2003 2004 2005 2006 2007
------- ---- ---- ---- ---- ---- ---- ---- ----
YUMA PROJECT
PERFORMANCE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500 56,500 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Curtailment Hours (41) 1,300 1,300 1,300 1,300 1,300 1,800 1,800 1,800 1,800
Availability Factor (42) 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 89.3% 89.3% 89.3% 89.3% 89.3% 83.4% 83.4% 83.4% 83.4%
Energy Generated (MWh)(42) 391,300 391,300 391,300 391,300 391,300 365,100 365,100 365,100 365,100
Transmission Losses (MWh)(45) 3,900 3,900 3,900 3,900 3,900 3,700 3,700 3,700 3,700
Energy Delivered (MWh) 387,400 387,400 387,400 387,400 387,400 361,400 361,400 361,400 361,400
Process Steam Sales (Mlb)(46) 49,500 49,500 49,500 49,500 49,500 46,200 46,200 46,200 46,200
Supplemental Steam Sales (Mlb)(46) 9,200 9,200 9,200 9,200 9,200 11,900 11,900 11,900 11,900
Chilling Steam Demand (Mlb)(46) 116,500 116,500 116,500 116,500 116,500 108,700 108,700 108,700 108,700
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830 8,830 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 3,474 3,474 3,474 3,474 3,474 3,248 3,248 3,248 3,248
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) $140.00 140.00 140.00 140.00 140.00 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) $163.92 163.92 163.92 163.92 163.92 163.92 163.92 163.92 163.92
Energy Rate ($/MWh)(50) $0.00 0.00 0.00 3.40 7.80 11.30 14.40 12.60 14.90
Process Steam Price ($/Mlb)(51) $7.81 8.01 8.22 8.44 8.65 8.88 9.11 9.35 9.63
Supplemental Steam Price ($/Mlb)(51) $10.42 10.68 10.96 11.25 11.54 11.84 12.15 12.47 12.84
Chilling Steam Price ($/Mlb)(52) $0.43 0.44 0.45 0.57 0.72 0.85 0.96 0.92 1.00
True-up Steam Price ($/Mlb)(52) $0.11 0.11 0.11 0.14 0.18 0.21 0.24 0.23 0.25
Natural Gas Price ($/MMBtu)(53) $2.15 2.23 2.31 2.40 2.48 2.57 2.67 2.77 2.89
Gas Transportation Cost ($/MMBtu)(53) $0.23 0.23 0.24 0.25 0.25 0.26 0.27 0.27 0.28
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment $7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000
Bonus Capacity Payment $1,196 1,196 1,196 1,196 1,196 1,196 1,196 1,196 1,196
Energy Payment $0 0 0 1,317 3,022 4,084 5,204 4,554 5,385
Steam Revenue
Process Steam $387 397 407 418 428 410 421 432 445
Supplemental Steam $96 98 101 103 106 141 145 148 153
Chilling Steam $50 51 53 67 84 92 104 99 109
True-up Steam $4 4 5 6 7 8 9 8 9
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Operating Revenues $8,733 8,746 8,762 10,107 11,843 12,931 14,079 13,437 14,297
OPERATING EXPENSES ($000)
Natural Gas $8,251 8,546 8,852 9,175 9,498 9,198 9,526 9,864 10,283
Natural Gas Use/Sales Taxes (54) $648 672 696 721 746 723 749 775 808
Natural Gas Service Fees (55) $182 185 187 190 192 195 198 200 203
Operating & Maintenance (56) $1,363 1,400 1,438 1,476 1,516 1,557 1,599 1,642 1,687
Major Maintenance (57) $183 3,278 193 198 2,262 209 215 0 3,950
Other Operating Fees/Water (56) $443 455 467 480 493 506 520 534 548
Audit, Legal & Finance (56) $762 12 13 13 13 14 14 14 15
Insurance (56) $157 161 166 170 175 179 184 189 194
Property & Other Taxes (56) $779 800 822 844 867 890 914 939 964
Capital Expenditures (56) $179 9 6 23 40 40 40 40 40
Wheeling (58) $963 963 963 963 963 961 961 961 961
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Operating Expenses $13,910 16,481 13,803 14,253 16,765 14,472 14,920 15,158 19,653
NET OPERATING REVENUES ($000) ($5,177) (7,735) (5,041) (4,146) (4,922) (1,541) (841) (1,721) (5,356)
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $0 0 0 0 0 0 0 0 0
DISTRIBUTIONS TO
CE GENERATION ($000)(59) $0 0 0 0 0 0 0 0 0
Year Ending December 31 2008 2009
---- ----
YUMA PROJECT
PERFORMANCE
<S> <C> <C>
Nameplate Capacity (kW)(39) 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000
Curtailment Hours (41) 1,800 1,800
Availability Factor (42) 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0%
Capacity Factor (%)(44) 83.4% 83.4%
Energy Generated (MWh)(42) 365,100 365,100
Transmission Losses (MWh)(45) 3,700 3,700
Energy Delivered (MWh) 361,400 361,400
Process Steam Sales (Mlb)(46) 46,200 46,200
Supplemental Steam Sales (Mlb)(46) 11,900 11,900
Chilling Steam Demand (Mlb)(46) 108,700 108,700
Heat Rate (Btu/kWh)(42) 8,830 8,830
Fuel Consumption (BBtu)(47) 3,248 3,248
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) 163.92 163.92
Energy Rate ($/MWh)(50) 9.20 12.90
Process Steam Price ($/Mlb)(51) 9.85 10.11
Supplemental Steam Price ($/Mlb)(51) 13.14 13.48
Chilling Steam Price ($/Mlb)(52) 0.84 0.97
True-up Steam Price ($/Mlb)(52) 0.21 0.24
Natural Gas Price ($/MMBtu)(53) 2.97 3.08
Gas Transportation Cost ($/MMBtu)(53) 0.29 0.30
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment 7,000 7,000
Bonus Capacity Payment 1,196 1,196
Energy Payment 3,325 4,662
Steam Revenue
Process Steam 455 467
Supplemental Steam 156 160
Chilling Steam 91 105
True-up Steam 8 9
------ ------
Total Operating Revenues 12,231 13,599
OPERATING EXPENSES ($000)
Natural Gas 10,579 10,952
Natural Gas Use/Sales Taxes (54) 831 861
Natural Gas Service Fees (55) 206 209
Operating & Maintenance (56) 1,732 1,779
Major Maintenance (57) 233 239
Other Operating Fees/Water (56) 563 578
Audit, Legal & Finance (56) 15 16
Insurance (56) 200 205
Property & Other Taxes (56) 990 1,017
Capital Expenditures (56) 40 40
Wheeling (58) 961 961
------ ------
Total Operating Expenses 16,350 16,857
NET OPERATING REVENUES ($000) (4,119) (3,258)
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) 0 0
DISTRIBUTIONS TO
CE GENERATION ($000)(59) 0 0
</TABLE>
B-82
<PAGE>
Exhibit B-10
CE Generation Gas Projects
Projected Operating Results
Sensitivity I: Yuma Breakeven Electricity Price
<TABLE>
<CAPTION>
Year Ending December 31 2010 2011 2012 2013 2014 2015 2016 2017 2018
---- ---- ---- ---- ---- ---- ---- ---- ----
YUMA PROJECT
PERFORMANCE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Nameplate Capacity (kW)(39) 56,500 56,500 56,500 56,500 56,500 56,500 56,500 56,500 56,500
Contract Firm Capacity (kW)(40) 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Curtailment Hours (41) 2,600 2,600 2,600 2,600 2,600 2,600 2,600 2,600 2,600
Availability Factor (42) 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0% 96.0%
On-Peak Availability Factor (43) 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0%
Capacity Factor (%)(44) 73.8% 73.8% 73.8% 73.8% 73.8% 73.8% 73.8% 73.8% 73.8%
Energy Generated (MWh)(42) 323,100 323,100 323,100 323,100 323,100 323,100 323,100 323,100 323,100
Transmission Losses (MWh)(45) 3,200 3,200 3,200 3,200 3,200 3,200 3,200 3,200 3,200
Energy Delivered (MWh) 319,900 319,900 319,900 319,900 319,900 319,900 319,900 319,900 319,900
Process Steam Sales (Mlb)(46) 40,900 40.900 40,900 40,900 40,900 40,900 40,900 40,900 40,900
Supplemental Steam Sales (Mlb)(46) 16,300 16,300 16,300 16,300 16,300 16,300 16,300 16,300 16,300
Chilling Steam Demand (Mlb)(46) 96,200 96,200 96,200 96,200 96,200 96,200 96,200 96,200 96,200
Heat Rate (Btu/kWh)(42) 8,830 8,830 8,830 8,830 8,830 8,830 8,830 8,830 8,830
Fuel Consumption (BBtu)(47) 2,886 2,886 2,886 2,886 2,886 2,886 2,886 2,886 2,886
COMMODITY PRICES
General Inflation (%)(7) 2.70 2.70 2.70 2.70 2.70 2.70 2.70 2.70 2.70
Electricity Price
Capacity Price ($/kW-yr)(48) $140.00 140.00 140.00 140.00 140.00 140.00 140.00 140.00 140.00
Bonus Capacity Price ($/kW-yr)(49) $163.92 163.92 163.92 163.92 163.92 163.92 163.92 163.92 163.92
Energy Rate ($/MWh)(50) $22.70 20.80 17.00 21.00 17.20 19.70 19.50 21.80 19.20
Process Steam Price ($/Mlb)(51) $10.38 10.66 10.95 11.25 11.56 11.59 12.20 12.53 12.86
Supplemental Steam Price ($/Mlb)(51) $13.84 14.21 14.60 15.00 15.41 15.45 16.26 16.71 17.15
Chilling Steam Price ($/Mlb)(52) $1.29 1.25 1.14 1.29 1.18 1.28 1.29 1.38 1.32
True-up Steam Price ($/Mlb)(52) $0.32 0.31 0.29 0.32 0.30 0.32 0.32 0.35 0.33
Natural Gas Price ($/MMBtu)(53) $3.19 3.31 3.43 3.56 3.69 3.62 3.97 4.11 4.25
Gas Transportation Cost ($/MMBtu)(53) $0.30 0.31 0.32 0.33 0.34 0.35 0.36 0.37 0.38
OPERATING REVENUES ($000)
Revenue from Electricity Sales
Firm Capacity Payment $7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000
Bonus Capacity Payment $1,196 1,196 1,196 1,196 1,196 1,196 1,196 1,196 1,196
Energy Payment $7,262 6,654 5,438 6,718 5,502 6,302 6,238 6,974 6,142
Steam Revenue
Process Steam $425 436 448 460 473 474 499 512 526
Supplemental Steam $226 232 238 244 251 252 265 272 280
Chilling Steam $124 120 110 124 114 123 124 133 127
True-up Steam $11 10 9 11 10 10 11 11 11
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Operating Revenues $16,244 15,648 14,439 15,753 14,546 15,357 15,333 16,098 15,282
OPERATING EXPENSES ($000)
Natural Gas $10,075 10,439 10,817 11,209 11,616 11,457 12,468 12,915 13,351
Natural Gas Use/Sales Taxes (54) $792 820 850 881 913 900 980 1,015 1,049
Natural Gas Service Fees (55) $211 214 217 220 223 226 229 232 235
Operating & Maintenance (56) $1,827 1,876 1,927 1,979 2,033 2,087 2,144 2,202 2,261
Major Maintenance (57) $245 2,799 259 266 0 4,887 288 296 304
Other Operating Fees/Water (56) $594 610 626 643 661 678 697 716 735
Audit, Legal & Finance (56) $16 17 17 17 18 18 19 19 20
Insurance (56) $210 216 222 228 234 240 247 254 260
Property & Other Taxes (56) $1,044 1,072 1,101 1,131 1,162 1,193 1,225 1,258 1,292
Capital Expenditures (56) $40 40 40 40 40 40 40 40 40
Wheeling (58) $957 957 957 957 957 957 957 957 957
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Operating Expenses $16,011 19,060 17,033 17,571 17,857 22,683 19,294 19,904 20,504
NET OPERATING REVENUES ($000) $233 (3,412) (2,594) (1,818) (3,311) (7,326) (3,961) (3,806) (5,222)
CASH AVAILABLE
FOR DISTRIBUTIONS ($000) $233 0 0 0 0 0 0 0 0
DISTRIBUTIONS TO
CE GENERATION ($000)(59) $233 0 0 0 0 0 0 0 0
</TABLE>
B-83
<PAGE>
Footnotes to Exhibit B-10
The footnotes to Exhibit B-10 are the same as the footnotes for Exhibit
B-1, except:
50. Assumes prices projected by Fluor Daniel which result in a debt
service coverage ratio on the Securities of 1.00 in all years.
B-84
<PAGE>
APPENDIX C
GEOTHERMAL PROJECTS
INDEPENDENT ENGINEER'S REPORT
CE GENERATION PROJECT ANALYSIS
PREPARED FOR
CE GENERATION, LLC
FEBRUARY 17, 1999
FLUOR DANIEL, INC.
IRVINE, CALIFORNIA
C-1
<PAGE>
TABLE OF CONTENTS
1.0 EXECUTIVE SUMMARY AND CONCLUSIONS .................................. 3
1.1 EXECUTIVE SUMMARY .................................................. 3
1.2 CONCLUSIONS ........................................................ 6
2.0 SCOPE OF SERVICES .................................................. 9
3.0 FACILITIES OVERVIEW ................................................ 10
3.1 GENERAL DESCRIPTION ................................................ 10
3.2 MANAGEMENT AND ORGANIZATION ........................................ 11
3.3 SALTON SEA PROJECTS ................................................ 12
3.4 PARTNERSHIP PROJECTS ............................................... 13
3.5 ROYALTY PROJECTS ................................................... 13
3.6 pH MODIFICATION PROCESS ............................................ 13
4.0 NEW PROJECTS ....................................................... 13
4.1 GENERAL DESCRIPTION -- SALTON SEA UNIT V PROJECT ................... 13
4.2 GENERAL DESCRIPTION -- REGION II BRINE FACILITIES CONSTRUCTION ..... 14
4.3 MATERIALS OF CONSTRUCTION .......................................... 15
4.4 NEW PROJECTS MANAGEMENT ORGANIZATION ............................... 15
4.5 PROJECT SITE GEOTECHNICAL DESCRIPTION .............................. 15
4.6 SCHEDULE ........................................................... 16
4.7 CAPITAL COST ANALYSIS .............................................. 17
5.0 PROJECT OPERATIONS ................................................. 17
6.0 PERMITTING AND ENVIRONMENTAL ....................................... 17
6.1 ENVIRONMENTAL COMPLIANCE ........................................... 17
6.2 APPLICABLE ENVIRONMENTAL PERMIT AND LICENSING REQUIREMENTS ......... 18
6.3 ENVIRONMENTAL REQUIREMENT COMPLIANCE, DEFICIENCIES AND
LIMITATIONS ........................................................ 18
7.0 ASSESSMENT OF FINANCIAL PROJECTIONS ................................ 18
7.1 BASE CASE PROJECTION ASSUMPTIONS ................................... 18
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SECTION 1.0
1.0 EXECUTIVE SUMMARY AND CONCLUSIONS
1.1 EXECUTIVE SUMMARY
Fluor Daniel, Inc. (Fluor Daniel) prepared an Independent Engineer's
report for the Salton Sea Funding Corporation, dated September 23, 1998, in
connection with Salton Sea Funding Corporation's Bond Offering Circular (the
Salton Sea Project Analysis). The analysis and conclusions contained in that
report are incorporated herein, except as hereinafter modified. Specifically,
CE Generation, LLC has requested Fluor Daniel to update the Salton Sea Project
Analysis to remove references to the Zinc Recovery Project and to report on the
construction status of Salton Sea Unit V and the CE Turbo Project (hereinafter
the Updated Events).
Presented herein is Fluor Daniel's, review and analyses (the Report) of
eight operating geothermal power plants (the Existing Projects), and two new
geothermal power plants (the New Projects), as listed below. The geothermal
resource production facilities (wellheads and related brine delivery system)
were not reviewed by Fluor Daniel.
o Salton Sea Units I, II, III and IV, including brine modification (pH
Modification) and a planned capacity increase via a new Salton Sea
Unit V (collectively the Salton Sea Projects).
o Vulcan, Del Ranch, Elmore and Leathers, including the Region II Brine
Facilities Construction, the CE Turbo Project (collectively the
Partnership Projects).
o Royalty and other payments received from the Del Ranch, Elmore, and
Leathers Projects (the Royalty Projects). The Salton Sea Projects,
Partnership Projects and the Royalty Projects are collectively
referred to herein as the Projects.
NEW PROJECTS -- OVERVIEW
Salton Sea Power LLC (Power LLC) is constructing a 49.0 MW net geothermal
power plant (Salton Sea Unit V Project) using proven technology designed to
produce electrical energy primarily from the Salton Sea Region I injection
brine. This brine is currently reinjected and contains over 40 MW of available
thermal energy to be used by Salton Sea Unit V. Additional power will be
produced utilizing minimal increased brine flows through the existing brine
handling facilities located at the Salton Sea Projects. Therefore, Salton Sea
Unit V will produce electrical energy by increasing the thermal efficiency of
Region I with only a limited increase in the quantity of brine production, as
well as providing a consistent supply of brine suitable for the ion exchange
zinc recovery process.
The Region II Brine Processing Construction will include the installation
of modern brine processing facilities to service the total brine flow to be
provided to Vulcan and Del Ranch. It is intended that these facilities will be
designed with the appropriate technology, developed and proven at the Salton
Sea, to provide for reliable steam production for power generation, and a
consistent supply of brine suitable for the ion exchange zinc recovery process.
CE Turbo LLC is constructing the CE Turbo Project which is designed to
provide electrical power output of 10.0 MW net. This power output will result
from increased efficiencies in the steam field and brine handling facilities
and no new production or injection wells are required.
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A summary overview of the current and intended features of the Projects is
presented in Table 1-1.
TABLE 1-1
OVERVIEW OF THE PROJECTS
<TABLE>
<CAPTION>
FACILITY (1) NET
NET OWNERSHIP COMMERCIAL POWER
CAPACITY INTEREST OPERATION CONTRACT CONTRACT POWER
(MW) (MW) (YEARS) EXPIRATION TYPE PURCHASER
-------------- ----------- ------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
SALTON SEA PROJECTS
Salton Sea Unit I ....... 10.0 10.0 16 6/2017 Negotiated SCE
Salton Sea Unit II ...... 20.0 20.0 8 4/2020 SO4 SCE
Salton Sea Unit III ..... 49.8 49.8 9 2/2019 SO4 SCE
Salton Sea Unit IV ...... 39.6 39.6 2 5/2026 Negotiated SCE
Salton Sea Unit V ....... 49.0 49.0 0 N/A SPOT Zinc Recovery
----- ----- Project and PX
Subtotal ............... 168.4 168.4
PARTNERSHIP PROJECTS
Elmore .................. 38.0 38.0 10 12/2018 SO4 SCE
Del Ranch ............... 38.0 38.0 10 12/2018 SO4 SCE
Leathers ................ 38.0 38.0 8 12/2019 SO4 SCE
Vulcan .................. 34.0 34.0 12 2/2016 SO4 SCE
CE Turbo ................ 10.0 10.0 0 N/A N/A PX
----- -----
Subtotal ............... 158.0 158.0
===== =====
Total ................... 326.4 326.4
</TABLE>
----------
(1) Power Project capacity is a nominal number that varies with operating and
reservoir conditions.
PROJECT LOCATION
The Salton Sea and Partnership Projects are located in Imperial County
California in the Salton Sea Area. A map showing the general location of the
Projects is provided in Figure 1-1.
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FIGURE 1-1
PLANT LOCATION MAP
[MAP SHOWING THE GENERAL LOCATION OF THE PROJECTS]
GEOTHERMAL PROJECT AGREEMENTS
As shown in Table 1-1, the Existing Projects sell power to Southern
California Edison Company (SCE) in accordance with power purchase agreements
and related agreements for transmission system interconnection. Salton Sea Unit
V will sell approximately one-third of its net output to the CalEnergy Minerals
LLC Zinc Recovery Project and also sell power through the Power Exchange (PX).
CE Turbo will sell all its power through the PX.
It is understood that the Salton Sea and Partnership Projects are, and
will continue to be, operated by CalEnergy Operating Corporation (CEOC). The
Existing Projects have been in commercial operation for numerous years.
Construction of a portion of the facilities is being performed under
Engineering, Procurement and Construction (EPC) contracts, with completion and
cost guarantees. The Salton Sea Unit V, CE Turbo and Region II Brine Processing
Construction Projects are being constructed by Stone and Webster Engineering
Corporation (S&W) under two separate guaranteed price contracts.
GEOTHERMAL PROJECT PARTICIPANTS
The Salton Sea Units I, II and III are owned by Salton Sea Power
Generation L.P. (SSPG). SSPG and Fish Lake Power Company (FLPC) are owners of
the Salton Sea Unit IV Project. Salton Sea
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Unit V will be owned by Salton Sea Power L.L.C. (Power LLC). SSPG, SSBP FLPC,
and Power LLC are referred to collectively as the "Salton Sea Guarantors".
The improvements to the brine processing facility part of the Region II
Brine Processing Construction will be owned by certain of the Existing
Projects. The CE Turbo Project will be owned by CE Turbo LLC. Agreements were
reviewed that indicate that the Salton Sea Royalty Company (the Royalty
Guarantor) receives royalties and other payments from Leathers, Elmore, and Del
Ranch.
SCHEDULE
The commercial operation date for Salton Sea Unit V is currently scheduled
for mid 2000. The commercial operation dates for the CE Turbo Project and the
Region II Brine Processing Construction are currently scheduled for the first
half of 2000.
1.2 CONCLUSIONS
On the basis of Fluor Daniel's review of the information provided by CE
Generation (CEG), and in reliance thereon, Fluor Daniel provides the following
opinions:
1.2.1 EXISTING PROJECTS -- OPERATIONS AND PERFORMANCE
o The Projects use commercially proven technology and are operated in
accordance with recognized electric utility industry practices.
o The useful life of the surface facilities are expected to exceed the
final maturity date of the debt Securities.
o Principal project participants possess the necessary experience to
successfully fulfill their project obligations.
o Operating plant capacity factors (expected forced and scheduled
outages) used in the projections are based on the operating results
for the operating years 1995, 1996, 1997 and 1998, and these are felt
to be reasonable. For the years 1995 through 1998, selected highlights
of the operating history reported by the CEG are as follows:
o Revenue increased 83 percent.
o Site operating costs decreased from 3.53 cents/net kWh to 1.77
cents/net kWh for the Salton Sea Units I-IV Projects, and from
3.17 cents/net kWh to 2.19 cents/net kWh for the Partnership
Projects. For the Existing Projects as a whole, operating costs
decreased from 3.28 cents/net kWh to 2.01 cents/net kWh.
o Nominal capacity factors in 1998 were maintained at 94.2 percent
for the Salton Sea I-IV Projects, 101.4 percent for the
Partnership Projects, and 98.2 percent on a combined basis.
o The pH Modification technology is proven and reliable, as has been
shown by the eight year operating history at Salton Sea Unit II and
the two years of operating history of this technology at Salton Sea
Units I, III, and IV. The pH Modification program should continue to
increase availability and decrease costs consistent with assumptions
in the financial projections.
o The Existing Projects are expected to continue operations in
accordance with all relevant existing permits and environmental laws.
1.2.2 NEW PROJECTS
SALTON SEA UNIT V
o The technology upon which the Salton Sea Unit V is based, is proven
and reliable. The scope of work is within demonstrated capabilities of
the principal project participants. The EPC
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contract for the Salton Sea Unit V Project provides for a guaranteed
completion date. It appears that the completion of the Salton Sea Unit
V Project can be achieved within the guaranteed date in the EPC
contract.
o The pH Modification technology is proven and reliable. Similar
technology has been installed and has operated successfully throughout
Salton Sea Units I -- IV. As demonstrated by the eight year operating
history at Salton Sea Unit II, and the more recent operating history
of Salton Sea Units I, III, and IV, the pH Modification program should
continue to operate at the same or improved levels of reliability.
o Reasonable selections have been made in selecting the EPC Contractor
for this work, and in preparing the list of equipment suppliers. Major
equipment suppliers approved by Power LLC are recognized as qualified
suppliers in the geothermal power industry.
o The Salton Sea Unit V Project should meet the guaranteed performance
criteria contained in the EPC contracts and should comply with all
applicable environmental regulations.
o Based upon a review of the EPC contract for the Salton Sea Unit V
Project, the capital cost budget appears adequate for the facilities
provided under the contract. The guaranteed price in the S&W contract,
plus S&W's substantial prior experience with geothermal plants, should
mitigate the risk of cost overruns and schedule delays, and should
thus adequately protect both the Bondholders and Owners. Power LLC
should have adequate Contractor resources available to cover the
possibility of performance shortfalls by S&W for the Salton Sea Unit V
Project . The contractual Liquidated Damages provisions provided in
the EPC contract are typical for securing contractor completion of
projects utilizing proven technology such as that utilized on the
Salton Sea Unit V Project.
o Construction on the Salton Sea V Project has just started with
grubbing and site clearing. At this point construction appears to be
on schedule. The Permit-to-Construct for this work is also in place.
o Based on Fluor Daniel's knowledge of conventional power project
financing, Owner's costs, such as administration costs, insurance,
financing costs, contingency funds, working capital, etc., estimated
by the Power LLC appear to be reasonable.
o All discretionary permit approvals have been obtained for
construction.
o The useful life of the Salton Sea Unit V Project can be expected to
exceed the final maturity date of the Securities.
REGION II BRINE PROCESSING CONSTRUCTION
o The technology upon which brine processing is based has been
demonstrated to be proven and reliable. The EPC contract for the
Region II Brine Processing Construction provides for a guaranteed
completion date. It appears that the completion of the Region II Brine
Processing Construction can be achieved within the guaranteed date in
the EPC contract.
o The pH Modification technology has been demonstrated to be proven and
reliable at the Existing Projects. Similar technology has been serving
Salton Sea Units I -- V and has a proven operating history. The pH
Modification system should increase availability and decrease
operating costs and maintenance consistent with assumptions in the
financial projections.
o Reasonable selections have been made in selecting the EPC Contractor
for this work, and in preparing the list of equipment suppliers. Major
equipment suppliers approved for this project are recognized as
qualified suppliers in the geothermal field.
o A review of the EPC contract for the Region II Brine Processing
Construction provided confidence that the capital cost budget should
be adequate for the facilities provided under the contract. The
guaranteed price in the S&W EPC contract, plus S&W's substantial prior
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experience with geothermal installations, should mitigate the risk of
cost overruns and schedule delays. The contractual Liquidated Damage
provisions in the EPC contract are typical for securing contractor
completion of projects utilizing proven technology such as that
utilized, and should adequately protect both the Bondholders and the
Owners.
o The Region II Brine Processing Construction should meet the guaranteed
performance criteria contained in the EPC contract and should comply
with all applicable environmental regulations.
o All discretionary permit approvals have been obtained for
construction.
o Construction on the Region II Brine Processing Project has yet to
begin, but is scheduled to begin as planned. A Permit-to-Construct for
this work is in place.
CE TURBO PROJECT
o The CE Turbo Project uses technology which has been demonstrated to be
proven and reliable. The scope of work is within demonstrated
capabilities of the principal project participants which should make
the currently scheduled completion during the first quarter of 2000
achievable.
o The EPC Contract for the Region II Brine Processing Construction,
which also encompasses the CE Turbo Project provides for a guaranteed
completion date. It appears that the completion of the CE Turbo
Project can be achieved within the guaranteed date in the EPC
contract.
o S&W, the EPC contractor for this work, is recognized as an experienced
contractor in this field. The major equipment suppliers that have been
approved for S&W's selection are recognized as qualified suppliers to
the industry.
o The CE Turbo Project should meet the guaranteed performance criteria
contained in the EPC contract and should comply with all current
applicable environmental regulations.
o On the basis of the EPC contract reviewed for the CE Turbo Project,
the capital cost budget appears adequate for the facilities provided
under those contracts. The guaranteed price in the S&W contract, plus
S&W's substantial prior experience with geothermal power plants,
should mitigate the risk of cost overruns and schedule delays. CE
Turbo LLC should have adequate contractor resources available to cover
the possibility of performance shortfalls by S&W for the CE Turbo
Project. The contractual Liquidated Damages provisions in the EPC
contract are typical for securing contractor completion of projects
utilizing proven technology such as that utilized in CE Turbo Project,
and should adequately protect both the Bondholders and the Owners.
o Based on Fluor Daniel's knowledge of conventional power project
financing, the Owner's costs, such as administration costs, insurance,
financing costs, contingency funds, working capital, etc., estimated
by CE Turbo LLC appear to be reasonable.
o All required discretionary permit approvals have been obtained for the
construction of the CE Turbo Project.
o The useful life of the CE Turbo Project can be expected to exceed the
final maturity date of the Securities.
o Construction on the CE Turbo Project has yet to begin, but is
scheduled to begin as planned. The Permit-to-Construct for this work
is in place.
ENVIRONMENTAL PERMITTING AND LICENSING
o The reviewed records show no environmental Notices of Violation for
any media (air emissions, wastewater, solid/hazardous waste) have been
filed against the Existing Projects in the last two years.
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o The Existing Projects appeared to be neat and well maintained.
o The H2S abatement systems consist of existing biofilters for Salton
Sea Units I, II, III and IV. A review of the preliminary design
indicated that sufficient capacity appears to exist to handle any
anticipated increase of H2S loads resulting from the operation of
Salton Sea Unit V.
o The water and brine pond designs appear adequate to minimize or
eliminate the potential for water and brine release into the
underlying soil and groundwater.
o Solid waste handling and disposal appears adequate.
o Dust control in the solid waste handling operation should be improved
by planned dust handling equipment and dust abatement measures.
o All discretionary environmental permit approvals have been received
for the proposed new construction.
PROJECT AGREEMENTS
o Major project agreements (as listed in Attachment 2-1) for the Salton
Sea Projects and Partnership Projects, including Power Purchase
agreements, EPC contracts, major subcontracts, Zinc Extraction
Services Agreement, O&M Services Agreement, and related contracts for
transmission system interconnection appear reasonable from a technical
perspective and are consistent with the financial projections reviewed
herein.
FINANCIAL PROJECTIONS
o An economic/financial model, presented in Exhibit 1, has been
developed by CEG which represents the projected performance of the
Salton Sea and Partnership Projects. The assumptions underlying the
economic/financial model appear to be reasonable, and the projected
operating results reasonably represent the future financial profile of
CEG.
o Fluor Daniel has confirmed that the input assumptions regarding
revenues in the Imperial Valley model are reasonably consistent with
the Power Purchase and Royalty documents provided to Fluor Daniel.
o Projected operating and maintenance costs and capital expenditures for
major maintenance projects appear to be reasonable and representative
of the planned operations of the Salton Sea and Partnership Projects.
o Financial projections, based on the Base Case assumptions recommended
by CEG, appear to be reasonable and indicate that revenues should be
adequate to pay operations and maintenance expenses and provide cash
flow for debt service and distributions.
SECTION 2.0
2.0 SCOPE OF SERVICES
On the basis of information and documents provided by CEG, Fluor Daniel,
as Independent Engineer, has reviewed certain technical, environmental and
economic aspects of the Projects as listed below:
o Current status of Existing Projects
o Project participants
o Plant designs and projected performance
o Project capital cost estimates
o Operations and maintenance
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o Project agreements
o Environmental permitting and licensing
o Financial projections (Exhibit 1)
o Project completion testing
Fluor Daniel conducted this analysis, and prepared this report, utilizing
reasonable care and skill in applying methods of analysis consistent with
normal industry practice. In the preparation of this report and the opinions
expressed, Fluor Daniel has made certain assumptions with respect to conditions
which may exist, or events which may occur in the future. A listing of
assumptions and documentation relied upon by Fluor Daniel in the preparation of
this report are provided in Attachment 2-1. The information set forth herein
has been obtained from sources which are believed to be reliable, but it is not
guaranteed as to accuracy or completeness by, and is not construed as a
representation by, Fluor Daniel or the Project sponsors.
SECTION 3.0
3.0 FACILITIES OVERVIEW
3.1 GENERAL DESCRIPTION
The Existing Projects consist of eight operating geothermal power plants
near the Salton Sea in the Imperial Valley of Southern California. These plants
produce net power generation of approximately 288 MW from high temperature
geothermal brines produced by drilling deep production wells into the Salton
Sea Known Geothermal Resource Area (SSKGRA). Imperial Valley brines are
characterized by heavy concentrations of compounds of silica, zinc, manganese
and other metals. Over twenty million pounds of brine per hour are produced and
flashed to supply the steam for electric power generation. After the brine is
flashed to produce steam, it is reinjected into the subsurface reservoir
through separate injection wells constructed for that purpose.
As mentioned above, the Salton Sea and Partnership Projects are located in
the SSKGRA and are within a central radius of approximately five miles. A
representative map showing approximate plant locations is provided in Figure
1-1.
Hot brine from the geothermal resource is flashed into high pressure,
standard pressure, and low pressure steam which is expanded through steam
turbine generators to produce electric power. The steam is condensed and then
used for cooling tower make-up. Excess condensate is injected back into the
geothermal reservoir. Brine from the steam flash process is further processed
to remove solids, or maintain them in solution, and is injected back into the
geothermal reservoir. The Existing Projects employ proven geothermal resource
flash technology which has been commercially operated worldwide for over 30
years.
Plant design and operation are affected by the geothermal resource which,
in the SSKGRA, is relatively high in solids content at approximately 250,000 to
300,000 parts per million. Leathers, Elmore, Del Ranch, and Vulcan utilize the
crystallizer-reactor-clarifier (CRC) process to control scaling and to
precipitate solids. The majority of the solids are disposed of in an
appropriately licensed landfill and the remainder are recycled to the
crystallizers to promote crystal growth (seeding) to control scaling on vessel
walls.
Salton Sea Units I, II, III, and IV utilize the pH Modification process to
control scaling. This process involves injection of a pH modification agent
into the liquid brine resource to maintain solids in solution so that the brine
may be injected directly into the reservoir without precipitation and removal
of the solids. Implementation of this process as part of the Region II Brine
Processing Construction is expected to simplify resource handling in a similar
fashion, thus improving availability and reducing costs.
Noncondensible gases from the Existing Projects are removed from the
condensers for efficient power generation and turbine operation using a
combination of steam jet ejectors and vacuum pumps.
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Systems for abatement of hydrogen sulfide present in the noncondensible gases
are not currently required for the Partnership Projects since ambient hydrogen
sulfide concentrations are at acceptable levels. However, hydrogen sulfide
abatement systems were installed for Salton Sea Units I, II, III and IV as part
of an earlier Salton Sea expansion project. The technology for such abatement
systems is proven and reliable.
The cooling systems for all operating projects consist of surface
condensers and wet mechanical draft cooling towers. Utility systems are
provided to support each operating plant. Fire protection systems are also
provided, including cooling tower wetdown systems which keep the tower wet
during shutdown periods, and fire monitors which are provided at grade around
the perimeter of each tower. Standby diesel generators are available to support
plant safety systems during shutdowns.
Brine is injected into the reservoir by injection pumps after solids
processing. Brine ponds are provided at each plant for temporary storage of
brine during startup/shutdown periods and for emergency use.
3.2 MANAGEMENT AND ORGANIZATION
An Operations Manager is responsible for operations, maintenance, and
plant performance of the Existing Projects. The Salton Sea Projects, Vulcan and
Del Ranch, and Elmore and Leathers each have a Region Supervisor who is
responsible for operations, maintenance, and plant performance. The plant's
Control Operators are trained to operate the plants, perform routine lab tests
and supervise the Outside Operators. The plant's onsite staff is trained to
conduct routine maintenance activities.
In support of these Project sites, CEOC provides centralized
administrative support, engineering support, maintenance support, and
analytical lab support. A Maintenance Supervisor is responsible for the
Mechanics as well as the Instrument and Electrical Technicians. When additional
manpower is required at the Project sites, the Central Maintenance shop
provides the necessary staff. This organization and staffing procedure is
typical for these types of plants.
Fluor Daniel is of the opinion that the overall operating and maintenance
organization is adequate to support operation of the Salton Sea and Partnership
Projects and should continue to provide operating and maintenance cost
reductions.
SAFETY
CEOC has an established safety program based on a Corporate Safety Manual
and Imperial Valley Site Specific Safety Procedures. These safety procedures
appear to be generally consistent with general industry practices.
CEOC is staffed with a Safety Manager and two Safety Engineers. All are
trained in Safety procedures as well as environmental response, pursuant to
stated procedures. The Safety personnel conduct ongoing safety reviews at each
of the Project sites and monthly training sessions for all-hands. These
sessions are designed to emphasize compliance with current CEOC Safety
Procedures in place and to convey new safety procedures and execution methods.
CEOC utilizes a "Safe Work Permit" procedure that must be implemented by
maintenance and operating personnel prior to starting any work. CEOC also has a
plant lockout/tagout procedure for isolating systems for maintenance and
personnel protection.
All procedures were found to be sound and in line with safety procedures
normally found in this type of industry.
TRAINING
CEOC has a very comprehensive training program, which includes Operator
and Maintenance Technician certification. There are five classifications of
Operators: Operator 1, 2, and 3, Control Operator, and Senior Operator. Each
classification, except Senior Operator, has a Certification
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Manual. The manual contents and associated tests have been developed in
accordance with CEOC's organizational structure. The certification program
includes written tests administered by the CEOC Training Department and a plant
walk-through test conducted by the Training Review Board.
The CEOC Senior Operator classification was recently implemented, but no
certification program is currently in place. A job description and
certification testing procedure is being prepared for this new classification
In Fluor Daniel's opinion, the program appears to be in line with training
programs found in the power industry.
OPERATING PROCEDURES
Operating Procedures are in place for the Salton Sea and Partnership
Projects. They included step-by-step methods for start-up, normal operation,
and shutdown of the Projects. Fluor Daniel is of the opinion that the operating
procedures are satisfactory.
MAINTENANCE PROGRAM
Maintenance at each plant is supervised by a Maintenance Supervisor. Most
of the routine maintenance is performed in the centralized maintenance shop
with specialty maintenance being performed by specialty contractors on a
subcontract basis. The Salton Sea and Partnership Projects are using a
commercially available Central Maintenance Management System (CMMS) software
package, which has reportedly improved management of plant maintenance
activities.
Since the Salton Sea Projects are using the pH modification process which
results in cleaner equipment than the CRC process, these plants are currently
on a four-year major turnaround cycle. Major turnarounds are generally
scheduled for twelve days and include process valve maintenance, cleaning, and
descaling of process pipe and vessels. Mini-outages (three to five days) are
scheduled each spring in preparation for the summer peak runs.
For the Partnership Projects, major overhaul planning is also performed by
Central Maintenance with input from the sites. Major twelve day overhauls are
scheduled every two years with mini-outages (three to five days) scheduled each
spring in preparation for the summer peak runs.
In all plants, specialized maintenance such as turbine overhaul and
electrical protective relay calibration is performed by outside contractors.
The plants historically operate reliably as a result of these maintenance and
overhaul scheduling practices.
Fluor Daniel's review of the plants during a site walk-through found the
plants to be well maintained. Plant personnel indicated that spare parts were
available when required.
3.3 SALTON SEA PROJECTS
Salton Sea Units I and II are located adjacent to the Salton Sea; the
shoreline has appropriate dikes and levies designed to protect these units from
increases in the Salton Sea water level. The dikes appear to be adequately
maintained. Salton Sea Unit III and IV are located approximately 0.5 miles from
the Salton Sea.
Salton Sea Unit I has been in service since 1982. Power generation
equipment consists of a 10 MW Fuji steam turbine operating with standard
pressure (SP) steam originally produced by CRC technology. This process also
produces high pressure (HP) and low pressure (LP) steam. The generation voltage
of 13.8 kV is stepped up to 34.5 kV for transmission to Southern California
Edison (SCE).
Salton Sea Unit II was placed in service in 1990. A total of three steam
turbines produce electrical power. Salton Sea Unit II was the original plant to
operate on the pH Modification process and has done so successfully for eight
years. The Mitsubishi turbine-generator produces electrical power at 4,160
volts which is stepped-up to 13.8 kV; the other generators produce power at
13.8 kV. One transformer steps-up power from these three generators to 92 kV
for transmission by the Imperial Irrigation District (IID) to the Rancho Mirage
substation for sale to SCE.
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Salton Sea Unit III is a 49.8 MW plant with a Mitsubishi turbine that
operates on SP and LP steam. The turbine is a 5-stage, dual flow, condensing
turbine. Three stages of steam jet air ejectors remove noncondensible gases
from the steam. Operational flexibility provided by steam jet air ejector
trains are used to respond to varying noncondensible gas content. Commercial
operation was declared on February 14, 1989. Power is stepped up to 92 kV for
transmission by the IID to the Rancho Mirage substation for sale to SCE.
Salton Sea Unit IV is a General Electric steam turbine generator installed
next to the Salton Sea Unit III site to provide additional capacity of 39.6 MW.
Salton Sea Unit IV's design involved modification of existing steam and brine
processing equipment and related systems. All of the steam used is processed
through this system.
3.4 PARTNERSHIP PROJECTS
The Vulcan Project was commissioned in February 1986. It generates
electrical power for transmission to SCE via IID lines. Noncondensible gases
are directed to the cooling tower using two stages of steam jet air ejectors
and a vacuum pump. Each of these components has at least one spare. A standby
diesel generator is available to provide emergency power. Solids precipitated
from the CRC process are monitored for metals concentrations and hauled by
truck to a permitted landfill. Covered solids storage is provided onsite on a
concrete slab for emergency purposes.
Electrical power is generated at 14.4 kV and is transmitted to SCE over 92
kV IID lines. The Del Ranch and the Vulcan Projects are connected via an
electrical tie-line.
The Del Ranch Project achieved commercial operation in October 1988. The
plant is very similar to the Vulcan Project. A dual pressure nine-stage Fuji
turbine produces electrical power for transmission to SCE via IID.
Commercial operation was achieved at the Elmore Project in December 1988
and at the Leathers Project in January 1990. These two plants are identical in
all major design respects to the Del Ranch Project, including the main turbine.
Three spare turbine rotors and two spare sets of diaphragms are available for
the Del Ranch, Elmore, and Leathers Projects.
3.5 ROYALTY PROJECTS
Magma receives royalties, fees and other payments ("Royalties") from the
Leathers, Del Ranch and Elmore Projects based on a percentage of each project's
annual revenue. Total Royalties from these Partnership Projects paid to Magma
annually are projected to be $21,766,000 in 1999, stepping down to $9,427,000
in 2000 as revenues from the three Partnership Projects revert to avoided cost
pricing. The Royalties from the Leathers, Del Ranch and Elmore Projects are
included in the financial projections.
3.6 PH MODIFICATION PROCESS
The pH Modification process currently used for Salton Sea Unit I, II, III
and IV lowers the pH of the geothermal resource by injection of a pH
modification agent into the liquid brine stream. As a result, solids remain in
solution rather than precipitate out of solution as in the CRC process
previously used at Salton Sea Units I and III, and at the Partnership Projects.
Therefore, scaling is minimized and solids in solution can be injected into the
reservoir. Certain aspects of the process were a proprietary process developed
by Unocal and subsequently licensed to Magma, which was purchased in 1995 by
CalEnergy. The pH Modification process has operated successfully since 1990.
SECTION 4.0
4.0 NEW PROJECTS
4.1 GENERAL DESCRIPTION -- SALTON SEA UNIT V PROJECT
4.1.1 DESIGN CONSIDERATIONS
The Salton Sea Unit V geothermal power plant (49.0 MW net) is being
designed to produce electrical energy from the spent brine that would otherwise
be reinjected following usage in Salton
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<PAGE>
Sea Units I -- IV. This brine is currently reinjected at a temperature of
approximately 360 degreesF and at the current rate contains over 40 MW of
available thermal energy to be used by Salton Sea Unit V. Additional power will
be produced utilizing minimal increased brine flows through the existing Salton
Sea Units I -- IV brine handling facilities. Therefore, the Salton Sea Unit V
Project will produce electrical energy by significantly increasing the thermal
efficiency of existing brine usage with only a minor increase in the quantity
of brine production.
The Salton Sea Unit V Project will include a multiple inlet pressure
turbine utilizing standard pressure (SP) steam, low pressure (LP) steam, and
very low pressure (VLP) steam, operating at approximately 110/30/10 psig,
respectively. The SP steam will be provided from additional production from the
existing Region I facilities. The LP and VLP steam will be produced at the
Salton Sea Unit V Project by flashing the brine delivered from the Salton Sea
Units I -- IV brine processing facilities (producing LP steam) and subsequent
flashing of the brine (producing VLP steam). Other equipment necessary for the
Salton Sea Unit V Project includes a pH modification agent handling system, wet
cooling tower, surface condenser, non-condensable gas system, electrical
switchgear, and associated cooling water pumps, condensate pumps, and brine
pumps. Auxiliary equipment includes a lube oil system, expanding the existing
fire protection system, and plant air.
Salton Sea Units I -- IV are using pH Modification of the geothermal brine
to prevent precipitation of silica dissolved in the brine during the power
production cycle. The Salton Sea Unit V Project will utilize refinements in pH
Modification technology. Additional pH modification agent will be injected into
the brine prior to flashing/cooling the brine below 360 degreesF. This has been
shown to prevent precipitation of silica at the lower temperatures, which would
otherwise cause scaling/plugging of brine handling equipment. The brine will
then be flashed to produce LP and VLP steam for conversion into electrical
power. Just before being delivered to the Zinc Recovery Plant, the remaining
brine passes through an atmospheric flash/reactor vessel which removes residual
heat and most of the silica. The silica will initially be disposed of in a
licensed landfill but may later be marketed to potential consumers such as
cement and tire manufacturers.
The facilities will produce a significant quantity of steam as part of the
brine cooling process. A majority of this steam will normally be utilized by
Salton Sea Unit V, with very low pressure steam being used by the Zinc Recovery
Project as process heat.
4.2 GENERAL DESCRIPTION -- REGION II BRINE FACILITIES CONSTRUCTION
4.2.1 CE TURBO PROJECT
The CE Turbo Project is being designed to produce 10.0 MW net of
electrical power output. The CE Turbo Project will use existing unutilized
geothermal energy and additional geothermal energy made available through
efficiency improvements via the Region II Brine Processing Construction; no new
production or injection wells or associated pipelines will be required. The new
power generation will be transmitted through IID power lines.
The new turbine will be an Atlas Copco Rotoflow design. The system will
consist of a turbo-expander, a gearbox, and a generator coupled together in a
power delivery train. All auxiliary equipment required to operate the turbine
will be included in the package.
4.2.2 REGION II BRINE FACILITIES CONSTRUCTION
PROJECT SUMMARY
The Region II Brine Processing Construction upgrade project is installing
modern brine processing facilities designed to service the total brine flow now
provided to Vulcan and Del Ranch. This centralized brine plant will service the
total brine demand for both Vulcan and Del Ranch. These Facilities are being
designed with technology developed and proven at the Salton Sea Projects, to
provide steam production for power generation. Process design and equipment
specifications have been developed and are intended to minimize the long term
cost of plant operations. The existing
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<PAGE>
brine gathering system, and upgraded cement lined production and injection
systems, should facilitate the conversion to a the new facilities. It is
intended that proven existing designs, and equipment where possible, will be
used to minimize cost, schedule and project risk.
SILICA CONTROL PROCESS
The silica control process for this development combines features common
to the pH Modification process and the CRC process. This process is designed to
be lower in capital cost and in projected operating cost than a traditional CRC
process. The pH Modification technology is designed to increase the service
interval between shutdowns of its respective equipment. This technology also
allows a smaller, more efficient standard pressure brine-steam separator vessel
to be used in place of the two SP crystallizers required for the current Region
II SP brine flow. Two low pressure crystallizer and atmospheric flash tank
trains, a primary clarifier, a secondary clarifier, filter press, and brine
booster pump system complete the major equipment. These are traditional CRC
components, but upgraded for long term reliability and performance.
H2S ABATEMENT
The high pressure steam from the turbo-expander will flow through various
standard pressure steam components to arrive at the SP Turbine's condenser,
where the additional noncondensible gas stream must be removed. An H2S
abatement unit will be added downstream of this condenser to ensure the
projected air quality standards are met. This unit will be a biofilter type
device, similar to the ones used at Salton Sea Units I -- IV.
4.3 MATERIALS OF CONSTRUCTION
A review of the design documents and specifications for the mechanical
components revealed that the New Projects have specified design requirements
typically found in the geothermal industry. In some cases, the specifications
and design criteria further defined very specific requirements that are based
on the operating history and proven experience with similar equipment that has
been in similar service for a number of years. As presented on the reviewed
documents, the materials of construction are appropriate for these facilities.
4.4 NEW PROJECTS MANAGEMENT ORGANIZATION
Salton Sea Unit V will be managed as part of the Salton Sea Units I, II,
III, and IV group of units (Region I). These units are managed by a Region
Supervisor and the combined units are operated by three Control Operators and
Outside Operators. The operations program includes a safety program, a training
program, and operating procedures. Maintenance programs include CMMS, training,
and spare parts inventory control.
Fluor Daniel considers the overall operating and maintenance organization
planned for these new facilities to be adequate to support expanded operations.
4.5 PROJECT SITE GEOTECHNICAL DESCRIPTION
The project sites are located in the Salton Trough geologic region. This
region is a result of extensive tectonic activity due to three active or
potentially active faults in the area. The site area is classified by Uniform
Building Code (UBC) as an earthquake zone of 4.
The subsurface geologic site conditions typically consist of stiff to firm
silty clay at shallow depth. At depth, loose to medium dense silty sand exists
with a potential for liquefaction. The silty clay exists with the potential for
long term settlements. The depth to groundwater at the site varies, but is in
the range of 5 to 6 feet below grade.
On the basis of geotechnical reports prepared by Southland Geotechnical,
the project sites are believed to be suitable for the proposed new Projects.
Foundation designs proposed in the report are similar to designs previously
used on other geothermal projects in this area which have operated for numerous
years and are believed to be adequate for these facilities.
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<PAGE>
4.6 SCHEDULE
4.6.1 SALTON SEA UNIT V PROJECT
Stone & Webster Engineering Corporation (S&W) was selected as the
Contractor to engineer, procure, construct, and startup the Salton Sea Unit V
Project and is currently executing this work. S&W is a world-wide EPC power
project Contractor with a background in, and experience with geothermal
projects. S&W has engineering and construction experience with some of the
Existing Projects, including the original design for Salton Sea Unit III and is
familiar with the site conditions and resources of the Imperial Valley.
Additionally, S&W previously worked for the Salton Sea Funding Corporation as
consultant for the existing Bondholders. Belmont Construction (a subsidiary of
S&W) is being utilized for the construction phase, having previously performed
construction services for Salton Sea Unit IV.
The project schedule milestones require:
o Notice to Proceed October 13, 1998
o Startup Commissioning March 16, 2000
o Substantial Completion July 12, 2000
Under the EPC contract, S&W guarantees that substantial completion will be
attained by July 12, 2000, or S&W will be assessed for delay damages.
S&W acknowledged that the procurement, fabrication, delivery and erection
of the Turbine Generator is the critical path of the Salton Sea Unit V Project.
In support of this understanding they have awarded the Turbine Generator and
other critical equipment. The overall schedule duration is approximately 7
months for engineering, 18 months for construction, and 4 months for startup
and testing. This schedule provides that the project be substantially complete
approximately 6 weeks prior to the guaranteed Substantial Completion milestone.
Fluor Daniel has reviewed the current Salton Sea Unit V Project EPC
schedule. To date, planned progress has been achieved and it appears that the
EPC schedule can be achieved as indicated, subject to customary permitted
delays under the contract. S&W has identified and addressed the major project
components, allowing for sufficient time and interface to meet the schedule
objectives such as tie-ins and support to other facilities. Critical equipment
purchases have been made and the deliveries support the current scheduled
delivery dates. Construction is also underway with grubbing and grading of the
site.
Given S&W's qualifications and past experience at the Existing Projects
and elsewhere, the EPC project schedule should be achievable.
4.6.2 REGION II BRINE PROCESSING CONSTRUCTION
S&W was selected as the contractor to engineer, procure, construct, and
startup the CE Turbo Project and Region II Brine Processing Construction, and
is currently executing the work. S&W has engineering and construction
experience with some of the Existing Projects, including the original design
for Salton Sea Unit III and is familiar with the site conditions and resources
of the Imperial Valley. Additionally, S&W previously worked for the Salton Sea
Funding Corporation as consultant for the existing Bondholders. Belmont
Construction (a subsidiary of S&W) is being utilized for the construction
phase, having previously performed construction services for Salton Sea Unit
IV.
The Project Schedule Milestones require:
o Notice to Proceed October 13. 1998
o Startup Commissioning November 17, 1999
o Substantial Completion -- Brine Facilities
Construction February 22, 2000
o Substantial Completion CE Turbo Project April 13, 2000
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<PAGE>
Under its EPC contract, S&W guarantees that substantial completion will be
attained by February 22, 2000 for the Brine Facilities Construction and by
April 13, 2000 for the CE Turbo Project, or S&W will be assessed for delay
damages.
S&W has acknowledged that the procurement, fabrication, delivery and
erection of the CE Turbo is the critical path of the Region II facilities
construction. They have awarded the CE Turbo and other critical equipment. Even
though construction has not begun, Fluor Daniel has reviewed the current Region
II Construction Schedule and believes that Substantial Completion as planned
should be achievable, subject to customary permitted delays under the contract.
4.7 CAPITAL COST ANALYSIS
4.7.1 SALTON SEA UNIT V PROJECT
The fixed price of $91.8 million equates to approximately $1,874 per net
kilowatt of new installed capacity, which is consistent with the cost of
similar geothermal facilities requiring solids removal technology. Currently,
S&W is executing the project under a fixed price contract with no change orders
having been identified. To date, S&W has invoiced for 22 percent of the fixed
price.
4.7.2 REGION II BRINE FACILITIES CONSTRUCTION
The fixed price of $49.8 million appears reasonable for this project.
Currently, S&W is executing the project under a fixed price contract with no
change orders having been identified. To date, S&W has invoiced 15 percent of
the fixed price.
4.7.3 CAPITAL IMPROVEMENTS
Proceeds from the October 7, 1998 Salton Sea Funding Corporation debt
offering and equity will be used to fund certain capital expenditures involving
plant and wellfield facilities at Elmore and Leathers. These costs are
presented below:
<TABLE>
<CAPTION>
1998 1999 2000 TOTAL ($000'S)
---- ---- ---- --------------
<S> <C> <C> <C> <C>
Elmore ............ $9,858 $7,109 0 $16,967
Leathers .......... 0 $ 977 $3,393 $ 4,370
------ ------ ------ -------
Total ............. $9,858 $8,086 $3,393 $21,337
</TABLE>
At Elmore, approximately $9.9 million of the total was used in 1998 for a
regularly scheduled plant overhaul and various other capital expenditure items.
At Leathers, approximately $2.3 million will be spent in 2000 for an overhaul.
The remaining expenditures in that year are for various other plant capital
expenditure items. On the basis of past expenditures for this type of similar
installations, Fluor Daniel finds these expenditures to be reasonable.
The remaining capital expenditure amounts are wellfield-related and are
separately analyzed by GeothermEx.
SECTION 5.0
5.0 PROJECT OPERATIONS
The Salton Sea and Partnership Projects use proven technology and have
operated reliably since initiating commercial operation. The most significant
operating and maintenance activities for the Salton Sea and Partnership
Projects are caused by the geothermal resource which corrodes and deposits
solids in the geothermal resource processing systems. These activities were
significantly reduced at the Salton Sea Projects with the implementation of the
pH Modification program and should be significantly reduced at Vulcan and Del
Ranch with the same system. This should result in similar decreases in cost at
Vulcan and Del Ranch.
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<PAGE>
SECTION 6.0
6.0 PERMITTING AND ENVIRONMENTAL
6.1 ENVIRONMENTAL COMPLIANCE
Fluor Daniel has conducted a walk through of the Existing Projects in the
Imperial Valley. This walk through included an environmental overview of the
facilities. Facilities' inspections included Salton Sea Units I -- IV, and the
proposed sites for the New Projects. The environmental overview focused on the
H2S air emissions abatement systems; water and brine ponds design and
operation; stormwater control; solid waste handling and disposal; general noise
environment; and the associated solvent extraction sites.
The plants appeared neat and well maintained. The H2S abatement systems
consisted of existing biofilters for Salton Sea Units I, II, III and IV. A
review of the design indicated that there should be sufficient capacity to
handle any anticipated increase of H2S loads from Salton Sea Unit V. The water
and brine ponds design appeared adequate to minimize or eliminate the potential
for water and brine release into the underlying soil and groundwater. The
build-up of brine solids in the brine pond and subsequent land disposal should
be minimized in the future by enhanced solids retention in the brine injected
into the geothermal reservoir by project pH modification features.
Stormwater onsite is collected and injected into the geothermal reservoir.
Solid waste handling and disposal appear to be adequate. Dust control in the
solid waste handling operation should be improved by proposed dust handling
equipment and dust abatement measures.
The noise environment encountered appears to be comparable to other
similar power plant designs. Noise was qualitatively experienced within
acceptable OSHA limits near equipment. Excessive noise was not experienced at
the nearest residence. The preliminary design of the proposed ion exchange
units, central solvent extraction and electrowinning plant appeared feasible
and environmentally protective, evidenced by the pilot plant walk-through and
review of system process flow diagrams.
In reviewing two years worth of available files, Fluor Daniel has found no
environmental Notices of Violation for any media (air emissions, wastewater,
solid/hazardous waste).
6.2 APPLICABLE ENVIRONMENTAL PERMIT AND LICENSING REQUIREMENTS
All Existing Projects and the New Projects have received appropriate
regulatory approvals/exemptions in all media (air emissions,
stormwater/wastewater, brine injection), and have appropriate solid and
hazardous waste transportation and disposal contracts or agreements in place.
The New Projects have received the required Imperial County Conditional Use
Permits and Imperial County Air Pollution Control District air permits.
6.3 ENVIRONMENTAL REQUIREMENT COMPLIANCE, DEFICIENCIES AND LIMITATIONS
It is the opinion of Fluor Daniel that the New Projects have appropriate
designs and have or plan to have trained personnel to comply with all
environmental laws and regulations, have received all environmental permits and
approvals, and have contracts and agreements in place with licensed waste
transportation and disposal companies. If operated in accordance with the
provided design, and good utility practices the projects should not have any
environmental deficiencies or limitations.
SECTION 7.0
7.0 ASSESSMENT OF FINANCIAL PROJECTIONS
7.1 BASE CASE PROJECTION ASSUMPTIONS
7.1.1 CONSTRUCTION EXPENDITURES
CEG provided what we believe to be reasonable assumptions regarding new
capital expenditures to be funded in accordance with the October 7, 1998
issuance of Salton Sea Funding Corporation
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<PAGE>
securities, including the construction cost of the Salton Sea Unit V Project,
the CE Turbo Project, Region II Brine Facilities Construction and the Capital
Improvements. As used in the summary, the Project construction costs include
certain owner's administration costs, owner's contingency funds and other costs
for construction and services not included in the fixed price EPC contracts.
These assumptions along with the financing plan, are shown below.
USES AND SOURCES OF FUNDS
(X$000'S)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
1998 1999 2000 TOTAL
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Salton Sea Unit V Project 15,983 77,284 13,596 106,863
--------------------------------------------------------------------------------
Zinc Recovery Project 31,779 104,640 43,911 180,330
--------------------------------------------------------------------------------
CE Turbo Project 1,502 8,504 215 10,221
--------------------------------------------------------------------------------
Region II Brine Processing 6,908 39,097 987 46,992
Construction
--------------------------------------------------------------------------------
Capital Improvements 10,817 7,127 3,393 21,337
--------------------------------------------------------------------------------
Interest and Financing Cost 9,908 21,305 10,564 41,770
--------------------------------------------------------------------------------
TOTAL USES $76,897 $257,957 $76,666 $407,513
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Bond Proceeds 76,897 208,110 0 285,000
--------------------------------------------------------------------------------
Equity 0 49,847 72,666 122,513
--------------------------------------------------------------------------------
TOTAL SOURCES $76,897 $257,957 $72,666 $407,513
--------------------------------------------------------------------------------
</TABLE>
7.1.2 POWER PRODUCTION
Existing operations at the Salton Sea consist of eight power plants:
Salton Sea Units I, II, III, and IV, Vulcan, Del Ranch, Elmore, and Leathers.
These facilities have demonstrated reliable operation in the range of 95-100
percent average plant availability . The assumptions regarding future
operations are shown in the table below. The capacity factors for the Existing
Projects are shown for 1998.
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<PAGE>
PROFORMA OPERATING ASSUMPTIONS
<TABLE>
<CAPTION>
-----------------------------------------------------------------
NAMEPLATE AVERAGE AVAILABILITY
LOCATION CAPACITY (KW) FACTOR (1)
-----------------------------------------------------------------
<S> <C> <C>
Salton Sea Unit I 10,000 92%
-----------------------------------------------------------------
Salton Sea Unit II 20,000 96%
-----------------------------------------------------------------
Salton Sea Unit III 49,800 98%
-----------------------------------------------------------------
Salton Sea Unit IV 39,650 99%
-----------------------------------------------------------------
Leathers 41,000 98%
-----------------------------------------------------------------
Elmore 41,000 98%
-----------------------------------------------------------------
Vulcan 34,000 98%
-----------------------------------------------------------------
Del Ranch 38,000 99%
-----------------------------------------------------------------
Salton Sea Unit V 49,000 95%
-----------------------------------------------------------------
CE Turbo 10,000 95%
-----------------------------------------------------------------
TOTAL 332,450
-----------------------------------------------------------------
</TABLE>
----------
(1) For years 2000 through 2004.
On the basis of past plant performance, Fluor Daniel finds the capacity
factor assumptions used in the financial projections to be reasonable.
7.1.3 REVENUES
All of the Existing Projects sell power under contract to Southern
California Edison Company. Six of the eight Existing Projects have a 10-year
provision for fixed energy pricing at rates that are now considered to be
substantially above market. These six Existing Projects have already reached,
or by 2000 will reach the expiration of the 10-year fixed energy price period
by 2000 causing a drop in project revenue. Pricing for electrical energy beyond
these fixed price termination dates will be subject to pricing under the new
deregulated wholesale power market in California. The chart showing the
forecast of gross revenues for the Projects is shown below.
CEG PROJECTED REVENUES -- GEOTHERMAL PROJECTS
[LINE CHART SHOWING PROJECTED REVENUES OF THE GEOTHERMAL PROJECTS]
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<PAGE>
7.1.4 OPERATING EXPENSES
CEOC presently operates the Existing Projects under contract to the
various ownership entities. As evidenced by the information provided by the
CEG, over the last three years operating expenses have been reduced through
consolidation of operations. Projected operating costs have been developed in
detail by CEOC and appear to be reasonable.
A significant annual expense associated with operation of each facility is
the payment of royalties for use of the geothermal brine. Under the present
ownership arrangement, the majority of royalties paid by each project flow back
to the Royalty Guarantor. This impact is captured in the cash flow analysis.
7.1.5 ONGOING CAPITAL EXPENDITURE
The CE Generation has prepared a ten-year plan for ongoing geothermal
capital expenditures. This plan was reviewed by Fluor Daniel, was determined to
be reasonable, and is used as the basis for projecting future capital
expenditures in the forecasting model (Exhibit 1). Categories of expenditure
include such items as geothermal well drilling, power plant improvements, and
power plant overhaul.
7.1.6 ESCALATION
All expenses in the financial projection (Exhibit 1) have been escalated
at an assumed rate of 2.5 percent. Unless specified otherwise.
7.1.7 CASH FLOW
The cash flow model (Exhibit 1) computes cash flow available for
distribution. Operating expenditures, capital expenditures, and debt service
are then calculated and subtracted from total receipts to determine cash flow
available for distribution.
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<PAGE>
ATTACHMENT 2-1
ASSUMPTIONS, QUALIFICATIONS AND REVIEW DOCUMENTS
THIS REPORT WAS PREPARED BY FLUOR DANIEL, INC. EXPRESSLY FOR USE BY CE
GENERATION. IT IS FLUOR DANIEL'S UNDERSTANDING THAT THIS REPORT WILL BE INCLUDED
IN THE PUBLIC OFFERING MEMORANDUM AND SUBSEQUENT PROSPECTUS FOR THE OFFERING OF
THE BONDS, AS DESCRIBED HEREIN. NEITHER FLUOR DANIEL NOR ANY PERSON ACTING IN
ITS BEHALF, MAKES ANY WARRANTY, EXPRESS OR IMPLIED, OR ASSUMES ANY LIABILITY
WITH RESPECT TO THE USE OF ANY INFORMATION, TECHNOLOGY, ENGINEERING, OR METHODS
DISCLOSED IN THIS REPORT.
It is believed that the information contained in the Salton Sea Project
Analysis is reliable under conditions and subject to the limitations set forth
therein. Except only as to the revisions to the Salton Sea Project Analysis
required to reflect the Updated Events, the analysis or conclusions contained
in that report are incorporated herein. This Report therefore summarizes our
work as of September 23, 1998, modified to reflect the Updated Events and
information contained in Attachment 2-1, 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.
In the preparation of this Report and the opinions contained therein,
Fluor Daniel has 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 exclusively upon the information specified in
the list of Review documents. Neither CE Generation nor Fluor Daniel Inc. has
made an analysis, verified, or rendered an independent judgment of the validity
of the information provided by others. While it is believed that the
information contained herein will be reliable under the conditions and subject
to the limitations set forth herein, neither CE Generation nor Fluor Daniel,
Inc. guarantee the accuracy thereof. Further, 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 forecast. The principal
assumptions and considerations utilized by Fluor Daniel in developing the
results and conclusions presented in this report include the following:
o Only the power plants and above ground geothermal resource piping and
processing facilities were evaluated. The adequacy, reliability, and
costs of geothermal resources and wells were assessed by GeothermEx.
o The projected interest rates on the Securities, reinvestment rates,
cost of arranging the financing and the amortization schedule of the
Securities used in the debt service coverage analysis have been
provided to Fluor Daniel.
o Fluor Daniel's inspection of the existing Salton Sea operations were
limited to a visit of personnel on July 24, 1998 and February 9, 1999.
o CE Generation provided 1998 financial statements for the CE Generation
and other cost accounting information as well as future projections of
cost, expenses, prices, and other key assumptions.
o Brine quantities and depletion rates were provided by GeothermEx.
o The electricity pricing forecast was provided by Henwood Energy
Services.
o Fluor Daniel has not undertaken an independent review with all
regulatory agencies which could under any circumstances have
jurisdictions over or interests pertaining to the project.
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<PAGE>
REVIEW DOCUMENTS
<TABLE>
<CAPTION>
DOCUMENT
DATE DOCUMENT
---- --------
<S> <C>
7/18/95 Salton Sea Funding Corporation Confidential Offering Circular
6/17/96 Salton Sea Funding Corporation Confidential Offering Circular
3/31/93 Technology Transfer Agreement -- Units I, II, & III
7/28/98 Second Amended and Restated Waste Disposal Agreement -- Units I, II, III, & IV
11/24/93 Ground Lease -- Units I & II
9/25/90 Plant Connection Agreement -- Unit II
7/20/88 Plant Connection Agreement -- Unit III
3/31/93 Ground Lease -- Units III & IV
7/14/95 Plant Connection Agreement -- Unit IV
6/9/88 Plant Connection Agreement -- Del Ranch, L.P.
3/14/88 Ground Lease -- Del Ranch, L.P.
3/14/88 Technology Transfer Agreement -- Del Ranch, L.P.
6/9/88 Plant Connection Agreement -- Elmore, L.P.
3/14/88 Ground Lease -- Elmore, L.P.
3/14/88 Technology Transfer Agreement -- Elmore, L.P.
9/25/89 Plant Connection Agreement -- Leathers, L.P.
10/26/88 Ground Lease -- Leathers, L.P.
8/15/88 Technology Transfer Agreement -- Leathers, L.P.
12/6/88 Plant Connection Agreement -- Vulcan Power Company
4/14/98 IID Construction Agreement -- Salton Sea Unit V
4/1/98 IID Plant Connection Agreement -- Salton Sea Unit V
4/14/98 IID Transmission Services Agreement -- Salton Sea Unit V
7/30/98 Lump Sum Cost Proposal -- Salton Sea Unit V Project Schedule
9/11/98 Conditional Use Permit G91-0001 -- Region II Power Plant Modification Project
4/98 Geotechnical Report -- Salton Sea Unit V & Zinc Extraction Facilities
8/98 Geotechnical Investigation -- Upgrade To Vulcan Power Plant
8/5/98 Imperial Valley Operating Statistics
8/5/98 Excerpts from 5 Year Operating Plan
8/98 GeothermEx Report -- Assessment of the Resource Supply
8/5/98 BHP Royalty Agreement and Amendment
8/5/98 California Energy Commission, State of California Energy Resources Conservation
and Development Commission Clearance/Acknowledgement that the Desert
Valley/Salton Sea Unit V Project is not subject to the Commission's jurisdiction.
6/26/98 Conditional Use Permit (#G94-0001) Second Amendment, Granted by Imperial
County and Recorded on 6/26/98 to Allow Brine Flow Increase to Accommodate New
49 MW Power Plant Site.
6/25/98 Conditional Use Permit (#G98-0001) Granted by Imperial County and Recorded on
6/25/98 for a New 23 acre, 49 MW Power Plant generating 0.35 Tons Filter Cake per
Net Megawatt.
7/22/98 Agreement To Conditional Use Permit (G91-0001) Del Ranch, L.P. -- Region 2
(dated July 22, 1998)
7/22/98 Agreement To Conditional Use Permit (G84-0001) Vulcan/BN Geo. Power CO/CE
Turbo LLC -- Region 2 (dated July 22, 1998)
7/1/98 Imperial County Air Pollution Control District, Amended Conditions For Authority
To Construct and Permit To Operate #1894C. Amended Conditions Issued 7/1/98.
This permit is for amended conditions for construction and operation of the elements
in Region I, Unit III.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
DOCUMENT
DATE DOCUMENT
---- --------
<S> <C>
9/17/98 Imperial County Air Pollution Control District, Amended Conditions For Authority
To Construct and Permit To Operate #1672B. Amended Conditions Issued 9/17/98.
This permit is for amended conditions for construction and operation of the elements
at the Vulcan Power Plant.
9/17/98 Imperial County Air Pollution Control District, Amended Conditions For Authority
To Construct and Permit To Operate #1891E. Amended Conditions Issued 9/17/98.
This permit is for amended conditions for construction and operation of the elements
at the A. W. Hoch Power Plant.
8/5/98 Imperial County Air Pollution Control District Permit to Construct # 2743 -- Permit
to construct Unit V
8/5/98 Imperial County Public Health Department Water System Permit for 1998, Permit
Number 637
4/1/96 Laidlaw Environmental Services Contract for Facilities Waste Removal and Disposal
Services, dated April 1, 1996, expiring April 1, 2001. Contract NO. 963093.
6/13/96 State of California, Department of Conservation, Division of Oil, Gas, and
Geothermal Resources, Unit 3 Permanent Injection Project Approval.
4/1/98 Cal/EPA State Water Resources Control Board, Letters of Receipt and Processing of
Notices of Intent (2) to Comply with the General Permit to Discharge Stormwater
Associated with Construction Activity, dated April 1, 1998 effective 9/1/98 through
7/1/2000.
9/13/94 California Regional Water Quality control Board, Colorado River Basin, Region 7
Waste Discharge Order (Permit) NO. 94-081for the Injection of Brine and operation
of a brine pond and Holding Basin, effective 9/13/94.
8/5/98 Material Safety Data Sheet, Nalco 1387 Scale Inhibitor (phosphonomethylated amine).
9/2/98 Salton Sea Unit V Engineering, Procurement, and Construction Contract
9/11/98 Region II Upgrade Engineering, Procurement, and Construction Contract
8/12/98 Draft Amendments to Power Purchase Agreement
3/31/98 Salton Sea Funding Corp. Securities and Exchange Commission Form 10-Q
12/31/97 Salton Sea Funding Corp. Securities and Exchange Commission Form 10-K
02/10/99 Draft Amended and Restated Zinc Extraction Services Agreement
</TABLE>
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<PAGE>
EXHIBIT 1
CE GENERATION IMPERIAL VALLEY
Projected Operating Results ($'000s)
Base Case
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 2004
--------- --------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
RECEIPTS:
Revenue $ 216,272 $ 164,994 $ 160,363 $ 171,989 $ 176,884 $181,718
Magma and other revenues 1,000 1,000 1,000 1,000 1,000 1,000
Interest income 5,048 2,264 2,252 2,758 2,603 2,804
--------------------------------------------------------------------------
Total Receipts 222,320 168,258 163,615 175,747 180,487 185,522
OPERATING EXPENDITURES:
Royalty Expense (26,313) (14,356) (14,715) (16,236) (16,823) (17,339)
Operations (12,095) (11,193) (11,445) (11,458) (11,743) (12,036)
Maintenance (4,280) (3,816) (3,505) (3,477) (3,564) (3,653)
Machine shop (439) (451) (462) (474) (487) (499)
Engineering (326) (599) (617) (634) (650) (665)
Well workovers (4,639) (3,496) (3,687) (4,378) (3,055) (1,564)
Services, general & administrative (5,757) (5,570) (5,391) (5,718) (5,853) (5,997)
Accounting, legal & land (1,317) (1,589) (1,630) (1,682) (1,721) (1,760)
Management fees (5,029) (3,377) (3,306) (3,576) (3,641) (3,758)
Guaranteed capacity (3,199) (1,333) (1,389) (1,591) (1,782) (1,735)
Insurance (2,119) (2,286) (2,457) (2,489) (2,551) (2,613)
Property tax (7,561) (5,743) (6,061) (6,049) (5,928) (5,866)
IID transmission line fee (5,068) (6,003) (6,007) (6,085) (6,165) (6,252)
Magma Expenses/Obligations (1,089) (1,040) (903) (903) (903) (903)
Adjustment - Royalties / Fees Paid to Magma 23,783 11,160 11,191 12,469 13,099 13,406
Other 0 (44) (78) (84) (85) (85)
--------------------------------------------------------------------------
Total Operating Expenditures (55,448) (49,737) (50,462) (52,366) (51,852) (51,319)
CAPITAL EXPENDITURES:
Ongoing Capital Expenditures (21,525) (21,159) (17,305) (7,334) (17,779) (15,598)
Construction Expenditures (142,812) (23,546) -- -- -- --
--------------------------------------------------------------------------
Total Capital Expenditures (164,337) (44,705) (17,305) (7,334) (17,779) (15,598)
FINANCING PROCEEDS:
Bond Proceeds 118,681 -- -- -- -- --
Equity Contributions 24,131 23,546 -- -- -- --
--------------------------------------------------------------------------
Total Financing Proceeds 142,812 23,546 -- -- -- --
DEBT SERVICE
Project loan interest payments (24,904) (26,473) (30,424) (28,651) (26,667) (24,602)
Project loan principal payments (57,836) (25,073) (23,027) (26,465) (26,682) (28,832)
--------------------------------------------------------------------------
Total Debt Service (82,740) (51,546) (53,451) (55,115) (53,349) (53,433)
CASH AVAILABLE FOR DISTRIBUTION $ 62,608 $ 45,816 $ 42,397 60,931 $ 57,507 $ 65,172
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2005 2006 2007 2008
--------- --------- --------- -------
<S> <C> <C> <C> <C>
RECEIPTS:
Revenue $ 186,591 $ 179,658 $ 177,732 $ 183,985
Magma and other revenues 1,000 1,000 1,000 1,000
Interest income 2,565 2,733 2,586 2,949
------------------------------------------------
Total Receipts 190,156 183,391 181,318 187,934
OPERATING EXPENDITURES:
Royalty Expense (18,602) (17,504) (17,643) (18,469)
Operations (12,336) (12,646) (12,963) (13,286)
Maintenance (3,744) (3,839) (3,935) (4,034)
Machine shop (511) (524) (536) (549)
Engineering (680) (697) (714) (731)
Well workovers (2,097) (2,080) (2,130) (2,175)
Services, general & administrative (6,166) (6,296) (6,451) (6,609)
Accounting, legal & land (1,799) (1,840) (1,882) (1,924)
Management fees (3,933) (3,924) (3,930) (4,127)
Guaranteed capacity (2,028) (1,852) (2,033) (2,029)
Insurance (2,679) (2,748) (2,817) (2,887)
Property tax (5,778) (5,682) (5,427) (5,280)
IID transmission line fee (6,339) (6,429) (6,519) (6,610)
Magma Expenses/Obligations (903) (903) (903) (903)
Adjustment - Royalties / Fees Paid to Magma 14,685 14,322 14,708 15,395
Other (86) (86) (87) (87)
------------------------------------------------
Total Operating Expenditures (52,997) (52,726) (53,260) (54,305)
CAPITAL EXPENDITURES:
Ongoing Capital Expenditures (26,092) (14,562) (16,215) (7,609)
Construction Expenditures -- -- -- --
------------------------------------------------
Total Capital Expenditures (26,092) (14,562) (16,215) (7,609)
FINANCING PROCEEDS:
Bond Proceeds -- -- -- --
Equity Contributions -- -- -- --
------------------------------------------------
Total Financing Proceeds -- -- -- --
DEBT SERVICE
Project loan interest payments (22,037) (20,310) (18,289) (16,257)
Project loan principal payments (28,618) (25,916) (25,090) (28,067)
------------------------------------------------
Total Debt Service (50,654) (46,226) (43,378) (44,323)
CASH AVAILABLE FOR DISTRIBUTION $ 60,413 $ 69,877 68,464 $ 81,697
</TABLE>
C-26
<PAGE>
EXHIBIT I
CE GENERATION IMPERIAL VALLEY
Projected Operating Results ($'000s)
Base Case
<TABLE>
<CAPTION>
2009 2010 2011 2012 2013 2014
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
RECEIPTS:
Revenue $ 181,895 $ 185,178 $ 184,499 $ 184,817 $ 190,380 $ 193,049
Magma and other revenues 1,000 1,000 1,000 1,000 1,000 1,000
Interest income 2,655 2,877 2,724 2,884 2,657 3,037
--------------------------------------------------------------------------
Total Receipts 185,550 189,055 188,223 188,701 194,037 197,086
OPERATING EXPENDITURES:
Royalty Expense (18,102) (18,524) (18,534) (18,416) (19,433) (19,442)
Operations (13,618) (13,958) (14,307) (14,664) (15,031) (15,407)
Maintenance (4,133) (4,238) (4,344) (4,453) (4,564) (4,679)
Machine shop (562) (574) (587) (602) (616) (631)
Engineering (750) (770) (791) (811) (831) (852)
Well workovers (256) (1,532) (1,391) (1,000) (3,407) (2,361)
Services, general & administrative (6,774) (6,944) (7,117) (7,295) (7,478) (7,664)
Accounting, legal & land (1,967) (2,014) (2,061) (2,109) (2,156) (2,208)
Management fees (4,062) (4,165) (4,153) (4,163) (4,309) (4,337)
Guaranteed capacity (2,127) (2,017) (2,200) (2,039) (2,312) (2,129)
Insurance (2,959) (3,033) (3,109) (3,187) (3,267) (3,348)
Property tax (5,131) (5,037) (4,885) (4,751) (4,536) (4,275)
IID transmission line fee (6,704) (6,797) (6,893) (6,991) (7,089) (7,189)
Magma Expenses/Obligations (903) (903) (903) 0 0 0
Adjustment - Royalties / Fees Paid to Magma 15,332 15,486 15,807 15,485 16,553 16,281
Other (88) (89) (89) (90) (91) (92)
--------------------------------------------------------------------------
Total Operating Expenditures (52,804) (55,109) (55,556) (55,087) (58,568) (58,332)
CAPITAL EXPENDITURES:
Ongoing Capital Expenditures (17,666) (10,456) (14,570) (8,944) (18,198) (7,529)
Construction Expenditures -- -- -- -- -- --
--------------------------------------------------------------------------
Total Capital Expenditures (17,666) (10,456) (14,570) (8,944) (18,198) (7,529)
FINANCING PROCEEDS:
Bond Proceeds -- -- -- -- -- --
Equity Contributions -- -- -- -- -- --
--------------------------------------------------------------------------
Total Financing Proceeds -- -- -- -- -- --
DEBT SERVICE
Project loan interest payments (14,085) (11,809) (9,758) (8,491) (7,286) (6,140)
Project loan principal payments (26,210) (26,741) (19,991) (16,615) (14,665) (17,338)
--------------------------------------------------------------------------
Total Debt Service (40,294) (38,551) (29,749) (25,106) (21,951) (23,477)
CASH AVAILABLE FOR DISTRIBUTION $ 74,786 $ 84,940 $ 88,348 $ 99,564 $ 95,319 $ 107,747
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2015 2016 2017 2018
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
RECEIPTS:
Revenue $ 196,809 $ 196,491 $ 193,806 $ 193,582
Magma and other revenues 1,000 1,000 1,000 1,000
Interest income 3,106 3,045 2,909 2,939
------------------------------------------------
Total Receipts 200,915 200,536 197,715 197,521
OPERATING EXPENDITURES:
Royalty Expense (20,227) (20,616) (20,750) (21,002)
Operations (15,792) (16,188) (16,592) (17,008)
Maintenance (4,795) (4,915) (5,038) (5,164)
Machine shop (647) (663) (681) (699)
Engineering (873) (894) (915) (937)
Well workovers (2,930) (1,270) (1,627) (980)
Services, general & administrative (7,856) (8,053) (8,253) (8,459)
Accounting, legal & land (2,259) (2,311) (2,363) (2,419)
Management fees (4,427) (4,372) (4,314) (4,344)
Guaranteed capacity (2,407) (2,558) (2,560) (2,656)
Insurance (3,432) (3,518) (3,606) (3,697)
Property tax (3,983) (3,728) (3,339) (2,987)
IID transmission line fee (7,290) (7,394) (7,498) (7,604)
Magma Expenses/Obligations 0 0 0 0
Adjustment - Royalties / Fees Paid to Magma 17,169 17,427 17,611 18,017
Other (93) (93) (94) (95)
------------------------------------------------
Total Operating Expenditures (59,839) (59,145) (60,019) (60,035)
CAPITAL EXPENDITURES:
Ongoing Capital Expenditures (6,427) (8,828) (10,036) (8,315)
Construction Expenditures -- -- -- --
------------------------------------------------
Total Capital Expenditures (6,427) (8,828) (10,036) (8,315)
FINANCING PROCEEDS:
Bond Proceeds -- -- -- --
Equity Contributions -- -- -- --
------------------------------------------------
Total Financing Proceeds -- -- -- --
DEBT SERVICE
Project loan interest payments (4,814) (3,372) (1,859) (559)
Project loan principal payments (18,926) (20,371) (19,866) (9,969)
------------------------------------------------
Total Debt Service (23,740) (23,743) (21,725) (10,528)
CASH AVAILABLE FOR DISTRIBUTION 110,909 $ 108,820 $ 105,934 $ 118,642
</TABLE>
C-27
<PAGE>
APPENDIX D
THE SOUTHERN CALIFORNIA
ELECTRICITY MARKET AND
PRICE FORECAST
1999 -- 2018
PREPARED FOR:
CE GENERATION, LLC
FEBRUARY 11, 1999
PREPARED BY:
HENWOOD ENERGY SERVICES, INC.
2710 GATEWAY OAKS WAY, SUITE 300 NORTH
SACRAMENTO, CA 95833
D-1
<PAGE>
TABLE OF CONTENTS
THE SOUTHERN CALIFORNIA
ELECTRICITY MARKET AND
PRICE FORECAST
1999 -- 2018
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
------- ----
<S> <C> <C>
EXECUTIVE SUMMARY ........................................... D-4
1 THE U.S. ELECTRIC POWER MARKET .............................. D-6
1.1 INTRODUCTION ................................................ D-6
1.2 FEDERAL LEGISLATIVE AND REGULATORY INITIATIVES .............. D-6
1.2.1 Public Utility Regulatory Policies Act -- 1978 .............. D-6
1.2.2 Energy Policy Act -- 1992 ................................... D-6
1.2.3 FERC Order 888 -- 1996 ...................................... D-6
1.3 CALIFORNIA LEGISLATIVE INITIATIVES .......................... D-7
1.3.1 Assembly Bill 1890 .......................................... D-7
2 THE CALIFORNIA WHOLESALE POWER MARKET ....................... D-8
2.1 THE MARKET 1998 AND BEYOND .................................. D-8
2.1.1 Diversity of Energy Supply .................................. D-8
2.1.2 California Investor Owned Utilities ......................... D-9
2.1.3 Treatment of Qualifying Facilities (QFs) .................... D-9
2.2 CALIFORNIA MUNICIPAL UTILITIES AND AUTHORITIES .............. D-10
2.3 SYSTEM RELIABILITY .......................................... D-10
2.4 PX MARKET ................................................... D-10
2.4.1 PX Prices ................................................... D-10
2.4.2 Short Run Avoided Costs ..................................... D-11
2.5 PX PRICES AS A MEASURE OF AVOIDED COST ...................... D-12
3 PX PRICE FORECAST: KEY ASSUMPTIONS AND METHODOLOGY .......... D-13
3.1 MODELING METHODOLOGY AND TECHNIQUES ......................... D-13
3.2 ASSUMPTIONS REGARDING THE CALIFORNIA MARKET TRANSITION
PERIOD ..................................................... D-13
3.3 KEY ASSUMPTIONS FOR MODELING CALIFORNIA MARKET .............. D-14
3.3.1 Forecast Horizon ............................................ D-14
3.3.2 Market Structure ............................................ D-14
3.3.3 Existing Resource Base ...................................... D-14
3.3.4 Resource Retirements ........................................ D-14
3.3.5 Generic Resource Additions .................................. D-14
3.3.6 Loads ....................................................... D-15
3.3.7 Load Shape .................................................. D-15
3.3.8 Load Growth ................................................. D-15
3.3.9 Inflation ................................................... D-15
3.3.10 Fuel Prices ................................................. D-15
3.3.11 Operations & Maintenance .................................... D-17
3.3.12 Property Taxes .............................................. D-17
3.3.13 Insurance ................................................... D-17
3.3.14 Other Costs ................................................. D-17
</TABLE>
D-2
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
------- ----
<S> <C> <C>
3.4 WSCC TRANSMISSION SYSTEM CONFIGURATION ........................................... D-17
3.5 HYDRO POWER ...................................................................... D-18
3.5.1 Median Year Case ................................................................. D-18
3.5.2 Transactions ..................................................................... D-19
4 PX PRICE FORECAST: RESULTS ....................................................... D-20
4.1 BASE CASE 1999-2018 .............................................................. D-20
4.2 SENSITIVITY CASES ................................................................ D-21
4.2.1 Low Gas 1 Case ................................................................... D-21
4.2.2 Low Gas 2 Case ................................................................... D-21
5 THE POWER PROJECTS AND THE CALIFORNIA MARKET ..................................... D-22
5.1 MARKET ANALYSIS RESULTS .......................................................... D-22
5.2 PX PRICES AND THE MARKET POSITION OF THE POWER PROJECTS .......................... D-24
6 THE CALIFORNIA GREEN POWER MARKET AND ITS IMPLICATIONS
FOR THE POWER PROJECTS .......................................................... D-26
6.1 CEC RENEWABLE RESOURCE FUNDING ................................................... D-26
6.2 EXISTING RENEWABLE RESOURCE ACCOUNT .............................................. D-26
6.3 NEW RENEWABLE RESOURCE ACCOUNT ................................................... D-27
6.4 EMERGING RENEWABLES ACCOUNT ...................................................... D-28
6.5 CONSUMER-SIDE INCENTIVES ......................................................... D-28
6.6 DISCUSSION OF GREEN POWER MARKET BENEFITS ........................................ D-28
LIST OF TABLES
Table 2-1 1996 Net System Power (Electric Generation) ...................................... D-9
Table 2-2 Monthly Average California PX Prices -- April 1998 to January 1999 ($/MWh) ....... D-11
Table 2-3 SCE and SDG&E Annual Average Short-Run Avoided Costs of Energy ................... D-12
Table 3-1 Generic Resource Characteristics (1996 dollars) .................................. D-15
Table 4-1 Base Case PX Price Forecast 1999 -- 2018, $/MWh................................... D-20
Table 4-2 PX Prices Under Low Gas Case 1 ................................................... D-21
Table 4-3 PX Prices Under Low Gas Case 2 ................................................... D-21
Table 5-1 Average Operating Costs by Plant Type in the WSCC from Prosym Model Simulation
in 2005 ......................................................................... D-22
Table 5-2 PX Price Frequency Analysis in Southern California Transmission Area, 2005 ....... D-25
Table 6-1 AB 1890 Accounts -- Total Funding Allocations by Technology, $Millions ........... D-26
Table 6-2 Existing Renewable Resource Account Allocations by Tier, $Millions................ D-27
Table 6-3 New Renewable Resource Account Allocations by Year, $Millions .................... D-27
LIST OF FIGURES
Figure 2-1 California PX Daily Prices -- High, Low and Average .............................. D-12
Figure 3-1 WSCC Transmission System Configuration ........................................... D-18
Figure 5-1 PX Prices and Project Operating Costs, Units I to IV ............................. D-23
Figure 5-2 PX Prices and Project Operating Costs, Other Units ............................... D-23
Figure 5-3 PX Prices and New Power Project Operating Costs .................................. D-24
Figure 5-4 PX Prices and Yuma Operating Costs ............................................... D-24
LIST OF APPENDICES
A SCE SRAC FORECAST ................................................................ D-30
</TABLE>
D-3
<PAGE>
EXECUTIVE SUMMARY
BACKGROUND
CE GENERATION, LLC ("CEG") will issue securities to finance, among other
things, two new geothermal power plants -- Salton Sea Unit V and the CE Turbo
Project(the "New Power Projects"), which will have a combined net generation
capacity of 59 MW. The New Power Projects are located in the Salton Sea area of
California. The financing will encompass further investment in eight existing
geothermal units which sell power to Southern California Edison under Standard
Offer contracts authorized by the California Public Utilities Commission (the
"CPUC"). In addition, the financing includes a 50 MW gas-fired project, "Yuma",
in Yuma Arizona, which sells power to San Diego Gas and Electric under a
Standard Offer contract. The New Power Projects, the Existing Projects and Yuma
together comprise the "Power Projects". The financing requires an in-depth
assessment of the regulatory issues and electric energy markets in California
including information on the structure and operation of the California market
and an assessment of the competitive position of the Power Projects in the
market.
Henwood Energy Services, Inc (HESI) has developed an independent
assessment of (i) the wholesale electricity market in California for the 20
year period 1999 through 2018; (ii) the competitive position of the Power
Projects in the California market, and; (iii) the outlook for renewable energy
in the emerging Green Power market.
This assessment is presented in both quantitative and qualitative fashion
as listed below:
1. A brief description of the California wholesale electricity market.
2. The key assumptions used in assessing the market and as inputs into
the HESI Electric Market Simulation System.
3. Forecasts of average electricity prices in the California market and
the methodology to develop them. HESI used its proprietary Electric
Market Simulation System (EMSS) to produce the forecasts of market
clearing prices. The base case scenario was developed using
assumptions developed and tested by HESI. Two low gas price scenarios
were developed to assess the Power Projects' sensitivity to market
prices.
4. A specific competitive assessment of the Power Projects on a
stand-alone basis using revenue and variable cost estimates generated
by HESI.
5. An assessment of the Power Projects within the context of the
competitive market and how the Power Projects compare with other
generators.
6. An assessment of the Green Power and renewable energy markets.
7. An analysis of the changes to Qualifying Facility (QF) payments, the
transition formula for calculating such payments, and forecasts of the
payments for the Power Projects.
Based on these analyses, our report contains the following conclusions:
1. Our Base Case forecast indicates that the Southern California annual
Power Exchange (PX) market clearing price (MCP) will increase from
$28.3/MWh in 1999 to $50.3/MWh by 2018 in nominal dollars -- which
translates into an average annual rate of increase of 3.1 percent over
that period.
2. We expect all of the Power Projects to be low cost producers in all
years of the study. The annual average operating cost of the Power
Projects in 2005 is $17.5/MWh (excluding Yuma). In fact, about 66
percent of the electricity produced in the WSCC in 2005 -- the first
year of full competition -- is generated from units with higher costs,
a strong indication that the Power Projects will be dispatched as
baseload. The new units, Salton Sea Unit V and the CE Turbo Project,
are even better positioned with operating costs of $10.0 and $9.3 per
MWh respectively. Of all the generation in the region, only
hydroelectric generators have lower operating costs.
D-4
<PAGE>
3. The annual average operating costs of the Power Projects, in $/MWh,
are below the annual average PX prices. In fact, the Power Projects'
operating costs are close to the off-peak PX price in 1999 through
2002 and significantly below that in all years thereafter.
4. The low-cost relationship between PX prices and the Power Projects'
operating costs also prevails with the Low Gas Price sensitivity
cases. In these cases, operating costs are also well below the PX
prices. The range of annual average PX prices in the Low Gas Case 1 is
$27.9/MWh in 2000 to $47.0/MWh in 2018.
5. A significant finding of the study is that Salton Sea Unit V and the
CE Turbo Project will have operating costs lower than all other
generator types, except hydro, and will be extremely well-positioned
to be dispatched any hour in the year. The operating costs of these
units are about $18.5 to $20/MWh lower than PX prices in 2000 and
2001. The difference increases to $30/MWh by 2005 and to nearly
$40/MWh by 2018. The margin is so significant it is extremely unlikely
that any new significant capacity with lower operating costs will be
built. The Yuma plant appears very cost competitive compared to HESI
estimates of natural gas cogeneration. Yuma operating costs are about
$9.0/MWh below power market prices in 2000 and $15 to $17/MWh below
forecast PX prices in all years after 2005.
6. We also find that the PX price will be greater than or equal to
$20.3/MWh in 96 percent of all hours in 2005. This means that the
Power Projects, with an average operating cost of $17.5/MWh, will be
below the PX price in each of those hours and will be dispatched
accordingly.
7. The transition of short--run avoided cost determination to
competitively determined pricing, while subject to regulatory and
market dynamics, is expected to be complete by the beginning of 2000.
We forecast the Southern California Edison SRAC to be $30.3/MWh in
1999 and $31.1/MWh in 2000, on an annual average basis. SRAC prices
for QF sales to San Diego Gas and Electric are estimated at $30.9/MWh
in 1999 and $31.7/MWh in 2000.
8. In addition to being low cost producers, the Power Projects have the
added competitive advantage of being a renewable and environmentally
preferred (or "green") energy resource.
o Surveys indicate that 40 to 70 percent of California residential
consumers are willing to pay a 5 to 15 percent premium for green
power products. Current retail premiums for green power products
range from 0.7 to 3.1 cents per kWh.
o California is a world leader in the promotion and development of
clean renewable energy and its energy consumers are
environmentally aware. While the traditional power utilities are
cutting back on renewable expenditures, the State of California
has established a $543 million fund to subsidize existing and new
sources of renewable energy. HESI's analysis of the disbursement
criteria and delivery mechanisms, as well as CalEnergy's own
demonstrated expertise in acquiring such funds, all suggest that
the Power Projects will derive substantial benefits from
generating clean and renewable energy.
D-5
<PAGE>
SECTION 1.0
THE U.S. ELECTRIC POWER MARKET
1.1 INTRODUCTION
The U.S. electric power industry is undergoing a profound transformation.
The industry is evolving from a vertically integrated and cost-regulated
monopoly to one that is market-based with competitive prices. The transition
began with the passing of the Public Utility Regulatory Policies Act (PURPA) in
1978, which made it possible for non-utility generators to enter the wholesale
power market. As a result, non-utility capacity additions grew 54 percent from
1990 to 1996 while utility capacity additions during the same period grew only
2 percent. The deregulation process is likely to continue at the state level
far into the next decade.
1.2 FEDERAL LEGISLATIVE AND REGULATORY INITIATIVES
This section briefly discusses the major federal legislation and
regulation that established a framework for electric power industry
deregulation and set the stage for further legislative initiatives at the state
level.
1.2.1 PUBLIC UTILITY REGULATORY POLICIES ACT -- 1978
PURPA is one of five bills signed into law on November 9, 1978, as part of
the National Energy Act. It is the only one remaining in force. Enacted to
combat the "energy crisis," and the perceived shortage of petroleum and natural
gas, PURPA requires utilities to buy power from non-utility generating
facilities that use renewable energy sources or "cogeneration," i.e. the use of
steam both for heat and to generate electricity. The Act stipulates that
electric utilities must interconnect with and buy, at the utilities' avoided
cost, the capacity and energy offered by any non-utility facility ("Qualifying
Facility") meeting certain ownership, operating and efficiency criteria
established by the Federal Energy Regulatory Commission (FERC).
1.2.2 ENERGY POLICY ACT -- 1992
The Energy Policy Act of 1992 (EPACT) opened access to transmission
networks and exempted certain non-utilities from the restrictions of the Public
Utility Holding Company Act of 1935 (PUHCA). EPACT therefore has made it even
easier for non-utility generators to enter the wholesale market for
electricity.
The Act also created a new category of power producers, called exempt
wholesale generators (EWGs). By exempting them from PUHCA regulation, the law
eliminated a major barrier for utility-affiliated and nonaffiliated power
producers wanting to compete to build new non-rate-based power plants. EWGs
differ from PURPA QFs in two ways. First, they are not required to meet PURPA's
utility ownership, cogeneration or renewable fuels limitations. Second,
utilities are not required to purchase power from EWGs.
In addition to giving EWGs and QFs access to distant wholesale markets,
EPACT provides transmission-dependent utilities the ability to shop for
wholesale power supplies, thus releasing them -- mostly municipals and rural
cooperatives -- from their dependency on surrounding investor-owned utilities
for wholesale power requirements. The transmission provisions of EPACT have led
to a nationwide open-access electric power transmission grid for wholesale
transactions.
1.2.3 FERC ORDER 888 -- 1996
With the passage of EPACT, Congress opened the door to wholesale
competition in the electric utility industry by authorizing FERC to establish
regulations to provide open access to the nation's transmission system. FERC's
subsequent rules, issued in April 1996 as Order 888, is designed to
D-6
<PAGE>
increase wholesale competition in the nation's transmission system, remedy
undue discrimination in transmission, and establish standards for stranded cost
recovery. A companion ruling, Order 889, requires utilities to establish
electronic systems to share information about available transmission capacity.
1.3 CALIFORNIA LEGISLATIVE INITIATIVES
1.3.1 ASSEMBLY BILL 1890
The legislation that introduced electric power deregulation in California
is Assembly Bill 1890, which achieves a number of goals, including:
o An immediate 10 percent rate reduction for residential and small
commercial users.
o A new power market structure with an Oversight Board (OB), an
Independent System Operator (ISO) and a PX.
o Limits the amount of costs (e.g. stranded assets) that are recoverable
in the transition to a deregulated market.
o Preserves public programs supporting energy efficiency, research &
development and low-income households.
o Provides approximately $540 million in subsidies to support renewable
energy programs, including geothermal power generation, such as the
Power Projects.
D-7
<PAGE>
SECTION 2.0
THE CALIFORNIA WHOLESALE POWER MARKET
In September 1996, the California legislature passed Assembly Bill 1890
("AB 1890") that deregulated parts of the electric power business in
California. The California market, originally scheduled to begin on January 1,
1998, was delayed to March 31, 1998. At that time, the PX and ISO began
operation. AB 1890 permits a fully competitive electric generation market to
phase in over a four-year transition period between January 1998 and March 2002
(the "Transition"). At the end of the Transition period, most of the
protections afforded California's investor owned-utilities (IOUs) for past
uneconomic investments and power contracts will be removed. It is anticipated
that, eventually, municipal utilities will also permit their retail customers
to enter into direct supply agreements with competitive power suppliers.
2.1 THE MARKET 1998 AND BEYOND
With deregulation, a steadily increasing percentage of customers will be
allowed to shop for power in an open market. Customers will have direct access
to generators. No longer restricted to buying power only from their local
utility company, they can freely select the power arrangement that suits their
preferences.
On March 31, 1998, the PX began operating the day-ahead energy market, a
wholesale market-clearing auction into which PX participants bid energy supply
and demand for each of the next day's 24 hours. On the same date, the ISO took
control of the electric grid, and began operating a complementary set of
competitive auctions. The ISO relies on these auctions to manage transmission
line congestion, to procure a portion of the needed ancillary services (for
reliability purposes), and to balance physical generation with load in real
time.
During the Transition, utilities are afforded the opportunity to recover
certain "stranded costs" for generation-related investments. These costs had
been previously authorized by the CPUC for inclusion in rates, but are not
likely to be recoverable through the prices that emerge in the competitive
market. The mechanism for this cost recovery is an unavoidable Competition
Transition Charge (CTC) assessed against all customers served by the
distribution system of California IOUs. 2.1.1 Market Size
California's energy market is very large, with a non-coincident peak
energy demand of 51,280 MW(1) in 1996 and total energy consumption of 245,900
GWh. The average retail cost of electricity is 9.4 cents/kWh (1996 $), with
total electric revenue accounting for over $20 billion. Peak demand for
electricity is forecast to reach 68,100 megawatts by 2015 -- a growth rate of
1.5 percent per year between 1996 and 2015.
California's three largest IOU's -- PG&E, SCE, and SDG&E account for
188,470 GWh, or approximately 77 percent, of California's statewide energy
consumption.
2.1.1 DIVERSITY OF ENERGY SUPPLY
During the 1970s, over two-thirds of California's electricity was
generated from oil and natural gas. This decade, however, California has
developed a more diverse resource mix of electricity generation. As Table 2-1
shows, over half of the state's 258,801 gigawatt-hours of electricity
production is now met with non-fossil fuel sources. Further, over 11 percent of
power generation is fueled by renewable energy, mainly geothermal, small hydro
and biomass (but excluding large hydro).
California leads in developing new generation technologies. It has 40
percent of the world's geothermal power plants, 30 percent of the installed
wind capacity and 90 percent of the world's solar generation. The state also
leads the nation in the amount of electricity supplied by non-utility
generators.
----------
(1) "Electricity Report," California Energy Commission, August 1997.
D-8
<PAGE>
Table 2-1 also shows that just over 32 percent of electricity generation
is supplied by natural gas. Because of its cheap price and clean-burning
characteristics, natural gas has become California's fuel of choice,
particularly for electricity generation. Demand for natural gas in 1990
exceeded 2,025 trillion cubic feet and one-third of California's electrical
energy is generated by natural gas. According to the California Energy
Commission, natural gas will account for 38 percent of energy used for power
generation by 2009.
TABLE 2-1
1996 NET SYSTEM POWER
(ELECTRIC GENERATION)
<TABLE>
<CAPTION>
FUEL TYPE GIGAWATT-HOURS PERCENT
------------------------------- ---------------- ----------
<S> <C> <C>
Coal * ...................... 40,283 15.6%
Large Hydro * ............... 64,958 25.1%
Natural Gas * ............... 84,110 32.5%
Nuclear ..................... 39,753 15.4%
Other(Oil, Diesel) .......... 693 0.3%
Biomass & Waste ............. 5,848 2.3%
Geothermal .................. 13,541 5.2%
Small Hydro ................. 5,767 2.2%
Solar ....................... 807 0.3%
Wind ........................ 3,041 1.2%
------ ----
Total ....................... 258,801 100%
======= ====
</TABLE>
----------
* Includes out of state imports.
Source: California Energy Facts, California Energy Commission
Natural gas pipeline capacity into California stood at about 8 BCF/day in
1996. Between 1990 and 1996, interstate pipeline capacity into California
increased by 65 percent. The major sources of new capacity during this period
were the Mojave, El Paso and Tuscarora pipelines.(2)
2.1.2 CALIFORNIA INVESTOR OWNED UTILITIES
As California's utility market moves toward free competition, over 17,800
MW of generating assets owned by IOUs have been sold, or will be in the near
future. However, despite this divestiture of generation resources, the IOUs are
expected to retain ownership and control of substantial nuclear, QF, and
hydropower generation in California and jointly owned thermal coal-fired
generation outside of California.
The IOUs also buy and sell power from each other, as well as engage in
transactions with other utilities in California and the surrounding Western
states. Each has assumed responsibility for matching load and resources to
maintain frequency, and matching scheduled and actual flows at the tie points
by which utilities are connected to other power producers. Because of their
obligation to serve within their service territories, they also developed
generation and demand forecasts, operated generating plants, and entered into
long-term procurement contracts for the fuel used to generate electricity. They
also participated in short- and long-term bilateral contracts for electric
power in order to meet changes in demand and demand growth, respectively.
2.1.3 TREATMENT OF QUALIFYING FACILITIES (QFS)
Qualifying Facilities are currently compensated under a Transition Formula
-- the Short Run Avoid Cost (SRAC) -- that in its current form is tied directly
to changes in the price of natural gas.
----------
(2) Deliverability on the Interstate Natural Gas Pipeline System, Energy
Information Administration, May 1998.
D-9
<PAGE>
However, this relationship is not likely to persist much longer. The CPUC,
which has the regulatory authority to determine SRAC, in Decision 96-12-028,
stated its intention to change the formula to one based on the PX price once
certain conditions are satisfied. These conditions are that the PX is
functioning properly and that either the IOUs have divested 90 percent of their
gas-fired fossil generation, or the fossil-fired generation units owned
directly or indirectly by the IOUs are recovering all of their going forward
costs from PX based prices. HESI believes these conditions will be met by the
beginning of 2000.
2.2 CALIFORNIA MUNICIPAL UTILITIES AND AUTHORITIES
While it is anticipated that municipal utilities and other governmental
authorities will participate in the PX and ISO, there is no regulatory
requirement for them to do so. The largest municipal utilities are the Los
Angeles Department of Water and Power (LADWP) and the Sacramento Municipal
Utility District (SMUD), which in combination own or control over 15,000 MW of
generating resources. To date, they have not announced plans regarding their
participation nor have they submitted their transmission resources to ISO
control. The Imperial Irrigation District has also not as yet announced plans
to turn-over its transmission system to ISO control.
2.3 SYSTEM RELIABILITY
The ISO is the entity responsible for the security and operating
reliability of the statewide electric grid. In this function, the ISO will
adhere to the North American Electric Reliability Council (NERC) and Western
Systems Coordinating Council (WSCC) standards for reliable operation.
In the near term, the new market is designed to accommodate this
centralized, third-party control structure through the combined use of two
mechanisms. One is the ISO-conducted, competitive auction for eligible
ancillary services, such as operating (spinning and non-spinning) reserve,
replacement reserve, and regulation capacity that can be controlled
electronically by the ISO.
The other mechanism available to the ISO for procurement of generating
services is the use of long-term contracts with generating facilities that are
designated as "reliability must-run" facilities. As with the ancillary service
auction, the ISO will use reliability must-run contracts to obtain operating
reserve, replacement reserve, "black start" capability, voltage support, and
regulation capacity. The prices established in these must-run contracts are
unrelated to PX market prices. Instead, they are based on the actual costs of
the generating units under contract. Most of the IOU-owned generators in
California were declared must-run by their owners. The ISO will examine each
must-run contract during the Transition and retain those required for system
reliability. The ISO's use of must-run contracts through the Transition period
was authorized by AB 1890. Service procured under must-run contracts will be
replaced by those procured competitively after the end of the AB 1890-specified
Transition period.
2.4 PX MARKET
The PX is responsible for managing the transactions for all power
auctioned through, and purchased by, market participants except those bound by
contract. It was mandated by AB 1890 and set-up as a private, non-profit
corporation subject to regulation by FERC. The different auctions include: the
Day-ahead Market, Hour-ahead Market, Real-time Market, and an Ancillary
Services Market.
The day-ahead market is the most forward-looking of the scheduled markets,
and is the largest in terms of total volume. It will give participants the
opportunity to buy and sell energy for each hour of the 24-hour trading day on
a day-ahead basis.
The hour-ahead market is also a forward-looking, scheduled market, but its
scale is much smaller in terms of both ahead-time and total volume. It will
give participants the opportunity to adjust their schedules two hours before
the hour of operation.
D-10
<PAGE>
The real-time market is dramatically different from the scheduled
day-ahead and hour-ahead markets, in that it is not forward-looking. Rather, it
seeks to balance the real-time differences actually experienced between
scheduled and metered values for load and generation.
2.4.1 PX PRICES
Actual monthly average California PX prices are shown in Table 2-2 below.
While monthly average prices reveal some of the variation in power prices that
occurred in 1998, a truer depiction of the actual variability in prices day to
day, and even within a day, are displayed in Figure 2-1. The Figure shows
actual high, low and average prices in the California PX day-ahead market
throughout 1998 and for the first two weeks of January 1999. The average daily
price is highlighted in bold and the high/low range for the day is depicted by
the length of the gray-shaded vertical line.
TABLE 2-2
MONTHLY AVERAGE CALIFORNIA PX PRICES -- APRIL 1998 TO JANUARY 1999
($/MWH)
<TABLE>
<CAPTION>
AVERAGE AVERAGE
MONTH ON-PEAK AVERAGE OFF-PEAK ALL HOURS
----- ------- ---------------- ---------
<S> <C> <C> <C>
April, 1998 ........... 26.84 18.55 22.60
May ................... 17.37 6.92 11.49
June .................. 16.97 7.43 12.09
July .................. 40.61 24.39 32.42
August ................ 54.27 27.38 39.53
September ............. 42.18 26.19 34.01
October ............... 30.81 22.91 26.65
November .............. 29.45 22.50 25.74
December .............. 33.50 24.87 29.13
January, 1999 ......... 24.78 17.81 20.96
</TABLE>
----------
Note: On-peak is defined as the weekday hours between the 7:00 A.M. and 11:00
P.M. Off-peak consists of the hours between 11:00 P.M. and 7:00 A.M. on
weekdays and all hours during weekends and holidays.
2.4.2 SHORT RUN AVOIDED COSTS
All QFs are compensated on the basis of the SRAC of the IOU purchasing the
power. The Power Projects' QFs currently receive payment under the SRAC
"Transition Formula" for Southern California Edison (SCE) and San Diego Gas and
Electric (SDG&E). This "formulaic" SRAC is a linear function of the price of
natural gas as measured at the "California Border". Table 2-3 presents a
forecast of the annual average SRAC price, as computed pursuant to the existing
SRAC Transition Formula for SCE and SDG&E. The gas prices (southern California
border prices) used to make this calculation are the same as the gas prices
used in the HESI model to produce the forecast of PX prices.
D-11
<PAGE>
FIGURE 2-1
CALIFORNIA PX DAILY PRICES -- HIGH, LOW AND AVERAGE
[GRAPH SHOWING CALIFORNIA PX PRICES DURING APRIL THROUGH DECEMBER PERIOD]
TABLE 2-3
SCE AND SDG&E ANNUAL AVERAGE
SHORT-RUN AVOIDED COSTS OF ENERGY
<TABLE>
<CAPTION>
PRICE OF GAS SCE AVOIDED SDG&E AVOIDED
YEAR ($/MMBTU) COST ($/MWH) COST ($/MWH)
---- --------- ------------ ------------
<S> <C> <C> <C>
1999 ......... 2.30 30.3 30.9
2000 ......... 2.38 31.2 31.7
2001 ......... 2.46 32.0 32.4
</TABLE>
----------
Note: The SRAC prices shown are weighted averages with the weights based on the
number of hours in each "time-of use" period.
While the SRAC is projected through 2001, we believe PX pricing will
replace SRAC pricing as early as the start of 2000.
SCE's 1995 forecast of avoided costs of energy is included in Appendix A
for comparison purposes, containing low, medium, and high forecasts.
2.5 PX PRICES AS A MEASURE OF AVOIDED COST
The SRAC Transition Formula is expected to be in effect until several
conditions are met. One is the divestiture by California IOUs of their
California fossil-fired generation, a process expected to be completed in the
next twelve months for all major utilities. The other is a determination by the
CPUC that the PX market is "functioning properly." Currently PX operations are
being gradually phased in. Once complete, the CPUC will likely wait at least
several more months before determining the PX is functioning properly, a
determination which could be subject to several months of regulatory delay.
However, if PX market prices are substantially below transition SRAC prices,
utilities will be motivated to seek a change in SRAC pricing through the CPUC
more quickly. PX trading prices through June 1998 were substantially lower than
SRAC payments, a situation that was reversed in July. HESI's market price
forecasting supports the notion that the trend of annual average PX prices
being lower than SRAC will likely continue through the Transition years
(1999-2001) of California restructuring.
Given the above considerations, the change from Transition Formula to PX
pricing should occur at the beginning of Year 2000.
D-12
<PAGE>
SECTION 3.0
PX PRICE FORECAST: KEY ASSUMPTIONS AND METHODOLOGY
3.1 MODELING METHODOLOGY AND TECHNIQUES
To develop a forecast of PX market clearing prices for the Southern
California Transmission Area, simulation of the entire Western Systems
Coordinating Council (WSCC) electrical system was required. Such a simulation
requires a vast amount of data regarding power plants, fuel prices,
transmission capability and constraints, and customer demands.
HESI utilizes its proprietary Electric Market Simulation System (EMSS) and
its MULTISYM (Trade Mark) production cost model to simulate the operation of
the WSCC. EMSS is a sophisticated application of relational database
technology, which operates in conjunction with a state-of-the-art, multi-area,
chronological, production simulation model. It is used to manage the tens of
thousands of individual data points necessary to properly characterize the WSCC
electric system for the forecast.
The types of data managed by the EMSS database include the data necessary
to correctly consider the configuration of the regional transmission system.
This includes:
o individual power plant characteristics;
o transmission line interconnections, ratings, losses, and wheeling
rates;
o forecasts of resource additions and fuel costs; and
o forecasts of loads for each utility in the region.
MULTISYM (Trade Mark) simulates the operation of the individual
generators, utilities and control areas (also referred to as transmission
areas) within the region, taking into consideration various system and
operational constraints. Output from the simulation is generated in hourly,
station-level detail and provided in database format. This data may then be
aggregated and sorted for any level of aggregation required by the user.
3.2 ASSUMPTIONS REGARDING THE CALIFORNIA MARKET TRANSITION PERIOD
It is assumed during the Transition period that the market will consist of
a limited number of generators that will be required to operate competitively
in the market. AB 1890-mandated regulatory Must-Take generation and regulatory
Must-Run contracts provide for the continuation of capacity payments through
Transition. Must-Take includes power from QF resources -- including the
Existing Power Projects -- nuclear units, and existing purchase power
agreements that have minimum-take provisions, is not subject to competition and
will be scheduled with the ISO on a must-take basis. Must-Run contracts are
between IOU generators and the ISO for the purposes of system reliability and
provide a capacity payment to the owners during all, or part, of the
Transition.
Must-Take units owned by municipal and public power agencies are assumed
to continue operating as they did in the past. Other Must-Take units, like QFs,
will continue to operate under existing contracts.
Units identified on the ISO's must-run list will end up with one of three
types of Must-Run contracts -- A, B, or C. This study assumes that most
Must-Run contracts will be Must-Run "B" which allows the generators to cover
its fixed costs of operation through the ISO's payment. Those units that do not
sign the "B" contract and remain on an "A" contract will generally be those
that are must-run or follow load, like hydroelectric. There will be few
Must-Run "C" contracts which dedicate the units to the ISO in exchange for full
cost recovery but do not allow the unit to bid independently into the market.
The ISO has the right to terminate any must-run contract it deems unnecessary
with a 90 day notice.
Since a majority of the generating units both inside and outside of
California will generally continue to bid to the PX just above their variable
cost of production until the end of the AB 1890
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<PAGE>
specified Transition period, we assume that the PX closely resembles a variable
cost pool in the near term. At the end of the Transition period, fixed costs
will also be recovered through the PX. Thus, a relatively small number of units
will be exposed to full competition during the Transition period.
We have forecasted the Must-Run contracts to impact the market through the
end of 2001 by putting downward pressure on PX prices. The Must-Run contract
payments cover much of the generators' costs by allowing fixed costs to be
recovered through the ISO. Thus, generators will not require higher PX prices
to recover their fixed costs. When the contracts terminate during, or at the
end of, the Transition period, all generators will be required to recover their
costs through normal, competitive trading activities. The model takes into
account the phasing out of the Must Run contracts in the Transition period,
resulting in an increase in PX prices.
3.3 KEY ASSUMPTIONS FOR MODELING CALIFORNIA MARKET
3.3.1 FORECAST HORIZON
The forecast period covers a twenty-year period beginning January 1,1999
and ending December 31, 2018.
3.3.2 MARKET STRUCTURE
It is assumed that all generators in the WSCC, except a few in California
that were not declared Must Run, receive some payment for capacity through
2001, the end of the Transition period specified in AB 1890. From 2002 through
2018 there are no capacity payments to the California generators. We assume
non-California generators will continue to operate with regulated tariffs and
capacity payments from 2002 through 2004. We believe the market will become
fully competitive by 2005 and, from that point forward, all generators will
need to recover capacity costs through the market.
3.3.3 EXISTING RESOURCE BASE
All existing generation units within the WSCC are included in the
analysis. HESI's database contains information regarding all such units and
their performance characteristics. This data has been updated to reflect the
most recent filings made by utilities regarding their resources. Much of this
data was taken from the "OE-411" and is current as of January 1, 1997.
Generation resource data were also supplemented by a review of specific utility
resource plan filings and reports generated by state agencies. Existing
resources are assumed to continue operating through the forecast horizon,
except for those resources that have specific retirement dates or assumed
retirements.
3.3.4 RESOURCE RETIREMENTS
We have conservatively estimated the retirements to be only those publicly
announced, except in the case of the nuclear units. Recent CPUC decisions on
rate recovery allow California utilities to recover investments in nuclear
plants on an accelerated schedule. Investments in Diablo Canyon and Palo Verde
will therefore be fully recovered by the end of 2001 and San Onofre by the end
of 2003. After this special rate treatment period ends, these plants must
compete individually. All costs will have to be recovered in the competitive
energy market. HESI believes that Diablo Canyon and San Onofre will not be
competitive in the new environment and so will be shut down shortly after their
investments are recovered, in 2001 and 2003 respectively. Palo Verde is assumed
to operate throughout the forecast period.
3.3.5 GENERIC RESOURCE ADDITIONS
HESI believes that gas-fired combined cycle units (CC) and gas-fired
combustion turbines (CT) will be added as needed to meet the projected increase
in customer demand over the forecast period. HESI's analysis assumes that
generation resources will be added over the forecast period in a 3 CC MWs to 1
CT MW ratio for all trans-areas.
D-14
<PAGE>
Table 3-1 lists the cost and performance assumptions for these resources.
TABLE 3-1
GENERIC RESOURCE CHARACTERISTICS (1996 DOLLARS)
<TABLE>
<CAPTION>
COMBUSTION COMBINED
UNIT CHARACTERISTIC TURBINE CYCLE
------------------- ------- -----
<S> <C> <C>
Capacity (MW) ......................... 120 240
Heat Rate (Btu/kWh) ................... 11,000 7,100
Fixed O&M ($/kW- year) ................ 3.00 10.00
Variable O&M (dollars/MWh) ............ 4.00 2.00
Forced Outage Rate (%) ................ 0.00 2.00
Maintenance Outage Rate (%) ........... 4.00 4.00
Capital Cost ($/kW) ................... 300.00 500.00
Cost of Money (%) ..................... 10% 10%
Capital Amort. Period (years) ......... 15 15
</TABLE>
3.3.6 LOADS
HESI is using the latest available data to project future customer demand
and energy requirements. This data was filed electronically by the utilities
with the Federal Energy Regulatory Commission (FERC) early in 1997, and
represents each utility's most recent recorded historic loads and their most
recent load forecast data. HESI has used data approved by the California Energy
Commission in its 1996 Electricity Report for the California utilities.
3.3.7 LOAD SHAPE
The load shape is based on recent historic load data filed with the FERC
by utilities which reflects their complete hourly loads over calendar years
1993 through 1996. HESI has used these load shapes to create a load shape
consistent with the load forecasts provided by utilities. These "synthetic"
load shapes are used to project the shapes of future utility loads based on the
load growth data described in section below.
3.3.8 LOAD GROWTH
Based on the load forecasts filed with the FERC in 1996 under Form 714 and
on more recent information filed to state regulatory agencies, including
California ER96, peak demand and energy requirements for the entire WSCC are
expected to both grow at less than 2 percent per year through the study.
3.3.9 INFLATION
General inflation drives a number of cost elements that underlie power
market prices including Operations and Maintenance (O&M) costs, the cost of new
resource additions, and is combined with expectations of real escalation to
result in future fuel prices. For this study inflation was assumed to be 2.5
percent.
3.3.10 FUEL PRICES
There are two principal fuels that drive electricity prices in the WSCC
region -- natural gas and coal.
NATURAL GAS
The natural gas price forecast utilized in this study was developed based
on the price of gas futures contracts for the 1999 period and estimates of gas
transportation costs associated with moving gas from the relevant gas basin to
the power plant. Each power plant in EMSS is assigned a fuel group. Each fuel
group is comprised of two components: a commodity price and a gas
transportation price.
D-15
<PAGE>
Gas Commodity Prices
Gas Commodity prices are tied to the San Juan basin in the southwest and
to the AECO C Hub in Canada, the two main gas-producing basins in the WSCC
region. The price of a series of gas futures contracts for gas delivered to the
San Juan Basin was used as the basis for the study's southwest gas basin price.
Gas basin prices at the AECO C Hub were based on forward gas futures at Henry
Hub plus the price of a financial swap tying Henry Hub prices to the AECO C
Hub. Although generators within the WSCC often use gas from more than one of
these basins, it is assumed that only one gas basin will set the key marginal
gas price for each generator. Each gas basin is mapped to generation regions
within the WSCC as discussed below:
San Juan
This basin is assumed to be the dominant gas basin supply generating
stations in the New Mexico, southern Nevada, Arizona, and California.
Additional pipeline and Local Distribution Company (LDC) charges must be added
to the San Juan price to yield the delivered price of gas to each generating
unit.
Alberta
This basin is assumed to supply generating stations within Alberta; the
same gas price is also applied to generators in British Columbia. Alberta gas
is also assumed to supply electric generators located in the following states:
Washington, Oregon, Idaho, Montana, Wyoming, Utah, and Northern Nevada. Again,
gas transportation costs are added to yield the gas prices to generators in
those states.
Gas Transport Prices
Pipeline transportation costs are added to basin prices to determine
Citygate gas prices. The gas transportation price is a combination of gas
pipeline charges and the cost to move gas across a gas LDC. In many areas,
Citygate prices are the relevant marginal gas costs used by electric generators
to "dispatch" their electric systems, either because the generation owners
receive service directly from pipelines or pay only nominal additional charges
to an LDC. In other areas, additional charges for intrastate or LDC
transportation must be added to yield the dispatch price of gas. These costs
are based on the difference in historic Citygate and basin prices.
Additionally, the monthly price profile of the referenced basin's natural gas
futures contract is used to approximate the seasonality of the gas
transportation price.
Local Distribution Company Charges
For those generators with gas delivered by an LDC, additional charges must
be added. These charges were again estimated using data developed from relevant
regulatory filings and other publicly available company information. The key
generators receiving LDC gas service are California's electric generators. The
LDC charges for each of these were estimated using 1996 charges. These charges
were assumed to remain flat in nominal terms through the study horizon, based
on data that has been published by the California Energy Commission. HESI
assumes the utilities will not continue their current practice of recognizing
only a small portion of their total transportation costs in their dispatch
decisions; rather, the utilities will likely recognize their average
transportation cost in each dispatch decision, or run the risk of substantial
under-recovery of their transportation costs.
Total Gas Costs
The total cost of gas for each "gas price region" within the WSCC is
developed by combining the above costs to yield a forecast of delivered gas
prices.
COAL
HESI bases its coal prices on historic power plant specific coal price
data extracted from the "Form 423's" utilities regularly file with the FERC.
The Form 423 data include historic consumption
D-16
<PAGE>
as well as both spot and average (transportation and so-called fixed fees
included) prices. Given the competitive nature of fuel supply markets and the
current pricing of coal relative to gas, HESI expects no coal price escalation
through the forecast period. HESI used spot coal prices to simulate the
economic operation of coal plants. Spot prices are historically about 77
percent of average prices.
3.3.11 OPERATIONS & MAINTENANCE
Power plant specific non-fuel O&M costs are reported by utilities in
annual reports to the FERC in a number of separate accounts. HESI averages
these data for the 1991 through 1995 time periods (normalized for constant year
dollars) to develop average starting O&M costs. The amounts in these various
accounts are then allocated between fixed and variable O&M. To derive a unit's
fixed O&M cost, the total O&M cost is decreased by the variable O&M cost
component. Both fixed and variable O&M costs are assumed to escalate with
inflation.
3.3.12 PROPERTY TAXES
Property taxes are set by local jurisdiction and so vary throughout the
WSCC. In California they are 1.09 percent of remaining generation station book
value. In other jurisdictions, the rates range from 0.4 percent to
approximately 4 percent. For purposes of establishing the property tax
component of going forward costs, jurisdictional tax rates will be used.
3.3.13 INSURANCE
Insurance is calculated as 0.2 percent of the remaining, undepreciated
book value of the power plant.
3.3.14 OTHER COSTS
In addition to fuel costs, a power plant operator experiences other costs
associated with the on-going business of producing power. These costs include
O&M, property taxes and insurance. For the most part, these costs can be
avoided if a facility is "mothballed" or retired, and thus are included in
power plant bids when performing competitive market analysis.
3.4 WSCC TRANSMISSION SYSTEM CONFIGURATION
In order to perform a study of the Southern California market prices
likely to result from the PX, the operation of the transmission system in the
entire WSCC region must be modeled. The transmission system configuration for
this study is shown in Figure 3-1. This characterization reflects the zones
proposed by the California IOUs in their PX applications to FERC.
D-17
<PAGE>
FIGURE 3-1
WSCC TRANSMISSION SYSTEM CONFIGURATION
[GRAPHIC SHOWING WSCC TRANSMISSION SYSTEM CONFIGURATION]
3.5 HYDRO POWER
3.5.1 MEDIAN YEAR CASE
HESI utilized average or median hydro conditions depending on the WSCC
sub-region and the data available. The sources for these data follow.
PACIFIC NORTHWEST (PNW) HYDRO DATA
The hydroelectric generation in the PNW accounts for almost half of the
hydro generation in the entire WSCC. HESI used the Bonneville Power
Administration's (BPA) 1996 Pacific Northwest Loads and Resources Study to
update hydroelectric data in the PNW. HESI calculated monthly capacity and
energy values for each hydroelectric station in the PNW based on this data,
choosing the median conditions from a recorded database of 50 years.
HYDRO DATA FOR OTHER REGIONS
Hydro data for the other regions come from a number of sources and are
updated periodically by HESI.
The WSCC Coordinated Bulk Power Supply Program document was used for the
majority of the plant capacity data for plants outside the Northwest. This
document is the WSCC's response to the Department of Energy's Form OE-411. It
includes summer and winter capacity ratings for all of the existing hydro and
thermal resources in the WSCC.
The McGraw Hill Electrical World Directory of Electric Utilities (The
"Bluebook") was the source of hydro plant energy data in a number of the WSCC
regions.
D-18
<PAGE>
3.5.2 TRANSACTIONS
HESI incorporates known firm, contracted power transactions into its
model, as reported by the WSCC in the annual FERC Form OE-411 Filing. The
transactions are reflected in the load requirements of the buying and selling
utilities, in transactions between regions, and by adjusting the transmission
capacity. Any remaining transmission capacity is used to facilitate additional
power transactions between regions.
D-19
<PAGE>
SECTION 4
PX PRICE FORECAST: RESULTS
The following sections summarize the model results from the Base Case and
the two Low Gas price sensitivity cases. Gas prices are sensitized due to the
fact that gas-burning generators will continue to be marginal cost producers
and therefore a major influence on the PX price. Any additional baseload
capacity, including the New Power Projects, would be low cost producers and
price takers. Additional intermediate capacity will need to be flexible enough
to accommodate hourly load fluctuations. The gas-fired combined-cycle and
combustion turbines are the most flexible technologies to meet these needs
cost-effectively. The role of these units and the impact of gas prices in
setting the PX prices will increase over time making gas the ideal input to
vary for sensitivity. To test this sensitivity two gas price downside cases are
developed as described in the sections below.
4.1 BASE CASE 1999-2018
The Base Case annual average PX price forecast for the Southern California
transmission area is presented in Table 4-1.
Annual average PX prices decrease at an annual average of 0.18 percent per
year from 1999 through 2001. This is the Transition period during which most
market players bid selling prices into the market which reflect their short run
marginal fuel costs. During this period, most IOU-owned generators receive
payments for capacity from the ISO Must Run contracts, if in California, or
through traditional tariffs, if outside of California. The capacity payments
cease for most ISO-contracted Must Run generators by the end of 2001.
After the AB 1890 Transition period ends in March 2002, the power pool
should cease to behave as a marginal cost pool. We believe California
generators will begin to recover some, though not all, of their fixed costs
through their sales through the PX. However, they will continue to compete with
out-of-state generators that continue to receive capacity payments through
their regulated rates and may continue to bid as if the PX was a marginal cost
pool. This change is reflected in the average PX price increasing from
$28.16/MWh in 2001 to $33.99/MWh in 2002.
TABLE 4-1
BASE CASE PX PRICE FORECAST 1999 -- 2018, $/MWH
<TABLE>
<CAPTION>
ANNUAL AVERAGE AVERAGE
AVERAGE OFF-PEAK ON-PEAK
YEAR MCP $/MWH MCP $/MWH MCP $/MWH
---- --------- --------- ---------
<S> <C> <C> <C>
1999 28.31 23.18 33.94
2000 28.19 23.49 33.42
2001 28.16 22.71 34.16
2002 33.99 26.73 41.98
2003 35.23 27.79 43.43
2004 36.82 28.80 45.65
2005 40.09 30.97 50.14
2006 39.91 31.02 49.68
2007 40.19 31.02 50.30
2008 43.05 32.17 55.02
2009 42.04 31.77 53.35
2010 43.48 33.03 54.99
2011 43.48 33.08 54.93
2012 43.26 33.10 54.45
2013 45.70 34.37 58.18
2014 45.89 34.95 57.93
2015 47.57 35.87 60.46
2016 47.79 35.67 61.12
2017 49.16 36.78 62.79
2018 50.31 37.19 64.75
</TABLE>
D-20
<PAGE>
From 2002 to 2005, California generators are exposed to the competitive
market, but their out-of-state competitors continue to receive capacity
payments. The average PX price increases at an annual average rate of 5.7
percent during this period.
HESI assumes that the entire WSCC will be competitive starting in 2005 and
that the bidding behavior of generators reflects their efforts to recover fixed
costs through sales to the PX. The PX price increases from $40.09/MWh in 2005
to $50.31/MWh by 2018 -- an average rate of increase of 1.8% per year, which is
less than the assumed rate of inflation.
4.2 SENSITIVITY CASES
4.2.1 LOW GAS 1 CASE
In the Low Gas Case 1, the inflation rate is set at zero, thereby keeping
the gas price flat relative to the Base Case. The gas price decreases each year
to the point it is 10 percent below the Base Case. It was held at a constant 10
percent below the Base Case gas price in all remaining years of the analysis.
This low gas scenario, while unlikely, could occur if there was an oversupply
of gas, for which there was no market, followed by a lengthy period of recovery
and market demand.
A total of 6 simulations, representing the sample years listed in Table
4-2, were run to calculate the annual average PX prices for those years
(intervening years can be interpolated).
TABLE 4-2
PX PRICES UNDER LOW GAS CASE 1
<TABLE>
<CAPTION>
BASE CASE LOW GAS 1
ANNUAL AVE ANNUAL AVE PERCENT BELOW BASE
SAMPLE YEAR MCP $/MWH MCP $/MWH CASE PRICE
----------- --------- --------- ----------
<S> <C> <C> <C>
2000 28.19 27.92 1.0
2001 28.16 27.86 1.1
2005 40.09 38.70 3.5
2010 43.48 40.25 7.4
2014 45.89 42.89 6.5
2018 50.31 46.95 6.7
</TABLE>
4.2.2 LOW GAS 2 CASE
In the Low Gas Case 2, the Base Case gas price forecast is reduced by
three percent each year from 1999 through 2004, so that by 2004 the gas price
is 15 percent below the Base Case forecast gas price. The Low Gas 2 gas price
is then held at a constant 15 percent below the Base Case gas price for the
remaining years of the analysis. This scenario also requires an oversupply of
gas or a dramatic decline in demand followed by a lengthy period of recovery.
A total of 6 simulations, representing the sample years listed in Table
4-3, were run to calculate the annual average PX prices for those years.
TABLE 4-3
PX PRICES UNDER LOW GAS CASE 2
<TABLE>
<CAPTION>
BASE CASE LOW GAS 2
ANNUAL AVE ANNUAL AVE PERCENT BELOW BASE
SAMPLE YEAR MCP $/MWH MCP $/MWH CASE PRICES
----------- --------- --------- -----------
<S> <C> <C> <C>
2000 28.19 27.23 3.4
2001 28.16 26.47 6.0
2005 40.09 35.58 11.0
2010 43.48 38.47 12.0
2014 45.89 39.98 13.0
2018 50.31 43.31 14.0
</TABLE>
D-21
<PAGE>
SECTION 5
THE POWER PROJECTS AND THE CALIFORNIA MARKET
5.1 MARKET ANALYSIS RESULTS
This section presents an analysis of the Power Projects and their position
in the competitive California market and consists of two sets of comparisons:
1) a comparison of unit operating cost estimates provided by CEG and operating
costs of other types of generation; 2) a comparison of Power Project operating
costs and forecasted PX prices. The latter set of comparisons were performed
using the Base Case and two Low Gas price cases.
We expect all of the Power Projects to be low cost producers in all years
of the study. Table 5-1 lists the average operating costs projected in 2005 for
several categories of generators in the WSCC region including the Power
Projects. We selected the year 2005 for this analysis as it is the first year
in which we assumed a fully competitive market. The average operating cost of
the Power Projects in 2005 is $17.50/MWh -- which makes them low cost
producers. In fact, about 66 percent of the electricity produced in the WSCC in
2005 is generated from units with higher costs, a strong indication that the
Power Projects will be dispatched as baseload. The new units, Salton Sea Unit V
and the CE Turbo Project, are even better positioned at $10.00 and $9.30 per
MWh respectively. Of all the generation in the region, only hydroelectric
generators have lower operating costs.
TABLE 5-1
AVERAGE OPERATING COSTS BY PLANT TYPE IN THE WSCC FROM PROSYM MODEL SIMULATION
IN 20051
<TABLE>
<CAPTION>
ELECTRICITY AVERAGE OPERATING
PLANT TYPE GENERATION (GWH) COST ($/MWH)2
---------- ---------------- -------------
<S> <C> <C>
Internal Combustion Engines ......... 62 62.22
Gas Turbine ......................... 26,177 39.94
Geothermal (3)....................... 18,890 37.49
Gas/Cogeneration .................... 21,917 26.85
Gas/Combined Cycle .................. 151,804 25.41
YUMA COGENERATION ................... 351 23.70
Other Renewables (4)................. 6,737 23.29
Steam Plants ........................ 335,527 18.21
THE POWER PROJECTS (5)............... 2,879 17.50
Nuclear ............................. 35,885 13.33
Wind ................................ 3,435 10.45
SALTON SEA UNIT V (5)................ 421 10.00
CE Turbo Project (5)................. 82 9.30
Hydroelectric ....................... 246,434 4.91(7)
Total ............................... 846,867(8)
</TABLE>
----------
[1] The table displays operating cost by plant-type for various plant
categories in the Prosym simulation results. The values shown are for the
simulation year 2005 and are stated in nominal dollars. These values
reflect expenses for fuel and variable operation and maintenance only. They
do not include costs associated with fixed operation and maintenance, the
inclusion of which would increase overall costs for some plants
substantially. For example, inclusion of fixed operation and maintenance in
the nuclear category would increase the cost reported in the Table from
$13.33/MWh to $34.00 /MWh. In as much as it is presently unclear what
portion of fixed costs will be recovered in the competitive market and
under what conditions, the Table should be viewed as a conservative
representation of the operational costs of these plants.
[2] Cost based on fuel and variable O&M in nominal dollars.
[3] The operating costs of the Geothermal category reflect the fact that many
of the utility-owned geothermal facilities have long term steam contracts
with steam suppliers. In the case of the Power Projects, the steam supply
and facility owners are all Guarantors.
[4] Includes solar, biomass, and other renewables.
[5] Based on weighted facility operating cost (includes fuel, variable O&M and
fixed O&M) and consists of Salton Sea Units 1-5, Elmore, Leathers, Del
Ranch, Vulcan, and CE Turbo Project. Source: IPP Co.
[6] Cost based on average aggregated operating expenses of hydroelectric
facilities in the WSCC as reported to FERC on FERC Form 1.
[7] The generation totals in bold are not included in the total, but are
included in the total geothermal production. They are listed here to
provide relative scale to the market.
D-22
<PAGE>
Operating Costs of the Power Projects, in $/MWh, are compared to the Base
Case annual average PX prices in the figures below. All units have operating
costs below the annual average PX price, with the exception of the Leathers
unit, which has an operating cost above the annual average PX price in the
first year. This occurrence is because 1) Leathers is still in the S04 fixed
price energy period, and 2) certain costs such as geothermal royalties are
directly linked to revenues. In fact, all of the Power Projects' operating
costs are close to the off-peak PX price in 1999 through 2002 and significantly
below that in all years thereafter.
FIGURE 5-1
PX PRICES AND PROJECT OPERATING COSTS, UNITS I TO IV
[LINE CHART SHOWING PX PRICES AND OPERATING COSTS FOR UNITS I TO IV]
FIGURE 5-2
PX PRICES AND PROJECT OPERATING COSTS, OTHER UNITS
[LINE CHART SHOWING PX PRICES AND OPERATING COSTS FOR OTHER UNITS]
D-23
<PAGE>
FIGURE 5-3
PX PRICES AND NEW POWER PROJECT OPERATING COSTS
[LINE CHART SHOWING PX PRICES AND OPERATING COSTS FOR NEW PROJECTS]
FIGURE 5-4
PX PRICES AND YUMA OPERATING COSTS
[LINE CHART SHOWING PX PRICES AND OPERATING COSTS FOR YUMA PROJECT]
Most important is the comparison between the PX prices and the New Power
Projects, Salton Sea Unit V and CE Turbo Project as shown in Figure 5-3. These
units are about $20/MWh lower than the PX prices in 2000 and 2001, a difference
that increases to $30/MWh in 2005 and to nearly $40/MWh by 2018. The margin is
so significant it is extremely unlikely that any new generators with lower
operating costs will be built. It is very unlikely that any significant hydro
generation capacity, even with lower operating costs, due to siting and
licensing difficulties. Thus, we conclude that the New Power Projects will have
operating costs lower than all other generator types, except hydro, and will be
extremely well-positioned to be dispatched any hour in the year.
The differential between PX prices and operating costs is perpetuated in
the Low Gas Price Cases -- namely, operating costs are well below the PX
prices. PX prices in the Low Gas Case 1 range between $27.92/MWh in 2000 to
$46.95/MWh in 2018. In Low Gas Case 2, forecast PX prices range from $27.23/MWh
in 2000 to $43.31/MWh by 2018.
5.2 PX PRICES AND THE MARKET POSITION OF THE POWER PROJECTS
For an additional perspective of the relative position of the Power
Projects in the market, a table summarizing the frequency of PX prices
(Marginal Prices) is developed. This approach captures more
D-24
<PAGE>
of the hour by hour price variability than the preceding results. First, the
hourly PX price results from the Base Case year 2005 are ranked from highest to
lowest. From this, the frequency of price levels (i.e. the percentage of hours
in which the price is at, or above, a given level) is developed. The analysis
for 2005 indicates that in 96 percent of the hours the PX price is greater
than, or equal to, $20.30/MWh. This means that the Power Projects, with an
average operating cost of $17.50/MWh will be below the PX price 96 percent of
the time.
TABLE 5-2
PX PRICE FREQUENCY ANALYSIS IN SOUTHERN CALIFORNIA TRANSMISSION AREA, 2005
<TABLE>
<CAPTION>
MINIMUM% OF PX PRICE
TIME $/MWH
---- -----
<S> <C>
70 28.73
75 25.65
80 24.12
85 23.15
90 21.73
95 20.68
96 20.30
</TABLE>
D-25
<PAGE>
SECTION 6
THE CALIFORNIA GREEN POWER MARKET AND
ITS IMPLICATIONS FOR THE POWER PROJECTS
The sweeping regulatory changes initiated by Federal and California
regulators present significant opportunities for providers of electricity from
renewable energy sources. HESI believes a number of emerging market factors
bode well for the most efficient renewable energy projects in general including
the Existing Projects and the New Power Projects in particular. These factors
are listed and discussed below. First, however, this section presents a brief
summary of the renewable funding programs.
6.1 CEC RENEWABLE RESOURCE FUNDING
AB 1890 established a $540 million fund to promote and develop renewable
energy projects and directed the CEC to administer and distribute the funds. In
response, the CEC established four separate accounts to deliver these funds
over the period January 1, 1998 to January 1, 2002. Each account has been
allocated a fixed percentage of the total fund and a different distribution
mechanism is used for each account. The four accounts and the amount of funds
allocated to each are shown in Table 6-1.
TABLE 6-1
AB 1890 ACCOUNTS -- TOTAL FUNDING ALLOCATIONS BY TECHNOLOGY, $MILLIONS
<TABLE>
<CAPTION>
TECHNOLOGY $MILLIONS
---------- ---------
<S> <C>
Existing Technologies .......... 243
New Technologies ............... 162
Emerging Technologies .......... 54
Consumer-Side .................. 81
Total .......................... 540
</TABLE>
Source: Policy Report on AB 1890 Renewables Funding, Report to the Legislature,
California Energy Commission, March 1998.
The "existing" and "new" categories are the most important, accounting for
75% of the total fund disbursement. Further, these accounts are applicable to
the majority of active or economically feasible renewable energy projects in
California, including the New and Existing Projects. An existing technology
refers to a facility that started operation prior to September 23, 1996 and a
new technology means a facility that started generation on or after September
26, 1996 but before January 1, 2002. Existing facilities that are substantially
refurbished on or after September 23, 1996 can apply for funding from the new
technology category. However, the non-refurbished portion of the facility
cannot exceed 20% of the refurbished facility's total value.
The "emerging" category is restricted to projects using small wind
turbines of 10 kW or less, fuel cell technology and solar power -- both
photovoltaic and solar thermal. A total of $54 million has been allocated to
the emerging technology account -- $10.5 million of which became available on
March 20 on a first-come, first-served basis.
The consumer-side account is designed to promote customer participation in
the renewable energy market. This fund has been allocated $81 million in total,
which in turn is divided between two sub-accounts: a customer credit account;
which has been most of the consumer-side funds, and secondly, a consumer
information account.
6.2 EXISTING RENEWABLE RESOURCE ACCOUNT
The Existing Renewable Resource Account was designed to help maintain
existing renewable technologies during the first four years of the electric
industry restructuring. The total amount of funds allocated to the existing
renewable account is $243 million, which is divided among three tiers.
D-26
<PAGE>
Existing technologies are assigned to a tier according to their cost
characteristics and potential for further cost efficiencies. Tier 1 contains
biomass and solar thermal technologies and is allocated 25% of the total
existing renewable account. Wind generation is placed in Tier 2 and is
allocated 13% of the total. Tier 3 is allocated 7% of the existing renewable
fund total and consists of geothermal, small hydro, digester gas, and municipal
solid waste and landfill gas technologies.
TABLE 6-2
EXISTING RENEWABLE RESOURCE ACCOUNT ALLOCATIONS BY TIER, $MILLIONS
<TABLE>
<CAPTION>
TIER 3 --
TIER 1- BIOMASS, TIER 2 -- GEOTHERMAL, SMALL
SOLAR, THERMAL WIND HYDRO, OTHERS TOTAL
-------------- ---- ------------- -----
<S> <C> <C> <C>
$ 135 $ 70.2 $ 37.8 $243
</TABLE>
Source: Policy Report on AB 1890 Renewables Funding, Report to the Legislature,
California Energy Commission, March 1998, page ES-8.
The amount of funds available annually to each tier declines over the four
year period. The CEC expects renewable generation facilities to become more
cost efficient and therefore more competitive as the unregulated market
evolves.
The subsidy is distributed monthly to renewable energy suppliers through a
cents per kWh payment. However, the payment is based on the lowest of three
possible calculations: the difference between a target price and the market
clearing price (the SRAC specific to each IOU is used as a proxy for the market
clearing price at present), a pre-determined cents per kWh price cap, and a
funds adjusted price (the adjustment ensures that the amount disbursed does not
exceed the amount of funds available). The CEC designated target price and
price cap for existing technology tier 3 geothermal facilities are 3.0 and 1.0
cents per kWh, respectively. Thus the Existing Projects benefit from these
subsidies on a cent per kWh basis to the extent that the SRAC is below 3 cents
per kWh. SRAC prices applicable to Southern California Edison have recently
been in the 2.7 to 3.1 per kWh range.
6.3 NEW RENEWABLE RESOURCE ACCOUNT
The New Renewable Resources Account contains $162 million to support new
renewable electricity generation projects. According to the AB 1890
legislation, "new" in this context means a renewable energy facility located in
California that became operational on or after September 23, 1996, but prior to
January 1, 2002. As Table 6-3 shows, the proportion of total funds devoted to
new technologies increases from $32.4 million in 1998 to $48.6 million by 2001.
TABLE 6-3
NEW RENEWABLE RESOURCE ACCOUNT ALLOCATIONS BY YEAR, $MILLIONS
<TABLE>
<CAPTION>
1998 1999 2000 2001 TOTAL
---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C>
New Renewables .......... $ 32.4 $ 37.8 $ 43.2 $ 48.6 $162
</TABLE>
Source: Policy Report on AB 1890 Renewables Funding, Report to the
Legislature, California Energy Commission, March 1998, page 33.
The full $162 million allocated to new renewable energy technologies was
disbursed in a single auction held in July of this year. Auction participants
were required to submit "bids" -- a cents per kWh subsidy -and an estimate of
project generation over a 5 year period (however, acceptable bids were capped
at 1.5 cents per kWh). The fund was then allocated from lowest to highest
bidder until it was exhausted. Winners will receive a payment for renewable
electric generation produced and sold in the first five years of project
operation.
The New Power Projects were awarded $31.3 million in this auction, one of
the largest subsidies granted by the CEC. This subsidy directly and positively
impacts the ability of the New Power
D-27
<PAGE>
Projects to produce competitively priced power. HESI also notes that the award
is a strong indication that the New Power Projects are among the lowest unit
cost producers of new renewable energy in California.
6.4 EMERGING RENEWABLES ACCOUNT
The purpose of the emerging renewable subsidy or Buy-Down Program is to
reduce the cost to consumers of certain renewable energy generation equipment.
Four types of renewable power generation are eligible for these funds: small
wind turbines of 10 kilowatts or less, fuel cells that convert renewable fuels
such as methane gas into electricity, and solar power -- both photovoltaic (PV)
and solar thermal. The first $10.5 million of the total $54 million allocated
to this fund became available March 20, 1998 from the CEC on a first-come,
first-served basis.
6.5 CONSUMER-SIDE INCENTIVES
The consumer-side account is designed to promote customer participation in
the renewable energy market. This account was allocated $81 million, or 15% of
the total fund. These funds in turn have been allocated to two sub-accounts, a
customer credit account, which has most of the allotted funds, and secondly, to
a consumer information account.
The customer credit account provides "credits" to consumers who purchase
CEC-registered renewable power that satisfy certain eligibility criteria.
Through this program, residential and small commercial customers' electricity
bill who purchase renewable energy will automatically be credited up to 1.5
cents for every kilowatt-hour of renewable electricity they consume up to the
total fund amount of $75.6 million. Funds for customer credits were distributed
in early 1998. For at least the first two years, payments to some customers
have a ceiling of $1,000 per year per customer. This program directly reduces
the retail cost of renewable energy and thus makes power produced by the New
Power Projects more attractive to customers who otherwise would not have
purchased renewable-based power.
The $5.4 million consumer information account is to fund a renewable
energy public information program. The objective of the program is to help
build a viable customer-driver market for renewable energy through consumer
education.
6.6 DISCUSSION OF GREEN POWER MARKET BENEFITS
The New Power Projects can earn the market clearing price by selling power
directly into the PX. However, an alternative marketing strategy exists --
tapping into the retail market by selling directly to green power marketers.
Based on our analysis, we believe this option may reap additional benefits for
the New Power Projects. This section of the report discusses the potential
benefits to the New Power Projects from participation in the California green
power energy market.
Surveys consistently show that 40 to 70 percent of California residential
customers are willing to pay a 5 to 15 percent premium for green power
products.(1)(3) Current retail premiums for green power products range from
about 0.7 to 3.1 cents per kWh, depending upon the percentage of renewable
energy contained in the resource mix. Assuming that 50 percent of the New Power
Projects' output is sold into the green power market and that 2.5 cents per kWh
can be obtained from such sales, assumptions we believe to be reasonable, the
New Power Projects would earn additional revenue of approximately $6.5 million a
year.
----------
(3) See, for example a summary of customer survey results in "Selling Green
Power in California: Product, Industry, and Market Trends," by Ryan H.
Wiser and Steven J. Pickle, Ernest Orlando LawrenceBerkeley National
Laboratory, University of California, Berkeley, California, May 1998,
page 5.
D-28
<PAGE>
A study by the Lawrence Berkeley Laboratory2(4) estimates that between 25
to 60 thousand households will have switched to a green power energy source by
the end of 1998.(3) However, expectations among renewable energy marketers are
much higher. In proceedings before the California Energy Commission, marketers
suggested that the number of customers switching to a renewable energy source
could reach as high as 175,000 households within the first twelve months.
The study also suggests that a combination of rising consumer demand for
renewable energy and a scarcity of renewable energy projects will result in a
higher renewable energy price premium in the near future. This situation is
likely to continue until higher cost renewable projects are developed and
eventually brought on-line.
While California possesses a large amount of renewable generation, the
significant majority of it is either tied up in long term contracts with the
IOUs or is owned outright by them and thus not available to the green power
market in the near term. Consequently, the short-term supply of non-utility
renewable energy available to marketers is very small -- perhaps no more than
200 MW.(4) Because of this situation, new renewable resource projects that can
offer competitively priced power, such as the New Power Projects, will likely be
in a position to capture a significant portion of the rising premiums that are
excepted in the near future. Further, the improved market position of low cost
renewable energy providers is also likely to be reflected in more attractive
contract terms. According to the Lawrence Berkeley Laboratory report, the
majority of green power marketers expect contracts of one to five years to
become the standard within 5 years.(5) Contracts with existing renewable energy
providers are, in contrast, generally two years at a maximum.
In conclusion, the California green power market can potentially provide
significant additional benefits to the New Power Projects above and beyond the
proven financial return these plants can earn dealing through the PX market.
CEG has indicated to HESI that while it intends to fully exploit the green
power market, none of the anticipated benefits discussed in this section have
been reflected in its analysis.
----------
(4) The Ernest Orlando Lawrence Berkeley National Laboratory (Berkeley Lab) is
a multi-program national research facility operated by the University of
California for the Department of Energy (DOE). Its fundamental mission is
to provide national scientific leadership and technological innovation in
support of DOE's objectives. Founded in 1931, it is the oldest of the
national laboratories. The Laboratory specializes in research related to
technology and the environment, such as advanced materials science, life
sciences, energy efficiency and energy supply, and nuclear physics. The
Berkeley Lab has been awardednine Nobel prizes in the fields of physics and
chemistry for this research.
(5) IBID, page 5.
(6) IBID, page 26. In comparison, the CEC estimates about 500 MW. See "Policy
Report on AB 1890 Renewables Funding:Report to the Legislature," 1997.
(7) IBID, page 27.
D-29
<PAGE>
APPENDIX A
SCE SRAC FORECAST
SCE'S SRAC FORECAST
FOR 1995 THROUGH 2015
CENTS/KWH
<TABLE>
<CAPTION>
YEAR LOW MEDIAN HIGH
---- --- ------ ----
<S> <C> <C> <C>
1995 .......... 2.41 2.41 2.41
1996 .......... 2.48 2.51 2.54
1997 .......... 2.55 2.60 2.68
1998 .......... 2.72 2.83 2.97
1999 .......... 2.91 2.99 3.28
2000 .......... 3.11 3.22 3.60
2001 .......... 3.30 3.46 3.91
2002 .......... 3.42 3.59 4.13
2003 .......... 3.52 3.72 4.36
2004 .......... 3.62 3.88 4.61
2005 .......... 3.72 4.11 4.86
2006 .......... 3.83 4.31 5.16
2007 .......... 3.95 4.44 5.48
2008 .......... 4.06 4.59 5.82
2009 .......... 4.18 4.74 6.19
2010 .......... 4.31 4.89 6.59
2011 .......... 4.43 5.06 7.07
2012 .......... 4.57 5.22 7.60
2013 .......... 4.70 5.40 8.16
2014 .......... 4.84 5.58 8.76
2015 .......... 4.99 5.76 9.41
</TABLE>
D-30
<PAGE>
APPENDIX E
ASSESSMENT OF THE RESOURCE SUPPLYING
GEOTHERMAL FACILITIES
AT SALTON SEA, CALIFORNIA
FOR
CE GENERATION, LLC
OMAHA, NEBRASKA
BY
GEOTHERMEX, INC.
RICHMOND, CALIFORNIA
FEBRUARY 1999
E-1
<PAGE>
EXECUTIVE SUMMARY
Introduction
Presented herein are the review and analyses (the "Report") by GeothermEx,
Inc. ("GeothermEx") of the long-term resource sufficiency of the Salton Sea
Known Geothermal Resource Area (the "Salton Sea Field") to supply geothermal
resource to existing and proposed power plants and a proposed zinc recovery
facility. CalEnergy Company, Inc. ("CECI"), has established CE Generation, LLC
("CEG") to issue notes and bonds to investors which are supported by revenue
produced by the power plants which are as follows:
o Salton Sea Guarantors: Salton Sea Units I, II, III and IV ("Salton Sea
Projects"), including the construction of Salton Sea Unit V;
o Partnership Guarantors: partnership interests in the Vulcan, Del Ranch
(Hoch), Elmore and Leathers Projects (the "Partnership Projects"),
including certain royalty and other payments; and
o Royalty Guarantor: Royalty interests paid by the Royalty Projects
consisting of three of the Partnership Projects.
Affiliates of CEG are constructing two additional power facilities at the
Salton Sea: 1) Unit V, a 49 MW (net) facility; and 2) the CE Turbo Project, a
10 MW (net) facility. A third project, a zinc recovery facility, is being
constructed by a CECI affiliate. Collectively, these are the "New Projects."
GeothermEx has prepared this report as an independent resource consultant for
CEG and for future potential bondholders.
Scope of Work and Assumptions
GeothermEx has reviewed the behavior of the wells and resource supplying
the existing geothermal power plants in the Salton Sea Field, located in
Imperial County, California. Well locations are shown in figure 1. The purposes
of this report are: 1) to assess the long-term resource sufficiency and
suitability for supplying the existing plants and the proposed additional
facilities mentioned above and 2) to assess the reasonableness of the projected
workover and wellfield capital budget for the program.
In the preparation of this report and the opinions expressed, GeothermEx
has made certain assumptions about conditions which may exist or events which
may occur in the future. The principal assumptions and considerations made and
the database used by GeothermEx in developing the results and conclusions
presented in this report are described below.
GeothermEx has provided several due-diligence evaluations for the Salton
Sea Projects and the Partnership Projects. These have included evaluations
prepared in 1995 and 1998 in support of the first and third bond offerings of
Salton Sea Funding Corporation ("Funding Corporation"). As such, GeothermEx
holds a large amount of information on the Salton Sea wells, which has been
presented in numerous technical reports in the past.
For the current study, CEG provided updated production and injection
histories from the California Division of Oil, Gas, and Geothermal Resources
(CDOGGR), new chemical analyses, information on the drilling and logging of
recent wells, and budget information for future wellfield expenditures.
Together, all of this information constitutes the database used in the present
study. Reports that have formed a significant part of GeothermEx's current
evaluation are included in the document list in section 5.
GeothermEx has independently reviewed and relied upon data from the Salton
Sea Field supplied by CEG, in addition to other data mentioned above. In our
opinion, the data is reliable and accurate, based on our extensive knowledge of
the resource and the history of operations at the Salton Sea Field.
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<PAGE>
Conclusions
Based upon our review and the considerations and assumptions set forth
above, we have reached the following conclusions:
o The Salton Sea Field is highly productive and wells have historically
behaved favorably with minimal flow rate or pressure declines.
o The proposed Unit V will utilize the heat energy in reinjection brine
which is presently separated from the steam supplying Units I -- IV.
The nominal additional production fluid needed for Salton Sea Unit V
will be supplied from existing wellhead capacity.
o The nominal additional production fluid needed for the CE Turbo
Project can be supplied by spare capacity at existing wells. In
addition, a new production well is planned and budgeted for drilling
in 1999.
o Numerical simulation studies undertaken to date forecast acceptable
well behavior for the existing and planned level of power generation
and zinc recovery. Well behavior has historically been consistent with
results predicted by earlier simulation models; therefore, future well
behavior is expected to be adequate to support the Salton Sea,
Partnership and New Projects.
o The recoverable geothermal energy reserves from the reservoir are more
than sufficient to support existing projects and the planned
additional increments of capacity resulting in a total capacity of
326.4 MW. We estimate that 1,200 MW of reserves are available within
the portion of the Salton Sea Field dedicated to the Salton Sea,
Partnership and New Projects.
o The recoverable reserves of geothermal energy will not be affected by
either the planned capacity expansion or the zinc recovery project.
o In unescalated dollars, CEG's projected budget through 2020 includes
$70.4 million for wellfield capital (new wells, re-drills, and
tie-ins) and $38.4 million for well workovers. The budget for
wellfield costs is reasonable and should allow the CEG facilities to
achieve the forecasted levels of electrical generation and zinc
production.
1. OVERVIEW AND DESCRIPTION OF THE SALTON SEA GEOTHERMAL FIELD
1.1 DEVELOPMENT HISTORY AND PRESENT STATUS
CEG and its subsidiaries own and operate eight geothermal power plants and
propose to develop two additional power plants in the Salton Sea Field. The
plant names, capacities and start-up dates are listed below.
<TABLE>
<CAPTION>
PLANT NAME CAPACITY (NET MW) START-UP DATE
---------- ----------------- -------------
<S> <C> <C>
Vulcan 34.0 1986
Del Ranch (Hoch) 38.0 1989
Elmore 38.0 1989
Leathers 38.0 1990
Unit I 10.0 1982
Unit II 20.0 1990
Unit III 49.8 1989
Unit IV 39.6 1996
Unit V 49.0 2000(planned)
CE Turbo Project 10.0 2000(planned)
-----
Total 326.4
</TABLE>
E-3
<PAGE>
1.2 NEW PLANTS
Salton Sea Unit V is scheduled to start-up in 2000, concurrently with a
facility to recover zinc from the geothermal brine. The CE Turbo Project is
scheduled for start-up in mid-2000. The third of the New Projects is the
30,000-metric-tonne zinc recovery facility. Satellite process facilities will
be located at four existing power plant facilities: Leathers, Elmore,
Vulcan/Hoch and the Region 1 (Units I -- V) brine processing facility. These
sites will be connected by pipelines to the central processing facility, which
will process the solution from the satellite plants into a final marketable
product of metallic zinc.
2. WELL BEHAVIOR
2.1 HISTORICAL
A total of about 130 production or injection wells have been drilled
within the Salton Sea field to date. Production and injection histories were
obtained from the archives of the CDOGGR, which receives monthly average flow
rate (or injection rate), wellhead pressure and wellhead temperature from the
field operators. GeothermEx has adjusted the production and injection rates
from the CDOGGR archives to reflect actual steam usage rates as reported by the
CEG facilities. To the best of our knowledge, this information represents the
most consistent and complete production and injection database available.
There are 31 active production wells in the Salton Sea field with an
average capacity of 9 MW per well, which exceeds the US industry average. The
plants are often operated at higher levels than their net capacity ratings, and
many of the wells are routinely operated in a throttled condition that does not
draw on their full capacity.
Both the production and injection wells have been worked over periodically
because of scaling and corrosion. In general, these workovers have helped to
maintain the productivity and injectivity of the wells; however, as in most
geothermal projects, it has been necessary to redrill some wells because of
mechanical problems which sometimes occur during a workover operation, or
because of other mechanical damage.
Despite the need for workovers and/or redrills, the project wells have
behaved very favorably to date. Flow rate declines have been small, and many
wells have excess capacity.
In May 1996, output from the field was increased when new wells were
brought on line to supply Unit IV. As shown in figure 2, production and
injection rates have been relatively stable since then.
2.2 ANTICIPATED WELL AND FIELD BEHAVIOR
It will be shown in the following chapter of this report that the
recoverable geothermal energy reserves are more than sufficient to support the
existing projects and the New Projects. While it is a necessary condition,
adequacy of geothermal reserves by itself does not guarantee commercial success
of a geothermal project. Future behavior of the field, in general, and the
wells, in particular, will dictate how much of these reserves can be
economically recovered. As mentioned above, the wells have behaved very
favorably to date, and CEG is using numerical modeling to forecast and optimize
future well and field behavior under various operating scenarios.
GeothermEx independently developed a numerical simulation model of the
Salton Sea field in 1997and 1998, and CEG independently developed a numerical
simulation of the Salton Sea Field in 1998. These models are used to evaluate
future well and reservoir behavior in response to production and injection
under specified scenarios, including the modification of injection well
locations to optimize zinc recovery, and the additional production required to
supply Unit V and the CE Turbo project. CEG developed and utilizes its model as
a reservoir management tool, to maximize both power production and zinc
recovery from the field. The CEG model incorporates the most recent production
and injection data, as well as current development and operational plans. The
results of
E-4
<PAGE>
both modeling efforts indicate that the existing and planned production
facilities can be supported by the existing wells (maintained as needed) and by
those budgeted wells which may be drilled in the near future.
3. RECOVERABLE GEOTHERMAL ENERGY RESERVES
This study confirms that there are sufficient geothermal energy reserves
to support the existing projects and the New Projects. For calculating the
reserves, the area under consideration includes the acreage dedicated to Units
I -- V, and the Vulcan, Del Ranch (Hoch), Elmore and Leathers units. This is
referred to herein as the "Subject Area".
The first step in making a volumetric reserve estimate is to calculate the
heat energy in place within the subject area using the subsurface temperature
distribution. The volume considered is an irregular block confined by the
downward vertical projections of the boundaries of the subject area between
elevations of -1,500 feet and -6,500 feet (msl). The volume of reservoir
considered is also limited by temperature constraints; the minimum acceptable
temperature used herein is 380 degreesF. Certain assumptions were then made
regarding the recoverability of the heat-in-place, the efficiency of converting
heat energy to electrical energy, and the annual plant capacity factor. The
methodology is described in detail below.
Reserves in a geothermal area can be expressed as the maximum electric
power plant capacity that can be supplied commercially for 30 years. Volumetric
calculation of reserves requires estimation of four parameters:
1. Gross thermal energy in place (H, Btu);
2. Fraction of the gross in-place thermal energy that can be recovered
commercially (recovery factor, R);
3. Fraction of recoverable thermal energy that can be converted to
electrical energy (conversion efficiency, E); and
4. Power plant load factor (F).
Using the above-defined quantities, the maximum sustainable power plant
capacity is expressed as:
H o R o E
MW = 1.11 x 10-12 ---------
F (1)
where MW= average gross MWe over 30 years.
We can calculate the gross heat in place as:
H = (Cvr + Cvb) V (T -- To) (2)
where Cvr = volumetric specific heat of rock (Btu/ft3/degreesF)
Cvb = volumetric specific heat of brine (Btu/ft3/degreesF)
V = reservoir bulk volume (ft3),
T = average reservoir temperature (degreesF), and
To = a reference or base temperature (degreesF).
Within the Subject Area, the volume of rock with temperatures exceeding
380 degreesF (parameter V in equation 2 above) was calculated to be
1.26 x 10(12) cubic feet. Average temperature (T) was estimated to be
522 degreesF on the basis of the subsurface temperature distribution.
In equation (2),
Cvr = Pr Cr (1-- o NS) (3),
and Cvb = Pf Cf - o NS (4),
where Pf = bulk density of reservoir fluid,
E-5
<PAGE>
= 60 lbs/ft(3)
Cf = specific heat capacity of reservoir brine,
= 0.85 Btu/lb/ degreesF,
P = reservoir porosity,
= 20%;
Pr = bulk density of rock matrix,
= 168 lbs/ft3;
Cr = specific heat capacity of rock matrix,
= 0.255 Btu/lb/ degreesF; and
NS = net sand fraction
= 0.35.
Using the above estimates of the various parameters, the heat in place (H)
is calculated for the subject area using equation 2:
H = 5.84 x 10(13) (522 -- To) Btu for the subject area. (5).
Now the parameters R (recovery factor), E (conversion efficiency) and F
(power plant capacity factor) need to be estimated to complete the calculation
of gross MW available for 30 years. We assume a conversion efficiency of 15%,
which is typical for power plants like those presently in operation at Salton
Sea, and a capacity factor of 85%. The recovery factor (R) cannot be readily
estimated as it depends critically on the degree of heterogeneity in the
reservoir, whereas the model used for volumetric reserve estimation is assumed
to be homogeneous.
For the purpose of volumetric reserve estimation, the following approach
was considered to estimate an approximate value for R. In this case, R is
estimated to be 0.35, based on the reasonable assumptions that: (a) 35% of the
reservoir bulk volume is permeable because the average sand fraction in the
Salton Sea reservoir is 35%; (b) there is no in-situ boiling; and (c) the
injected water can cool the entire porous and permeable volume (sand layers) of
the reservoir (including the sand grains) to T0 (here assumed to be the
temperature of the power plant waste water, or 225 degreesF). We have
conservatively assumed essentially no heat recovery from shale for our
single-phase heat extraction model. This assumption is balanced to some degree
by assuming that there is 100% sweep of all sand layers by injection water.
Our analysis is that 30-year energy reserves of 1,200 MW were calculated
for the subject area. A total capacity of 267.4 MW has been installed to date
and another 59 additional MW (Salton Sea Unit V and the CE Turbo Project) are
planned, resulting in a total capacity of 326.4 MW. Accordingly, our analysis
indicates that the energy reserves are more than sufficient to support the
existing and planned facilities within the subject property.
4. REVIEW OF FUTURE WELLFIELD COSTS
CEG's estimate of projected wellfield costs includes two components. The
first component is wellfield capital, which comprises new production wells, new
injection wells, and tie-ins for these wells (that is, connections from the
wellheads to the gathering system pipelines). The second component is workovers
(that is, repairs of existing wells to correct such problems as wellbore
scaling or casing damage). Figure 3 shows the projected annual expenditures for
these components through the year 2020. The dollar values in figure 3 and in
the following discussion are in unescalated 1998 dollars.
The total projected budget for wellfield costs from 1999 to 2020 is $108.8
million, of which $70.4 million is for wellfield capital and $38.4 million is
for workovers. Wellfield costs are expected to be higher in the first three
years (through 2001), reflecting the planned drilling of several new production
wells with titanium casing and several new injection wells. Workover costs are
also
E-6
<PAGE>
somewhat higher in the first few years, reflecting continuing repairs to older
wells with carbon steel casing that are being gradually replaced by new wells.
The titanium casing in the new production wells is less prone to wellbore
scaling, and the injection water after start-up of the zinc extraction
facilities is expected to have less entrained solids, which should extend the
lives of the injection wells. For these reasons, annual workover expenditures
after the first few years of the project life are expected to be lower.
GeothermEx agrees with this conclusion.
New production wells with titanium casing are expected to cost about $4
million each. New injection wells are expected to cost somewhat less (about
$2.5 million each) because they do not require titanium casing. A re-drill
(that is, a well drilled to a new down-hole location from an existing wellhead)
is expected to cost about $0.8 million. The number, timing, and location of new
wells during the project life will depend on field performance. However, the
projected budget contains sufficient funds for roughly 10 new producers, 10 new
injectors, and 8 re-drills, including the costs of tie-ins for these wells. In
GeothermEx's opinion, the budget amounts are reasonable estimates for the
forecasted levels of electrical generation and zinc production over the next 20
years.
5. DOCUMENT LIST
ADA International Consulting, Ltd., "TETRAD Version 12.0 User's Manual."
Calgary, Alberta, Canada. Reservoir simulation software.
California Division of Oil, Gas, and Geothermal Resources, "Monthly
Reports of Geothermal Operations." Production and injection statistics for
Salton Sea wells.
CE Generation, LLC
-- maps of existing and proposed well locations in Salton Sea Field
-- recent production and injection statistics for Salton Sea wells
-- database of chemical analyses from Salton Sea wells
-- input deck for CEG's numerical simulation of Salton Sea Field using
TETRAD software
-- Imperial Valley Capital Expenditures by Year (budget forecast of
wellfield costs)
GeothermEx (1995), "Assessment of the Geothermal Resource Underlying
Geothermal Power Projects, Salton Sea Geothermal Field, California." Report
prepared for Salton Sea Funding Corporation, Omaha, Nebraska.
GeothermEx (1998), "Assessment of the Resource Supplying Geothermal
Facilities at Salton Sea, California." Report prepared for Salton Sea Funding
Corporation, Omaha, Nebraska.
E-7
<PAGE>
[MAP OF THE SALTON SEA GEOTHERMAL AREA]
E-8
<PAGE>
[LINE CHART SHOWING HISTORICAL PRODUCTION RATE]
[LINE CHART SHOWING HISTORICAL INJECTION RATE]
E-9
<PAGE>
FIGURE 3. PROJECTED EXPENDITURES FOR WELLFIELD CAPITAL AND WORKOVERS AT
CE GENERATION'S GEOTHERMAL FACILITIES AT SALTON SEA, CALIFORNIA
[BAR GRAPH SHOWING PROJECTED EXPENDITURES FOR WELLFIELD CAPITAL AND WORKOVERS]
E-10
<PAGE>
ADDRESS OF EXCHANGE AGENT:
CHASE MANHATTAN BANK AND TRUST COMPANY, NATIONAL ASSOCIATION
101 CALIFORNIA STREET, NO. 2725
SAN FRANCISCO, CALIFORNIA 94111
TELEPHONE: (415) 954-9508
FAX: (415) 693-8850
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
CE Generation, LLC, a Delaware limited liability company, is empowered by
Section 18-108 of the Delaware Limited Liability Company Act, subject to the
procedures and limitations stated therein, to indemnify any person against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with any
threatened, pending or completed action, suit or proceeding in which such
person is made a party by reason of his being or having been a director,
officer, employee or agent of CE Generation, LLC. The statute provides that
indemnification pursuant to its provisions is not exclusive of other rights of
indemnification to which a person may be entitled under any agreement, vote of
members or disinterested directors or otherwise. The limited liability company
operating agreement of CE Generation, LLC provides for indemnification of the
managers, officers and directors of CE Generation, LLC to the full extent
permitted by the Delaware Limited Liability Company Act.
MidAmerican Energy Holdings Company maintains an insurance policy
providing for indemnification of the officers and directors of its subsidiaries
against liabilities and expenses incurred by any of them in certain stated
proceedings and under stated conditions.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
------------- --------------------------------------------------------------------------------------
<S> <C>
3.1* Certificate of Formation of CE Generation, LLC
3.2* Limited Liability Company Operating Agreement of CE Generation, LLC
4.1* Indenture, dated as of March 2, 1999, by and between CE Generation, LLC and Chase
Manhattan Bank and Trust Company, National Association
4.2* Form of First Supplemental Indenture to be entered into by and between CE Generation,
LLC and Chase Manhattan Bank and Trust Company, National Association, Trustee
4.3* Purchase Agreement, dated February 24, 1999, by and among CE Generation, LLC,
Credit Suisse First Boston Corporation and Lehman Brothers, Inc.
4.4* Exchange and Registration Rights Agreement, dated as of March 2, 1999, by and among
CE Generation, LLC, Credit Suisse First Boston Corporation and Lehman Brothers, Inc.
4.5* Debt Service Reserve Letter of Credit and Reimbursement Agreement, dated as of
March 2, 1999, by and among CE Generation, LLC, the banks named therein and Credit
Suisse First Boston, as Agent
4.6* Deposit and Disbursement Agreement, dated as of March 2, 1999, by and among CE
Generation, LLC, Magma Power Company, Salton Sea Power Company, Falcon Seaboard
Resources, Inc., Falcon Seaboard Power Corporation, Falcon Seaboard Oil Company,
California Energy Development Corporation, CE Texas Energy LLC and Chase
Manhattan Bank and Trust Company, National Association, as Collateral Agent and
Depositary Bank
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
------------- ---------------------------------------------------------------------------------------
<S> <C>
4.7* Intercreditor Agreement, dated as of March 2, 1999, by and among CE Generation, LLC,
Magma Power Company, Salton Sea Power Company, Falcon Seaboard Resources, Inc.,
Falcon Seaboard Power Corporation, Falcon Seaboard Oil Company, California Energy
Development Corporation, CE Texas Energy LLC, Credit Suisse First Boston and Chase
Manhattan Bank and Trust Company, National Association, as Trustee, Collateral Agent
and Depositary Bank
4.8* Assignment and Security Agreement, dated as of March 2, 1999, by and among Magma
Power Company, Salton Sea Power Company, Falcon Seaboard Resources, Inc., Falcon
Seaboard Power Corporation, Falcon Seaboard Oil Company, California Energy
Development Corporation, CE Texas Energy LLC, Credit Suisse First Boston and Chase
Manhattan Bank and Trust Company, National Association, as Collateral Agent
4.9* Assignment and Security Agreement, dated as of March 2, 1999, by and between CE
Generation, LLC and Chase Manhattan Bank and Trust Company, National Association,
as Collateral Agent
4.10* Pledge Agreement (SSPC Stock), dated as of March 2, 1999, by Magma Power Company
in favor of Chase Manhattan Bank and Trust Company, National Association, as
Collateral Agent
4.11* Pledge Agreement (FSRI Stock and CEDC Stock), dated as of March 2, 1999, by CE
Generation, LLC in favor of Chase Manhattan Bank and Trust Company, National
Association, as Collateral Agent
4.12* Securities Account Control Agreement, dated as of March 2, 1999, by and among CE
Generation, LLC, Magma Power Company, Salton Sea Power Company, Falcon Seaboard
Resources, Inc., Falcon Seaboard Power Corporation, Falcon Seaboard Oil Company,
California Energy Development Corporation, CE Texas Energy LLC, Credit Suisse First
Boston and Chase Manhattan Bank and Trust Company, National Association, as
Collateral Agent and Depositary Bank
5.1 Opinion of Latham & Watkins regarding the validity of the new Securities
10.1 Trust Indenture, dated as of July 21, 1995, between Chemical Trust Company of
California and Salton Sea Funding Corporation (incorporated by reference to Exhibit
4.1(a) to Salton Sea Funding Corporation's Registration Statement on Form S-4 dated
August 9, 1995, 33-95538)
10.2 First Supplemental Indenture, dated as of October 18, 1995, between Chemical Trust
Company of California and Salton Sea Funding Corporation (incorporated by reference to
Exhibit 4.1(b) to Salton Sea Funding Corporation's Registration Statement on Form S-4
dated August 9, 1995, 33-95538)
10.3 Second Supplemental Indenture, dated as of July 20, 1996, between Chemical Trust
Company of California and Salton Sea Funding Corporation (incorporated by reference to
Exhibit 4.1(c) to Salton Sea Funding Corporation's Registration Statement on Form S-4
dated July 2, 1996, 333-07527)
10.4 Third Supplemental Indenture, dated as of July 29, 1996, between Chemical Trust
Company of California and Salton Sea Funding Corporation (incorporated by reference to
Exhibit 4.1(d) to Salton Sea Funding Corporation's Registration Statement on Form S-4
dated July 2, 1996, 333-07527)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
------------- ----------------------------------------------------------------------------------------------
<S> <C>
10.5 Fourth Supplemental Indenture, dated as of October 13, 1998, between Chase Manhattan
Bank and Trust Company, National Association, and Salton Sea Funding Corporation
(incorporated by reference to Exhibit 4.1(e) to Salton Sea Funding Corporation's Form
10-K/A dated March 27, 1999)
10.6 Fifth Supplemental Indenture, dated as of February 16, 1999, between Chase Manhattan
Bank and Trust Company, National Association, and Salton Sea Funding Corporation
(incorporated by reference to Exhibit 4.1(f) to Salton Sea Funding Corporation's
Registration Statement on Form S-4 dated June 29, 1999, 333-79581)
10.7 Sixth Supplemental Indenture, dated as of June 29, 1999, between Chase Manhattan Bank
and Trust Company, National Association, and Salton Sea Funding Corporation
(incorporated by reference to Exhibit 4.1(g) to Salton Sea Funding Corporation's
Registration Statement on Form S-4 dated June 29, 1999, 333-79581)
10.8 Amended and Restated Salton Sea Guarantors Credit Agreement, dated as of
October 13, 1998, by and among Salton Sea Power Generation L.P., Salton Sea Brine
Processing L.P., Salton Sea Power, L.L.C. and Fish Lake Power Company (incorporated
by reference to Exhibit 4.12 to Salton Sea Funding Corporation's Registration Statement
on Form S-4 dated June 29, 1999, 333-79581)
10.9 Second Amended and Restated Partnership Guarantors Credit Agreement, dated as of
October 13, 1998, by and among CalEnergy Operating Corporation, Vulcan Power
Company, Conejo Energy Company, Niguel Energy Company, San Felipe Energy
Company, BN Geothermal Inc., Del Ranch, L.P., Elmore, L.P., Leathers, L.P., Vulcan/BN
Geothermal Power Company, CalEnergy Minerals LLC, CE Turbo LLC and Salton Sea
Funding Corporation (incorporated by reference to Exhibit 4.19 to Salton Sea Funding
Corporation's Registration Statement on Form S-4 dated June 29, 1999, 333-79581)
10.10 Amended and Restated Deposit and Disbursement Agreement, dated as of October 13,
1998, by and among Salton Sea Funding Corporation, Salton Sea Power Generation L.P.,
Salton Sea Brine Processing L.P., Salton Sea Power, L.L.C., Fish Lake Power Company,
CalEnergy Operating Corporation, Vulcan Power Company, Conejo Energy Company,
Niguel Energy Company, San Felipe Energy Company, BN Geothermal Inc., Del Ranch,
L.P., Elmore, L.P., Leathers, L.P., Vulcan/BN Geothermal Power Company, CalEnergy
Minerals LLC, CE Turbo LLC, and Chase Manhattan Bank and Trust Company, National
Association, as Collateral Agent and Depositary Agent (incorporated by reference to
Exhibit 4.14 to Salton Sea Funding Corporation's Registration Statement on Form S-4
dated June 29, 1999, 333-79581)
10.11 Amendment and Restatement, dated as of September 30, 1994, of the Loan Agreement,
dated as of December 29, 1992, by and among Saranac Power Partners, L.P., County of
Clinton Industrial Development Agency, North Country Gas Pipeline Corporation, the
financial institutions party thereto, Credit Suisse First Boston and General Electric Capital
Corporation
10.12 Amended and Restated Security Deposit Agreement, dated as of October 7, 1994, among
Saranac Power Partners, L.P., Credit Suisse, General Electric Capital Corporation, TPC
Saranac Partner One, Inc., TPC Saranac Partner Two, Inc., and The Fuji Bank and Trust
Company
10.13 Installment Sale Agreement, dated as of December 29, 1992, by and between County of
Clinton Industrial Development Agency and Saranac Power Partners, L.P.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
------------- -------------------------------------------------------------------------------------
<S> <C>
10.14 Second Amended and Restated Agreement of Limited Partnership of Saranac Power
Partners, L.P., dated as of May 13, 1994, by and among Saranac Energy Company, Inc.,
TPC Saranac Partner One, Inc. and TPC Saranac Partner Two, Inc., as amended by the
First Amendment to Second Amended and Restated Agreement of Limited Partnership
of Saranac Power Partners, L.P., by and among Saranac Energy Company, Inc., TPC
Partner One, Inc., TPC Saranac Partner Two, Inc. and General Electric Capital
Corporation (incorporated by reference to Exhibit 10.2 to CalEnergy Company, Inc.'s
Form 10-Q for the quarterly period ended September 30, 1996)
10.15 Amended and Restated Term Loan Agreement, dated as of December 30, 1988, among
Kansallis-Osake-Pankki, Credit Suisse and Power Resources, Inc., Amendment No. 1 to
Amended and Restated Term Loan Agreement, dated as of March 1, 1989, among
Kansallis-Osake-Pankki, Credit Suisse and Power Resources, Inc., Amendment No. 2 to
Amended and Restated Term Loan Agreement, dated as of April 28, 1989, among
Kansallis-Osake-Pankki, Credit Suisse and Power Resources, Inc., Amendment No. 3 to
Amended and Restated Term Loan Agreement, dated as of June 1, 1990, among
Kansallis-Osake-Pankki, Credit Suisse and Power Resources, Inc., Amendment No. 4 to
Amended and Restated Term Loan Agreement, dated as of April 15, 1991, among
Kansallis-Osake-Pankki, Credit Suisse and Power Resources, Inc., and Amendment No. 5
to Amended and Restated Term Loan Agreement, dated as of June 29, 1995, among
Kansallis-Osake-Pankki, Credit Suisse, the other lenders named therein and Power
Resources, Inc.
10.16 Contract for the Purchase and Sale of Electric Power from the Salton Sea Geothermal
Facility, dated May 9, 1987, between Southern California Edison Company and Earth
Energy, Inc. (incorporated by reference to Exhibit 10.4 to Salton Sea Funding
Corporation's Registration Statement on Form S-4 dated August 9, 1995, 33-95538)
10.17 Amendment No. 1 to Contract for the Purchase and Sale of Electric Power from the
Salton Sea Geothermal Facility, dated March 30, 1993, between Southern California
Edison Company and Earth Energy, Inc. (incorporated by reference to Exhibit 10.5 to
Salton Sea Funding Corporation's Registration Statement on Form S-4 dated August 9,
1995, 33-95538)
10.18 Amendment No. 2 to Contract for the Purchase and Sale of Electric Power from the
Salton Sea Geothermal Facility, dated November 29, 1994, between Southern California
Edison Company and Salton Sea Power Generation L.P. (incorporated by reference to
Exhibit 10.6 to Salton Sea Funding Corporation's Registration Statement on Form S-4
dated August 9, 1995, 33-95538)
10.19 Contract for the Purchase and Sale of Electric Power, dated April 16, 1985, between
Southern California Edison Company and Westmoreland Geothermal Associates
(incorporated by reference to Exhibit 10.7 to Salton Sea Funding Corporation's
Registration Statement on Form S-4 dated August 9, 1995, 33-95538)
10.20 Amendment No. 1 to Contract for the Purchase and Sale of Electric Power, dated
December 18, 1987, between Southern California Edison Company and Earth Energy, Inc.
(incorporated by reference to Exhibit 10.8 to Salton Sea Funding Corporation's
Registration Statement on Form S-4 dated August 9, 1995, 33-95538)
10.21 Power Purchase Contract, dated April 16, 1985, between Southern California Edison
Company and Union Oil Company of California (incorporated by reference to Exhibit
10.9 to Salton Sea Funding Corporation's Registration Statement on Form S-4 dated
August 9, 1995, 33-95538)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
------------- -------------------------------------------------------------------------------------------
<S> <C>
10.22 Power Purchase Contract, dated November 19, 1994, between Southern California Edison
Company, Salton Sea Power Generation L.P. and Fish Lake Power Company
(incorporated by reference to Exhibit 10.10 to Salton Sea Funding Corporation's
Registration Statement on Form S-4 dated August 9, 1995, 33-95538)
10.23 Long Term Power Purchase Contract, dated March 1, 1984, as amended, between
Southern California Edison Company and Vulcan/BN Geothermal Power Company, as
successor to Magma Electric Company (incorporated by reference to Exhibit 10.26 to
Salton Sea Funding Corporation's Registration Statement on Form S-4 dated July 2, 1996,
333-07527)
10.24 Long Term Power Purchase Contract, dated June 15, 1984, as amended, between Southern
California Edison Company and Elmore, L.P., as successor to Magma Electric Company
(incorporated by reference to Exhibit 10.31 to Salton Sea Funding Corporation's
Registration Statement on Form S-4 dated July 2, 1996, 333-07527)
10.25 Long Term Power Purchase Contract, dated August 16, 1985, as amended, between
Southern California Edison Company and Leathers, L.P., as successor to Imperial Energy
Corporation (incorporated by reference to Exhibit 10.36 to Salton Sea Funding
Corporation's Registration Statement on Form S-4 dated July 2, 1996, 333-07527)
10.26 Long Term Power Purchase Contract, dated February 22, 1974, as amended, between
Southern California Edison Company and Del Ranch, L.P., as successor to Magma
Electric Company (incorporated by reference to Exhibit 10.41 to Salton Sea Funding
Corporation's Registration Statement on Form S-4 dated July 2, 1996, 333-07527)
10.27 Amended and Restated Power Sales Agreement, dated as of November 1, 1988, by and
between CalEnergy Minerals LLC and Salton Sea Power L.L.C.
10.28 Agreement between New York State Electric & Gas Corporation and Saranac Energy
Company, Inc., dated as of April 27, 1987 and Amendment No. 1 to Power Purchase
Agreement between New York State Electric & Gas Corporation and Saranac Energy
Company, Inc. dated August 29, 1991 (incorporated by reference to Exhibit 10.1 to
CalEnergy Company, Inc.'s Form 10-Q for the quarterly period ended September 30,
1996)
10.29 Amendment No. 2 to Power Purchase Agreement between New York State Electric &
Gas Corporation and Saranac Energy Company, Inc. dated February 24, 1994
10.30 (Power Purchase) Agreement, dated July 30, 1986, between Falcon Seaboard Oil
Company and Texas Utilities Electric Company, First Amendment to (Power Purchase) Agreement,
dated December 23, 1986, between Falcon Seaboard Oil Company and Texas Utilities Electric
Company, and Second Amendment to (Power Purchase) Agreement, dated May 27, 1988, between
Falcon Seaboard Oil Company and Texas Utilities Electric Company
10.31 Standard Offer Number 2 for Power Purchase with a Firm Capacity Qualifying Facility
effective June 13, 1990 between San Diego Gas & Electric Company and Bonneville
Pacific Corporation (incorporated by reference to Exhibit 10.42 to CalEnergy Company,
Inc.'s Form 10-K for the fiscal year ended December 31, 1993)
10.32 Amendment No. 1 to Standard Offer Number 2 for Power Purchase with a Firm Capacity
Qualifying Facility dated September 25, 1990 between San Diego Gas & Electric
Company and Bonneville Pacific Corporation (incorporated by reference to Exhibit 10.43
to CalEnergy Company, Inc.'s Form 10-K for the fiscal year ended December 31, 1993)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
------------- -------------------------------------------------------------------------------------------
<S> <C>
10.33 Ground Lease, dated as of November 24, 1993, by and between Imperial Irrigation
District, Salton Sea Power Generation L.P. and Salton Sea Brine Processing L.P., and First
Amendment to Ground Lease, dated as of December 15, 1993, by and between Imperial
Irrigation District, Salton Sea Power Generation L.P. and Salton Sea Brine Processing L.P.
10.34 Ground Lease, dated as of March 31, 1993, by and between Magma Land Company I,
Salton Sea Power Generation L.P. and Salton Sea Brine Processing L.P.
10.35 Ground Lease, dated as of October 26, 1988, by and between Magma Power Company
and Leathers, L.P., and Clarification and Amendment, dated as of June 17, 1996, between
Magma Power Company and Leathers, L.P.
10.36 Ground Lease, dated as of March 14, 1988, by and between Magma Power Company and
Del Ranch, Ltd., and Clarification and Amendment, dated as of June 17, 1996, between
Magma Power Company and Del Ranch L.P.
10.37 Ground Lease, dated as of March 14, 1988, by and between Magma Power Company and
Elmore, Ltd., and Clarification and Amendment, dated as of June 17, 1996, by and
between Magma Power Company and Elmore, L.P.
10.38 Ground Lease, dated as of October 13, 1998, by and between Imperial Magma and Salton
Sea Power L.L.C.
10.39 Easement Grant Deed and Agreement Regarding Rights for Geothermal Development,
dated as of March 14, 1988, by and between Magma Power Company and Del Ranch,
Ltd. (incorporated by reference to Exhibit 10.58 to Magma Power Company's Form 10-K
for the fiscal year ended December 31, 1987)
10.40 Easement Grant Deed and Agreement Regarding Rights for Geothermal Development,
dated as of August 15, 1988, by and between Magma Power Company and Leathers, L.P.
(incorporated by reference to Magma Power Company's Form 10-K for the fiscal year
ended December 31, 1988)
10.41 Easement Grant Deed and Agreement Regarding Rights for Geothermal Development,
dated as of March 14, 1988, by and between Magma Power Company and Elmore, Ltd.
(incorporated by reference to Exhibit 10.59 to Magma Power Company's Form 10-K for
the fiscal year ended December 31, 1988)
10.42 Lease Agreement, dated as of November 21, 1986, between Fina Oil and Chemical
Company and Power Resources, Inc., and First Amendment to Lease Agreement, dated
as of December 29, 1986, between Fina Oil and Chemical Company and Power
Resources, Inc.
10.43 Salton Sea Unit 5 Engineering, Procurement, and Construction Contract, dated
September 2, 1998, between Salton Sea Power L.L.C. and Stone & Webster Engineering
Corporation
10.44 Administrative Services Agreement, dated as of March 3, 1999, by and between
CalEnergy Company, Inc. and CE Generation, LLC
10.45 Fuel Management Services Agreement between El Paso Energy Marketing Company and
CE Generation, LLC
10.46 Power Marketing Services Agreement between El Paso Power Services Company and CE
Generation, LLC
10.47 Equity Purchase Agreement, dated as of February 21, 1999, by and between CalEnergy
Company, Inc. and El Paso Power Holding Company
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
------------- ---------------------------------------------------------------------------------------
<S> <C>
10.48 Equity Commitment Agreement, dated as of March 3, 1999, among CalEnergy Company,
Inc. and El Paso Power Holding Company
12.1* Computation of Ratio of Earnings to Fixed Charges
23.1* Consent of Latham & Watkins (included in their opinion filed as Exhibit 5.1)
23.2 Consent of Deloitte & Touche LLP
23.3* Consent of Fluor Daniel, Inc.
23.4* Consent of R.W. Beck, Inc.
23.5* Consent of Henwood Energy Services, Inc.
23.6* Consent of GeothermEx, Inc.
23.7 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 Chase Manhattan Bank and Trust Company, National Association
27.1* Financial Data Schedule
99.1* Form of Letter of Transmittal to tender unregistered 7.416% Senior Secured Bonds Due
December 15, 2018 of CE Generation, LLC
99.2* Form of Letter to Registered Holders and DTC Participants from CE Generation, LLC
regarding the exchange offer
99.3* Form of Instruction to Registered Holder or DTC Participant from Beneficial Owner of
7.416% Senior Secured Bonds Due December 15, 2018 of CE Generation, LLC
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>
----------
* Filed as an exhibit to CE Generation, LLC's Registration Statement filed
with the Securities and Exchange Commission on October 22, 1999.
(b) Financial Statement Schedules
Financial statement schedules are not included because the required
information is inapplicable or is presented in the financial statements or the
notes to the financial statements.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes 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 registrant hereby undertakes as follows: 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 registrant hereby undertakes that every prospectus (i)
that is filed pursuant to the immediately preceding paragraph or (ii) that
purports to meet the requirements of Section l0(a)(3)
II-7
<PAGE>
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.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of the issue.
The undersigned registrant hereby undertakes 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 Securities and Exchange Commission under
section305(b)(2) of the Trust Indenture Act.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Amendment No. 1 to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Omaha, State of
Nebraska, on November 29, 1999.
CE GENERATION, LLC
By: /s/ Douglas L. Anderson
--------------------------------
Name: Douglas L. Anderson
Title: Vice President and General
Counsel
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has been signed by the following persons in the capacities, as of the
dates and in the cities and states indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE CITY AND STATE
------------------------- --------------------- ------------------- ---------------
<S> <C> <C> <C>
* President and Chief November 29, 1999 Omaha,
------------------ Operating Officer; Nebraska
Robert S. Silberman Director
* Vice President and November 29, 1999 Omaha,
------------------ Treasurer Nebraska
Brian K. Hankel
/s/ Douglas L. Anderson Vice President and November 29, 1999 Omaha,
------------------ General Counsel; Nebraska
Douglas L. Anderson Director
* Vice President and November 29, 1999 Omaha,
------------------ Commercial Officer Nebraska
Richard P. Johnston
* Director November 29, 1999 Omaha,
------------------ Nebraska
Patrick J. Goodman
* Director November 29, 1999 Omaha,
------------------ Nebraska
Larry Kellerman
* Director November 29, 1999 Omaha,
------------------ Nebraska
John L. Harrison
* Director November 29, 1999 Omaha,
------------------ Nebraska
Steven M. Pike
</TABLE>
* By /s/ Douglas L. Anderson
----------------------
Attorney-In-Fact
II-9
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
------------- --------------------------------------------------------------------------------------
<S> <C>
3.1* Certificate of Formation of CE Generation, LLC
3.2* Limited Liability Company Operating Agreement of CE Generation, LLC
4.1* Indenture, dated as of March 2, 1999, by and between CE Generation, LLC and Chase
Manhattan Bank and Trust Company, National Association
4.2* Form of First Supplemental Indenture to be entered into by and between CE Generation,
LLC and Chase Manhattan Bank and Trust Company, National Association, Trustee
4.3* Purchase Agreement, dated February 24, 1999, by and among CE Generation, LLC,
Credit Suisse First Boston Corporation and Lehman Brothers, Inc.
4.4* Exchange and Registration Rights Agreement, dated as of March 2, 1999, by and among
CE Generation, LLC, Credit Suisse First Boston Corporation and Lehman Brothers, Inc.
4.5* Debt Service Reserve Letter of Credit and Reimbursement Agreement, dated as of
March 2, 1999, by and among CE Generation, LLC, the banks named therein and Credit
Suisse First Boston, as Agent
4.6* Deposit and Disbursement Agreement, dated as of March 2, 1999, by and among CE
Generation, LLC, Magma Power Company, Salton Sea Power Company, Falcon Seaboard
Resources, Inc., Falcon Seaboard Power Corporation, Falcon Seaboard Oil Company,
California Energy Development Corporation, CE Texas Energy LLC and Chase
Manhattan Bank and Trust Company, National Association, as Collateral Agent and
Depositary Bank
4.7* Intercreditor Agreement, dated as of March 2, 1999, by and among CE Generation, LLC,
Magma Power Company, Salton Sea Power Company, Falcon Seaboard Resources, Inc.,
Falcon Seaboard Power Corporation, Falcon Seaboard Oil Company, California Energy
Development Corporation, CE Texas Energy LLC, Credit Suisse First Boston and Chase
Manhattan Bank and Trust Company, National Association, as Trustee, Collateral Agent
and Depositary Bank
4.8* Assignment and Security Agreement, dated as of March 2, 1999, by and among Magma
Power Company, Salton Sea Power Company, Falcon Seaboard Resources, Inc., Falcon
Seaboard Power Corporation, Falcon Seaboard Oil Company, California Energy
Development Corporation, CE Texas Energy LLC, Credit Suisse First Boston and Chase
Manhattan Bank and Trust Company, National Association, as Collateral Agent
4.9* Assignment and Security Agreement, dated as of March 2, 1999, by and between CE
Generation, LLC and Chase Manhattan Bank and Trust Company, National Association,
as Collateral Agent
4.10* Pledge Agreement (SSPC Stock), dated as of March 2, 1999, by Magma Power Company
in favor of Chase Manhattan Bank and Trust Company, National Association, as
Collateral Agent
4.11* Pledge Agreement (FSRI Stock and CEDC Stock), dated as of March 2, 1999, by CE
Generation, LLC in favor of Chase Manhattan Bank and Trust Company, National
Association, as Collateral Agent
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
------------- ----------------------------------------------------------------------------------------
<S> <C>
4.12* Securities Account Control Agreement, dated as of March 2, 1999, by and among CE
Generation, LLC, Magma Power Company, Salton Sea Power Company, Falcon Seaboard
Resources, Inc., Falcon Seaboard Power Corporation, Falcon Seaboard Oil Company,
California Energy Development Corporation, CE Texas Energy LLC, Credit Suisse First
Boston and Chase Manhattan Bank and Trust Company, National Association, as
Collateral Agent and Depositary Bank
5.1 Opinion of Latham & Watkins regarding the validity of the new Securities
10.1 Trust Indenture, dated as of July 21, 1995, between Chemical Trust Company of
California and Salton Sea Funding Corporation (incorporated by reference to Exhibit
4.1(a) to Salton Sea Funding Corporation's Registration Statement on Form S-4 dated
August 9, 1995, 33-95538)
10.2 First Supplemental Indenture, dated as of October 18, 1995, between Chemical Trust
Company of California and Salton Sea Funding Corporation (incorporated by reference to
Exhibit 4.1(b) to Salton Sea Funding Corporation's Registration Statement on Form S-4
dated August 9, 1995, 33-95538)
10.3 Second Supplemental Indenture, dated as of July 20, 1996, between Chemical Trust
Company of California and Salton Sea Funding Corporation (incorporated by reference to
Exhibit 4.1(c) to Salton Sea Funding Corporation's Registration Statement on Form S-4
dated July 2, 1996, 333-07527)
10.4 Third Supplemental Indenture, dated as of July 29, 1996, between Chemical Trust
Company of California and Salton Sea Funding Corporation (incorporated by reference to
Exhibit 4.1(d) to Salton Sea Funding Corporation's Registration Statement on Form S-4
dated July 2, 1996, 333-07527)
10.5 Fourth Supplemental Indenture, dated as of October 13, 1998, between Chase Manhattan
Bank and Trust Company, National Association, and Salton Sea Funding Corporation
(incorporated by reference to Exhibit 4.1(e) to Salton Sea Funding Corporation's Form
10-K/A dated March 27, 1999)
10.6 Fifth Supplemental Indenture, dated as of February 16, 1999, between Chase Manhattan
Bank and Trust Company, National Association, and Salton Sea Funding Corporation
(incorporated by reference to Exhibit 4.1(f) to Salton Sea Funding Corporation's
Registration Statement on Form S-4 dated June 29, 1999, 333-79581)
10.7 Sixth Supplemental Indenture, dated as of June 29, 1999, between Chase Manhattan Bank
and Trust Company, National Association, and Salton Sea Funding Corporation
(incorporated by reference to Exhibit 4.1(g) to Salton Sea Funding Corporation's
Registration Statement on Form S-4 dated June 29, 1999, 333-79581)
10.8 Amended and Restated Salton Sea Guarantors Credit Agreement, dated as of
October 13, 1998, by and among Salton Sea Power Generation L.P., Salton Sea Brine
Processing L.P., Salton Sea Power, L.L.C. and Fish Lake Power Company (incorporated
by reference to Exhibit 4.12 to Salton Sea Funding Corporation's Registration Statement
on Form S-4 dated June 29, 1999, 333-79581)
10.9 Second Amended and Restated Partnership Guarantors Credit Agreement, dated as of
October 13, 1998, by and among CalEnergy Operating Corporation, Vulcan Power
Company, Conejo Energy Company, Niguel Energy Company, San Felipe Energy
Company, BN Geothermal Inc., Del Ranch, L.P., Elmore, L.P., Leathers, L.P., Vulcan/BN
Geothermal Power Company, CalEnergy Minerals LLC, CE Turbo LLC and Salton Sea
Funding Corporation (incorporated by reference to Exhibit 4.19 to Salton Sea Funding
Corporation's Registration Statement on Form S-4 dated June 29, 1999, 333-79581)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
------------- ----------------------------------------------------------------------------------------------
<S> <C>
10.10 Amended and Restated Deposit and Disbursement Agreement, dated as of October 13,
1998, by and among Salton Sea Funding Corporation, Salton Sea Power Generation L.P.,
Salton Sea Brine Processing L.P., Salton Sea Power, L.L.C., Fish Lake Power Company,
CalEnergy Operating Corporation, Vulcan Power Company, Conejo Energy Company,
Niguel Energy Company, San Felipe Energy Company, BN Geothermal Inc., Del Ranch,
L.P., Elmore, L.P., Leathers, L.P., Vulcan/BN Geothermal Power Company, CalEnergy
Minerals LLC, CE Turbo LLC, and Chase Manhattan Bank and Trust Company, National
Association, as Collateral Agent and Depositary Agent (incorporated by reference to
Exhibit 4.14 to Salton Sea Funding Corporation's Registration Statement on Form S-4
dated June 29, 1999, 333-79581)
10.11 Amendment and Restatement, dated as of September 30, 1994, of the Loan Agreement,
dated as of December 29, 1992, by and among Saranac Power Partners, L.P., County of
Clinton Industrial Development Agency, North Country Gas Pipeline Corporation, the
financial institutions party thereto, Credit Suisse First Boston and General Electric Capital
Corporation
10.12 Amended and Restated Security Deposit Agreement, dated as of October 7, 1994, among
Saranac Power Partners, L.P., Credit Suisse, General Electric Capital Corporation, TPC
Saranac Partner One, Inc., TPC Saranac Partner Two, Inc., and The Fuji Bank and Trust
Company
10.13 Installment Sale Agreement, dated as of December 29, 1992, by and between County of
Clinton Industrial Development Agency and Saranac Power Partners, L.P.
10.14 Second Amended and Restated Agreement of Limited Partnership of Saranac Power
Partners, L.P., dated as of May 13, 1994, by and among Saranac Energy Company, Inc.,
TPC Saranac Partner One, Inc. and TPC Saranac Partner Two, Inc., as amended by the
First Amendment to Second Amended and Restated Agreement of Limited Partnership
of Saranac Power Partners, L.P., by and among Saranac Energy Company, Inc., TPC
Partner One, Inc., TPC Saranac Partner Two, Inc. and General Electric Capital
Corporation (incorporated by reference to Exhibit 10.2 to CalEnergy Company, Inc.'s
Form 10-Q for the quarterly period ended September 30, 1996)
10.15 Amended and Restated Term Loan Agreement, dated as of December 30, 1988, among
Kansallis-Osake-Pankki, Credit Suisse and Power Resources, Inc., Amendment No. 1 to
Amended and Restated Term Loan Agreement, dated as of March 1, 1989, among
Kansallis-Osake-Pankki, Credit Suisse and Power Resources, Inc., Amendment No. 2 to
Amended and Restated Term Loan Agreement, dated as of April 28, 1989, among
Kansallis-Osake-Pankki, Credit Suisse and Power Resources, Inc., Amendment No. 3 to
Amended and Restated Term Loan Agreement, dated as of June 1, 1990, among
Kansallis-Osake-Pankki, Credit Suisse and Power Resources, Inc., Amendment No. 4 to
Amended and Restated Term Loan Agreement, dated as of April 15, 1991, among
Kansallis-Osake-Pankki, Credit Suisse and Power Resources, Inc., and Amendment No. 5
to Amended and Restated Term Loan Agreement, dated as of June 29, 1995, among
Kansallis-Osake-Pankki, Credit Suisse, the other lenders named therein and Power
Resources, Inc.
10.16 Contract for the Purchase and Sale of Electric Power from the Salton Sea Geothermal
Facility, dated May 9, 1987, between Southern California Edison Company and Earth
Energy, Inc. (incorporated by reference to Exhibit 10.4 to Salton Sea Funding
Corporation's Registration Statement on Form S-4 dated August 9, 1995, 33-95538)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
------------- ------------------------------------------------------------------------------------------
<S> <C>
10.17 Amendment No. 1 to Contract for the Purchase and Sale of Electric Power from the
Salton Sea Geothermal Facility, dated March 30, 1993, between Southern California
Edison Company and Earth Energy, Inc. (incorporated by reference to Exhibit 10.5 to
Salton Sea Funding Corporation's Registration Statement on Form S-4 dated August 9,
1995, 33-95538)
10.18 Amendment No. 2 to Contract for the Purchase and Sale of Electric Power from the
Salton Sea Geothermal Facility, dated November 29, 1994, between Southern California
Edison Company and Salton Sea Power Generation L.P. (incorporated by reference to
Exhibit 10.6 to Salton Sea Funding Corporation's Registration Statement on Form S-4
dated August 9, 1995, 33-95538)
10.19 Contract for the Purchase and Sale of Electric Power, dated April 16, 1985, between
Southern California Edison Company and Westmoreland Geothermal Associates
(incorporated by reference to Exhibit 10.7 to Salton Sea Funding Corporation's
Registration Statement on Form S-4 dated August 9, 1995, 33-95538)
10.20 Amendment No. 1 to Contract for the Purchase and Sale of Electric Power, dated
December 18, 1987, between Southern California Edison Company and Earth Energy, Inc.
(incorporated by reference to Exhibit 10.8 to Salton Sea Funding Corporation's
Registration Statement on Form S-4 dated August 9, 1995, 33-95538)
10.21 Power Purchase Contract, dated April 16, 1985, between Southern California Edison
Company and Union Oil Company of California (incorporated by reference to Exhibit
10.9 to Salton Sea Funding Corporation's Registration Statement on Form S-4 dated
August 9, 1995, 33-95538)
10.22 Power Purchase Contract, dated November 19, 1994, between Southern California Edison
Company, Salton Sea Power Generation L.P. and Fish Lake Power Company
(incorporated by reference to Exhibit 10.10 to Salton Sea Funding Corporation's
Registration Statement on Form S-4 dated August 9, 1995, 33-95538)
10.23 Long Term Power Purchase Contract, dated March 1, 1984, as amended, between
Southern California Edison Company and Vulcan/BN Geothermal Power Company, as
successor to Magma Electric Company (incorporated by reference to Exhibit 10.26 to
Salton Sea Funding Corporation's Registration Statement on Form S-4 dated July 2, 1996,
333-07527)
10.24 Long Term Power Purchase Contract, dated June 15, 1984, as amended, between Southern
California Edison Company and Elmore, L.P., as successor to Magma Electric Company
(incorporated by reference to Exhibit 10.31 to Salton Sea Funding Corporation's
Registration Statement on Form S-4 dated July 2, 1996, 333-07527)
10.25 Long Term Power Purchase Contract, dated August 16, 1985, as amended, between
Southern California Edison Company and Leathers, L.P., as successor to Imperial Energy
Corporation (incorporated by reference to Exhibit 10.36 to Salton Sea Funding
Corporation's Registration Statement on Form S-4 dated July 2, 1996, 333-07527)
10.26 Long Term Power Purchase Contract, dated February 22, 1974, as amended, between
Southern California Edison Company and Del Ranch, L.P., as successor to Magma
Electric Company (incorporated by reference to Exhibit 10.41 to Salton Sea Funding
Corporation's Registration Statement on Form S-4 dated July 2, 1996, 333-07527)
10.27 Amended and Restated Power Sales Agreement, dated as of November 1, 1988, by and
between CalEnergy Minerals LLC and Salton Sea Power L.L.C.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
------------- -------------------------------------------------------------------------------------------
<S> <C>
10.28 Agreement between New York State Electric & Gas Corporation and Saranac Energy
Company, Inc., dated as of April 27, 1987 and Amendment No. 1 to Power Purchase
Agreement between New York State Electric & Gas Corporation and Saranac Energy
Company, Inc. dated August 29, 1991 (incorporated by reference to Exhibit 10.1 to
CalEnergy Company, Inc.'s Form 10-Q for the quarterly period ended September 30,
1996)
10.29 Amendment No. 2 to Power Purchase Agreement between New York State Electric &
Gas Corporation and Saranac Energy Company, Inc. dated February 24, 1994
10.30 (Power Purchase) Agreement, dated July 30, 1986, between Falcon Seaboard Oil
Company and Texas Utilities Electric Company, First Amendment to (Power Purchase) Agreement,
dated December 23, 1986, between Falcon Seaboard Oil Company and Texas Utilities Electric
Company, and Second Amendment to (Power Purchase) Agreement, dated May 27, 1988, between
Falcon Seaboard Oil Company and Texas Utilities Electric Company
10.31 Standard Offer Number 2 for Power Purchase with a Firm Capacity Qualifying Facility
effective June 13, 1990 between San Diego Gas & Electric Company and Bonneville
Pacific Corporation (incorporated by reference to Exhibit 10.42 to CalEnergy Company,
Inc.'s Form 10-K for the fiscal year ended December 31, 1993)
10.32 Amendment No. 1 to Standard Offer Number 2 for Power Purchase with a Firm Capacity
Qualifying Facility dated September 25, 1990 between San Diego Gas & Electric
Company and Bonneville Pacific Corporation (incorporated by reference to Exhibit 10.43
to CalEnergy Company, Inc.'s Form 10-K for the fiscal year ended December 31, 1993)
10.33 Ground Lease, dated as of November 24, 1993, by and between Imperial Irrigation
District, Salton Sea Power Generation L.P. and Salton Sea Brine Processing L.P., and First
Amendment to Ground Lease, dated as of December 15, 1993, by and between Imperial
Irrigation District, Salton Sea Power Generation L.P. and Salton Sea Brine Processing L.P.
10.34 Ground Lease, dated as of March 31, 1993, by and between Magma Land Company I,
Salton Sea Power Generation L.P. and Salton Sea Brine Processing L.P.
10.35 Ground Lease, dated as of October 26, 1988, by and between Magma Power Company
and Leathers, L.P., and Clarification and Amendment, dated as of June 17, 1996, between
Magma Power Company and Leathers, L.P.
10.36 Ground Lease, dated as of March 14, 1988, by and between Magma Power Company and
Del Ranch, Ltd., and Clarification and Amendment, dated as of June 17, 1996, between
Magma Power Company and Del Ranch L.P.
10.37 Ground Lease, dated as of March 14, 1988, by and between Magma Power Company and
Elmore, Ltd., and Clarification and Amendment, dated as of June 17, 1996, by and
between Magma Power Company and Elmore, L.P.
10.38 Ground Lease, dated as of October 13, 1998, by and between Imperial Magma and Salton
Sea Power L.L.C.
10.39 Easement Grant Deed and Agreement Regarding Rights for Geothermal Development,
dated as of March 14, 1988, by and between Magma Power Company and Del Ranch,
Ltd. (incorporated by reference to Exhibit 10.58 to Magma Power Company's Form 10-K
for the fiscal year ended December 31, 1987)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
------------- ---------------------------------------------------------------------------------------
<S> <C>
10.40 Easement Grant Deed and Agreement Regarding Rights for Geothermal Development,
dated as of August 15, 1988, by and between Magma Power Company and Leathers, L.P.
(incorporated by reference to Magma Power Company's Form 10-K for the fiscal year
ended December 31, 1988)
10.41 Easement Grant Deed and Agreement Regarding Rights for Geothermal Development,
dated as of March 14, 1988, by and between Magma Power Company and Elmore, Ltd.
(incorporated by reference to Exhibit 10.59 to Magma Power Company's Form 10-K for
the fiscal year ended December 31, 1988)
10.42 Lease Agreement, dated as of November 21, 1986, between Fina Oil and Chemical
Company and Power Resources, Inc., and First Amendment to Lease Agreement, dated
as of December 29, 1986, between Fina Oil and Chemical Company and Power
Resources, Inc.
10.43 Salton Sea Unit 5 Engineering, Procurement, and Construction Contract, dated
September 2, 1998, between Salton Sea Power L.L.C. and Stone & Webster Engineering
Corporation
10.44 Administrative Services Agreement, dated as of March 3, 1999, by and between
CalEnergy Company, Inc. and CE Generation, LLC
10.45 Fuel Management Services Agreement between El Paso Energy Marketing Company and
CE Generation, LLC
10.46 Power Marketing Services Agreement between El Paso Power Services Company and CE
Generation, LLC
10.47 Equity Purchase Agreement, dated as of February 21, 1999, by and between CalEnergy
Company, Inc. and El Paso Power Holding Company
10.48 Equity Commitment Agreement, dated as of March 3, 1999, among CalEnergy Company,
Inc. and El Paso Power Holding Company
12.1* Computation of Ratio of Earnings to Fixed Charges
23.1* Consent of Latham & Watkins (included in their opinion filed as Exhibit 5.1)
23.2 Consent of Deloitte & Touche LLP
23.3* Consent of Fluor Daniel, Inc.
23.4* Consent of R.W. Beck, Inc.
23.5* Consent of Henwood Energy Services, Inc.
23.6* Consent of GeothermEx, Inc.
23.7 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 Chase Manhattan Bank and Trust Company, National Association
27.1* Financial Data Schedule
99.1* Form of Letter of Transmittal to tender unregistered 7.416% Senior Secured Bonds Due
December 15, 2018 of CE Generation, LLC
99.2* Form of Letter to Registered Holders and DTC Participants from CE Generation, LLC
regarding the exchange offer
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
------------- -------------------------------------------------------------------------------------
<S> <C>
99.3* Form of Instruction to Registered Holder or DTC Participant from Beneficial Owner of
7.416% Senior Secured Bonds Due December 15, 2018 of CE Generation, LLC
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>
----------
* Filed as an exhibit to CE Generation, LLC's Registration Statement filed with
the Securities and Exchange Commission on October 22, 1999.
<PAGE>
[Latham & Watkins Letterhead]
---------
November 29, 1999
EXHIBIT 5.1
CE Generation, LLC
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
Re: Registration Statement on Form S-4;
$400,000,000 Aggregate Principal
Amount of Senior Secured Bonds
------------------------------
Ladies and Gentlemen:
In connection with the registration of $400,000,000 7.416% Senior
Secured Bonds Due December 15, 2018 (the "Securities") by CE Generation, a
Delaware limited liability company (the "Registrant"), under the Securities Act
of 1933, as amended (the "Act"), on Form S-4 filed with the Securities and
Exchange Commission (the "Commission") on October 22, 1999, as amended by
Amendment No. 1 thereto filed with the Securities and Exchange Commission on
November 29, 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 Registrant 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>
CE Generation, LLC
Page 2
We are opining herein as to the effect on the subject transaction only
of the internal laws of the State of New York and the Limited Liability Company
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 limited
liability company action of the Registrant, and when executed, authenticated and
delivered by or on behalf of the Registrant will constitute legally valid and
binding obligations of the Registrant, enforceable against the Registration 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 Registrant 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.
<PAGE>
CE Generation, LLC
Page 3
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 "Legal Matters" in the Prospectus.
Very truly yours,
/s/ Latham & Watkins
<PAGE>
AMENDMENT AND RESTATEMENT, dated as of September 30, 1994, of the LOAN
AGREEMENT, dated as of December 29, 1992, by and among (i) SARANAC POWER
PARTNERS, L.P., a Delaware limited partnership (the "Partnership"), (ii) solely
for purposes of consenting to the execution and delivery of this Amendment and
Restatement and making the representations and warranties as to itself and the
North Country Project set forth in Section 5, NORTH COUNTRY GAS PIPELINE
CORPORATION, a New York corporation ("North country"), (iii) COUNTY OF CLINTON
INDUSTRIAL DEVELOPMENT AGENCY, a public benefit corporation of the State of New
York (the "IDA"; together with the Partnership, the "Borrowers"), (iv) the
financial institutions parties hereto from time to time (the "Lenders"). (v)
Credit Suisse, ABN-AMRO Bank, N.V., National Westminster Bank PLC and The Fuji
Bank, Limited, New York Branch, as co-agents (collectively in such capacity, the
"Co-Agents"), (vi) The Sumitomo Bank, Limited, as lead manager (in such
capacity, the "Lead Manager"), (vii) Credit Suisse ("CS"), as agent for the
Lenders (in such capacity, the "Agent") and (viii) GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation ("GE Capital"), as issuer of the Letters of
Credit (as defined in Appendix A) hereunder (in such capacity, the "Letter of
Credit Issuer") and as Surety Bond Arranger (as defined in Appendix A) hereunder
(in such capacity, the "Surety Bond Arranger").
W I T N E S S E T H :
WHEREAS, unless otherwise defined herein, all terms used herein that
are defined in Appendix A shall have the meanings therein assigned to such
terms;
WHEREAS, in order to finance the costs of developing, constructing and
equipping the Facility, pursuant to the Resolution, the IDA borrowed IDA
Development Loans and IDA Building Loans and, as evidence of such Loans, the
IDA, together with the Partnership, issued to the Lenders the IDA Development
Loan Notes and the IDA Building Loan Notes;
WHEREAS, in order to finance the costs of developing, constructing and
equipping the Pipeline, pursuant to the Resolution, the IDA borrowed IDA (North
Country) Development Loans and IDA (North Country) Building Loans and, as
evidence of such Loans, the IDA, together with the Partnership and North
country, issued to the Lenders the IDA (North Country) Development Loan Notes
and the IDA (North Country) Building Loan Notes;
WHEREAS, in order to finance the additional costs of developing the
Project, the Partnership borrowed Partnership Development Loans and, as
evidence of such Loans, the Partnership issued to the Lenders the Partnership
Development Loan Notes;
Amendment and Restatement
of Loan Agreement
<PAGE>
2
WHEREAS, subject to and upon the terms and conditions set forth herein,
on the Second Capital Contribution Date, (i) the IDA Development Loan Notes and
the IDA Building Loan Notes will be amended, restated and issued in the forms of
the IDA Development Term Notes and the IDA Building Term Notes, respectively,
(ii) to the extent the Partnership Development Loans are not repaid in full on
the Second Capital Contribution Date, the Partnership Development Loan Notes
will be amended and restated in the form of the Partnership Term Note, and (iii)
the IDA (North Country) Development Loans and the IDA (North Country) Building
Loans will be repaid in full;
WHEREAS, the parties to the Original Loan Agreement desire to amend
and restate the Original Loan Agreement and Appendix A thereto in their entirety
and, among other things, desire to add the new Agent and the Co-Agents as
parties hereto;
NOW, THEREFORE, it is agreed:
SECTION 1 DEFINITIONS
(a) All terms defined in this Agreement or in Appendix A shall have
the defined meanings when used in any certificate or other document made or
delivered pursuant hereto.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto, accounting terms not defined in Appendix A and
accounting terms partly defined in Appendix A to the extent not defined, shall
have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section, appendix,
schedule and exhibit references are to this Agreement unless otherwise
specified.
(d) References to agreements defined herein or in Appendix A shall
include such agreements as they may be amended, supplemented or otherwise
modified from time to time in accordance with the provisions of the Basic
Documents.
(e) Terms defined in this Agreement or in Appendix A by reference to
any other agreement, document or instrument shall have the meanings assigned to
them in such agreement, document or instrument, whether or not such agreement,
document or instrument is then in effect,
Amendment and Restatement
of Loan Agreement
<PAGE>
3
SECTION 2 AMOUNTS AND TERMS OF TERM LOANS
2.1 Term Loans. (a) subject to and upon the terms and conditions set
forth herein, each Construction Lender severally agrees to convert a portion
(determined in accordance with the Notice of Term Loan Conversion) of its
Construction Loans into Term Loans (collectively, the "Term Loans") to the
Borrowers on the Second Capital Contribution Date in an aggregate amount equal
to the amount specified in the Notice of Term Loan Conversion.
(b) Concurrently with the conversion of the Construction Loans into
Term Loans and the occurrence of the Transfer Effective Date (as defined in the
Assignment and Acceptance, dated as of the date hereof, between GE Capital and
the other Lenders), each Lender will be deemed to have made a Term Loan to the
Borrowers in a principal amount equal to the amount set forth opposite such
Lender's name on Schedule 8.
2.2 Term Notes. Simultaneously with the conversion of the outstanding
Construction Loans of each Construction Lender into Term Loans of such
Construction Lender in accordance with Section 2.1 hereof and Section 2.7 of the
original Loan Agreement and Applicable Law, the Borrowers shall amend and
restate and the IDA shall issue the IDA (Partnership) Construction Notes (as
defined in the Original Loan Agreement) of such Construction Lender and, to the
extent the Partnership Development Loans are converted into Term Loans in
accordance with Section 2.1 hereof and Section 2.7 of the Original Loan
Agreement, amend and restate the Partnership Development Loan Note of such
Construction Lender and deliver to each Lender amended and restated promissory
notes evidencing such amendments and restatements as follows:
(a) the converted IDA Building Loans of such Construction Leader shall
be evidenced by a promissory note of the Borrowers substantially in the form
of Exhibit A-1 (collectively, the "IDA Building Term Notes");
(b) the converted IDA Development Loans of such Construction Lender
shall be evidenced by a promissory note of the Borrowers substantially in
the form of Exhibit A-2 (collectively, the "IDA Development Term Notes");
and
(c) to the extent the Partnership Development Loans of such
Construction Lender are converted into Term Loans, the converted Partnership
Development Loans shall be evidenced by promissory notes of the Partnership
substantially in the form of Exhibit A-3 (collectively, the "Partnership
Term Notes"; together with the IDA Building Term Notes and the IDA
Development Term Notes, the "Term Notes").
The Term Notes of each Lender shall have appropriate insertions and be payable
to the order of such Lender. Each Term Note shall
Amendment and Restatement
of Loan Agreement
<PAGE>
4
(i) be dated the second Capital Contribution Date, (ii) in the case of the IDA
Building Term Notes and the IDA Development Term Notes, subject to Section
11.8(a), represent the joint and several obligations of the Partnership and
the IDA to pay the principal amount of the Term Loan made by such Lender as an
amendment and restatement of such IDA (Partnership) Construction Notes (as
defined in the Original Loan Agreement) and, in the case of the Partnership Term
Notes, represent the obligation of the Partnership to pay the principal amount
of the Term Loan made by such Lender as an amendment and restatement of such
Partnership Development Loan Note, (iii) be payable in consecutive quarterly
installments of principal on each Installment Payment Date in the amounts set
forth on Schedule 11, (iv) provide for the payment of interest for the period
from the date thereof until paid in full on the unpaid principal amount thereof
from time to time outstanding in accordance with Section 4.3 and. (v) be
entitled to the benefit of this Agreement and the Collateral Security Documents.
Promptly following the receipt by each Construction Lender of (i) Term Notes in
accordance with this Section 2.2 and (ii) an amount in cash equal to the excess
of (A) the aggregate outstanding principal amount of the Construction Loans made
by such Lender over (B) the principal amount of the Term Notes delivered to such
Construction Lender, such construction Lender shall mark the Construction Notes
held by such Construction Lender "Cancelled" and shall return such Construction
Notes to the Borrowers and North Country. Each Lender is hereby authorized to
record the date, Type and amount of each IDA Building Loan, IDA Development
Loan, or Partnership Development Loan, as the case may be, converted from a
Construction Loan into a Term Loan by such Construction Lender or purchased by
such Lender from a Construction Lender, the date and amount of each payment or
prepayment of principal of the Term Loans made by any of the Borrowers, the date
of each conversion of one Type of Term Loan into another Type of Term Loan and,
in the case of a Eurodollar Loan, the Eurodollar Interest Period and the
interest rate with respect thereto, on the schedules annexed to and constituting
a part of the Term Notes held by such Lender, and any such recordation shall
constitute prima facie evidence of the accuracy of the information so recorded;
provided, that the failure by any Lender to make any such recordation shall not
limit or otherwise affect the Obligations of any of the Borrowers.
2.3 Interest Rate Options. (a) Subject to Section 2.3(b), the
Partnership may elect from time to time to convert Term Loans maintained as
Eurodollar Loans into Base Rate Loans by notifying the Agent prior to 12:00
Noon, New York City time, at least two Business Days prior to the proposed
conversion date, provided, that any such conversion of Eurodollar Loans shall
only be made on the last day of the then current Eurodollar Interest Period with
respect thereto. The Partnership may elect from time to time to convert Term
Loans maintained as Base Rate Loans into Eurodollar Loans by notifying the Agent
in writing prior to 12:00
Amendment and Restatement
of Loan Agreement
<PAGE>
5
Noon, New York City time, at least three Working Days prior to the proposed
conversion date.
(b) Unless the Agent and the Lenders shall otherwise agree, the Term
Loans to be made on the Second Capital Contribution Date shall be Base Rate
Loans and three Working Days thereafter such Term Loans shall be converted to
Eurodollar Loans with a Eurodollar Interest Period ending on December 31, 1994.
Thereafter, all Term Loans shall be maintained as Eurodollar Loans and the
Eurodollar Interest Period for all such Loans shall be three months.
2.4 Partnership and North Country as Authorized Agents. Pursuant to and
in accordance with the provisions of the Installment Sale Agreements, each of
the Partnership and North Country has been appointed the exclusive agent of the
IDA to develop, design, engineer, acquire, construct, finance, test, start-up,
complete, operate and maintain the Project and the North Country Project, as the
case may be. The IDA authorizes the Partnership or North Country, as agents of
the IDA, to convert the Construction Loans to Term Loans hereunder, and,
pursuant to the Original Loan Agreement, authorized the Partnership and North
Country, as agents of the IDA, to borrow the Loans thereunder, deliver Notices
of Borrowing and apply the proceeds of the Loans as provided therein or
otherwise in accordance with the Installment Sale Agreements, without giving
notice to or obtaining the consent of the IDA, and the IDA agrees to be bound by
all such actions, subject to the provisions of Section 11.8(a) and the
Installment Sale Agreements.
SECTION 3 LETTERS OF CREDIT AND REIMBURSEMENT
OBLIGATIONS IN CONNECTION WITH SURETY BOND ARRANGEMENTS
3.1 Letter of Credit Commitment. (a) (i) Pursuant to the Original Loan
Agreement, the Letter of Credit Issuer executed and delivered (i) a certain
stand-by letter of credit for the account of the Partnership in favor of the
Royal Bank of Canada ("Royal Bank"), in the stated amount of $12,000,000 and
with an expiry date of October 31, 1995 (the "Existing Gas Supplier LOC"), to
secure the obligations of the Partnership to "Royal Bank under the Gas Supplier
LOC heretofore issued by Royal Bank to the Gas Supplier and (ii) the Power
Purchase Letter of Credit.
(ii) Subject to and upon the terms and conditions set forth herein,
the Letter of Credit Issuer agrees to execute and deliver certain additional
stand-by letters of credit, including any Backup Extension of Credit referred
to in Section 3.12 and renewals of the Power Purchase Letter of Credit and the
Existing Gas Supplier LOC for the account of the Partnership to secure the
payment of the Partnership's obligations under the Project
Amendment and Restatement
of Loan Agreement
<PAGE>
6
Contracts listed on Schedule 2, including the Partnership's obligation to
reimburse any Gas Supplier LOC Issuer for any drawings in respect of a Gas
Supplier LOC (such additional letters of credit and Backup Extensions of Credit,
together with the Existing Gas Supplier LOC and the Power Purchase Letter of
Credit collectively are referred to herein as the "Project Letters of Credit").
(b) The Partnership shall request the Letter of Credit Issuer to issue,
and the Letter of Credit Issuer shall, on the Second Capital Contribution Date,
issue the Senior Debt Service Reserve "A" Letter of Credit to the Agent, for the
ratable benefit of the Secured Parties (as defined in the Amended and Restated
Security Deposit Agreement) (other than the SECI Term Lender).
(c) On the date of any withdrawal of cash from the Base Reserve Equity
Account to make equity distributions to the GE Capital Limited Partner as
required pursuant to the Amended and Restated Partnership Agreement, the
Partnership shall request the Letter of Credit Issuer to issue, and the Letter
of Credit Issuer shall issue on such date, the Senior Debt Service Reserve "B"
Letter of Credit (the Senior Debt Service Reserve "B" Letter of Credit, together
with the Project Letters of Credit and the Senior Debt Service Reserve "A"
Letter of Credit, collectively are referred to herein as the "Letters of
Credit") to the Agent, for the ratable benefit of the Lenders and the Swap
Counterparty, in the stated amount calculated pursuant thereto.
(d) At any time during the Term Loan Period, (i) the sum of the
aggregate stated amount of (x) the Project Letters of Credit and (y) the Senior
Debt Service Reserve "A" Letter of Credit shall not exceed $27,100,000 (such
amount to be in addition to the aggregate amount of the Term Loans then
outstanding), (ii) the sum of the aggregate stated amount of the Project Letters
of Credit shall not exceed $20,500,000 and (iii) the stated amount of the Senior
Debt Service Reserve "A" Letter of Credit shall not exceed $6,600,000.
3.2 Project Letters of Credit. Each Project Letter of Credit shall (i)
be denominated in Dollars (except in the case of Project Letters of Credit
designated to be in Canadian dollars or as, otherwise agreed by the Letter of
Credit Issuer), (ii) provide for the payment of a sight draft when presented for
honor thereunder in accordance with the terms thereof, (iii) be governed by the
laws of the State of New York, except any Project Letter of Credit designated to
be in Canadian dollars, which shall be governed solely by the Uniform Customs
and Practice for Documentary Credit (1993 Revision), International Chamber of
Commerce Publication No. 500, (iv) be in such form requested by the Partnership
as shall be required pursuant to the terms of the Project Contract to which such
Project Letter of Credit relates, or, to the extent no form is specified prior
to the date hereof,
Amendment and Restatement of
Loan Agreement
<PAGE>
7
shall otherwise be in form reasonably acceptable to the Letter of Credit Issuer
and (v) expire on a date certain, which date shall be the earlier of (A) the
date on which such Project Letter of Credit is no longer required pursuant to
the terms of the Project Contract to which such Project Letter of Credit relates
and (B) the Distribution Date on which the last Level 1 Distribution is
scheduled to be distributed.
3.3 Procedure for Opening Letter of Credit; Participatinq Interests.
(a) At least ten Business Days prior to the proposed issuance of a Project
Letter of Credit, the Partnership shall provide to the Letter of Credit Issuer a
written request and a form of Project Letter of Credit therefor. Such request
shall set forth the proposed issuance date of such Project Letter of Credit
(which shall be a Business Day) and the stated amount of such Project Letter of
Credit. The Partnership shall also provide such other certificates, documents
and other papers and information as the Letter of Credit Issuer may reasonably
request. Upon receipt of such request from the Partnership, the Letter of Credit
Issuer will promptly, but in no event later than three Business Days following
receipt of such request, notify each Lender that is a Letter of Credit
Participant (as defined below) thereof. Upon such receipt, the Letter of Credit
Issuer will process such form of Project Letter of Credit and the other
certificates, documents and other papers delivered to the Letter of Credit
Issuer in connection therewith in accordance with its customary procedures and,
subject to the terms and conditions hereof, shall promptly open such Project
Letter of Credit (but in no event shall the Letter of Credit Issuer be required
to open any Project Letter of credit earlier than three Business Days after
receipt by the Letter of Credit Issuer of the request relating thereto) by
issuing the original Of such Project Letter of Credit to the beneficiary
identified to the Letter of Credit Issuer in the Partnership's request to the
Letter of Credit Issuer and furnishing a copy thereof to the Partnership.
(b) If the Letter of Credit Issuer sends a written request to the
Lenders to participate in the Letters of Credit, and each Lender, in its sole
discretion, agrees in writing to so participate, the Letter of Credit Issuer
agrees to allot and does allot, to itself and each participating Lender (each,
a "Letter of Credit Parcicipant"), and each Letter of Credit Participant
severally and irrevocably agrees to take and does take in such Letter of Credit,
a participating interest in a percentage equal to such Letter of Credit
Participant's Commitment Percentage.
3.4 Reimbursements and other Payments by the Partnership. (a) Except as
otherwise provided in Section 3.12 with respect to the Gas Supplier LOC (if the
Gas Supplier LOC is not issued by the Letter of Credit Issuer) or any Backup
Extension of Credit, the Partnership agrees to pay to the Letter of Credit
Issuer and the Letter of Credit Participants the
<PAGE>
8
aggregate amount of any drawing under any Letter of Credit made by the
beneficiary of such Letter of Credit in accordance with the provisions of this
section and the provisions of the Amended and Restated Security Deposit
Agreement. Any such payment in respect of any Project Letter of Credit (other
than the Power Purchase Letter of Credit) shall be due and payable in full on
the first Installment Payment Date to occur on or after the related Drawing
Date, provided that to the extent that cash is available in the Revenue Account
on any Monthly Transfer Date occurring on or after such Drawing Date but prior
to such next Installment Payment Date pursuant to and in accordance with 4.2(b)
of the Amended and Restated Security Deposit Agreement to reimburse the Letter
of Credit Issuer for or any' such drawing, the Partnership shall prepay such
reimbursement obligation in an amount equal to the amount of such available cash
on each such Monthly Transfer Date. Any such payment in respect of the Power
Purchase Letter of Credit shall be due and payable in full on the related
Drawing Date. Any such payment in respect of the Senior Debt Service Reserve
"A" Letter of Credit shall be due and payable in full on the first Monthly
Transfer Date to occur on or after the related Drawing Date and on which cash is
available in the Revenue Account, after application of the cash therein in
accordance with Sections 4.1 and 4.2(a) and (b) of the Amended and Restated
Security Deposit Agreement, to make such payment, provided that in no event
shall such payment be made later than the earlier of the Term Loan Maturity Date
and the date of acceleration of the other Obligations pursuant to Section 9. Any
such payment in respect of the Senior Debt Service Reserve "B" Letter of Credit
shall, subject to Section 3.4(d), be due and payable in full on the first
Monthly Transfer Date to occur on or after the related Drawing Date.
(b) Interest will accrue on the unreimbursed amount of any drawings
made under a Letter of Credit from the date of such drawing until repayment in
full by the Partnership at a rate equal to the Prime Rate plus 5% per annum.
Interest on reimbursement obligations in respect of each Letter of Credit (other
than the Power Purchase Letter of Credit) shall be due and payable on each
Monthly Transfer Date after the related Drawing Date. Interest on reimbursement
obligations in respect of the Power Purchase Letter of Credit shall be payable
upon demand.
(c) The Partnership shall discharge all obligations with respect to any
amount available to be drawn under the Letters of Credit on the Distribution
Date on which the last Level 1 Distribution is scheduled to be distributed. The
Partnership's obligations in respect of any amount available to be drawn under
the Letters of Credit may be so discharged by (i) paying or prepaying any amount
due or to become due by the Partnership to the beneficiaries under the Letters
of Credit, (ii) if the Letter of Credit Issuer and the Letter of Credit
Participants so agree, providing the Letter of Credit Issuer and the Letter of
Credit Participants with cash collateral, pursuant
Amendment and Restatement
of Loan Agreement
<PAGE>
9
to documentation in form and substance satisfactory to the Letter of Credit
Issuer and the Letter of Credit Participants, in an amount equal to the
aggregate undrawn face amount of the Letters of Credit or (iii) causing the
termination of the Letters of Credit.
(d) Notwithstanding anything to the contrary contained herein or in any
other Loan Document, until the other Obligations shall have been paid in full,
the reimbursement and interest payment obligations of the Partnership in respect
of the senior Debt Service Reserve "B" Letter of Credit shall be payable solely
from Project Revenues and other revenues of the Partnership derived and to be
derived from the lease, sale or other disposition of the Project when and to the
extent that such Project Revenues and other revenues are available after
payments in respect of the other obligations which are then due and owing have
been made; provided that nothing contained herein shall limit or be construed to
limit the Letter of Credit Issuer's right to receive payments in respect of the
Senior Debt Service Reserve "B" Letter of Credit pursuant to Section 4.2 of the
Amended and Restated Security Deposit Agreement.
3.5 Letter of Credit Fees. (a) The Partnership agrees to pay an initial
fee and a reservation fee, in each case solely with respect to each Project
Letter of Credit, to the Letter of Credit Issuer as specified in the Letter
Agreement. In Addition, the Partnership agrees to pay to the Agent for the
account of the Letter of Credit Issuer and the Letter of Credit Participants,
solely with respect to each Project Letter of Credit issued and outstanding, a
letter of credit fee equal to the rate set forth in the Letter Agreement on the
amount available to be drawn under such Project Letter of Credit. The fees
described in this paragraph (a) collectively are referred to herein as the
"Letter of Credit Fees".
(b) Letter of Credit Fees with respect to any Project Letter of Credit
shall be payable quarterly in arrears, commencing on the first Interest Payment
Date to occur after the issuance of such Project Letter of Credit.
3.6 Payments by Lenders Upon Unreimbursed Drawings. The Letter of
Credit Issuer will notify each Letter of Credit Participant promptly of any
drawing under a Letter of Credit and, in the case of the Power Purchase Letter
of Credit, that any drawing under such Letter of Credit has not promptly been
reimbursed by the Partnership pursuant to Section 3.4. Upon its receipt of any
such notice, each Letter of Credit Participant will transfer to the Letter of
Credit Issuer, in immediately available funds, an amount equal to such Letter of
Credit Participant's Commitment Percentage of the amount of the drawing.
3.7 Obligations Absolute. The obligations of the Partnership under this
Agreement in respect of the Letters of
Amendment and Restatement
of Loan Agreement
<PAGE>
10
Credit and the Surety Bond Arrangements shall be absolute, unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement, under all circumstances whatsoever, including, without limitation,
the following circumstances:
(a) any lack of validity or enforceability of the Surety Bond
Arrangements or any Letter of Credit or any agreement or instrument related
thereto;
(b) any amendment or waiver of or any consent to departure from the
terms of the Surety Bond Arrangements or any Letter of Credit; provided,
that any such amendment of the terms of any Letter of Credit shall have been
effectuated in accordance with section 11;
(c) the existence of, any claim, set-off, defense or other rights which
the Partnership may have at any time against any beneficiary or any
transferee of the Surety Bond Arrangements or any Letter of Credit (or any
Persons for whom any such beneficiary or any such transferee may be
acting), the Letter of Credit Issuer; the Agent, the Letter of Credit
Participants, the Surety Bond Arranger or any other Person, whether in
connection with the Surety Bond Arrangements or such Letter of Credit, this
Agreement, any other Basic Document or any agreement or instrument related
thereto, the transactions contemplated herein, or any unrelated transaction;
(d) any statement or any other document presented under any Letter of
Credit or the Surety Bond proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect whatsoever;
(e) payment by the Letter of Credit Issuer or the Surety Bond Issuer
under any Letter of Credit or the Surety Bond, respectively, against
presentation of a draft or certificate or notice that does not comply with
the terms of such Letter of Credit or Surety Bond; and
(f) any other circumstances or happening whatsoever, whether or not
similar to any of the foregoing;
provided, that the Letter of Credit Issuer acted in good faith and used due care
in the examination of any draft or certificate presented under any Letter of
Credit in ascertaining whether on its face it appeared to comply with the terms
of such Letter of Credit.
3.8 Indemification. The Partnership hereby indemnifies and holds
harmless the Letter of Credit Issuer, the Letter of Credit Participants and the
Surety Bond Arranger from
Amendment and Restatement
of Loan Agreement
<PAGE>
11
and against any and all claims, damages, losses, liabilities, reasonable costs
and expenses whatsoever which the Letter of Credit Issuer, any Letter of Credit
Participant or the Surety Bond Arranger may incur (or which may be claimed
against the Letter of Credit Issuer, any Letter of Credit Participant or the
Surety Bond Arranger by any Person) by reason of or in connection with the
execution and delivery or transfer of, or payment or failure to pay under, any
Letter of Credit or the Surety Bond Arrangements; provided, that the Partnership
shall not be required to indemnify the Letter of Credit Issuer, any Letter of
Credit Participant or the Surety Bond Arranger for any claims, damages, losses,
liabilities, costs or expenses to the extent, but only to the extent, caused by
the failure of the Letter of Credit Issuer or the Surety Bond Arranger to act in
good faith or, in the case of the Letter of Credit Issuer, to use due care in
the examination of any draft or certificate presented under any Letter of Credit
in ascertaining whether on its face it appeared to comply with the terms of such
Letter of Credit. Nothing in this section 3.8 is intended to limit the
reimbursement obligations of the Partnership contained herein.
3.9 Liability of the Letter of Credit Issuer, the Letter of Credit
Participants and the Surety Bond Arranger. The Partnership assumes all risks of
the acts or omissions of the beneficiary and any transferee of any Letter of
Credit with respect to its use of such Letter of Credit or of the Surety Bond
with respect to its use of the Surety Bond. None of the Agent, the Letter of
Credit Issuer, any other Letter of Credit Participant or the Surety Bond
Arranger or any of their respective officers or directors shall be liable or
responsible for: (a) the use which may be made of any Letter of Credit or the
Surety Bond for any acts or omissions of the beneficiary and any transferee in
connection therewith; (b) the validity, sufficiency or genuineness of documents,
or of any endorsements thereon, even if such documents should in fact prove to
be in any or all respects invalid, insufficient, fraudulent or forged; (c)
payment by the Letter of Credit Issuer, the Surety Bond Issuer or the Surety
Bond Arranger against presentation of documents which do not comply with the
terms of any Letter of Credit or the Surety Bond, including failure of any
documents to bear any reference or adequate reference to such Letter of Credit
or the Surety Bond; or (d) any other circumstances whatsoever in making or
failing to make payment under any Letter of credit or the Surety Bond, except
only that the Partnership shall have a claim against the Letter of credit Issuer
or the Surety Bond Arranger and the Letter of Credit Issuer and the Surety
Bond Arranger shall be liable to the Partnership, to the extent, but only to
the extent, of any direct, as opposed to consequential, damages suffered by the
Partnership which the Partnership proves were caused by the failure of the
Letter of Credit Issuer or the Surety Bond Issuer to act in good faith or, in
the case of the Letter of Credit Issuer, to use due care in the examination of
any draft or certificate presented under any Letter of Credit in
Amendment and Restatement
of Loan Agreement
<PAGE>
12
ascertaining whether on its face it appeared to comply with the terms of such
Letter of Credit. In furtherance and not in limitation of the foregoing, the
Letter of Credit Issuer and the Surety Bond Arranger may accept documents that
appear on their face to be in order, without responsibility for further
investigation.
3.10 Assignments. (a) No Letter of Credit Participant's participation
in any Letter of Credit or any of its rights or duties hereunder shall be
subdivided, assigned or transferred (other than in connection with a transfer of
part or all of such Letter of Credit Participant's Term Notes in accordance
with Section 11.7), without the prior written consent of the Letter of Credit
Issuer, which consent will not be unreasonably withheld. Such consent may be
given or withheld without the consent or agreement of any other Letter of Credit
Participant. Notwithstanding the foregoing, a Letter of Credit Participant may
participate its interest in any Letter of Credit without obtaining the prior
written consent of the Letter of credit Issuer.
(b) The Letter of Credit Issuer may assign it rights and obligations in
respect of any Project Letter of Credit to any entity that is rated "AA" or
better by Standard & Poor's Corporation or the equivalent by any nationally
recognized rating agency and is acceptable to the beneficiary thereof pursuant
to the terms of the Project Contract to which such Project Letter of Credit
relates.
3.11 Participations. Each Letter of Credit Participant's obligation to
make payments to the Letter of Credit Issuer upon any drawing of a Letter of
Credit thereon shall be absolute and unconditional and shall not be affected by
any circumstance, including, without limitation, (a) any set-off, counterclaim,
recoupment, defense or other right which such Letter of Credit Participant may
have against the Letter of Credit Issuer, the Borrowers or any other Person for
any reason whatsoever; (b) the occurrence or continuance of a Default or an
Event of Default; (c) any adverse change in the condition (financial or
otherwise) of the Borrowers; (d) any breach of this Agreement by the Borrowers
or any other Letter of Credit Participant; or (e) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.
3.12 Reimbursements and Other Payments by the Partnership in Respect of
Gas Supplier LOC. In the event that the (i) Gas Supplier LOC Issuer is a Person
other than the Letter of Credit Issuer and (ii) the Letter of Credit Issuer has
reimbursed the Gas Supplier LOC Issuer pursuant to a drawing under a Project
Letter of Credit (each such Project Letter of Credit or other extension of
credit the proceeds of which are used to make such reimbursement, as amended,
supplemented or otherwise modified from time to time, a "Backup Extension of
Amendment and Restatement
of Loan Agreement
<PAGE>
13
Credit"), the Partnership agrees to pay to the Agent for the account of the
Letter of Credit Issuer and the Letter of Credit Participants an amount equal to
the aggregate amount of any drawings under the Gas Supplier LOC in respect of
which the Letter of Credit Issuer has so reimbursed the Gas Supplier LOC Issuer
in accordance with the provisions of this Section and the provisions of the
Amended and Restated Security Deposit Agreement. Any such payment shall be due
and payable in full on the first Installment Payment Date to occur on or after
the date on which the Letter of Credit Issuer has so reimbursed the Gas
Supplier LOC Issuer, provided that to the extent that cash is avaliable in the
Revenue Account on any Monthly Transfer Date occurring on or after such
reimbursement date but prior to such next Installment Payment Date pursuant to
and in accordance with Section 4.2(b) of the Amended and Restated Security
Deposit Agreement to reimburse the Letter of Credit Issuer for any such
extension of credit, the Partnership shall prepay such reimbursement obligation
in an amount equal to the amount of such available cash on each such Monthly
Transfer Date. Interest will accrue on any Backup Extension of Credit from the
date of the making of such extension of credit until repayment in full by the
Partnership at a rate equal to the Prime Rate plus 5% per annum. Any such
interest accruing pursuant to the immediately preceding sentence shall be due
and payable on each Monthly Transfer Date after the related reimbursement date.
The Partnership shall also cause the discharge of all obligations with respect
to any amount available to be drawn under any such Gas Supplier LOC and Backup
Extension of Credit on the Distribution Date on which the last scheduled Level 1
Distribution is to be distributed. The Partnership may so discharge any such
obligations in respect of any amount available to be drawn under such Backup
Extension of Credit by (i) paying or prepaying any amount due or to become due
to the beneficiaries under such Backup Extension of Credit, (ii) if the Letter
of Credit Issuer and the Letter of Credit Participants so agree, securing such
Backup Extension of Credit with cash collateral pursuant to documentation in
form and substance satisfactory to the Letter of Credit Issuer and the Letter of
Credit Participants, in an amount equal to the aggregate undrawn face amount of
such Backup Extension of Credit or (iii) causing the termination of such Backup
Extension of Credit.
3.13 Fee for Gas Supplier LOC Arrangements. The Partnership agrees to
pay all fees and expenses of the Gas Supplier LOC Issuer in connection with the
issuance of the Gas Supplier LOC and all fees and expenses of the Letter of
Credit Issuer in connection with the issuance of any Backup Extension of
Credit.
3.14 Payments by Lenders Upon Unreimbursed Drawings. The Letter of
Credit Issuer will notify each Letter of Credit Participant promptly of any
drawing under the Gas Supplier LOC. Upon its receipt of any such notice, each
Letter of Credit
Amendment and Restatement
of Loan Agreement
<PAGE>
14
Participant, will transfer or to the Letter of Credit Issuer, in immediately
available funds, an amount equal to such Letter of Credit Participant's
Commitment Percentage of the amount of such drawing.
3.15 Obligations Absolute. The provisions of Sections 3.7, 3.8, 3.9,
3.10 and 3.11 shall apply mutatis mutandis to the Gas Supplier LOC and any
Backup Extension of Credit and the obligations of the Partnership in respect of
the Gas Supplier LOC and any Backup Extension of Credit.
3.16 Replacement of Letter of Credit Issuer. If, at any time, the
Letter of Credit Issuer fails to maintain a Standard & Poor's credit rating of
"A" or better, the Partnership shall cause such Letter of Credit Issuer to be
replaced by a financial institution with a Standard & Poor's credit rating of
"A" or better which is acceptable to the beneficiary of each Letter of Credit
then issued and outstanding. Such replacement shall be accomplished by the
successor Letter of Credit Issuer issuing to each beneficiary of a Letter of
Credit then issued and outstanding a replacement Letter of Credit in exchange
therefor. Each such replacement Letter of Credit shall be substantially in the
form of the Letter of Credit being replaced and shall otherwise conform to the
requirements hereof. Each replaced Letter of Credit shall be promptly returned
to the issuer thereof and marked "canceled". Concurrently with any such
replacement, the existing Letter of Credit Issuer and the replacement Letter of
Credit Issuer shall execute and deliver such documents as may be necessary to
provide for the assignment to such replacement Letter of Credit Issuer, of all
rights and obligations of the existing Letter of Credit Issuer hereunder and
under the other Loan Documents.
3.17 Surety Bond Arrangements Commitment. At the request of the
Partnership, and subject to the terms and conditions hereof, the Surety Bond
Arranger agrees to enter into the Surety Bond Arrangements on or prior to the
Second Capital Contribution Date.
3.18 Reimbursements and Other Payments by the Partnership in Respect Of
Surety Bond Arrangements. (a) The Partnership agrees to reimburse the Surety
Bond Arranger (the "Surety Bond Arrangements Reimbursement Obligation") for the
aggregate amount of each payment required to be made by the Surety Bond
Arranger to the Surety Bond Issuer in connection with the Surety Bond (each such
payment, a "Surety Bond Arranger Payment") in accordance with the provisions of
this Section, the Surety Bond Arrangements Cash Collateral Agreement and the
SECI Term Loan Agreement. Any such reimbursement payment shall, subject to
Section 3.18(d), be due and payable in full on the date on which the Surety Bond
Arranger makes the related Surety Bond Arranger Payment.
Amendment and Restatement
of Loan Agreement
<PAGE>
15
(b) Interest will accrue on the unreimbursed amount of any Surety Bond
Arranger Payment from the date on which such payment is made until reimbursement
in full by the Partnership at a rate equal to the Prime Rate plus 5% per annum.
Interest on each Surety Bond Arrangements Reimbursement Obligation shall be
Payable on demand.
(c) The Partnership shall cause all obligations of the Surety Bond
Arranger under the Surety Bond Arrangements to be discharged on the earlier of
(i) the date on which both surety bonds constituting the Surety Bond shall have
been released, (ii) the date on which the other Obligations shall have become
due and payable (whether at stated maturity, by acceleration or otherwise) and
(iii) September 30, 1999. The Partnership may cause such discharge by (i) paying
or prepaying any amount due or to become due by the Surety Bond Arranger to the
Surety Bond Issuer under the Surety Bond Arrangements, (ii) if the Surety Bond
Arranger so agrees, providing the Surety Bond Arranger with cash collateral
pursuant to documentation in form and substance satisfactory to the Surety Bond
Arranger, in an amount equal to the aggregate amount of the obligations of the
Surety Bond Arranger under the Surety Bond Arrangements or (iii) causing the
termination of the Surety Bond Arrangements.
(d) Notwithstanding anything to the contrary contained herein, until
the other obligations (other than obligations in respect of the senior Debt
Service Reserve "B" Letter of Credit) shall have been paid in full, all Surety
Bond Arrangements Reimbursement Obligations shall be payable only first, from
the Surety Bond Arrangements Collateral, and second, from capital contributions
to be made for such purpose by SECI to the Partnership pursuant to (i) the SECI
Term Loan Agreement or the Partnership Agreement and (ii) Section 7.24 of this
Agreement; provided that nothing contained herein shall limit or be construed to
limit the Surety Bond Arranger's right to receive payments in respect of
expenses pursuant to Sections 4.1(a) and 4.2(a) of the Amended and Restated
Security Deposit Agreement.
3.19 Cost of Issuance of Surety Bond; Surety Bond Arranger Fee. (a) The
parties hereto recognize and agree that the cost of issuing the Surety Bond was
paid as a Certified Construction Cost with the proceeds of the last Construction
Loan borrowing under the Original Loan Agreement.
(b) The Partnership agrees to pay to the Surety Bond Arranger a
utilization fee equal to the rate set forth in the Letter Agreement on the
amount of the Surety Bond (the "Surety Bond Arranger Fee"). Such Surety Bond
Arranger Fee shall be payable quarterly in arrears, commencing on the first
Interest Payment Date to occur after the issuance of the Surety Bond.
Amendment and Restatement
of Loan Agreement
<PAGE>
16
SECTION 4 PROVISIONS RELATING TO ALL EXTENSIONS
OF CREDIT; FEES AND PAYMENTS
4.1 Agency Fees. The Partnership agrees to pay to the Agent an
administrative agent's fee on October 7, 1994, and annually, in advance, on each
anniversary of the date hereof (the "Agency Fee") in an amount equal to
$100,000 per annum.
4.2 Prepayments and Repayments. (a) (i) If the Required Lenders have
delivered a notice in writing to the Partnership declaring that an Event of
Loss had occurred, the respective Borrowers parties thereto (1) shall prepay in
full the unpaid principal amount of the then outstanding Term Notes, together
with accrued interest thereon to the date of prepayment and the Breakage Amount
thereon and all other amounts due and owing in respect of the Term Loans, (2)
shall satisfy its obligations in respect of the Letters of Credit by (x) paying
or prepaying any amount due or to become due by the Partnership to the
beneficiaries under the Letters of Credit, (y) if the Letter of Credit
Participants and the Letter of Credit Issuer so agree, providing the Letter of
Credit Participants and the Letter of Credit Issuer with cash collateral,
pursuant to documentation in form and substance satisfactory to the Letter of
Credit Participants and the Letter of Credit Issuer, in an amount equal to the
aggregate undrawn face amount of the Letters of Credit or (z) causing the
termination of the Letters of Credit and (3) shall satisfy its obligations in
respect of the Surety Bond Arrangements by (x) paying or prepaying any amount
due or to become due by the Surety Bond Arranger to the Surety Bond Issuer under
the Surety Bond Arrangements, (y) if the Surety Bond Arranger so agrees,
providing the Surety Bond Arranger with cash collateral, pursuant to
documentation in form and substance satisfactory to the Surety Bond Arranger, in
an amount equal to the aggregate amount of the obligations of the Surety Bond
Arranger under the Surety Bond Arrangements or (z) causing the termination of
the Surety Bond Arrangements, and shall pay any unpaid Letter of Credit Fees and
other fees accrued hereunder to the date of prepayment, on the earlier of (I)
the date occurring 90 days after the date of receipt of such notice from the
Required Lenders and (II) the date on which insurance proceeds are received with
respect to such Event of Loss.
(ii) If (A) the Debt Service Coverage Ratio as of the end of any six
consecutive Measurement Periods is less than 1.20 to 1.00 or (B) if an Event of
Default has occurred and is continuing, any amount in the Senior Debt Service
Coverage Account shall be applied to the prepayment of the principal amount of
the Term Loans in the inverse order of maturity, plus the Breakage Amount
thereon and all other amounts due and owing in respect of the Term Loans.
(b) The Borrowers may, from time to time, prepay the Term Loans, in
whole or in part, together with interest thereon
Amendment and Restatement
of Loan Agreement
<PAGE>
17
to the date of prepayment, plus any amounts payable pursuant to Section 4.10
and the Breakage Amount thereon. Optional prepayments pursuant to this Section
4.2(b) shall be made upon at least two Working Days' prior written irrevocable
notice by the Partnership to the Agent, specifying the date and amount of such
prepayment. If any such notice is given, the Borrowers will make the prepayment
specified therein and such prepayment shall be due and payable on the date
specified therein, together with interest accrued thereon to the date of
prepayment, plus any amounts payable pursuant to Section 4.10 and the Breakage
Amount thereon. Optional prepayments shall be applied to the prepayment of the
principal amount of the Term Loans in the inverse order of maturity.
(c) (i) The Partnership's obligations in respect of the Letters of
Credit may be satisfied by (x) paying or prepaying any amount due or to become
due by the Partnership to the beneficiaries under the Letters of Credit, (y) if
the Letter of Credit Participants and the Letter of Credit Issuer so agree,
providing the Letter of Credit Participants and the Letter of Credit Issuer with
cash collateral, pursuant to documentation in form and substance satisfactory to
the Letter of Credit Participants and the Letter of Credit Issuer, in an amount
equal to the aggregate undrawn face amount of the Letters of Credit or (z)
causing the termination of the Letters of Credit.
(ii) The Partnership's obligations in respect of the Surety Bond
Arrangements may be satisfied by (x) paying or prepaying any amount due or to
become due by the Partnership to the Surety Bond Issuer under the Surety Bond
Arrangements, (y) if the Surety Bond Arranger so agrees, providing the Surety
Bond Arranger with cash collateral, pursuant to documentation in form and
substance satisfactory to the Surety Bond Arranger, in an amount equal to the
aggregate amount the obligations of the Surety Bond Arranger under of the Surety
Bond Arrangements or (z) causing the termination of the Surety Bond
Arrangements.
(d) Upon prepayment in full, (i) the Letter of Credit Commitment and
all other terms and provisions of this Agreement shall terminate (other than any
terms and provisions hereof which by their express terms survive the termination
of this Agreement) and (ii) the Agent shall deliver to the Borrowers, at the
Partnership's expense, such documents reasonably requested by the Borrowers to
evidence the release of the Lenders' Liens on the Collateral pursuant to the
Collateral Security Documents.
(e) Payments and prepayments made pursuant to this Section 4.2 may not
be reborrowed.
(f) Except as otherwise provided herein, payments and prepayments of
the Term Loans shall be applied to installments of principal of the Term Loans,
pro rata, in the inverse order of maturity.
Amendment and Restatement
of Loan Agreement
<PAGE>
18
4.3 Interest Rates and Payment Dates. (a) (i) The Term Loans that are
Eurodollar Loans shall bear interest for each Eurodollar Interest Period on the
unpaid principal amount thereof at the Interest Rate set forth in clause (a) of
the definition thereof.
(ii) The Term Loans that are Base Rate Loans shall bear interest on the
unpaid principal amount thereof at the Interest Rate set forth in clause (b) of
the definition thereof.
(b) If all or a portion of the principal amount of any Term Loan
made hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such Term Loan, if a Eurodollar Loan, shall be
converted to a Base Rate Loan at the end of the Eurodollar Interest Period
therefor. If all or a portion of the principal amount of any Term Loan made
hereunder or any other amount due and payable hereunder shall be paid when due
(whether at the stated maturity, by acceleration or otherwise), such Term Loan
or other amount shall bear interest at a rate per annum which is 2% above the
rate which would otherwise be applicable pursuant to Section 4.3 from the date
of such non-payment until paid in full (as well after as before judgment).
(c) Interest on the aggregate unpaid principal amount of the Term Loans
shall be payable in arrears on each Interest Payment Date.
4.4 Interest Rate Conversions. Any Eurodollar Loan will be continued
as such upon the expiration of the Eurodollar Interest Period with respect
thereto; provided that no Eurodollar Loan will be continued as such when any
Default or Event of Default has occurred and is continuing, but shall
automatically be converted to a Base Rate Loan on the last day of the Eurodollar
Interest Period with respect thereto. The Eurodollar Interest Period for any
such continued Eurodollar Loan shall be of the same duration as the Eurodollar
Interest Period of the Eurodollar Loan so continued, unless otherwise specified
by the Partnership as provided in the definition of Eurodollar Interest Period
in Appendix A; provided, that the Eurodollar Interest Period commencing at the
end of the first Eurodollar Interest Period applicable to the Term Loans shall
be three months.
4.5 Pro Rata Treatment and Payment Dates. (a) Each borrowing by the
Borrowers from the Lenders, each payment (including each prepayment) by the
Borrowers on account of the principal of and interest on the Notes and on
account of any Letter of Credit Fee hereunder, shall be made pro rata according
to the respective Commitment Percentages of the Lenders and the respective
Letter of Credit Commitment Percentages of the Letter of Credit Participants, as
the case may be. Except in respect of the Surety Bond Arrangements Reimbursement
Obligations, all
Amendment and Restatement
of Loan Agreement
<PAGE>
19
payments (including prepayments) due hereunder or under the Notes on account of
principal, interest, fees, and any other obligation incurred hereunder shall be
paid to the Agent by wire or electronic transfer for deposit to the credit of
its account no. 904996002, Loan Department Clearing, at Credit Suisse, Tower 49,
12 East 49th Street, New York, New York, 10017 ABA Number: 026009179, or such
other account as the Agent may from time to time specify to the Partnership, in
freely transferable Dollars and in immediately available funds without set-off
or counterclaim. The Agent shall distribute such payments to the Lenders, the
Letter of Credit Issuer, and the Letter of Credit Participants, as the case may
be, promptly upon receipt in like funds as received. All payments (including
prepayments) due hereunder on account of the Surety Bond Arrangements
Reimbursement Obligations, interest thereon, and fees and other amounts in
respect thereof shall be paid to the Surety Bond Arranger by wire or electronic
transfer as specified in the Surety Bond Arrangements Cash Collateral Agreement,
in freely transferable Dollars and in immediately available funds without
set-off or counterclaim. No such payment, however, shall be deemed to be a
waiver of any claims the Borrowers may assert against the Agent, the Lenders,
the Letter of Credit Issuer, the Letter of Credit Participants or the Surety
Bond Arranger. All payments hereunder shall he made without any presentment of
the Notes to the Borrowers, but upon payment in full of the Notes, the holders
thereof shall cancel them and return them to the Borrowers.
(b) If any payment hereunder (other than payments on Eurodollar Loans)
becomes due and payable on a day other than a Business Day, such payment shall
be extended to the next succeeding Business Day and, with respect to payments of
principal, interest thereon shall be payable at the then applicable rate during
such extension. If any payment on Eurodollar Loans becomes due and payable on a
day other than a Working Day, the maturity thereof shall be extended to the next
succeeding Working Day unless the result of such extension would be to extend
such payment into another calendar month, in which event such payment shall be
made on the immediately preceding Working Day.
4.6 Inability to Determine Eurodollar Rate. In the event that the Agent
shall have determined (which determination shall be conclusive and binding upon
the Borrowers) that by reason of circumstances affecting the interbank
eurodollar market, adequate and reasonable means do not exist for ascertaining
the Eurodollar Rate applicable for any Eurodollar Interest Period with respect
to (a) Base Rate Loans that the Partnership has requested be converted to
Eurodollar Loans, or (b) the continuation of Eurodollar Loans beyond the
expiration of the then current Eurodollar Interest Period therefor, the Agent
shall give notice of such event to the Partnership within 30 days following the
date of such notice by the Agent, the Agent
Amendment and Restatement
of Loan Agreement
<PAGE>
20
(after consultation with each Lender) and the Partnership shall enter into
negotiations in good faith with a view to agreeing on an alternative basis
acceptable to the Partnership and the Lenders for determining the interest rate
(the "Substitute Eurodollar Rate") which shall be applicable during such
Eurodollar Interest Period for the Eurodollar Loans to which such Eurodollar
Interest Period applies and which shall reflect the cost to the Lenders of
funding such Eurodollar Loans for such Eurodollar Interest Period from
alternate sources plus the Applicable Margin applicable to Eurodollar Loans. If,
at the expiration of 30 days from the giving of such notice by the Agent, (i)
the Agent and the Partnership have agreed to such Substitute Eurodollar Rate,
such Substitute Eurodollar Rate shall take effect with respect to such
Eurodollar Interest Period from the beginning of such Eurodollar Interest
Period, or (ii) the Agent and the Partnership have not agreed to a Substitute
Eurodollar Rate, (x) any Loans that were to have been converted to Eurodollar
Loans shall be continued as Base Rate Loans and (y) any outstanding Eurodollar
Loans shall be converted, on the last day of the then current Eurodollar
Interest Period therefor, to Base Rate Loans. Until such notice has been
withdrawn by the Agent, no Base Rate Loans shall be converted to Eurodollar
Loans pursuant to Section 2.3(a).
4.7 Computation of Interest and Fees. (a) Interest in respect of
Eurodollar Loans shall be calculated on the basis of a 360-day year for the
actual days elapsed (including the first but excluding the last day). Interest
in respect of Base Rate Loans, and all fees hereunder, shall be calculated on
the basis of a 365 (or 366, as the case may be) day year for the actual days
elapsed (including the first but excluding the last day).
(b) The Agent shall as soon as practicable notify the Partnership and
the Lenders of each determination of a Eurodollar Rate and a Base Rate.
(c) Each determination of an interest rate by the Agent pursuant to
any provision of this Agreement shall be conclusive and binding on the Borrowers
and the Lenders in the absence of manifest error.
4.8 Illegality. Notwithstanding any other provision herein, if any
change in any Applicable Law or in the interpretation or application thereof
shall make it unlawful for any Lender to make or maintain Term Loans at the
Eurodollar Rate as contemplated by this Agreement, (a) the commitment of such
Lender hereunder to make or maintain Term Loans at the Eurodollar Rate, shall
forthwith be cancelled, and (b) such Lender's Term Loans then outstanding at the
Eurodollar Rate, if any, shall bear interest at the Base Rate. If any such
conversion occurs on a day other than the last day of a Eurodollar Interest
Period, the
Amendment and Restatement
of Loan Agreement
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21
Partnership shall pay to such Lender such amounts, if any, as may be required
pursuant to Section 4.10.
4.9 Applicable Law. (a) In the event that any change in any Applicable
Law or interpretation or application thereof or compliance by any Lender with
any request or directive (whether or not having the force of law) from any
central bank or other Governmental Authority made subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever with
respect to this Agreement, any Note or any Loan bearing interest at the
Eurodollar Rate made by it, or change the basis of taxation of payments to
such Lender in respect thereof (except for taxes covered by Section 4.11 and
changes in the rate of tax on the overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities of or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any
office of such Lender which is not otherwise included in the determination
of the Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, or maintaining
Eurodollar Loans or to reduce any amount receivable hereunder in respect thereof
then, in any such case, the Partnership shall promptly pay such Lender, within
five Business Days of demand therefor, any additional amounts necessary to
compensate such Lender for such increased cost or reduced amount receivable. If
any Lender becomes entitled to claim any additional amounts pursuant to this
Section, it shall promptly notify the Partnership, through the Agent, of the
event by reason of which it has become so entitled; provided, that the failure
of such Lender to so notify the Partnership shall not act as a waiver of the
right of such Lender to receive such additional amounts when such Lender
provides the required notice to the Partnership. A certificate as to any
additional amounts payable pursuant to this Section submitted by such Lender,
through the Agent, to the Partnership shall be conclusive in the absence of
manifest error. This covenant shall survive the termination of this Agreement
and the payment of the Term Notes and all other amounts payable hereunder.
(b) In the event that any Lender shall have determined that any change
in any Applicable Law regarding capital adequacy or in the interpretation or
application thereof or compliance by such Lender or any corporation controlling
such Lender with any
Amendment and Restatement
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<PAGE>
22
request or directive regarding capital adequacy (whether or not having the
force of law) from any Governmental Authority made subsequent to the date
hereof does or shall have the effect of reducing the rate of return on such
Lender's or such corporation's capital as a consequence of its obligations
hereunder to a level below that which such Lender or such corporation could have
achieved but for such change or compliance (taking into consideration such
Lender's or such corporation's policies with respect to capital adequacy) by an
amount deemed by such Lender to be material, then from time to time, after
submission by such Lender to the Partnership (with a copy to the Agent) of a
written request therefor, the Partnership shall pay to such Lender such
additional amount or amounts as will compensate such Lender for such reduction.
A certificate as to any additional amounts payable pursuant to this Section
submitted by such Lender, through the Agent, to the Partnership shall be
conclusive in the absence of manifest error.
4.10 Indemnity. The Partnership agrees to indemnify each Lender and to
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of (i) default by the Borrowers in making a borrowing
of Term Loans after the Partnership has given a notice requesting the same in
accordance with the provisions of the Original Loan Agreement or (ii) the making
of a prepayment of a Term Loan on a day which is not the last day of a
Eurodollar Interest Period with respect thereto, including, without limitation,
any such loss or expense arising from the reemployment of funds obtained by it
for the then current Eurodollar Interest Period or from fees payable to
terminate the deposits from which such funds were obtained. Each Lender agrees
to use reasonable efforts to minimize any such loss or expense. This covenant
shall survive the termination of this Agreement and the payment of the Term
Notes and all other amounts payable hereunder and the expiration of the Letters
of Credit.
4.11 Taxes. (a) All payments made by the Borrowers under this
Agreement, the Notes or the Letters of Credit or in respect of the Surety Bond
Arrangements Reimbursement Obligations shall be made free and clear of, and
without deduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings and all liabilities with respect thereto, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding, in the case of the Agent, the Letter of Credit Issuer, the
Surety Bond Arranger and the Lenders, taxes imposed on or measured by net
income, overall gross receipts, or capital of the Agent, the Letter of Credit
Issuer, the Surety Bond Arranger or any Lender or any franchise tax imposed in
lieu thereof as a result of a present or former connection between
the jurisdiction of the government or taxing authority imposing such tax and the
Agent, the Letter of Credit Issuer, the Surety Bond Arranger or such Lender
(excluding
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<PAGE>
23
a connection arising solely from the Agent, the Letter of Credit Issuer, the
Surety Bond Arranger or such Lender having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement, the
Notes, the Letters of Credit or the Surety Bond Arrangements) or any political
subdivision or taxing authority thereof or therein (all such non-excluded taxes,
levies, imposts, duties, charges, fees, deductions, liabilities and withholdings
being hereinafter called "Taxes"). If any Taxes are required to be withheld from
any amounts payable to the Agent, the Letter of Credit Issuer, the Surety Bond
Arranger or any Lender hereunder or under the Notes or the Letters of Credit,
the amounts so payable to the Agent, the Letter of Credit Issuer, the Surety
Bond Arranger or such Lender shall be increased to the extent necessary to yield
to the Agent, the Letter of Credit Issuer, the Surety Bond Arranger or such
Lender (after payment of all Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement and the
Notes. Whenever any Taxes are payable by the Borrowers, as promptly as possible
thereafter the Borrowers shall send to the Agent, the Letter of Credit Issuer,
the Surety Bond Arranger and the Lenders affected thereby a certified copy of an
original official receipt received by the Borrowers showing payment thereof. If
the Borrowers fail to pay any Taxes when due to the appropriate taxing authority
or fail to remit to the Agent, the Letter of Credit Issuer, the Surety Bond
Arranger and the Lenders affected thereby the required receipts or other
required documentary evidence, the Partnership shall indemnify the Agent, the
Letter of Credit Issuer, the Surety Bond Arranger and the Lenders affected
thereby for any incremental taxes, interest or penalties that may become
payable by the Agent, the Letter of Credit Issuer, the Surety Bond Arranger or
such Lenders as a result of any such failure. This indemnification payment
shall be made promptly following written demand by the Agent, the Letter of
Credit Issuer, the Surety Bond Arranger or such Lenders affected thereby (as the
case may be). This covenant shall survive the termination of this Agreement and
the payment of the Notes and all other amounts payable hereunder and the
expiration of the Letters of Credit and the Surety Bond Arrangements.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof agrees that it will deliver to the
Borrowers and the Agent (i) two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224 or successor applicable form, as the
case may be, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor
applicable form. Each such Lender also agrees to deliver to the Borrowers and
the Agent two further copies of the said Form 1001 or 4224 and Form W-8 or W-9,
or successor applicable forms or other manner of certification, as the case may
be, on or before the date that any such form expires or becomes obsolete or
after the occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrowers, and such
Amendment and Restatement
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<PAGE>
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extensions or renewals thereof as may reasonably be requested by the Borrowers
or the Agent unless in any such case an event (including, without limitation,
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 such Lender from duly completing and
delivering any such form with respect to it and such Lender so advises the
Borrowers and the Agent. Such Lender shall certify (i) in the case of a Form
1001 or 4224, that it is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income taxes and
(ii) in the case of a Form W-8 or W-9, that it is entitled to an exemption
from United States backup withholding tax.
SECTION 5 REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and the Lenders to enter into this
Agreement and to make the Term Loans, to induce the Letter of Credit Issuer to
enter into this Agreement and to issue the Letters of Credit and to induce the
Surety Bond Arranger to enter into this Agreement and the Surety Bond
Arrangements, (a) each of the Partnership, North Country (as to itself or with
respect the North Country Project only) and SECI represents and warrants to the
Agent, the Lenders, the Letter of Credit Issuer and the Surety Bond Arranger
under Sections 5.1 through 5.31 and (b) the IDA represents and warrants to such
Persons solely under Section 5.32, that:
5.1 Financial Statements; Base Case Pro Forma Financial Statements. (a)
The balance sheet of the Partnership as of June 30, 1994, heretofore furnished
to the Agent and certified by a Responsible Officer of SECI General, is complete
and correct in all material respects and fairly presents the financial condition
of the Partnership on such date, in conformity with GAAP applied on a consistent
basis. All liabilities, direct and contingent, of the Partnership on such date
required to be disclosed pursuant to GAAP are disclosed on such balance sheet.
(b) The balance sheet of SECI as of June 30, 1994, heretofore furnished
to the Agent and certified by a Responsible Officer of SECI is complete and
correct in all material respects and fairly presents the financial condition of
SECI as of such date, in conformity with GAAP applied on a consistent basis.
All liabilities, direct and contingent, of SECI on such date required to be
disclosed pursuant to GAAP are disclosed on such balance sheet.
(c) The balance sheet of North Country as of June 30, 1994, heretofore
furnished to the Agent and certified by a Responsible Officer of North Country,
is complete and correct in
Amendment and Restatement
of Loan Agreement
<PAGE>
25
all material respects and fairly presents the financial condition of North
Country on such date, in conformity with GAAP applied on a consistent basis. All
liabilities, direct and contingent, of North Country on such date required to be
disclosed pursuant to GAAP are disclosed in such balance sheet.
(d) Since October 31, 1992, no Material Adverse Effect has occurred and
on the initial Borrowing Date no additional Indebtedness (except as permitted
under Section 8.2 of the Original Loan Agreement) had been incurred by the
Partnership, North Country or SECI other than, in respect of SECI, the SECI Term
Loan and, in respect of North Country, its obligations to the Partnership in
connection with the Pipeline Construction Contract.
(e) The pro forma financial model and projections of the Partnership
(together, the "Base Case Pro Forma Financial Statements") for the period
starting on the Date of Commercial Operation and ending fifteen years
thereafter, copies of which have been delivered to the Agent, disclose all
material assumptions made in formulating the Base Case Pro Forma Financial
Statements, including technical standards of the Project (including the North
Country Project), schedule of values, operating management plan, estimates of
annual budgeted operating expenses and assumptions with respect to general
economic, financial and market conditions, and are based on an operating plan
approved by the Partnership, copies of which plan have been delivered to the
Agent. The most recently delivered Base Case Pro Forma Financial Statements
represent, in the best judgment, made in good faith, of the Partnership,
reasonable projections based on reasonable assumptions. The Partnership is not
aware of any fact in existence not disclosed in writing to the Agent and the
Lenders which could reasonably be expected to result in any material change in
any of the Base Case Pro Forma Financial Statements. The Base Case Pro Forma
Financial Statements were prepared in good faith on the basis of sound financial
planning practice.
(f) The amounts set forth in the Construction Budget are sufficient to
pay the costs of constructing the Project in accordance with the Construction
Contract. The amounts set forth in the Construction Budget for contingencies do
not include any amounts payable by the Partnership or North Country in respect
of Certified Construction Costs (including Certified Construction Costs in
respect of change orders entered into prior to the Construction Loan Closing
Date) due and payable prior to the Construction Loan Closing Date.
5.2 Corporate Existence and Business. (a) The Partnership is a limited
partnership duly organized and validly existing and in good standing under the
laws of the State of Delaware. The Partnership is duly qualified to do business
under the laws of each jurisdiction in which the conduct of its
Amendment and Restatement
of Loan Agreement
<PAGE>
26
business or the ownership, lease or operation of property so requires except
where the failure to so qualify would not have a Material Adverse Effect. The
Certificate of Limited Partnership of the Partnership has been duly filed in the
office of the Secretary of State of Delaware and no other filing, recording,
publishing or other act is necessary or appropriate in connection with the
existence or the business of the Partnership except those which have been duly
made or performed. Prior to the Conformed Agreement Date, the Partnership
engaged in no business other than the development of the Project, and the
negotiation, execution, delivery and performance of the Basic Documents to which
it is a party and the Partnership had no obligations or liabilities other than
those directly related to the conduct of such business. Since the Conformed
Agreement Date, the Partnership has engaged, and from and after the date hereof,
the Partnership is and will be engaged solely in the business of constructing,
owning and operating the Project and owning the stock of North Country.
(b) SECI is a corporation duly organized and validly existing in good
standing under the laws of the jurisdiction of its incorporation. SECI is duly
qualified to do business and is in good standing under the laws of each
jurisdiction in which the conduct of its business or the ownership, lease or
operation of property so requires except where any such failure would not have a
Material Adverse Effect. SECI is the sole general partner of the Partnership and
is engaged solely in the business of being the general partner of the
Partnership.
(c) North Country is a corporation duly organized and validly existing
in good standing under the laws of the jurisdiction of its incorporation. North
Country is duly qualified to do business and is in good standing under the laws
of each jurisdiction in which the conduct of its business or ownership, lease or
operation of property so requires except where any such failure would not have a
Material Adverse Effect.
(d) The only partners of the Partnership on the date of the execution
and delivery of this Agreement are SECI, as the sole general partner and as a
limited partner, and TPC One, TPC Two and GE Capital, as limited partners.
(e) The Partnership's only Subsidiary is North Country. SECI's only
direct Subsidiary is the Partnership and its only indirect Subsidiary is North
Country. North Country has no Subsidiaries.
5.3 Compliance with Law. Each of SECI, the Partnership, North Country
and the Project is in compliance with all Requirements of Law applicable to it.
5.4 Power and Authorization; Enforceable Obligations. (a) The
Partnership has full power and authority and the legal
Amendment and Restatement
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<PAGE>
27
right (subject to the receipt of the approvals referred to in section 5.5) to
construct, own and operate the Project, to conduct its business as now conducted
and as proposed to be conducted by it, to execute, deliver and perform this
Agreement, the Notes, and the other Basic Documents to which it is or is to
become a party, to take all action as may be necessary to complete the
transactions contemplated hereunder and thereunder, to grant the liens and
security interests provided for in the Collateral Security Documents to which it
is a party and to borrow hereunder. The Partnership has taken all necessary
partnership and legal action to authorize the borrowings hereunder on the terms
and conditions of this Agreement, the Notes and the other Basic Documents to
which it is a party, to grant the liens and security interests provided for in
the Collateral Security Documents to which it is a party and to authorize the
execution, delivery and performance of this Agreement, the Notes, and the other
Basic Documents to which it is a party or is to become a party. No consent or
authorization of, filing with, or other act by or in respect of any other
Person, that has not been made, obtained or complied with, is required in
connection with the borrowings hereunder or with the execution, delivery or
performance by the Partnership or the validity or enforceability as to the
Partnership of this Agreement, the Notes, or the other Basic Documents except
the Governmental Approvals referred to in Section 5.5 and other consents and
approvals referred to in Schedule 3. Each of this Agreement and the other Basic
Documents to which the Partnership is a party has been duly executed and
delivered by the Partnership and, assuming the due authorization and delivery
hereof and thereof by the other parties hereto and thereto, constitutes, and
each of the Notes and the other Basic Documents to which the Partnership is to
become a party will upon execution and delivery thereof by the Partnership and,
assuming due authorization thereof, by the other parties thereto (if any)
constitute, a legal, valid and binding obligation of the Partnership enforceable
against the Partnership in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the rights of creditors generally and by general
principles of equity (whether such enforcement is sought in a proceeding at law
or in equity). None of the Project Contracts to which the Partnership is a party
has been amended or modified since the Construction Loan Closing Date, except in
accordance with Section 8.6, and all such Project Contracts are in full force
and effect.
(b) SECI has full power and authority and the legal right to own its
properties and to conduct its business as now conducted and proposed to be
conducted by it (subject to receipt of the approvals referred to in Section
5.5), to execute, deliver and perform the Basic Documents to which it is or is
to become a party and to take all action as may be necessary to complete the
transactions contemplated thereunder. SECI has
Amendment and Restatement
of Loan Agreement
<PAGE>
28
taken all necessary corporate action to authorize the execution, delivery and
performance of the Basic Documents to which it is or is to become a party. No
consent or authorization of, filing with, or other act by or in respect of any
other Person (including any stockholder of SECI), that has not been made,
obtained or complied with is required in connection with the execution, delivery
or performance by SECI or the validity or enforceability as to the Operator of
the Basic Documents to which it is a party or is to become a party except the
Governmental Approvals referred to in Section 5.5 and other consents and
approvals referred to in Schedule 3. Each of the Basic Documents to which SECI
is a party has been duly executed and delivered by SECI and, assuming the due
authorization, execution and delivery thereof by the other parties thereto,
constitutes, and each of the other Basic Documents to which SECI is to become a
party will upon execution and delivery thereof by SECI and, assuming due
authorization thereof, by the other parties thereto (if any) constitute, a
legal, valid and binding obligation of SECI enforceable against SECI in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally and by general principles of equity (whether such
enforcement is sought in a proceeding at law or in equity).
(c) The Partnership Agreement has been duly authorized, executed and
delivered by SECI and, assuming the due authorization and delivery hereof and
thereof by the other parties hereto and thereto, constitutes a valid and legally
binding obligation of SECI enforceable against SECI in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors generally and by general principles of equity (whether such
enforcement is sought in a proceeding at law or in equity).
(d) North Country has full power and authority and the legal right
(subject to the receipt of the approvals referred to in Section 5.5) to
construct, own and operate the North Country Project, to conduct its business as
now conducted and as proposed to be conducted by it, to execute, deliver and
perform this Agreement and the other Basic Documents to which it is or is to
become a party, and to take all action as may be necessary to complete the
transactions contemplated hereunder and thereunder. North Country has taken all
necessary corporate and legal action to authorize the execution, delivery and
performance of this Agreement and the other Basic Documents to which it is a
party or is to become a party. No consent or authorization of, filing with, or
other act by or in respect of any other Person, that has not been made, obtained
or complied with, is required in connection with the execution, delivery or
performance by North Country or the validity or enforceability as to North
Country of this Agreement or the other Basic Documents except the
Amendment and Restatement
of Loan Agreement
<PAGE>
29
Governmental Approvals referred to in Section 5.5 and other consents and
approvals referred to in Schedule 3. Each of this Agreement and the other Basic
Documents to which North Country is a party has been duly executed and delivered
by North Country and, assuming the due authorization and delivery hereof and
thereof by the other parties hereto and thereto, constitutes, and each of the
other Basic Documents to which North Country is to become a party will upon
execution and delivery thereof by North Country and, assuming due authorization
thereof, by the other parties thereto (if any) constitute, a legal, valid and
binding obligation of North Country enforceable against North Country in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally and by general principles of equity (whether such
enforcement is sought in a proceeding at law or in equity). None of the Project
Contracts to which North Country is a party has been amended or modified since
the Construction Loan Closing Date, except in accordance with Section 8.6, and
all such Project Contracts are in full force and effect.
5.5 Governmental Approvals and Other Consents and Approvals. (a) Except
as set forth on Schedule 3 (with respect to items (i), (ii) and (iii) below) and
Schedule 4 (with respect to item (iv) below), no Governmental Approvals or other
consents or approvals are required in connection with (i) the participation by
the Partnership, SECI General or North Country in the transactions contemplated
by this Agreement and the other Basic Documents, (ii) the acquisition,
construction, use, ownership, maintenance or operation of the Project in
accordance with the applicable provisions of the Basic Documents and in
compliance with all Applicable Laws, (iii) the validity and enforceability
against the Partnership, SECI General or North Country, as the case may be, of
the Basic Documents to which it is a party, and (iv) the grant by the
Partnership of the Liens created pursuant to the Collateral Security Documents
and the validity, perfection and enforceability thereof and the exercise by the
Agent, the Lenders and the Surety Bond Arranger of their respective rights and
remedies thereunder (except any Governmental Approvals or other consents or
approvals applicable to the Agent, any Lender or the Surety Bond Arranger other
than as a result of its participation in the transactions contemplated herein).
(b) To the best knowledge of the Partnership, SECI General and North
Country after due inquiry, no Governmental Approvals (except as set forth on
Schedule 3 and except with respect to Governmental Approvals required to be
obtained by NYSEG or Georgia-Pacific with respect to the NYSEG Gas Agreement or
the Georgia-Pacific Gas Agreement, as to which no representation or warranty is
made) or other consents or approvals (other than those already obtained or that
are obtainable in due course and will be obtained when necessary) are
Amendment and Restatement
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<PAGE>
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required in connection with that validity and enforceability of the Basic
Documents (other than the Loan Documents) against each party thereto (other
than the Partnership, SECI General or North Country, as the case may be) and the
performance by such party of the Basic Documents.
(c) No Governmental Approvals are required in connection with the
participation by the Agent, the Lenders, the Letter of Credit Issuer or the
Surety Bond Arranger in the transactions contemplated by this Agreement and the
other Basic Documents to which any of them is a party.
(d) Except as otherwise indicated in Part A of Schedule 3, each of the
Governmental Approvals and other consents and approvals listed on Part A
of Schedule 3 has been duly obtained or made, is in full force and effect
and not subject to any statutory period of appeal and is not currently under
appeal or judicial review or, to the best knowledge of the Partnership and
North Country, governmental or other review. None of the Governmental
Approvals and other consents and approvals listed on Part B of Schedule 3 is
required to be obtained prior to the date hereof. Neither the Partnership nor
North Country has reason to believe, after due inquiry, that any of the
Governmental Approvals and other consents and approvals listed on Part B
of Schedule 3 cannot or will not be obtained or made in the normal course of
business as and when required and in accordance with the date set forth on Part
B of Schedule 3 for obtaining such actions or consents.
5.6 No Legal Bar. The execution, delivery and performance of this
Agreement, the Notes and the other Basic Documents as contemplated in accordance
with the terms thereof, the borrowings by the Borrowers hereunder and the use of
the proceeds thereof (i) will not violate (x) any Requirement of Law or any
Contractual Obligation of the Partnership, SECI or North Country that relates to
construction, ownership, operation or maintenance of the Project or the North
Country Project, as the case may be or (y) any other Requirement of Law as to
which any such violations, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect and (ii) will not result in, or
require, the creation or imposition of any Lien or any of the properties or
revenues of the Partnership, SECI or North Country pursuant to any Requirement
of Law or Contractual Obligation, except for Loan Agreement Permitted Liens.
5.7 No Proceeding or Litigation. Except as set forth on Schedule 10,
no litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the best knowledge of the Partnership
and North Country, after due inquiry, threatened against or affecting the
Partnership, SECI (other than relating to the SECI Loan Documents) or North
Country or against or affecting any of their respective
Amendment and Restatement
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<PAGE>
31
properties, rights, revenues or assets, or the Project or the North Country
Project, as the case may be, or which could result in a rescission, termination
or suspension of any Governmental Approval, consent or approval referred to in
Section 5.5 or could have a Material Adverse Effect.
5.8 No Default, Event of Default or Event of Loss. None of the
Partnership, SECI (other than relating to the SECI Loan Documents) or North
Country is in default under or with respect to any Contractual Obligation,
including without limitation any Basic Document, other than defaults which
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect. No notice of default has been given to the Partnership,
SECI or North Country under any of the Basic Documents. Other than with respect
to certain defaults of the Contractor under the Construction Contract arising
out of the circumstances previously disclosed to the Agent and the Lenders in a
letter, dated September 27, 1994, from the Partnership to the Contractor, to the
best knowledge of the Partnership and North Country after due inquiry, no other
party to a Basic Document is in default thereunder. No Default or Event of
Default has occurred and is continuing and no Event of Loss has occurred.
5.9 Ownership of Property; Liens. The IDA has been granted fee title to
the Site and the Pipeline Properties, and the Mortgages constitute a Lien upon
the Site, in each case free and clear of all Liens except Loan Agreement
Permitted Liens. Each of the IDA (with respect to the Project), the Partnership,
SECI and North Country has good title to all property purportedly owned or used
by it free and clear of all Liens other than Loan Agreement Permitted Liens. No
mortgage or financing statement or other instrument or recordation covering all
or any part of the Collateral which has been executed by, or with the permission
of, the Partnership, the IDA, SECI or North Country is on file in any recording
office, except such as has been filed in favor of the Agent for the benefit of
the Lenders or as evidence of Loan Agreement Permitted Liens. The IDA has all
rights purported to be given to it under any easements, leases and other title
instruments described in the title insurance policy referred to in Section
6.1(i), subject only to the Liens specified therein and other Loan Agreement
Permitted Liens, and the IDA's rights thereunder are not subject to any contest
or challenge and are encumbered only by the Mortgages As a perfected Lien and
other Loan Agreement Permitted Liens. All such easements, leases and other title
instruments are valid and subsisting in full force and effect. The IDA is not in
default under any such easement, lease or title instrument, and no event has
occurred which, with the giving of notice or the passage of time, or both, would
constitute a default thereunder.
5.10 Taxes. (a) SECI has filed or caused to be filed all tax returns
which are required to be filed by it or the
Amendment and Restatement
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<PAGE>
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Partnership, and has paid or caused to be paid all taxes shown to be due and
payable on such returns or on any assessments made against it or the
Partnership, or any of its or the Partnership's property and all other taxes,
fees or other charges imposed on it or any of its or the Partnership's property
by any Governmental Authority (other than any the amount or validity of which
are currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of SECI or the Partnership, as the case may be, and to the extent
non-payment thereof could not be reasonably expected to impair the value of the
security granted under the Collateral Security Documents); no tax Lien has been
filed, and, to the knowledge of SECI or the Partnership no claim is being
asserted, with respect to any such tax, fee or other charge.
(b) North Country has filed or caused to be filed all tax returns
which are required to be filed by it and has paid or caused to be paid all taxes
shown to be due and payable on such returns or on any assessments made against
it or any of its property and all other taxes, fees or other charges imposed on
it or any of its property by any Governmental Authority (other than any the
amount or validity of which are currently being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of North Country and to the extent
non-payment thereof could not be reasonably expected to impair the value of the
security granted under the Collateral Security Documents); no tax Lien has been
filed, and, to the knowledge of North Country no claim is being asserted, with
respect to any such tax, fee or other charge.
(c) Except for (i) transfer taxes and registration, recordation and
other miscellaneous fees payable in connection with the recordation or
assignment of the Mortgages, if any, and the filing of financing statements
required to perfect the Agent's rights under the Collateral Security Documents,
all of which taxes and fees have been paid in full by or on behalf of the
Partnership on or before the Construction Loan Closing Date (except with respect
to any recordation fees and other miscellaneous fees payable in connection with
the assignment by the Original Agent to the Agent, of its right, title and
interest in and to the Collateral Security Documents, which fees will have been
paid in full by or on behalf of the Partnership on or before the Second Capital
Contribution Date), and (ii) income, capital, any receipts or franchise taxes
imposed with respect to the Agent or Lender by the jurisdiction in which the
Agent or any Lender is organized, in which an office of the Agent or such Lender
is located or in which the Project is located or any political subdivision or
taxing authority thereof or therein, neither the execution and delivery of this
Agreement, the Notes or any other Basic Document, nor the consummation of any of
the transactions contemplated hereby or thereby, will result in any tax, levy,
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impost, duty, charge or withholding imposed by the United States or any agency
or taxing authority thereof, or by any state of the United States or any
political subdivision or taxing authority thereof or therein, on or with respect
to such execution, delivery or consummation, or upon or with respect to the
Agent or any Lender.
5.11 Regulation U. No part of the proceeds of any Loans will be used
for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect or for any purpose which violates the provisions of the Regulations of
such Board of Governors. If requested by any Lender or Agent, the Borrowers will
furnish to the Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 referred to in said Regulation
U.
5.12 ERISA. No Reportable Event has occurred during the five-year
period prior to the date on which this representation is made or deemed made
with respect to any Plan, and each Plan has complied in all material respects
with the applicable provisions of ERISA and the Code. The present value of all
accrued benefits under each Single Employer Plan maintained by the Partnership,
North Country or any Commonly Controlled Entity (based on those assumptions used
to fund the Plans) did not, as of the last annual valuation date prior to the
date on which this representation is made or deemed made, exceed the value of
the assets of such Plan allocable to such accrued benefits. Neither the
Partnership, North Country nor any Commonly Controlled Entity has had a complete
or partial withdrawal from any Multiemployer Plan, and neither the Partnership,
North Country nor any Commonly Controlled Entity would become subject to any
liability under ERISA if the Partnership, North Country or any such Commonly
Controlled Entity were to withdraw completely from all Multiemployer Plans as of
the valuation date most closely preceding the date on which this representation
is made or deemed made. No such Multiemployer Plan is in reorganization (within
the meaning of Section 4241 of ERISA) or insolvent (within the meaning of
Section 4241 of ERISA), The present value (determined using actuarial and other
assumptions which are reasonable in respect of the benefits provided and the
employees participating) of the liability of the Partnership, North Country and
each Commonly Controlled Entity for post-retirement benefits to be provided to
their current and former employees under Plans which are welfare benefit plans
(as defined in Section 3(l) Of ERISA) does not, in the aggregate, exceed the
assets under all such Plans allocable to such benefits.
5.13 Investment Company Act. None of the Partnership, SECI or North
Country is an "investment company" or a company "controlled" by an "investment
company" or an "investment
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adviser", within the meaning of the Investment Company Act of 1940, as amended.
5.14 Collateral Security Documents. The Collateral Security Documents
are effective to create, in favor of the Agent for the benefit of the Lenders,
legal, valid and enforceable liens on and security interests in all right,
title, estate and interest of the IDA or the Partnership, as the case may be, in
and to the Collateral and all necessary and appropriate recordings, including
those shown on Schedule 4, and filings have been or will be duly effected in all
appropriate public offices so that the liens and security interests created by
each of the Collateral Security Documents to which the Partnership is a party
constitute or will constitute perfected liens on and prior perfected security
interests in all right, title, estate and interest of the Partnership in and to
the Collateral described therein, prior and superior to all other Liens,
existing or future, except Loan Agreement Permitted Liens described in clauses
(ii), (iv), (v) and (vi) of the definition thereof. The recordings, filings and
other actions shown on Schedule 4 are all the recordings, filings and other
actions necessary and appropriate to establish, protect and perfect the Agent's
lien on and security interest in the right, title, estate and interest of the
Partnership in and to the Collateral. Notwithstanding the foregoing, neither the
Partnership, SECI nor North Country makes any representation or warranty with
respect to the Tomen Guarantee.
5.15 Full Disclosure. No representation, warranty or other statement
made by the Partnership, SECI or North Country in any Basic Document or in any
certificate, written statement other document furnished to the Agent, any
Lender or the Independent Engineer by or on behalf of the Partnership, SECI
or North Country, contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
or therein, in light of the circumstances under which they were made, not
misleading. There is no fact known to the Partnership or North Country, whether
related to Governmental Approvals, Basic Documents, or Project Participants or
otherwise, that has not been disclosed in writing to the Agent prior to the
Construction Loan Closing Date that has had a Material Adverse Effect or which
could reasonably be expected to have a Material Adverse Effect.
5.16 Project Contracts and North Country Gas Agreements. (a) To the
best knowledge of the Partnership after due inquiry, each of the Project
Contracts constitutes the legal, valid and binding obligation of each of the
parties thereto, and is enforceable against each such party in accordance with
its terms except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights
of creditors generally and by general principles of equity. Except as set forth
on Schedule 3, to the
Amendment and Restatement
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35
best knowledge of the Partnership after due inquiry, all Governmental Approvals
and other consents or approvals required in connection with the execution,
delivery and performance of each of the Project Contracts by the parties thereto
(other than the Partnership, SECI General and/or North Country) have been duly
obtained or made and are not subject to any statutory period of appeal and are
not currently under appeal or judicial review or, to the best knowledge of the
Partnership, governmental or other review.
(b) To the best knowledge of North Country after due inquiry, each of
the North Country Gas Agreements constitutes the legal, valid and binding
obligation of each of the parties thereto, and is enforceable against each such
party in accordance with its terms except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally and by general principles of equity.
5.17 Property Rights, Utilities, Etc. (a) All utility services, means
of transportation, facilities, other materials and easements that can reasonably
be expected to be necessary for the construction of the Project and for the
operation of the Project in accordance with the obligations of the Partnership
under the Power Purchase Agreement and the Steam Supply Agreement, if any
(including, without limitation, gas, electrical, water and sewage services and
facilities), are or will be available to the Project and, to the extent
appropriate, arrangements have been made to provide such services, means of
transportation, facilities, other materials and easements to the Project.
(b) The easements described in Schedule 7 and the easements granted to
the Borrowers and North Country pursuant to the Project Contracts, if any, are
the only easements necessary for the Partnership and North Country to perform
their respective obligations under the Project Contracts.
5.18 Compliance with Building Codes, Zoning Laws, Etc. The Project, as
contemplated by the Basic Documents, is capable of being constructed, maintained
and operated in compliance with all applicable zoning, environmental protection,
use and building codes, laws, regulations and ordinances. Neither the
Partnership nor North Country has any knowledge, after due inquiry, of any
violations of any laws, ordinances, codes, requirements or orders of any
Governmental Authority affecting the Project which could have a Material Adverse
Effect.
5.19 Principal Place of Business, Etc. (a) The principal place of
business and chief executive office of the Partnership and the office where the
Partnership keeps its records concerning the Project and all contracts relating
thereto, is located at Five Post Oak Park, Houston, Texas 77027.
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(b) The principal place of business and chief executive office of North
Country and the office where North Country keeps its records concerning the
Project and all contracts relating thereto, is located at Five Post Oak Park,
Houston, Texas 77027.
5.20 Description of Property. The description of the Site set forth in
Schedule 1 is true and accurate in all respects, and is adequate for the purpose
of establishing, preserving, protecting and perfecting the interests and rights,
and the priority of the Liens (subject only to Loan Agreement Permitted Liens),
intended to be created and provided in such property by the Mortgages.
5.21 Public Utility Status. a) Neither the Partnership nor North
Country is a "holding company", or a "subsidiary company" of a "holding company"
or an "affiliate" of a "holding company" or of a "subsidiary company" of a
"holding company", as such quoted terms are defined in PUHCA.
(b) Neither the Agent nor any Lender will, solely by reason of (i) the
ownership of the Facility or the operation thereof by the Partnership, (ii) the
making of the Loans hereunder or under the Original Loan Agreement, (iii) the
securing of the Loans by Liens on the Collateral, or (iv) any other transaction
contemplated by this Agreement or any of the other Basic Documents, be deemed by
any Governmental Authority having jurisdiction to be, or be subject to
regulation as, an "electric utility", "electric corporation", "electrical
company", "gas utility", "public utility" or a "public utility holding company"
under any existing law, rule or regulation of any Governmental Authority; and
neither the Agent nor any Lender will, solely by reason of the Agent's or such
Lender's ownership or operation of the Facility upon the exercise of remedies
under the Collateral Security Documents, be deemed by any Governmental Authority
having jurisdiction to be subject to financial, organizational or rate
regulation as an "electric company", "public utility" or a "public utility
holding company" under any existing law, rule or regulation of any Governmental
Authority.
(c) Neither the Agent nor any Lender will, solely by reason of (i)
the ownership of the North Country Project or the operation thereof by North
Country, (ii) the making of the Loans hereunder or under the Original Loan
Agreement, or (iii) any other transaction contemplated by this Agreement or any
of the other Basic Documents, be deemed by any Governmental Authority having
jurisdiction to be, or be subject to regulation as, an "electric utility",
"electric corporation", "electrical company", "gas utility", "public utility"
or a "public utility holding company" under any existing law, rule or regulation
of any Governmental Authority.
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(d) The Facility is a Qualifying Facility and as such is not considered
to be an "electric utility company" under PUHCA and, therefore, is exempt from
regulation as an "electric utility company" by the Securities and Exchange
Commission under Section 2(a) of PUHCA; and the FERC Order is in full force and
effect and is not the subject of any pending or, to the Partnership's knowledge,
threatened appeal or administrative or judicial proceedings.
5.22 Sufficiency of Basic Documents. The services to be performed, the
materials to be supplied and the leasehold and other property interests,
easements and other rights granted pursuant to the Basic Documents comprise
substantially all of the services, materials, property interests and rights
required for the acquisition, development, construction, installation,
completion, operation and maintenance of the Project in accordance with all
Applicable Laws and the Basic Documents and as contemplated by the Base Case Pro
Forma Financial Statements and the other information referred to in Section 5.15
except for services, materials and property to be purchased or acquired in the
ordinary course of business and which can reasonably be expected to be
commercially available at commercially reasonable prices as and where needed.
5.23 Sufficiency of Access. The Partnership and North Country have
adequate ingress and egress from the Site and the Pipeline Properties, as the
case may be, for any reasonable purpose in connection with the construction,
operation and maintenance of the Facility or the Pipeline, as the case may be.
5.24 Representations and Warranties. The representations and warranties
of the Partnership and North Country contained in the Basic Documents other than
this Agreement were true and correct as of the Construction Loan Closing Date,
and, as of the date of any subsequent borrowing and the date hereof, true and
correct except as to which any such failure, individually or collectively, could
not reasonably be expected to have a Material Adverse Effect. Each of the
Partnership and North Country hereby confirms each such representation and
warranty with the same effect as if set forth in full herein.
5.25 Locations of Site and Pipeline Properties. Neither the Site nor
the Pipeline Properties lies within an area identified by the Secretary of
Housing and Urban Development as an area having special flood hazards.
5.26 Environmental Matters. (a) Except as disclosed in the
Environmental Audit and, in the case of paragraph (i) below, as set forth on
Schedule 10:
(i) no proceeding is pending, no notice, notification, demand, request
for information, citation, summons or order
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has been issued, no complaint has been filed, no penalty has been
assessed, and no investigation or review is pending or, to the Partnership's
knowledge, threatened by any Governmental Authority or other Person:
(x) with respect to any violation of any Relevant Environmental
Law in connection with the property, operations or conduct of business
of the Partnership or the Project; or
(y) with respect to any failure to have any Governmental Approval
relating to Hazardous Materials or compliance with any Relevant
Environmental Law required in connection with the property, operations
or conduct of the business of the Partnership or the Project; or
(z) with respect to any generation, treatment, storage, discharge,
recycling, transportation or disposal or release, of any Hazardous
Material generated by the operations or business or located on, under
or at any property of the Partnership or the Project.
(ii) none of the Partnership or SECI or any of the businesses conducted
by either of them, or, to the best knowledge of the Partnership and SECI,
after due inquiry, any other Person has placed, held, located or released
any Hazardous Material on, under or at any property now or previously owned
or leased by the Partnership (including the Project) in such quantities or
conditions so as to cause a threatened release and/or to require removal or
other response or remedial action which has not yet been taken, and none of
such properties been used by the Partnership, or any other Person, as a dump
site or, in violation of any Relevant Environmental Law, relating to use as
a treatment disposal or storage site (whether permanent or temporary) for
any Hazardous Material;
(iii) there are no underground storage tanks which have been used to
store or have contained any Hazardous Material, active or abandoned at any
property now or previously owned or leased by the Partnership (including the
Facility and the Site);
(iv) no Hazardous Material has been released at, on or under any
property previously owned or leased by the Partnership (including the
Facility and the Site) in such quantities or conditions so as to require
removal or other response or remedial action which has not yet been taken;
and
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(v) no Hazardous Material is present in a reportable or threshold
planning quantity, where such a quantity would, under any Relevant
Environmental Law, require removal or response or remedial action at, on or
under any property now or previously owned by the Partnership (including the
Facility and the Site).
(b) None of the Partnership, SECI or any business conducted by either
of them has transported or arranged for the transportation and/or disposal
(directly or indirectly) of any Hazardous Material to or at any location which
is listed or proposed for listing under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), the Comprehensive
Environment Response, Compensation and Liability System ("CERCLIS") or any
similar state list or which is the subject of federal, state or local
enforcement actions or other investigations.
(c) No property now or previously owned or leased by the Partnership
(including the Facility and the Site) is listed or, to the knowledge of the
Partnership or SECI, proposed for listing on the National Priorities List
promulgated pursuant to CERCLA or CERCLIS, or any similar state list of sites
requiring investigation or clean-up.
(d) There are no environmental Liens on any property owned or leased by
the Partnership (including the Facility and the Site) and none of the
Partnership or SECI has received any written notice of any actions taken by any
Governmental Authority which could subject any of such properties to such Liens.
(e) Notwithstanding the foregoing, the disclosure, if any, in any
Environmental Audit of any fact or circumstance which would render any of the
foregoing representations untrue shall not otherwise relieve the Partnership of
its obligations under Sections 7.8, 7.12 and 7.19.
5.27 North Country Environmental Matters. (a) Except as disclosed in
the Environmental Audit:
(i) no proceeding is pending, no notice, notification, demand, request
for information, citation, summons or order has been issued, no complaint
has been filed, no penalty has been assessed, and no investigation or review
is pending or, to the Partnership's or North Country's knowledge, threatened
by any Governmental Authority or other Person:
(x) with respect to any violation of any Relevant Environmental
Law in connection with the property, operations or conduct of business
of North Country or the North Country Project; or
Amendment and Restatement
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(y) with respect to any failure to have any Governmental
Approval relating to Hazardous Materials or compliance with any
Relevant Environmental Law required in connection with the property,
operations or conduct of the business of North Country or the North
Country Project; or
(z) with respect to any generation, treatment, storage, discharge,
recycling, transportion or disposal or release, of any Hazardous
Material generated by the operations or business or located on, under
or at any property of North Country or the North Country Project.
(ii) neither North Country nor the business conducted by it, or, to
the best knowledge of North Country, after due inquiry, any other Person has
placed, held, located or released any Hazardous Material on, under or at any
property now or previously owned or leased by North Country (including the
North Country Project) in such quantities or conditions so as to cause a
threatened release and/or to require removal or other response or remedial
action which has not yet been taken, and none of such properties has been
used by the Partnership or North Country, or any other Person, as a dump
site or, in violation of any Relevant Environmental Law, relating to use as
a treatment disposal or storage site (whether permanent of temporary) for
any Hazardous Material;
(iii) there are no underground storage tanks which have been used to
store or have contained any Hazardous Material, active or abandoned at any
property now or previously owned or leased by North Country (including the
Pipeline and the Pipeline Properties);
(iv) no Hazardous Material has been released at, on or under any
property previously owned or leased by the Partnership or North Country
(including the Pipeline and the Pipeline Properties) in such quantities or
conditions so as to require removal or other response or remedial action
which has not yet been taken; and
(v) no Hazardous Material is present in a reportable or threshold
planning quantity, where such a quantity would, under any Relevant
Environmental Law, require removal or response or remedial action at, on or
under any property now or previously owned by the Partnership or North
Country (including the Pipeline and the Pipeline Properties).
(b) Neither North Country nor any business conducted by it has
transported or arranged for the transportation and/or
Amendment and Restatement
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disposal (directly or indirectly) of any Hazardous Material to or at any
location which is listed or proposed for listing under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), the
Comprehensive Environment Response, Compensation and Liability System
("CERCLIS") or any similar state list or which is the subject of federal, state
or local enforcement actions or other investigations.
(c) No property now or previously owned or leased by the Partnership
or North Country (including the Pipeline and the Pipeline Properties) is listed
or, to the knowledge of the Partnership or North Country, proposed for listing
on the National Priorities List promulgated pursuant to CERCLA or CERCLIS, or
any similar state list of sites requiring investigation or clean-up.
(d) There are no environmental Liens on any property owned or leased
by the Partnership or North Country (including the Pipeline and the Pipeline
Properties) and neither the Partnership nor North Country has received any
written notice of any actions taken by any Governmental Authority which could
subject any of such properties to such Liens.
(e) Notwithstanding the foregoing, the disclosure, if any, in any
Environmental Audit of any fact or circumstance which would render any of the
foregoing representations untrue shall not otherwise relieve the Partnership or
North Country of its obligations under Sections 7.8, 7.12 and 7.19.
5.28 Completion of Project. Substantial Completion of the Facility and
the Pipeline will occur on or prior to the Second Capital Contribution Date.
None of the Partnership, SECI or North Country has any reason to believe that
(a) Certified Construction Costs will exceed amounts budgeted therefor in the
Construction Budget, or, if different from the Construction Budget, the
Completion Budget, or (b) the Project, as completed in accordance with the
Basic Documents, will not (x) comply fully with all Applicable Laws and all
Governmental Approvals required in respect of the Project, or (y) perform in
accordance with the Base Case Pro Forma Financial Statements and Plans and
Specifications.
5.29 Gas Supply. The Gas Arrangements are sufficient to ensure that
sufficient natural gas will be delivered to the Facility to permit the operation
of the Project in accordance with the Base Case Pro Forma Financial Statements
for a period of at least 15 years from the Date of Commercial Operation.
5.30 Intellectual Property. No licenses, trademarks, patents or
agreements with respect to the usage of technology (other than any thereof which
have been obtained and are in full force and effect and have been assigned to
the Agent) are necessary for the construction, ownership, operation and
Amendment and Restatement
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maintenance of the Project. Each of the Partnership and North Country owns, or
is licensed to use, all trademarks, tradenames, copyrights, technology, know-how
and processes necessary for the conduct of its business as currently conducted
that are material to the condition (financial or other), business, or operations
of the Partnership (the "Intellectual Property"). No claim has been asserted and
is pending by any Person with respect to the use of any such Intellectual
Property in connection with the Project, or challenging or questioning the
validity or effectiveness of any such Intellectual Property and none of the
Partnership, SECI or North Country knows of any valid basis for any such claim.
The use of such Intellectual Property by the Partnership or North Country does
not infringe on the rights of any Person.
5.31 Labor Matters. There are no strikes or other organized labor
disputes pending or, to the best of the Partnership's, SECI's and North
Country's knowledge after due inquiry, threatened against the Partnership,
North Country, or any Project Participant. All payments due from the
Partnership, SECI or North Country, or for which a claim may be made
against the Partnership, SECI or North Country on account of wages and employee
health and welfare insurance and other benefits, have been paid or accrued as
a liability on the books of the Partnership, SECI or North Country,
5.32 Representations and Warranties of the IDA. The IDA represents
and warrants that:
(a) (i) It is duly organized and validly existing as a public benefit
corporation of the State of New York with full power and authority to
consummate the transactions contemplated hereby, and to execute the Basic
Documents to which it is party and to perform its obligations thereunder and
hereunder, including the making of any and all payments as provided therein
and herein, and (ii) with the execption of the Basic Documents to which it
is a party, there is not and will not be any contract or other obligation
providing for or requiring the IDA to convey the IDA's interest in the
Project or any estate or interest therein to any Person;
(b) Except as set forth on Schedule 10, there are no actions, suits or
proceedings pending or, to the best knowledge of the IDA, threatened against
or affecting the IDA or the Project, or involving the validity or
enforceability of the Resolution, this Agreement, the Pilot Agreement, the
Installment Sale Agreement or any of the other Basic Documents to which it
is a party; and the IDA is not in default with respect to any order, writ,
judgment, decree or demand of any court or any Governmental Authority;
(c) the consummation of the transactions contemplated by the Resolution
and the performance of the IDA's obligations under this Agreeemnt, the
Installment Sale
Amendment and Restatement
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Agreement, the Pilot Agreement or any of the other Basic Documents to which
it is a party will not result in any breach of, or constitute a default
under, or require any consent under any Applicable Law or Contractual
Obligation to which the IDA is a party or by which it or its properties are
bound or affected;
(d) Except for the IDA Documents and contracts entered into by the
Partnership or North Country as agent of the IDA, the IDA has not made any
Contractual Obligation or arrangement of any kind in connection with the
Project, other than any arrangement made with the Partnership, North Country
or the Lenders;
(e) The IDA has duly adopted the Resolution and has duly authorized the
execution and delivery of this Agreement, the Pilot Agreement, the Pilot
Mortgage, the Installment Sale Agreement and all of the other Basic
Documents to which it is a party, and has taken all actions necessary or
appropriate to carry out the same, and when executed and delivered, such
documents will constitute legal and validly binding obligations of the IDA,
enforceable in accordance with their respective terms except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity (whether such enforcement is
sought in a proceeding at law or in equity).
(f) The IDA makes no representation or warranty on behalf of the
Partnership or North Country, or as to the correctness or completeness of
any representation or warranty made by the Partnership or North Country in
any of the Basic Documents to which the Partnership or North Country is a
party.
SECTION 6 CONDITIONS PRECEDENT
6.1 Conditions to the Term Loans. The obligations of the Lenders to
make the Term Loans and the obligation of the Surety Bond Arranger to enter into
the Surety Bond Arrangements shall be subject to the fulfillement to the
satisfaction of the Agent, unless otherwise specified, of the following
conditions on or prior to the making of the Term Loans and the entering into of
the Surety Bond Arrangements, as the case may be:
(a) Agreement; Term Notes; Note Pledge Agreement; Notice of Term Loan
Conversion. The Agent shall have received a counterpart of this Agreement
for each Lender, duly executed and delivered by the Borrowers and North
Country. The Agent shall have received on behalf of each Lender (i) an IDA
Building Term Note executed by the
Amendment and Restatement
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Borrowers, (ii) an IDA Development Term Note executed by the Borrowers and
(iii) a Partnership Term Note executed by the Partnership, in each case with
appropriate insertions. The Agent shall have received a counterpart of the
Note Pledge Agreement, duly executed and delivered by the Partnership,
together with the pledged note described therein. The Original Agent shall
have received the Notice of Term Loan Conversion.
(b) Basic Documents. The Basic Documents shall be in full force and
effect, and none of such agreements shall have been amended, or any term or
provision thereof waived, except in accordance with the provisions of
Section 8.6.
(c) Representations and Warranties. The representations and warranties
made by the Partnership, the IDA, SECI, North Country, SECI Holdings or FSPC
herein, in the Original Loan Agreement or in any other Basic Document to
which it is a party, or which are contained in any certificate, document,
financial or other statement furnished by the Partnership, SECI, North
Country, SECI Holdings or FSPC hereunder or thereunder or in connection
herewith or therewith, shall be true and correct in all material respects on
and as of such Borrowing Date, except to the extent that such
representations and warranties relate solely to an earlier date (in which
case such representations or warranties shall have been true and correct as
of such earlier date), unless the circumstances that made any such
representation false or misleading at the time when made shall no longer be
continuing and the existence of such circumstances has not had a Material
Adverse Effect.
(d) No Default, Event of Default or Event of Loss. No Default or Event
of Default shall have occurred and be continuing on such Borrowing Date, or
after giving effect to the Loans to be made on such Borrowing Date. No Event
of Loss shall have occurred.
(e) No Material Adverse Effect. There shall have been no Material
Adverse Effect since the Construction Loan Closing Date, and no other event
(including, without limitation, a material adverse change in the financial
condition, business or operations of any Project Participant) shall have
occurred since the Construction Loan Closing Date which might reasonably be
expected to have a Material Adverse Effect.
(f) Capital Contributions. Each of GE Capital, TPC One and TPC Two
shall have made the capital contributions required to be made by it on the
Second Capital Contribution Date pursuant to the Capital Contribution
Agreement.
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(g) Documents Delivered under Capital Contribution Agreement. The Agent
shall have received a copy of each of the documents delivered to GE Capital
under Section 2(c) of the Capital Contribution Agreement. Each of the legal
opinions delivered pursuant to such Section shall have also been addressed
to the Agent, the Lenders, the Letter of Credit Issuer, the Swap
Counterparty and the Surety Bond Arranger.
(h) Perfection of Liens and Security Interests. All filings, recordings
and other actions that are necessary or desirable in order to establish,
protect, preserve and perfect the Lenders' lien on and perfected security
interest in all right, title, estate and interest of the Partnership or the
IDA, as the case may be, in and to all Collateral covered by the Collateral
Security Documents, prior and superior to all other Liens, existing or
future, except Loan Agreement Permitted Liens, shall have been duly made or
taken by the Partnership and all fees, taxes and other charges relating to
such filings and recordings and other actions shall have been paid by the
Partnership, or filings for exemptions therefrom shall have been made.
(i) Title Insurance; Survey; Payment of Premium. The Agent shall have
received (i) policies of title insurance issued by the Title Company, in
form and substance reasonably satisfactory to the Required Lenders, with
such endorsements and affirmative coverage as GE Capital and the Required
Lenders may reasonably request, (A) insuring the Agent, for the benefit of
the Lenders, the Letter of Credit Issuer and the Swap Counterparty, in the
amount of $231,850,000, that the Mortgages constitute a valid mortgage lien
on the Site, and the access, utility and interconnection easements, subject
only to Loan Agreement Permitted Liens, and (B) providing full coverage
against all mechanics' and materialmen's liens, and (ii) a survey of the
Site, by a licensed surveyor reasonably satisfactory to the Agent and the
Title Company, certified to the Agent and the Title Company and showing no
state of facts unsatisfactory to the Agent. Such policies shall be dated the
date of the recording of the assignment of the Mortgages from the Original
Agent to CS and shall recite such assignment together with the recording
information with respect thereto. The Agent shall also have received
evidence that the premiums in respect of such policies of title insurance
have been paid by or on behalf of the Partnership.
(j) Authorizing Actions. All partnership, corporate and other
proceedings in connection with the transactions contemplated by this
Agreement and the other Basic Documents, and all documents and instruments
incident thereto shall be reasonably satisfactory in form and substance to
the Agent and its counsel; and the Agent and
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its counsel shall have received such counterpart originals or certified
or other copies of all such documents and instruments and of all records of
partnership and corporate proceedings in connection with such transactions,
and such incumbency and signature certificates of officers of the
Partnership, SECI and North Country, as the Agent or its counsel may
reasonably request, together with certificates of good standing and payment
of franchise taxes in the jurisdiction of each such Person's organization.
(k) Gas Arrangements. The Agent shall have received, with a copy for
each Lender, a certificate of the Partnership certifying as to such matters
relating to the Gas Arrangements as the Co-Agents shall have reasonably
requested.
(l) Surety Bond Arrangements. The Surety Bond Arranger shall have
received a counterpart of the Surety Bond Arrangements Cash Collateral
Agreement, duly executed and delivered by the Partnership, the cash
collateral referred to therein shall have been deposited in the account
provided for therein or other arrangements therefor, satisfactory to the
Surety Bond Arranger shall have been made and the Surety Bond Arranger shall
have received counterparts of the Second Amendment to the SECI Term Loan
Agreement, dated as of the date hereof, executed by the SECI Term Lender and
SECI.
SECTION 7 AFFIRMATIVE COVENANTS
Each of the Partnership and SECI (with respect to Section 7.2(b) only)
agrees that, so long as the Letter of Credit Commitment remains in effect, any
Note or any Letter of Credit remains outstanding and unpaid, any Surety Bond
Arrangements remain in effect, any Obligations are owing to the Agent or any
Lender hereunder or under the Collateral Security Documents or any obligations
in respect of the Surety Bond Arrangements Reimbursement Obligations or the
Surety Bond are owing to the Surety Bond Arranger hereunder, the Partnership
shall, and shall cause North Country (as to itself or with respect to the North
Country Project only) to:
7.1 Completion of Project; Reports. (a) Cause the Project and the
North Country Project, as the case may be, to be constructed and completed in
compliance with Applicable Law and the terms of the Construction Contract.
(b) Provide the Independent Engineer and the Agent with a copy of each
report furnished by the Contractor to the Partnership or North Country pursuant
to the Construction Contract, and respond, and cause the Contractor to
respond, in a timely manner, to the independent Engineer's inquiries regarding
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the Contractor's performance of its work under the Construction Contract.
7.2 Conduct of Business, Maintenance of Existence, Etc. (a) In the case
of the Partnership, at all times (i) engage solely in the business of
developing, constructing, owning and operating the Project, (ii) preserve and
maintain in full force and effect its existence under the laws of the
jurisdiction of its organization, its qualification to do business in each
jurisdiction in which the conduct of its business requires such qualification
except where the failure to so qualify could not reasonably be expected to have
a Material Adverse Effect, and all of its rights, privileges and franchises
necessary for the construction, ownership and operation of the Project, and
(iii) obtain and maintain in full force and effect all Governmental Approvals
and other consents and approvals required at any time in connection with the
construction, ownership, operation or maintenance of the Project.
(b) In the case of SECI, engage solely in (i) the business of being the
sole general partner and a limited partner of the Partnership, (ii) activities
permitted pursuant to the SECI Term Loan Agreement and (iii) the performance of
the Partnership's obligations pursuant to the Basic Documents; and preserve and
maintain its existence as a corporation under the laws of the State of Delaware
and its qualification to do business in the State of New York and in each other
jurisdiction in which the conduct of its business requires such qualification.
(c) In the case of North Country, at all times (i) engage solely in the
business of developing, constructing, owning and operating the North Country
Project, (ii) preserve and maintain in full force and effect its existence under
the laws of the jurisdiction of its organization, its qualification to do
business in each jurisdiction in which the conduct of its business requires such
qualification except where the failure to so qualify could not reasonably be
expected to have a Material Adverse Effect, and all of its rights, privileges
and franchises necessary for the construction, ownership and operation of the
North Country Project, and (iii) obtain and maintain in full force and effect
all Governmental Approvals and other consents and approvals required at any time
in connection with the construction, ownership, operation or maintenance of the
North Country Project.
7.3 Payment of Obligations. (a) Pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent, as the case may be, all of
its indebtedness and other obligations of whatever nature under the Basic
Documents.
(b) Pay, discharge or otherwise satisfy at or before maturity or before
they become delinquent, all of its Indebtedness and other obligations of
whatever nature (other than
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under the Basic Documents) except where any such failure could not
reasonably be expected to have a Material Adverse Effect in the sole discretion
of the Required Lenders.
7.4 Performance Under Other Agreements. Duly perform and observe all of
the covenants, agreements and conditions on its part to be performed and
observed hereunder and under the Notes and the Collateral Security Documents to
which it is or is to become a party, and duly perform and observe in all
respects all of the covenants, agreements and conditions on its part to be
performed and observed under the other Basic Documents to which it is or is to
become a party except where any such failure could not reasonably be expected to
have a Material Adverse Effect in the sole discretion of the Required Lenders;
and diligently enforce all of its rights under each Assigned Contract to which
it is or is to become a party unless the failure to enforce such rights could
not reasonably be expected to have a material adverse effect on its rights or
remedies as a whole under such Assigned Contract; provided, however, that
testing standards or other criteria or procedures for performance testing under
the Construction Contract shall not be established without the prior written
consent of the Agent and the Required Lenders.
7.5 Partnership Insurance Coverage. In the case of the Partnership:
(a) Without limiting any of the other obligations or liabilities of
the Partnership under this Agreement, at all times carry and maintain or cause
to be carried and maintained at its own expense such insurance as is
customarily maintained by constructors, owners, operators, and lessees of
electric generating facilities and in all events shall carry and maintain at
least the minimum insurance coverage set forth in this Section 7.5. All
insurance carried pursuant to this Section 7.5 shall be with such insurers, in
such amounts and in such form and with deductibles or self insured retentions
as shall be reasonably satisfactory to the Agent.
(b) Maintain or cause to be maintained all-risk property and boiler
and machinery insurance, covering physical loss or damage to the Project, the
interconnection facilities, including fire and extended coverage, collapse,
earthquake, flood and comprehensive boiler and machinery (including
electrical malfunction and mechanical breakdown). Such insurance shall cover
each and every component of the Project and the interconnection facilities. The
all risk property and boiler and machinery coverage shall not contain
an exclusion for resultant damage caused by faulty workmanship, design or
materials. Coverage shall be written on a replacement cost basis and in an
amount acceptable to the Agent, but in no event less than the replacement cost
of the Project; sublimits of not less than $100,000,000 are acceptable for loss
or damage due to flood or earthquake. Such policy shall contain a valid agreed
amount
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endorsement waiving any coinsurance penalty. The policy may be subject to
deductibles not to exceed $100,000 per occurrence, except that the deductible
for the gas and steam turbines may not exceed $250,000. In the event that the
Partnership is unable to obtain the $250,000 deductible specified with respect
to the steam and gas turbines and/or the 30 day business interruption
deductible, the Partnership shall obtain a letter from an independent insurance
broker acceptable to the GE Capital Limited Partner and the Partnership stating
that such deductibles are not available. In such case the Partnership shall be
permitted to increase the deductible applicable to the steam and gas turbine up
to $500,000 and up to 45 days with respect to business interruption deductible
until such time as the $250,000 deductible and 30 day deductible again become
available. At the time when, and to the extent that, the sum of (i) the
principal of and interest on the Loans, (ii) the face amount of Letters of
Credit, (iii) the principal of and interest on the SECI Term Loan and (iv) the
Stipulated Redemption Value (which includes the amount necessary to prepay the
Term Loans) exceeds the limits of coverage under the property and boiler and
machinery policy specified in this Section 7.5(b), the Partnership shall
include as a part of this policy or procure a special policy known as a
"Lender's Single Interest Excess of Loss Coverage" or "Stipulated Loss
Coverage" covering all the perils provided by the property and boiler and
machinery policy. Such policy shall provide limits equal to the difference
between (A) the sum of the amounts specified in clause (i), (ii), (iii) and
(iv) of the immediately preceding sentence and (B) the property and boiler and
machinery limits, or as may be mutually agreed between the Partnership and the
Agent. The insured and loss payee under this "Lender's Single Interest Excess
of Loss Coverage" or "Stipulated Loss Coverage" policy shall be the Agent.
(c) As an extension of Section 7.5(b) or as a separate policy,
maintain or cause to be maintained business interruption insurance in an amount
equal to 12 months projected net operating revenues of the Partnership and
contingent business interruption insurance in an amount equal to 12 months
projected net operating revenues of the Partnership. This extension or separate
policy shall include coverage for (i) business interruption arising from loss
or damage to the Project, including a service interruption endorsement with a
limit of $5,000,000 and a deductible period of not more than 72 hours and (ii)
contingent business interruption arising from damage to the property and
equipment of customers of the Project, which is not covered by the insurance
specified in Section 7.5(b). Such customers shall include but not be limited to
the purchasers of thermal energy. This extension or separate policy shall also
include coverage for expediting expenses and extra expense with a sublimit of
$1,000,000. This extension or separate policy shall have a deductible not to
exceed 30 days' business interruption, except for expediting expenses and extra
expense, which deductible shall not exceed $100,000.
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(d) Maintain comprehensive (or commercial) general liability insurance
written on an occurrence basis (with the exception of products/completed
operations which may be written on a claims made form) and with a combined
single limit of not less than $1,000,000. In the event the Partnership elects to
insure such coverage on a claims made basis, the general liability policy shall
be endorsed to provide that the production, sale and distribution of steam and
electricity shall be deemed to be a premises/operations hazard and covered by
such policy on an occurrence form. Such coverage shall include
premises/operations, explosion, collapse and underground hazards, broad form
contractual, independent contractors, products/completed operations, broad form
property damage and personal injury. In the event general aggregate applies,
such policy or limits shall be written on a project specific basis naming the
Partnership and the Operator as the insured and the Agent as an additional
insured and shall apply solely to the construction, use, operation and
maintenance of the Project.
(e) Maintain (i) Workers Compensation insurance with statutory limits
and (ii) employers liability insurance coverage with limits of not less than
$1,000,000 including occupational disease coverage.
(f) Maintain comprehensive (or business) automobile liability
insurance for owned (if any), leased, non-owned and hired vehicles with
combined single limits of not less than $250,000.
(g) Maintain excess (or umbrella) liability insurance written on an
occurrence basis (with the exception of products/completed operations which
may be written on a claims made form) and providing coverage limits in excess
of the insurance required to be maintained pursuant to Sections 7.5(d), (e)(ii)
and (f). In the event the Partnership elects to insure such coverage on a
claims made basis, the general liability policy shall be endorsed to provide
that the production, sale and distribution of steam and electricity shall be
deemed to be a premises/operations hazard and covered by such policy on an
occurrence form. The limits of such insurance and such excess insurance (or
umbrella) coverage, when combined, shall be not less than $25,000,000. In the
event a general aggregate applies, such policy or limits shall be written on a
project specific basis naming the Partnership as the insured and the Agent as
an additiona1 insured and shall apply solely to the construction, use,
operation and maintenance of the Project.
(h) Maintain such insurance as the Partnership is required to maintain
pursuant to the provisions of any other Basic Document.
(i) Cause (i) the Contractor to obtain and maintain in full force and
effect the insurance referred to in items (A),
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(B), (C), (D) and (E) below and (ii) the Operator to obtain and maintain in
full force and effect the insurance referred to in clauses (C) and (D) below:
(A) Performance and payment bonds which cover all payment,
performance, material and other obligations of the Contractor and all
subcontractors under the Construction Contract including the
Performance and Payment Bond. The performance and payment bonds shall
at all times be in an amount acceptable to the Agent. Each such bond
shall cover the faithful performance of the Construction Contract or
the applicable subcontract. Such bonds shall name the Partnership and
the Agent as dual obligees and shall be written by surety companies
and shall otherwise be in such form as is acceptable to the Agent.
(B) Comprehensive general liability insurance written on an
occurrence basis and with a combined single limit of not less than
$1,000,000. Such coverage shall include premises/operations,
explosion, collapse and underground hazard, broad form contractual,
products/completed operations, independent contractors, broad form
property damage and personal injury.
(C) (x) Workers compensation insurance written with statutory
limits including an USL&H endorsement (if necessary) and (y)
employer's liability insurance coverage in an amount not less than
$1,000,000. The employer's liability coverage shall not contain an
occupational disease exclusion.
(D) Comprehensive automobile liability insurance for all
owned, non-owned and hired vehicles written in an amount not less than
$500,000.
(E) Excess (or umbrella) liability insurance providing
coverage limits in excess of the insurance required to be maintained
pursuant to clauses (B), (C)(y) and (D) above. The limits of such
insurance and such excess insurance (or umbrella) coverage, when
combined, shall not be less than $25,000,000.
(j) Cause the insurance carried in accordance with this Section 7.5
to be endorsed as follows:
(i) the Partnership shall be the named insured and the Agent
shall be an additional named insured with respect to insurance
maintained pursuant to Sections 7.5(b) and (c) and the Agent and the
Lenders shall be additional insureds with respect to insurance
maintained pursuant to Sections 7.5(d), (f), (g) and (h) and clauses
(B), (D) and (E) of Section 7.5(i);
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(ii) with respect to Sections 7.5(b) and (c), the interest
of the Agent as lender shall not be invalidated by any action or
inaction of the Partnership or any other Person and of any breach or
violation by the Partnership or any other Person of any warranties,
declarations or conditions in such policies;
(iii) the insurer thereunder shall waive all rights of
subrogation against the Agent, any right of setoff or counterclaim and
any other right to deduction, whether by attachment or otherwise;
(iv) such insurance shall be primary without right of
contribution of any other insurance carried by or on behalf of the
Agent with respect to its interest as such in the Project;
(v) if such insurance is canceled for any reason whatsoever,
including nonpayment of premium, or any changes are initiated by
carrier which reduces the limits or form which affects the interest of
the Agent, such cancellation or change shall not be effective as to
the Agent for 60 days, except for nonpayment of premium which shall be
10 days, after receipt by the Agent of written notice sent by
registered mail from such insurer of such cancellation or change;
(vi) any insurance carried in accordance with Section 7.5(d),
(f) or (g), or clause (B), (D) or (E) of Section 7.5(i) shall be
endorsed to provide that, inasmuch as the policy is written to cover
more than one insured, all terms, conditions, insuring agreements and
endorsements, with the exception of limits of liability, shall operate
in the same manner as if there were a separate policy covering each
insured; and
(vii) any insurance carried in accordance with Section 7.5(b)
or (c) shall include a standard Lender's loss payable endorsement in
favor of the Agent and shall name the Agent as sole loss payee.
Deductibles or self insured retentions shall be subject to approval by
the Agent.
(k) Deliver to the Agent a certificate executed by the insurer or its
duly authorized agent evidencing the continuance of such insurance policy (and,
upon request, a certified copy of such insurance policy).
(1) Cause to be deposited in the Insurance and Condemnation Proceeds
Account for application in accordance with the Security Deposit Agreement all
payments pursuant to Sections 7.5(b) and (c) received by the Agent or the
Partnership from any insurer with respect to loss or damage to the Project or
other Collateral within one Business Day of receipt thereof.
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(m) concurrently with the furnishing of all certificates referred to
in Section 7.5, furnish the Agent with an opinion of an independent
insurance broker acceptable to the Agent stating that all premiums then due
have been paid and that, in the opinion of such broker the insurance then
carried and maintained is in accordance with this Section 7.5. Furthermore,
upon their first knowledge, cause each insurer or such broker to advise
the Agent promptly in writing of any default in the payment of any premiums
or any other act or omission on the part of the Partnership or the
Contractor which might invalidate or render unenforceable, in whole or part,
any insurance provided hereunder. The Agent may at its sole option obtain
such insurance if not provided by the Partnership and in such event the
Partnership shall reimburse the Agent upon demand for the cost thereof.
(n) Notwithstanding anything to the contrary herein, no provision of
this Section 7.5 or any provision of any other Basic Document shall impose on
the Agent any duty or obligation to verify the existence or adequacy of the
insurance coverage maintained by the Partnership, nor shall the Agent
be responsible for any representations or warranties made by or on behalf of
the Partnership to any insurance company or underwriter.
7.6 North Country Insurance Coverage. In the case of North Country:
(a) Without limiting any of the other obligations or liabilities of
North Country under this Agreement, at all times carry and maintain or cause to
be carried and maintained at its own expense such insurance as is customarily
maintained by constructors, owners, operators, and lessees of natural gas
pipelines and in all events shall carry and maintain at least the minimum
insurance coverage set forth in this Section 7.6. All insurance carried
pursuant to this Section 7.6 shall be with such insurers, in such amounts and
in such form and with deductibles or self insured retentions as shall be
reasonably satisfactory to the Agent.
(b) Maintain or cause to be maintained all-risk property and
machinery insurance, covering physical loss or damage to the North Country
Project, including fire and extended coverage, collapse, earthquake, flood
and comprehensive machinery (including mechanical breakdown). Such
insurance shall cover each and every component of the North Country
Project and the interconnection facilities. The all-risk property
and machinery coverage shall not contain an exclusion for resultant damage
caused by faulty workmanship, design or materials. Coverage shall be written
on a replacement cost basis and in an amount acceptable to the Agent, but in
no event less than the replacement cost of the North Country Project. Such
policy shall contain a valid agreed amount endorsement waiving any coinsurance
penalty. The policy may be subject to deductibles not to exceed
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$100,000 per occurrence. North Country shall include as a part of this policy
or procure a special policy known as a "Lender's Single Interest Excess of Loss
Coverage" or "Stipulated Loss Coverage" covering all the perils provided by the
property and boiler and machinery policy. Such policy shall provide limits as
may be mutually agreed among the Partnership, North Country and the Agent. The
insured and loss payee under this "Lender's Single Interest Excess of Loss
Coverage" or "Stipulated Loss Coverage" policy shall be the Agent.
(c) As an extension of Section 7.6(b) or as a separate policy,
maintain or cause to be maintained business interruption insurance in an
amount equal to 12 months projected net operating revenues of North Country
and contingent business interruption insurance in an amount equal to 12 months
projected net operating revenues of North Country. This extension or
separate policy shall include coverage for (i) business interruption arising
from loss or damage to the North Country Project, including a service
interruption endorsement with a limit of $5,000,000 and a deductible period of
not more than 72 hours and (ii) contingent business interruption arising
from damage to the Facility and the property and equipment of customers
of the North Country Project, which is not covered by the insurance
specified in Section 7.6(b). This extension or separate policy shall also
include coverage for expediting expenses and extra expense with a sublimit of
$1,000,000. This extension or separate policy shall have a deductible not
to exceed 30 days' business interruption, except for expediting expenses
and extra expense, which deductible shall not exceed $100,000.
(d) Maintain comprehensive (or commercial) general liability insurance
written on an occurrence basis (with the exception of products/completed
operations which may be written on a claims made form) and with a combined
single limit of not less than $1,000,000. In the event North Country elects to
insure such coverage on a claims made basis, the general liability policy shall
be endorsed to provide that the production, sale and distribution of steam and
electricity shall be deemed to be a premises/operations hazard and covered by
such policy on an occurrence form. Such coverage shall include
premises/operations, explosion, collapse and underground hazards, broad form
contractual, independent contractors, products/completed operations,
broad form property damage and personal injury. In the event a general
aggregate applies, such policy or limits shall be written on a project specific
basis naming North Country as the insured and the Agent as an additional
insured and shall apply solely to the construction, use, operation and
maintenance of the North Country Project.
(e) Maintain (i) Workers Compensation insurance with statutory limits
and (ii) employers liability insurance coverage with limits of not less than
$1,000,000 including occupational disease coverage.
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(f) Maintain comprehensive (or business) automobile liability
insurance for owned (if any), leased, non-owned and hired vehicles with
combined single limits of not less than $250,000.
(g) Maintain excess (or umbrella) liability insurance written on an
occurrence basis (with the exception of products/completed operations which may
be written on a claims form) and providing coverage limits in excess of the
insurance required to be maintained pursuant to Sections 7.6(d), (e)(ii) and
(f). In the event North Country elects to insure such coverage on a claims made
basis, the general liability policy shall be endorsed to provide that the
production, sale and distribution of steam and electricity shall be deemed to
be a premises/operations hazard and covered by such policy on an occurrence
form. The limits of such insurance and such excess insurance (or umbrella)
coverage, when combined, shall be not less than $25,000,000. In the event a
general aggregate applies, such policy or limits shall be written on a project
specific basis naming North Country as the insured and the Agent as an
additional insured and shall apply solely to the construction, use, operation
and maintenance of the North Country Project.
(h) Maintain such insurance as North Country is required to maintain
pursuant to the provisions of any other Basic Document.
(i) Cause (i) the Contractor to obtain and maintain in full force and
effect the insurance referred to in items (A), (B), (C), (D) and (E) below and
(ii) obtain and maintain in full force and effect the insurance referred to in
clauses (C) and (D) below:
(A) Performance and payment bonds which cover all payment,
performance, material and other obligations of the Contractor and all
subcontractors under the Construction Contract including the
Performance and Payment Bond. The performance and payment bonds shall
at all times be in an amount acceptable to the Agent. Each such bond
shall cover the faithful performance of the Construction Contract or
the applicable subcontract. Such bonds shall name North Country and
the Agent as dual obligees and shall be written by surety companies
and shall otherwise be in such form as is acceptable to the Agent.
(B) Comprehensive general liability insurance written on an
occurrence basis and with a combined single limit of not less than
$1,000,000. Such coverage shall include premises/operations,
explosion, collapse and underground hazard, broad form contractual,
products/completed operations, independent contractors, broad form
property damage and personal injury.
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(C)(x) Workers compensation insurance written with statutory
limits including an USL&H endorsement (if necessary) and (y)
employer's liability insurance coverage in an amount not less than
$1,000,000. The employer's liability coverage shall not contain an
occupational disease exclusion.
(D) Comprehensive automobile liability insurance for all
owned, non-owned and hired vehicles written in an amount not less
than $500,000.
(E) Excess (or umbrella) liability insurance providing
coverage limits in excess of the insurance required to be maintained
pursuant to clauses (B), (C)(y) and (D) above. The limits of such
insurance and such excess insurance (or umbrella) coverage, when
combined, shall not be less than $25,000,000.
(j) Cause the insurance carried in accordance with this Sectin 7.6 to
be endorsed as follows:
(i) North Country shall be the named insured and the Agent
shall be an additional named insured with respect to insurance
maintained pursuant to Sections 7.6(b) and (c) and the Agent and the
Lenders shall be additional insureds with respect to insurance
maintained pursuant to Sections 7.6(d), (f), (g) and (h) and clauses
(B), (D) and (E) of Section 7.6(i);
(ii) with respect to Sections 7.6 (b) and (c), the interest
of the Agent as lender shall not be invalidated by any action or
inaction of North Country or any other Person and of any breach or
violation by North Country or any other Person of any warranties,
declarations or conditions in such policies;
(iii) the insurer thereunder shall waive all rights of
subrogation against the Agent, any right of setoff or counterclaim and
any other right to deduction, whether by attachment or otherwise;
(iv) such insurance shall be primary without right of
contribution of any other insurance carried by or on behalf of the
Agent with respect to its interest as such in the North Country
Project;
(v) if such insurance is canceled for any reason whatsoever,
including nonpayment of premium, or any changes are initiated by
carrier which reduces the limits or form which affects the interest of
the Agent, such cancellation or change shall not be effective as to
the Agent for 60 days, except for nonpayment of premium which shall be
10 days, after receipt by the Agent of written notice sent by
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registered mail from such insurer of such cancellation or
change;
(vi) any insurance carried in accordance with Section 7.6(d), (f)
or (g), or clause (B), (D), or (E) of Section 7.6(i) shall be
endorsed to provide that, inasmuch as the policy is written to cover
more than one insured, all terms, conditions, insuring agreements
and endorsements, with the exception of limits of liability, shall
operate in the same manner as if there were a separate
policy covering each insured; and
(vii) any insurance carried in accordance with Section 7.6(b) or
(c), shall include a standard Lender's lost payable endorsement in
favor of the Agent and shall name the Agent as sole loss payee.
Deductibles or self insured retentions shall be subject to approval
by the Agent.
(k) Deliver to the Agent a certificate executed by the insurer or its
duly authorized agent evidencing the continuance of such insurance policy
(and, upon request, a certified copy of such insurance policy).
(l) Cause to be deposited in the North Country Insurance and
Condemnation Proceeds Account for application in accordance with the Security
Deposit Agreement all payments pursuant to Sections 7.6(b) or (c) received by
the Agent or North Country from any insurer with respect to loss or damage to
the North Country Project or other Collateral within one Business Day of
receipt thereof.
(m) Concurrently with the furnishing of all certificates referred to
in Section 7.6, furnish the Agent with an opinion of an independent insurance
broker acceptable to the Agent stating that all premiums then due have been
paid and that, in the opinion of such broker the insurance then carried and
maintained is in accordance with this Section 7.6. Furthermore, upon their
first knowledge, cause each insurer or such broker to advise the Agent promptly
in writing of any default in the payment of any premiums or any other act or
omission on the part of North Country or the Contractor which might invalidate
or render unenforceable, in whole or part, any insurance provided hereunder.
The Agent may at its sole option obtain such insurance if not provided by North
Country and in such event North Country shall reimburse the Agent upon demand
for the cost thereof.
(n) Notwithstanding anything to the contrary herein, no provision of
this Section 7.6 or any provision of any other Basic Document shall impose
on the Agent any duty or obligation to verify the existence or adequacy of the
insurance coverage maintained by North Country, nor shall the Agent be
responsible
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for any representations or warranties made by or on behalf of North Country to
any insurance company or underwriter.
7.7 Inspection of Property; Change Orders; Books and Records; the
Independent Engineer; Discussions. (a) (i) Keep proper books of records and
accounts in which full, true and correct entries shall be made of all of its
transactions in accordance with sound accounting practice. Permit the Agent, the
Independent Engineer and other consultants (at the expense of each of the
Partnership and North Country, based on invoices for the actual costs thereof)
and the Lenders (at their own expense) to visit the Project and the North
Country Project and the other properties of each of the Partnership and North
Country during regular business hours after reasonable notice. The Agent and
each Lender agrees that it will not, in the course of any such visit, interfere
in the construction, operation or maintenance of the Project. Each of the
Partnership and North Country authorizes the Agent and each Lender to disclose
to any agent or consultant any and all information in its possession concerning
the Project or the Site in connection with such agent's or consultant's
evaluation of the Project or visit to the Project.
(ii) Provide access by the Agent, the Independent Engineer and other
consultants engaged by the Agent to (i) all Plans and Specifications (including,
without limitation, data relating to design changes in the Project or the North
Country Project, as the case may be), (ii) quality control data and performance
test data, (iii) invoices relating to construction progress and to services to
be performed and materials to be supplied on a cost reimbursement basis, and
invoices relied on by the Contractor in verifying construction progress, (iv)
contracts relating to the engineering of, the procurement of services,
equipment, supplies or other materials for, or the construction of, the Project
or the North Country Project, as the case may be, and (v) all other data
relating to the Project or the North Country Project, as the case may be, and
construction progress as may be reasonably requested by the Independent Engineer
or other consultant. Permit representatives of the Agent, the Independent
Engineer or other consultant to examine its books of records and accounts and to
discuss its affairs, finances and accounts with its principal officers,
engineers and independent accountants, all at such reasonable times during
business hours and at such intervals as the Agent, the Independent Engineer or
other consultant may request. Permit the Agent, the Independent Engineer or
other consultants to monitor, witness and appraise the Work (including without
limitation test procedures and performance testing), review and audit the
records specified in clauses (iii) and (v) above which relate to the costs
specified in clauses (iii) and (v) above. At all times cause an accurate and
complete set of the Plans and Specifications to be maintained at the Project and
the North Country Project, as the case may be.
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(b) At least once each calendar month, notify the Independent Engineer
of any change made to the Plans and Specifications (which has been presented to
the Partnership or North Country) since the last such notice and meet with the
Independent Engineer (and the Agent, should the Agent so request) to discuss
such changes; provided, that, subject to Section 8.18, neither the Partnership
nor North Country shall enter into any agreement to modify or change the Plans
and Specifications as the result of or in conjunction with any final settlement
of the Construction Contract without the prior written consent of the Agent
which consent will not be unreasonably withheld. The Partnership shall consider
such changes to the Plans and Specifications as the Agent may, subject to
Section 8.18, on or prior to the completion of the engineering work under the
Construction Contract, reasonably request.
(c) Notwithstanding anything to the contrary herein or in any other
Basic Document, no act or omission of the Agent or the Independent Engineer
shall in any way affect the obligations of the Partnership or North Country, the
Contractor or any other Person under any contract relating to the Construction
Contract, be deemed to be the acceptance of any defective work performed by the
Contractor or any other Person under the Construction Contract or be deemed to
be a waiver of any rights against the Contractor or any other Person under the
Construction Contract or otherwise.
(d) Give timely notice of, and permit the Agent, the Independent
Engineer, the other consultants or any representatives thereof as the Agent, the
Independent Engineer or such consultant may reasonably request to attend, all
Project or North Country Project progress review meetings held by the
Partnership or North Country or its agents or representatives, and any and all
performance tests of the Project or the North Country Project, as the case may
be, or any component thereof (whether any such test is to be conducted on or off
the Site or the Pipeline Properties).
7.8 Compliance with Laws. Comply with all Requirements of Law, and from
time to time obtain and comply with all Governmental Approvals as shall now or
hereafter be necessary under all Applicable Laws, in connection with the
construction, ownership, operation or maintenance of the Project and the North
Country Project, as the case may be, or the making and performance by the
Partnership or North Country, as the case may be, of any of the Basic Documents
to which it is a party, except any thereof the failure with which to comply or
of which to obtain would not, in the sole discretion of the Required Lenders,
reasonably be expected to have a Material Adverse Effect.
7.9 Financial Statements. Furnish or cause to be furnished to the
Agent:
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(a) as soon as available, but in any event within 120 days after the
end of each fiscal year of each Reporting Participant (other than Falcon),
a copy of the balance sheet of such Reporting Participant as of the end of
such fiscal year and the related statements of income, retained earnings
(or partners' capital) and changes in cash flows of such Reporting
Participant for such fiscal year, setting forth in each case in comparative
form the figures for the previous fiscal year, certified without
qualification or exception as to the scope of its audit by independent
public accountants of national standing reasonably acceptable to the Agent;
and
(b) as soon as available, but in any event within 60 days after the end
of each quarterly period of each fiscal year (other than the last quarterly
period of each such fiscal year) of each Reporting Participant (other than
Falcon), the unaudited balance sheet of such Reporting Participant as of the end
of such quarterly period and the related unaudited statements of income and
retained earnings (or partners' capital) and changes in cash flows of such
Reporting Participant for such quarterly period and for the portion of the
fiscal year then ended, setting forth in each case in comparative form the
figures for the previous period, certified by a Responsible Officer of such
Reporting Participant (subject to normal year-end audit adjustments).
All such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except for
changes approved or required by the independent public accountants certifying
such statements and disclosed therein).
7.10 Certificates; Operating Budgets; Other Information. Furnish or
cause to be furnished to the Agent:
(a) concurrently with the delivery of the financial statements of the
Partnership and North Country referred to in Section 7.9(a), a certificate
of the independent public accountants which certified such financial
statements stating that in making the examination necessary for the audit
thereof no knowledge was obtained of any Default or Event of Default,
except as specified in such certificate;
(b) concurrently with the delivery of the financial statements of the
Partnership and North Country referred to in Sections 7.9(a) and 7.9(b), a
certificate of a Responsible Officer of the Partnership, in the case of
financial statements of the Partnership, or North Country, in the case of
financial statements of North Country, stating that, to the best of such
Responsible Officer's knowledge after due inquiry, each of the Partnership
and SECI General, or North Country, as the case may be, during
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the period covered by such financial statements, has observed and performed
all of its covenants and other agreements hereunder, and satisfied every
condition, contained in this Agreement and the other Basic Documents to be
observed, performed or satisfied by it, and that such Responsible Officer
has obtained no knowledge of any Default or Event of Default hereunder at
any time during such period or on the date of such certificate and no
knowledge of any default or event which with the giving of notice or the
lapse of time or both would constitute a default under any of the other
Basic Documents at any time during such period or on the date of such
certificate (or, if any such Default or Event of Default or default or
event shall have occurred, a statement setting forth the nature thereof and
the steps being taken by the Partnership or North Country to remedy the
same);
(c) promptly after the same are sent, copies of all financial
statements and reports (other than with respect to Falcon) which the
Partnership sends to its Partners and which North Country sends to its
shareholders;
(d) promptly after the filing thereof, the "Annual Returns" (Form 5500
series) and attachments filed annually with the Internal Revenue Service
with respect to each Single Employer Plan, if any, of the Partnership and
North Country;
(e) with respect to any Single Employer Plan adopted or amended by the
Partnership, SECI, North Country or any Commonly Controlled Entity on or
after the first Borrowing Date, any determination letters received from the
Internal Revenue Service with respect to the qualification of such Plan, as
initially adopted or amended under Section 401(a) of the Code;
(f) promptly after delivery or receipt thereof, a copy of each material
notice, demand or other communication delivered or received by the
Partnership or North Country pursuant to any Basic Document (including,
without limitation, a copy of all engineer's reports furnished by the
Partnership to NYSEG pursuant to Part 2 of Exhibit B of the Power Purchase
Agreement), except any such communications which the Partnership may
deliver to its Partners pursuant to the Amended and Restated Partnership
Agreement which are in the ordinary course of business and which are not
otherwise required to be delivered to the Agent and the Lenders hereunder;
(g) copies of each Governmental Approval or other consent or approval
obtained or made by the Partnership or North Country, or obtained or made
by the Contractor and
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delivered to the Partnership or North Country pursuant to the Construction
Contract;
(h) in the case of the Partnership:
(i) on or prior to November 1 of each year commencing after the date of
Substantial Completion, submit to the Agent, with a copy for each Lender, the
proposed operating budget of the Partnership for the next succeeding year. Such
proposed operating budget shall be substantially in the form of Exhibit B (with
any deviations from such form indicated by the Partnership) (the "Partnership
Operating Budget") and shall include, in each case, on a cash basis a budget for
such operating year specifying on a monthly basis for such operating year the
principal items of (x) revenue anticipated to be received in respect of the
Facility, including, without limitation, the estimated energy and steam sales,
rates and revenues pursuant to the Steam Supply Agreement and the estimated
power sales, rates and revenues pursuant to the Power Purchase Agreement and (y)
costs and expenses anticipated to be incurred in connection with the operation,
maintenance and administration of the Facility, including, without limitation,
taxes, premiums for insurance policies required to be maintained pursuant to
this Agreement and any fees and expenses payable to Agent or any Lender pursuant
to the Loan Documents, together with a manpower forecast and periodic
inspection, maintenance and repair schedule and any other items necessary to
calculate "Operating Income" in the proposed Partnership Operating Budget and
(z) a revised estimate (and related schedule) of costs to be incurred by the
Partnership in respect of major maintenance items during the next six year
period. Such proposed Partnership Operating Budget shall be accompanied by (A) a
forecasted Partnership Operating Budget for the next succeeding operating year
specifying, in the same format, on an annual basis the items described in
clauses (x), (y) and (z) above for each such operating year, (B) a discussion of
any significant changes from the approved Partnership Operating Budget for the
previous year, (C) a discussion of any anticipated changes to the terms and
conditions, coverages, policies or carriers of the insurance described in
Section 7.5, (D) a discussion of whether the funding of the Maintenance Reserve
Account then contemplated by the Amended and Restated Security Deposit Agreement
will be sufficient to pay costs of all forecasted major maintenance items and,
if not, a proposed schedule of increases in such funding, and (E) a discussion
of any contemplated changes to agreements or elections
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covering the supply and transmission of fuel to the Facility and the
other Assigned Contracts;
(ii) such Partnership Operating Budget shall be subject to the
written approval of the Required Lenders (which approval shall not be
unreasonably withheld or delayed). In the event the Required Lenders
disapprove the proposed Partnership Operating Budget the Agent shall
indicate objections thereto in writing to the Partnership and the
Partnership shall revise the proposed Partnership Operating Budget to
reflect the revisions proposed by the Required Lenders or, if the
Partnership disagrees with the Required Lenders' objections, the
item(s) in dispute shall be submitted to, and resolved by, a mutually
agreeable independent engineering firm of national standing;
(iii) if, for any reason, the Partnership Operating Budget shall
not have been approved by the Required Lenders on or prior to the
commencement of the applicable operating year, the Partnership
Operating Budget for the prior operating year shall remain in effect,
with such adjustments thereto as shall be required in respect of (x)
any increase in fuel prices, (y) all contractual payment requirements
then binding on the Partnership, and (z) an increase of 5% of all
Project Expenses other than as provided under the foregoing clauses (x)
and (y). Upon any subsequent approval of the proposed Partnership
Operating Budget, such Partnership Operating Budget shall become
effective for such operating year; and
(iv) during the operating year, the Partnership shall promptly
advise the Agent of any circumstance that, in the reasonable judgment
of the Partnership, makes necessary or advisable any revision to the
effective Partnership Operating Budget (including, without limitation,
any allocation of savings in one item of the Partnership Operating
Budget to other items thereof) and shall promptly furnish to the Agent,
with copies to the Lenders, all information reasonably requested by the
Agent or any Lender in connection with its review of the proposed
revision. The Agent shall approve or disapprove such proposed revision
in accordance with the procedures outlined in paragraph (ii) above. No
such revision to the Partnership Operating Budget may be made without
such required approval; provided, however, that the Partnership may
allocate savings in one such item to other items in the Partnership
Operating Budget up to ten percent (10%) of the item from which the
allocation is made; and provided, further, that no item in the
Partnership Operating Budget may be increased as a result of the
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allocation of savings by an amount greater than ten percent (10%) of
the original amount of such item. During the existence of any emergency
or event of force majeure affecting the Facility, the Partnership may
in good faith take such actions as may be reasonably required by such
emergency or event of force majeure; provided, that the Partnership
shall promptly notify the Agent of such actions and any effect such
actions may have had on the amounts allocated in the Partnership
Operating Budget and shall promptly consider in good faith any further
reallocations in the Partnership Operating Budget which may be
recommended in writing by the Agent;
(i) in the case of North Country:
(i) on or prior to November 1 of each year commencing after the
date of Substantial Completion, submit to the Agent, with a copy for
each Lender, proposed operating budget of North Country for the next
succeeding year. Such proposed operating budget shall be substantially
in the form of Exhibit C (with any deviations from such form indicated
by North Country) (the "North Country Operating Budget") and shall
include, in each case, on a cash basis a budget for such operating year
specifying on a monthly basis for such operating year the principal
items of (x) revenue anticipated to be received in respect of the North
Country Project, including, without limitation, the estimated gas
sales, rates and revenues pursuant to the North Country Gas Agreements
and (y) costs and expenses anticipated to be incurred in connection
with the operation, maintenance and administration of the North Country
Project, including, without limitation, taxes, premiums for insurance
policies required to be maintained pursuant to this Agreement and any
fees and expenses payable to the Agent or any Lender pursuant to the
Loan Documents, together with a manpower forecast and periodic
inspection, maintenance and repair schedule and any other items
necessary to calculate "Operating Income" in the proposed North Country
Operating Budget and (z) a revised estimate (and related schedule) of
costs to be incurred by North Country in respect of major maintenance
times during the next six year period. Such proposed North Country
Operating Budget shall be accompanied by (A) a forecasted North Country
Operating Budget for the next succeeding operating year specifying, in
the same format, on an annual basis the items described in clauses (x),
(y) and (z) above for each such operating year, (B) a discussion of any
significant changes from the approved North Country Operating Budget
for the previous year, (C) a discussion of any anticipated
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changes to the terms and conditions, coverages, policies or carriers of
the insurance described in Section 7.6 and (D) a discussion of the
costs of maintaining the Pipeline;
(ii) such North Country Operating Budget shall be subject to the
written approval of the Required Lenders (which approval shall not be
unreasonably withheld or delayed). In the event the Required Lenders
disapprove the proposed North Country Operating Budget, the Agent shall
indicate objections thereto in writing to North Country. North Country
shall revise the proposed North Country Operating Budget to reflect the
revisions proposed by the Required Lenders or, if North Country
disagrees with the Required Lenders' objections, the item(s) in dispute
shall be submitted to, and resolved by, a mutually agreeable
independent engineering firm of national standing;
(iii) if, for any reason, the North Country Operating Budget shall
not have been approved by the Required Lenders on or prior to the
commencement of the applicable operating year, the North Country
Operating Budget for the prior operating year shall remain in effect,
with such adjustments thereto as shall be required in respect of (x)
all contractual payment requirements then binding on North Country, and
(y) an increase of 5% of all North Country Project Expenses other than
as provided under the foregoing clause (x). Upon any subsequent
approval of the proposed North Country Operating Budget, such North
Country Operating Budget shall become effective for such operating
year; and
(iv) during the operating year, North Country shall promptly advise
the Agent of any circumstance that, in the reasonable judgment of North
Country, makes necessary or advisable any revision to the effective
North Country Operating Budget (including, without limitation, any
allocation of savings in one item of the North Country Operating Budget
to other items thereof) and shall promptly furnish to the Agent, with
copies to the Lenders, all information reasonably requested by the
Agent or any Lender in connection with its review of the proposed
revision. The Agent shall approve or disapprove such proposed revision
in accordance with the procedures outlined in paragraph (ii) above. No
such revision to the North Country Operating Budget may be made without
such required approval; provided, however, that North Country may
allocate savings in one such item to other items in the North Country
Operating Budget up to ten percent (10%) of the item from which the
allocation is made; and
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provided, further, that no item in the North Country Operating Budget
may be increased as a result of the allocation of savings by an amount
greater than ten percent (10%) of the original amount of such item.
During the existence of any emergency or event of force majeure
affecting the North Country Project, North Country may in good faith
take such actions as may be reasonably required by such emergency or
event of force majeure; provided, that North Country shall promptly
notify the Agent of such actions and any effect such actions may have
had on the amounts allocated in the North Country Operating Budget and
shall promptly consider in good faith any further reallocations in the
North Country Operating Budget which may be recommended in writing by
the Agent;
(j) no later than the 10th Business Day of each month, an operating
report providing the information set forth on Schedule 9; and
(k) promptly, such additional financial and other information with
respect to the Reporting Participants or the Project or the North Country
Project, as the case may be, as the Required Lenders may from time to time
reasonably request.
7.11 Taxes. Pay and discharge all taxes (or payments in lieu of taxes
under the Pilot Agreements), assessments and governmental charges or levies
imposed on it or on its income or profits or on any of its property (including
payments under the respective Pilot Agreements) prior to the date on which
penalties attach thereto, and all lawful claims which, if unpaid, might become a
Lien upon the property of the Partnership or North Country, provided, that, if
no Event of Default shall have occurred and be continuing, and if an Event of
Default shall have occurred and be continuing with the prior written consent of
the Required Lenders, the Partnership or North Country, as the case may be, may
contest in good faith the validity or amount of any such tax, assessment,
charge, levy or claim by proper proceedings timely instituted, and may permit
the taxes, assessments, charges, levies or claims so contested to remain unpaid
during the period of such contest if: (a) the Partnership or North Country, as
the case may be, diligently prosecutes such contest, (b) the Partnership or
North Country, as the case may be, sets aside on its books adequate reserves
with respect to the contested items, (c) during the period of such contest the
enforcement of any contested item is effectively stayed, and (d) the outcome of
which, if adversely determined, could not reasonably be expected to have a
Material Adverse Effect. Promptly pay or cause to be paid any valid, final
judgment enforcing any such tax, assessment, charge, levy or claim and cause the
same to be satisfied of record.
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7.12 Maintenance of Property. (a) In the case of the Partnership, at
its expense, keep the Facility in good working order and condition and make all
repairs, replacements and renewals with respect thereto and additions and
betterments thereto which are necessary for the Facility to operate in
compliance with the terms of the Basic Documents (except where any failure could
not, in the determination of the Required Lenders, reasonably be expected to
have a Material Adverse Effect), and in compliance with all Applicable Laws
affecting the Project (except where any failure could not, in the determination
of the Required Lenders, reasonably be expected to have a Material Adverse
Effect), and to ensure enforceability of remedies under insurance policies.
(b) In the case of North Country, at its expense, keep the Pipeline in
good working order and condition and make all repairs, replacements and renewals
with respect thereto and additions and betterments thereto which are necessary
for the Pipeline to operate in compliance with the terms of the Basic Documents
(expect where any failure could not, in the determination of the Required
Lenders, reasonably be expected to have a Material Adverse Effect), and in
compliance with all Applicable Laws affecting the North Country Project (except
where any failure could not, in the determination of the Required Lenders,
reasonably be expected to have a Material Adverse Effect), and to ensure
enforceability of remedies under insurance policies.
7.13 Notices. Promptly (with respect to the North Country Project, in
the case of North Country, and with respect to the Project, in the case of the
Partnership) (and, in any event, within five days) upon obtaining knowledge of
any of the following, give notice to the Agent:
(a) of the occurrence of any Default or Event of Default;
(b) of any default or event of default under any Assigned Contract;
(c) of any litigation, investigation or proceeding which may exist at
any time between the Partnership or North Country and any Governmental
Authority, including, without limitation, any litigation, investigation or
proceeding to revoke or modify the FERC Order or any other license or
Governmental Approval required for the ownership or operation of the
Project or the North Country Project, as the case may be;
(d) of any litigation or proceeding affecting the Partnership or North
Country in which the amount involved is $100,000 or more or in which
injunctive or similar relief is sought;
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(e) of the following events, as soon as possible and in any event
within 30 days after the Partnership or North Country knows or has reason
to know thereof: (i) the occurrence or expected occurrence of any
Reportable Event with respect to any Plan, or (ii) the institution of
proceedings or the taking or expected taking of any other action by PBGC;
the Partnership or North Country to terminate, withdraw, or partially
withdraw from any Plan, or (iii) the reorganization or insolvency of any
Multiemployer Plan, and, in addition to such notice, deliver to the Agent
whichever of the following may be applicable: (A) a certificate of a
Responsible Officer of the Partnership or North Country, as the case may
be, setting forth details as to such Reportable Event and the action that
the Partnership or North Country, as the case may be, proposes to take with
respect thereto, together with a copy of any notice of such Reportable
Event that may be required to be filed with PBGC, or (B) any notice
delivered by PBGC evidencing its intent to institute such proceedings or
any notice to PBGC that such Plan is to be terminated, or (C) any notice of
the reorganization or insolvency of a Multiemployer Plan received by the
Partnership or North Country;
(f) of any Material Adverse Effect or any event which could reasonably
be expected to result in a Material Adverse Effect;
(g) of any loss or damage to the Project or the North Country Project,
as the case may be, or the Collateral in excess of $100,000;
(h) of any material delays for any reason in construction of the
Project or the North Country Project, as the case may be, and of any
unscheduled shutdown or material reduction in operation, in each case for a
period in excess of 24 hours;
(i) of any event or condition which would change any matter represented
to in Section 5.5, 5.26 (in the case of the Partnership), 5.27 (in the case
of North Country) or 5.28;
(j) of the execution and delivery of any Additional Contract;
(k) of any event constituting force majeure under any of the Basic
Documents or any claim by any party to any Basic Document alleging that a
force majeure event thereunder has occurred;
(l) of any litigation, investigation or proceeding affecting any
Project Participant other than the Partnership
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or North Country which if adversely determined could reasonably be expected
to have a Material Adverse Effect;
(m) of any litigation or proceeding relating to environmental matters
concerning the Partnership, the Project or North Country or the North
Country Project (including receipt by Partnership or North Country of any
notice of any proceeding involving a Relevant Environmental Law or any
discharge of Hazardous Materials);
(n) of any assertion by any Governmental Authority or any written
assertion by any other Person that the work on the Project or the North
Country Project does not comply with any Applicable Law;
(o) of any material delays for any reason in the delivery of materials
or equipment to be supplied under the Construction Contract;
(p) of any stop-work order;
(q) of any actual, proposed or threatened cessation or suspension in
the work at the Project or the North Country Project for any reason by the
Contractor for a period in excess of 48 hours; and
(r) of any Change Order or requested or required change in the Plans
and Specifications.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer of the Partnership or North Country, as the case may be,
setting forth details of the occurrence referred to therein and stating what
action the Partnership or North Country, as the case may be, proposes to take
with respect thereto and, with respect to a notice given pursuant to clause (j),
shall be accompanied by a copy of the Additional Contract. For all purposes of
clause (e) of this Section, the Partnership and North Country shall be deemed to
have all knowledge or knowledge of all facts attributable to the administrator
of such Plan.
7.14 Assignments of Additional Contracts and Rights; Maintenance of
Liens of the Collateral Security Documents; Future Mortgages. The Partnership
shall:
(a) within 30 Business Days after the execution and delivery of any
Additional Contract, execute and deliver to the Agent an assignment, in
form and substance satisfactory to the Agent, with respect to such
Additional Contract and (unless the Agent shall have agreed, after receipt
of a written request from the Partnership, that no such consent is
required) cause the other party or parties to such Additional Contract, to
execute and deliver to the Agent a
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consent with respect to such assignment and, if requested by the Agent, an
opinion, in form and substance acceptable to the Agent, of counsel to each
party thereto in respect of the validity and enforceability of such
Additional Contract;
(b) promptly upon the request of the Agent, and at the Partnership's
expense, execute and deliver, or cause the execution and delivery of, and
thereafter register, file or record in each appropriate governmental
office, any document or instrument supplemental to or confirmatory of the
Collateral Security Documents or otherwise deemed by the Agent to be
necessary or desirable for the creation or perfection of the liens and
security interests purported to be created by the Collateral Security
Documents or to protect the Borrowers' title in and to any of the
Collateral; and
(c) if the Borrowers shall at any time acquire any real property or
leasehold or other interests therein not covered by the Mortgages, within
15 Business Days after such acquisition (or on the first Borrowing Date, if
such acquisition occurred prior thereto) execute, deliver and record
supplements to the Mortgages, reasonably satisfactory in form and substance
to the Agent, subjecting such real property or leasehold or other interests
to the lien and security interest created by the Mortgages.
7.15 Employee Plans. For each Plan adopted by the Partnership or North
Country, as the case may be, (a) use its best efforts to seek and receive
determination letters from the Internal Revenue Service to the effect that such
Plan is qualified within the meaning of Section 401(a) of the Code; and (b) from
and after the date of adoption of any Plan, cause such Plan to be qualified
within the meaning of Section 401(a) of the Code and to be administered in all
material respects in accordance with the requirements of ERISA and Section
401(a) of the Code.
7.16 Management Letters. Promptly deliver to the Agent a copy of each
report delivered to the Partnership or North Country, as the case may be, by its
independent public accountants in connection with any annual or interim audit of
its books, including, without limitation, any letters or reports addressed to
the Partnership or any of its officers relating to internal controls, adequacy
of records or the like.
7.17 Easements. Submit to the Agent for the Agent's approval, which
shall not be unreasonably withheld, copies of all prospective easements,
licenses, restrictive covenants or other similar agreements affecting the Site
or the Pipeline Properties, as the case may be (including all reciprocal
easement agreements with parties interested in the Site or with parties
interested in
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adjacent property), prior to their execution, together with a drawing or survey
showing the location thereof.
7.18 Storage. Cause all materials owned or controlled by or for the
account of the Borrowers and supplied for, or intended to be utilized in, the
construction, operation or maintenance of the Project or the North Country
Project, as the case may be, but not affixed to or incorporated into the Project
or the North Country Project, as the case may be, to be suitably stored in
accordance with all Relevant Environmental Laws with adequate safeguards to
prevent loss, theft, damage or commingling with other materials.
7.19 Hazardous Materials. (a) Provide such information as is reasonably
requested by the Agent about all Hazardous Materials and the storage, handling
or disposal thereof which may exist at the Site or the Pipeline Properties, as
the case may be, and which are involved in the Project or the North Country
Project, as the case may be.
(b) Retain only those third-party independent contractors who are
properly licensed by each applicable Governmental Authority and any other
applicable licensing authority to provide the services they are retained to
perform.
(c) Comply with all Relevant Environmental Laws in connection with the
generation, management, handling, labeling, containing, treatment, storage,
transportation, or disposal of or reporting or notification in connection with
Hazardous Materials at the Site or the Pipeline Properties, as the case may be,
or which are used in connection with the Project or the North Country Project,
as the case may be, including without limitation, proper and complete
preparation of any required manifests, maintenance of material safety data
sheets, preparation of a hazardous materials business plan if required by
Relevant Environmental Law, and maintenance of safe working conditions.
Establish a regular schedule for transfer of all Hazardous Materials off the
Site or the Pipeline Properties, as the case may be, as soon as practicable
after its generation and, in any event, each of the Partnership and North
Country shall not allow any Hazardous Material to be maintained at the Site or
the Pipeline Properties, as the case may be, for a period exceeding that
permitted by any Relevant Environmental Law. Monitor the disposition of all
Hazardous Material from the Project or the North Country Project, as the case
may be, by contractors engaged by or on behalf of the Partnership and North
Country in connection with the storage, transportation and disposal thereof.
(d) Defend, indemnify and hold harmless the Agent and the Lenders, and
their respective employees, agents, officers and directors, from and against any
claims, demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature known or unknown, contingent or
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otherwise, arising out of, or in any way relating to the violation of,
noncompliance with or liability under any Relevant Environmental Laws applicable
to the operations of the Partnership, the Project or the Site or North Country,
the North Country Project or the Pipeline Properties, or any orders,
requirements or demands of Governmental Authorities related thereto, including,
without limitation, reasonable attorney's and consultant's fees, investigation
and laboratory fees, environmental audits, response costs, court costs and
litigation expenses, except to the extent that any of the foregoing arise out of
the gross negligence or willful misconduct of the party seeking indemnification
therefor. This indemnity shall continue in full force and effect regardless of
the termination of this Agreement and the payment of the Notes and all other
amounts payable hereunder.
7.20 Swap Agreement. On or prior to the Second Capital Contribution
Date, enter into the Second Swap Agreement in substantially the form of Exhibit
D.
7.21 Substitute Steam Host. If, at any time, the Required Lenders shall
determine, in their reasonable judgment, that (i) the Steam Host will cease for
any reason to purchase steam from the Facility in sufficient quantities so as to
maintain the Facility's status as a Qualifying Facility and the Partnership
shall not have undertaken an alternative to the sale of the thermal output of
the Facility to the Steam Host, which the Required Lenders shall have
determined, in their reasonable judgment, to be a viable and not economically
disadvantageous means to preserve the Facility's status as a Qualifying Facility
and (ii) such failure to purchase steam will occur at any time during which the
Letter of Credit Commitment is in effect, any Note or Letter of Credit remains
outstanding and unpaid, any Surety Bond Arrangements remain in effect, any
Obligations are owing to the Agent or any Lender or any Surety Bond Arrangements
Reimbursement Obligations are owing to the Surety Bond Issuer under the Loan
Documents, provide to the Agent, as soon as possible but in any event within 60
days after receipt by the Partnership of written notice from the Agent to such
effect, an Alternative Steam Plan, and shall cause the substitute facility and
the permits relating thereto described in such Alternative Steam Plan to be
developed, constructed, implemented and obtained within fifteen (15) days of the
milestones specified as "critical path milestones" in the timetable described in
clause (x) of the definition of Alternative Steam Plan in Appendix A, and shall
cause such substitute facility to be constructed and completed and become
operational in compliance with Applicable Law and the Alternative Steam Plan by
no later than the date one year after the written notice from the Agent referred
to above or, if the FERC shall have granted an exemption from the requirement
that the Facility be a Qualifying Facility, such longer period not later than
the date of the expiration of such exemption, so long
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as during such period NYSEG shall have taken no action to terminate the Power
Purchase Agreement.
7.22 Deposits to Reserve Accounts. (a) On each Monthly Transfer Date
(as defined in the Amended and Restated Security Deposit Agreement) in the case
of the Partnership, provide for the deposit of the Major Maintenance Required
Contribution into the Major Maintenance Reserve Account.
(b) On each Distribution Date, until the sum of (i) the amount on
deposit in the Base Reserve Debt Account and (ii) the amount available to be
drawn under the Base Reserve Letter of Credit, if any, shall be equal to or
greater than the Base Reserve Amount, there shall be deposited in the Base
Reserve Debt Account an amount equal to 23.7% of the Distributable Cash
otherwise distributable to each Other Partner on such Distribution Date in
accordance with the Amended and Restated Partnership Agreement and the Amended
and Restated Security Deposit Agreement. In the event of any (i) withdrawal from
the Base Reserve Debt Account (other than withdrawals of income or gain in
excess of the Base Reserve Amount) or (ii) drawing under the Base Reserve Letter
of Credit, on each Distribution Date, until the Base Reserve Debt Account shall
have been replenished by the amount of such withdrawal or the stated amount of
the Base Reserve Letter of Credit shall have been reinstated by the amount of
such drawing, as the case may be, there shall be deposited in the Base Reserve
Debt Account an amount equal to 100% of the Distributable Cash distributable to
each Partner on such Distribution Date in accordance with the Amended and
Restated Partnership Agreement and the Amended and Restated Security Deposit
Agreement.
(c) In the event that the Debt Service Coverage Ratio for any
Measurement Period shall be less than 1.20 to 1.00, 100% of the Distributable
Cash otherwise distributable to each Partner in accordance with the Amended and
Restated Partnership Agreement and the Amended and Restated Security Deposit
Agreement in respect of each of the three Distribution Dates immediately after
the end of such Measurement Period shall not be distributed to such Partner on
such Distribution Dates but shall instead be transferred to and retained in the
Senior Debt Service Coverage Account and applied in the manner set forth in the
Amended and Restated Security Deposit Agreement.
(d) Commencing with the first Distribution Date occurring on or after
the date twelve years after the Date of Commercial Operation and until the
amount on deposit in the Project Letters of Credit Reserve Account is equal to
or greater than the Project Letters of Credit Required Balance as of such
Distribution Date, the amount of Distributable Cash to be distributed to each
Other Partner pursuant to Section 4.3(b) of the Amended and Restated Partnership
Agreement in respect of such Distribution Date that corresponds to each such
Other Partner's
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allocable share of the Project Letters of Credit Required Contribution
(determined by multiplying the Project Letters of Credit Required Contribution
by the percentage interest of each Other Partner in such Distributable Cash)
shall not be distributed to each such Other Partner on such Distribution Date
but shall instead be transferred to and retained in the Project Letters of
Credit Reserve Account and applied as provided in the Amended and Restated
Security Deposit Agreement.
(e) During the period from the including the date of occurrence of a
Steam Host Event to but excluding the date on which the Agent shall have
delivered the written notice to the Security Agent described in Section 4.15(a)
of the Amended and Restated Security Deposit Agreement, 100% of the
Distributable Cash otherwise distributable to each Partner in accordance with
the Amended and Restated Partnership Agreement and the Amended and Restated
Security Deposit Agreement in respect of each Distribution Date following the
occurrence of such Steam Host Event shall not be distributed to such Partner on
such Distribution Date but shall instead be transferred to and retained in the
Steam Reserve Account and applied in the manner set forth in the Amended and
Restated Security Deposit Agreement.
7.23 Notices under Gas Arrangements. In the case of the Partnership, no
later than November 1, 1994, in conjunction with the Gas Supplier, if necessary
provide any notice required by the Gas Transportation Agreement to ensure the
transportation of natural gas to the Facility for a period commencing on the
Date of Commercial Operation and extending at least through the fifteenth
anniversary of the Date of Commercial Operation.
7.24 Reimbursement of Surety Bond Arranger. Upon receipt of any capital
contribution from SECI pursuant to (i) Section 2.5 of the SECI Term Loan
Agreement or (ii) Section 8.6 of the Partnership Agreement, apply such capital
contribution to reimburse the Surety Bond Arranger pursuant to Section 3.18 or
deposit such capital contribution into the Cash Collateral Account under the
Surety Bond Arrangements Cash Collateral Agreement pursuant to Section 5(b) of
such Agreement.
7.25 Air Permit. (a) The Partnership will, within four weeks prior to
the date of expiration of the Construction Permit, either (i) obtain an
Operating Permit with which it can comply or obtain modifications to the
Construction Permit satisfactory to the Independent Engineer or (ii) commence
the implementation of such mechanical or technical alterations to the Facility
which, in the reasonable judgment of the Independent Engineer, are necessary for
the Partnership to obtain such an Operating Permit prior to the expiration of
the Construction Permit.
(b) For purposes hereof, "Construction Permit" means the permit listed
as item II.8. on Part A of Schedule 3 hereto,
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as the same may be modified or extended from time to time, and "Operating
Permit" means the permit listed as item II.2. on Part B of Schedule 3 hereto.
The provisions of this Section 7.25 are not intended to limit any other
obligations of the Partnership contained in this Agreement.
7.26 Grant of Easement to NYSEG. As soon as practicable following the
Second Capital Contribution Date, but in any event by not later than October 20,
1994, the Borrowers shall submit to NYSEG a form of easement required to be
provided under Section 21(e) of the NYSEG Mortgage and shall diligently proceed
to cause such easement to become effective as NYSEG may require in accordance
with the NYSEG Mortgage.
SECTION 8 NEGATIVE COVENANTS
The Partnership agrees that, so long as the Letter of Credit Commitment
remains in effect, any Note or any Letter of Credit remains outstanding and
unpaid, any Surety Bond Arrangements remain in effect, any Obligations are owing
to the Agent or any Lender hereunder or under the Collateral Security Documents
or any obligations in respect of the Surety Bond Arrangements Reimbursement
Obligations or the Surety Bond are owing to the Surety Bond Arranger, the
Partnership shall not, and shall not permit North Country (as to itself or with
respect to the North Country Project only) to:
8.1 Merger, Sale of Assets, Purchases, Etc. Merge into or consolidate
with any other Person, change its form of organization or its business, or
liquidate or dissolve itself (or suffer any liquidation or dissolution), or
sell, lease, transfer or otherwise dispose of any assets other than (i) in the
case of the Partnership, sales of electric power or thermal energy pursuant to
the Power Purchase Agreement or the Steam Supply Agreement, (ii) sales of those
assets disposed of in the ordinary course of business in accordance with the
then current Operating Budget and not in excess of $250,000 in the aggregate in
any year and (iii) the sale of the Transmission Line (other than the High
Voltage Interconnection System between the Facility and the Saranac
Synchronizing Switchyard) to NYSEG pursuant to the Power Purchase Agreement and
of the Back-up Boiler to the Steam Host pursuant to the Steam Supply Agreement.
Purchase or acquire any assets other than (x) the purchase of assets in
connection with the completion of the Project or the North Country Project, as
the case may be, and provided for in the then current Construction Budget, or,
if different from the Construction Budget, the Completion Budget, (y) the
purchase of assets in the ordinary course of business reasonably required in
connection with the operation and maintenance of the Project as set forth in the
Partnership Operating Budget or the North Country Operating Budget, as the case
may be, and (z) Partnership Permitted
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Investments or North Country Permitted Investments, as the case may be.
8.2 Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness arising under the Basic Documents, provided, that any
Refinancing Loans or Subordinated Refinancing Loans incurred by the
Partnership pursuant to Section 10(a) of the Capital Contribution Agreement
to refinance only a portion (but not all) of the Term Loans held by the
Lenders (other than GE Capital) shall not be permitted Indebtedness under
this Section 8.2 unless the terms of such Loans (other than those terms set
forth in the proviso clause to such Section 10(a)) shall have been approved
in writing by the Required Lenders (which approval shall not be
unreasonably withheld);
(b) Partnership Permitted Indebtedness, provided, that any Indebtedness
described in clause (e) of the definition of Partnership Permitted
Indebtedness in Appendix A shall not be permitted Indebtedness under this
Section 8.2 unless (i) such Indebtedness is incurred on the terms set forth
in the second and third sentences of Section 10.10(a) (ii) of the Amended
and Restated Partnership Agreement, and is otherwise subordinated to the
Term Loans pursuant to terms which are reasonably satisfactory to the
Required Lenders and (ii) the Person to whom such Indebtedness is owed and
the Lenders shall have entered into an intercreditor agreement governing
their respective rights to the Collateral which is reasonably satisfactory
in form and substance to the Required Lenders;
(c) Indebtedness (other than Indebtedness for borrowed money) in
connection with Loan Agreement Permitted Liens described in clause (ii) of
the definition thereof; provided, that such Indebtedness was not incurred
by the Partnership or North Country, as the case may be, after the
occurrence and during the continuance of a Default or an Event of Default;
and
(d) other Indebtedness incurred with the prior written consent of the
Required Lenders.
8.3 Distributions, Etc. (a) In the case of the Partnership, without the
prior written consent of the Required Lenders, make any distributions to the
Partners or to any other Person in respect of any partnership interest in the
Partnership or any payments of management fees to any Partner, whether in cash
or other property, or redeem, purchase or otherwise acquire any interest of any
Partner in the Partnership, or permit any Partner to withdraw any capital from
the Partnership, excluding, however, unless a Default or Event of Default shall
have occurred
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and be continuing, distributions to Partners permitted by the provisions of the
Amended and Restated Partnership Agreement and the Amended and Restated Security
Deposit Agreement.
(b) In the case of North Country, without the prior written consent of
the Required Lenders, make any distributions to its shareholders or to any other
Person in respect of any capital stock of North Country, whether in cash or
other property, or redeem, purchase or otherwise acquire any capital stock of
North Country excluding, however, distributions to the Partnership of (A)
dividends to the Partnership or (B) payments under the Pipeline Construction
Contract or any intercompany debt, so long as such dividends or payments are
deposited in the Revenue Account.
8.4 Liens. Create or suffer to exist any Lien on any of its properties
or assets securing any Indebtedness or other obligation of the Partnership or
North Country or any other Person, other than Loan Agreement Permitted Liens.
Notwithstanding the foregoing, the Partnership shall protect and defend its
interests in, and the Agent's Liens on, the Collateral, and shall protect and
defend its interests in, and the Surety Bond Arranger's Liens on, the Surety
Bond Arrangements Collateral; provided, that the Partnership will pay or cause
to be paid promptly any valid, final and non-appealable judgment enforcing any
lien, cause the Lien relating thereto to be removed and otherwise cause such
lien to be satisfied of record.
8.5 Nature of Business. Engage in any business other than the
development, construction and operation of the Project or the North Country
Project, as the case may be.
8.6 Amendment of Contracts, Etc. Without the prior written consent of
the Required Lenders, agree to or permit (a) the cancellation, suspension or
termination of any Basic Document (except upon the expiration of the stated term
thereof) or (b) the assignment of the rights or obligations of any party to any
Basic Document except (i) as contemplated by this Agreement or the Collateral
Security Documents or (ii) as permitted without the consent of the Partnership
or North Country by the terms of such Basic Document. Except as permitted
pursuant to Section 8.18, without the prior written consent of the Required
Lenders, agree to or permit any amendment, supplement, or modification of, or
waiver with respect to any of the provisions of (i) any Basic Document, (ii) the
Plans and Specifications, (iii) the Partnership Operating Budget (in the case of
the Partnership) or (iv) the North Country Operating Budget (in the case of
North Country). Except as otherwise permitted by the Performance and Payment
Bond, amend, supplement, modify or waive any provision of the Construction
Contract without the prior consent of the issuer of the Performance and Payment
Bond.
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8.7 Investments. Make any investments (whether by purchase of stock,
bonds, notes or other securities, loan, advance or otherwise) other than
Permitted Investments, intercompany advances made by the Partnership to North
Country contemplated by clause (f) of the definition of "Partnership Permitted
Indebtedness" in Appendix A and investments of the collateral subject to the
Surety Bond Arrangements Cash Collateral Agreement in accordance with the terms
thereof.
8.8 Qualifying Facility. In the case of the Partnership, take any
action, or omit to take any action, or permit any other Person to take any
action or omit to take any action, which could cause the Facility to cease to be
a Qualifying Facility, or cause or permit the Facility to use a primary fuel
source other than natural gas.
8.9 Leases. Enter into, or be or become liable under, any agreement for
the lease, hire or use of any real property or of any personal property provided
for in the Partnership Operating Budget or the North Country Operating Budget,
as the case may be, except for the Installment Sale Agreements and leases of
personal property provided for in the Partnership Operating Budget or the North
Country Operating Budget, as the case may be, which are not Capital Leases, or
which are not provided for in the Partnership Operating Budget or the North
Country Operating Budget, as the case may be, and are not Capital Leases and the
aggregate annual rental under which shall not exceed $50,000 in any fiscal year
of the Partnership.
8.10 Change of Office. Change the location of its chief executive
office or principal place of business or the office where it keeps its records
concerning the Project or the North Country Project, as the case may be, and
all contracts relating thereto from that existing on the date of this Agreement
and specified in Section 5.19, unless the Partnership or North Country, as the
case may be, shall have given the Agent at least 30 days' prior written notice
thereof and all action requested by the Agent necessary or advisable in the
Agent's opinion to protect and perfect the liens and security interests with
respect to the right, title, estate and interest of the Partnership in and to
the Collateral created by the Collateral Security Documents to which the
Partnership is a party shall have been taken.
8.11 Change of Name. Change its name except on 60 days' prior written
notice to the Agent.
8.12 Compliance with ERISA. (a) Terminate any Single Employer Plan so
as to result in any material liability to PBGC, (b) engage in or permit any
Affiliate to engage in any "prohibited transaction" (as defined in Section 406
of ERISA or Section 4975 of the Code) involving any Plan which would subject the
Partnership or North Country, as the case may be, to any
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material tax, penalty or other liability, (c) incur or suffer to exist any
material "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, involving any Plan subject to Section 412 of the Code or
Part 3 of Title I(b) of ERISA, (d) allow or permit to exist any event (including
a Reportable Event) or condition which represents a material risk of incurring a
material liability to PBGC, or (e) permit the present value of all benefits
vested under all Single Employer Plans subject to Title IV of ERISA, based on
those assumptions used to fund the Plans, as of any valuation date with respect
to such Plans to exceed the value of the assets of the Plans allocable to such
benefits.
8.13 Transactions with Affiliates and Others. Directly or indirectly,
purchase, acquire, exchange or lease any property from, or sell, transfer or
lease any property to, or borrow any money from, or enter into any management or
similar fee arrangement with, any Affiliate of the Partnership or North Country
or any officer, director or employee of the Partnership or North Country except
for (a) the transactions contemplated by the Basic Documents and (b)
transactions in the ordinary course of business and upon fair and reasonable
terms no less favorable than the Partnership or North Country could obtain, or
could become entitled to, in the arm's length transaction with a Person which is
not an Affiliate of the Partnership or North Country; provided, that no payments
(other than (i) payments of O&M Costs (as defined in the Operation Agreement) to
the Operator, (ii) payments by North Country to the Partnership under the
Pipeline Construction Contract or any intercompany debt and (iii) payments
permitted in any Additional Contract (and the related Consent to Assignment
thereof) to which an Affiliate of the Partnership or North Country is a party)
shall be made to any of the Partnership's or North Country's Affiliates so long
as an Event of Default has occurred and is continuing.
8.14 Acceptance of Facility. In the case of the Partnership, without
the prior written consent of the Agent, accept Final Performance Acceptance or
the Notice of Final Completion (each as defined in the Construction Contract).
8.15 Payment of Certified Construction Costs. In the case of the
Partnership, pay any Certified Construction Cost or expense or any amount
otherwise due to the Contract or any other Person based on any cost or expense
or any percentage thereof except such Certified Construction Costs as are set
forth in the final Cost Certificate duly signed by the Partnership, verified by
the Independent Engineer and accompanied by invoices and other supporting
documentation as the Agent may deem necessary to properly document such
Certified Construction Costs.
8.16 Approval of Additional Contracts. Without the consent of the
Required Lenders, enter into any Additional Contract requiring payments by the
Partnership or North Country
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in excess of $1,500,000 during the term of such Additional Contract or if
the payments under such Additional Contract during the twelve month period
commencing with the effectiveness of such Additional contract, when
aggregated with the payments by the Partnership or North Country under all
other Additional Contracts then in effect during such twelve month
period would exceed $250,000, unless such Additional contract is
contemplated by the Partnership Operating Budget or North Country
Operating Budget most recently approved by the Required Lenders pursuant
to Section 7.10.
8.17 Alteration or Abandonment of the Site or Facility. (i) Alter,
remodel, add to, reconstruct, improve or demolish any part of the
Project or the North Country Project, as the case may be, or any other
Collateral covered by the Collateral Security Documents, except as
contemplated by or in accordance with the Plans and Specifications, in
any manner that could materially impair the value of the security
provided by the Collateral Security Documents, or (ii) abandon the
Project or the North Country Project, as the case may be.
8.18 Change Orders. Execute any revision (of whatever nature or
form) of the Construction Contract or any Change Order or change
bulletin or other instruments or understandings relating thereto without
the Required Lenders' prior written consent, which shall not be
unreasonably withheld, in the case of an amendment or modification which
would (i) result in costs in excess of $50,000 individually, or $250,OO0
in the aggregate, (ii) impair or reduce the operating capacity, cost
efficiency, or reliability of, or materially impair or reduce the value
of, the Project, or (iii) violate any Requirement of Law.
8.19 Capital Expenditures. Directly or indirectly, make or commit
to make any expenditure in respect of the purchase or other acquisition
(including installment purchases or financing leases) of fixed or capital
assets (excluding normal replacements and maintenance which are properly
charged to current operations), except for expenditures covered by the
Completion Budget, the Partnership Operating Budget or the North Country
Operating Budget, as the case may be, or funded by additional capital
contributions or Partner Loans to the Partnership.
8.20 Hazardous materials. (a) Cause or permit the location,
production, treatment, storage, transportation, incorporation, discharge,
emission, release, deposit or disposal of any Hazardous Material in, upon,
under, over or from any part of the Project or the North Country Project,
as the case may be, except in full compliance with all Relevant
Environmental Laws. The Partnership and North Country acknowledge and
agree that neither the Agent nor any Lender shall have any liability or
responsibility for either:
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(i) damage, loss or injury to human health, the environment or
natural resources caused by the presence of Hazardous Materials on
any part of the Project (including the Site), or
(ii) abatement and/or clean-up required under any Environmental
Law of any Hazardous Materials located at the Project (including
the Site) or used by or in connection with the construction,
operation or maintenance of the Project (including the Site),
whether by virtue of the interest of the Agent in the Project
(including the Site), any other part of the Project or the other
Collateral or as the result of the enforcement of their rights or
remedies hereunder with respect to the Project (including the Site)
(including, but not limited to, becoming the owner thereof by
foreclosure or conveyance in lieu of foreclosure).
8.21 Change of Operator. In the case of the Partnership, without the
prior written consent of the Required Lenders, appoint or allow the
appointment of any operator of the Facility other than the Falcon Power
Operating Company.
SECTION 9 EVENTS OF DEFAULT
If any of the Events of Default listed below in this Section 9 shall
occur and be continuing, the Agent may, and upon the written request of
the Required Lenders shall, (i) by notice to the Partnership or North
Country, and the IDA, declare the Letter of Credit Commitment to be
terminated, whereupon the same shall forthwith terminate; and/or (ii)
declare the entire unpaid principal amount of the Loans and the then
outstanding Notes, all interest accrued and unpaid thereon, and all
other Obligations (including, without limitation, obligations in respect
of the Letters of Credit and the Surety Bond Arrangements, although
contingent and unmatured) to be forthwith due and payable, whereupon
such amounts shall become and be forthwith due and payable, without
presentment, demand, protest, or notice of any kind, all of which are
hereby expressly waived by each of the Borrowers; and/or (iii) demand
that the Partnership discharge any or all the obligations supported by
the Letters of Credit by paying or prepaying any amount due or to become
due by the Partnership to the beneficiaries of such Letters of Credit;
and/or (iv) demand that the Partnership discharge the Surety Bond by
paying or prepaying any amount due or to become due by the Surety Bond
Issuer to the beneficiaries of the Surety Bond; and/or (v) foreclose on
any or all of the Collateral; and/or (vi) proceed to enforce all other
remedies available to it under applicable law. Notwithstanding the
foregoing, if an Event of Default referred to in paragraph (g) or (h)
below shall occur, automatically and without notice the actions
described in clauses (i) and (ii) above shall be deemed to have
occurred. All payments under this Section 9 on account of undrawn
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Credit shall be made by the Partnership directly to a cash collateral account
established by the Agent for such purpose for application to the Borrowers'
reimbursement obligations as drafts are presented under the Letters of Credit,
with the balance, if any, to be applied to the Borrowers' obligations under
this Agreement and the Notes as the Agent shall determine with the approval of
the Required Lenders. All payments under this Section 9 on account of the
Surety Bond Arrangements shall be made by the Partnership directly to a cash
collateral account established by the Surety Bond Arranger for such purpose
for application to the Partnership's reimbursement obligations as payments are
made by the Surety Bond Issuer under the Surety Bond, with the balance, if any,
to be applied to the Partnership's obligations to the Surety Bond Arranger under
this Agreement as the Surety Bond Arranger shall determine.
Such Events of Default are the following:
(a) Any principal on the Loans or any reimbursement obligation in
respect of any Letter of Credit or any Surety Bond Arrangements
Reimbursement Obligation shall not be paid when due and payable; or any
interest on the Loans or any fee or any other amount payable to any Lender
or the Letter of Credit Issuer or the Surety Bond Arranger hereunder or
under the Notes shall not be paid when due and shall remain unpaid for five
or more days; provided, however, that any such failure shall not be a
Default or an Event of Default if, and only if, payment of any such amount
is required to be made by means of a drawing under the Senior Debt Service
Letter of Credit and such failure is caused solely by the failure of the
Agent to make a drawing under the Senior Debt service Letter of Credit in
accordance with the provisions of section 4.3(a) of the Amended and
Restated Security Deposit Agreement; or
(b) Any representation or warranty made by any Project Participant in
any Basic Document to which such Person is a party, or any representation,
warranty or statement in any certificate, financial statement or other
document furnished to the Agent by or on behalf of the Borrowers or any
such Person hereunder, or the Borrowers or SECI under any Basic Document,
shall prove to have been false or misleading in any material respect as
of the time made or deemed made unless the circumstances that made any
such representation false or misleading at the time when made shall no
longer be continuing; or the representation contained in Section 5.21
shall cease to be true and correct at any time; or
(c) (i) The Partnership or North Country shall fail to perform or
observe any of its covenants contained in Section 7 (other than Sections
7.1(a), 7.2, 7.5 (in the case of the Partnership), 7.6 (in the case of
North Country) 7.11, 7.17, 7.18 and 7.19) and such failure shall continue
unremedied or
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unwaived for a period of 30 days, or (ii) the Partnership or North Country
shall fail to perform or observe any of its covenants in Section 7.8, 7.9
or 7.21 and such failure shall continue unremedied for 15 days, or (iii)
any Borrower shall fail to perform or observe any other of its covenants
contained in this Agreement or the other Loan Documents (other than the
covenants and obligations referred to in paragraph (a) or clause (c)(i) or
(ii) above); or
(d) The Partnership shall fail to perform or observe any of its
covenants or obligations (other than the covenants and obligations
referred to in paragraphs (a), (b) and (c) above) contained in (i) any of
the Basic Documents (other than the Installment Sale Agreement, the Power
Purchase Agreement, the Steam Supply Agreement and any of the Gas
Arrangements) and such failure shall continue unremedied and unwaived
until the later of (x) the end of the applicable grace period, if any,
contained in the applicable Basic Document, and (y) 30 days after notice
thereof by the Agent to the Partnership and (ii) the Installment Sale
Agreement, the Power Purchase Agreement, the Steam Supply Agreement and
any of the Gas Arrangements and such failure shall continue unremedied or
unwaived until the earlier of (x) the end of the applicable grace period,
if any, contained in such agreement and (y) 30 days after notice thereof
by the Agent to the Partnership; or
(e) The Partnership or North Country shall (i) default in any payment
of principal of or interest on any Indebtedness (other than the Notes),
the principal amount of which exceeds $250,000, for a period in excess of
the lesser of 30 days or the period of grace, if any, provided in the
instrument and agreement under which such Indebtedness was created; or
(ii) default in the observance or performance of any other agreement or
condition relating to any such Indebtedness or contained in any instrument
or agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders)
to cause, such Indebtedness to become due prior to its stated maturity or
to realize upon any collateral given as security therefor; or
(f) Any Project Participant (other than the Partnership or North
Country) shall fail to perform or observe any of its covenants or
obligations contained in any of the Basic Documents for a period in excess
of the grace period, if any, provided for in such Basic Documents and
which failure could have a Material Adverse Effect or materially adversely
affect (i) the ability of any Project Participant to perform its
obligations under such Basic
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Document or any other Basic Document or (ii) the ability of either
Borrower to perform its obligations under any of the Basic Documents
to which it is a party; provided, however, that any such failure by a
Project Participant (other than the Operator or NYSEG) shall not be an
Event of Default if, during the 30 days immediately following such
failure, the Partnership diligently proceeds to enter into an
agreement with a substitute Project Participant as set forth below and
within 30 days of such failure:
(i) a substitute Project Participant shall have entered
into an agreement with the Partnership in substantially the form
of such Basic Document and containing, in the reasonable
judgment of the Required Lenders, terms not materially less
favorable to the Project than the terms contained in such Basic
Document.
(ii) in the reasonable judgment of the Required Lenders,
such substitute Project Participant shall be as financially
sound as the replaced Project Participant (and the guarantor, if
any, of the obligations of such Project Participant) was on the
date of execution of the original Loan Agreement;
(iii) the Agent shall have received fully executed
counterparts of such agreement;
(iv) the Agent shall have received a recognition agreement
from the Partnership and such substitute Project Participant and
an opinion of counsel for such substitute Project Participant,
each in form and substance reasonably satisfactory to the Agent;
and
(v) all Governmental Approvals and other consents and
approvals required in connection with the execution, delivery
and performance of such substitute agreement shall have been
duly obtained or made, and shall be in full force and effect
(other than any such Governmental Approvals or other consents
and approvals which are obtainable in the ordinary course of
business and which are not required for either Borrower or such
substitute Project Participant to execute or deliver such
substitute agreement or to perform its obligations under such
substitute agreement which are then required to be performed by
it, (including the obligation of the Partnership to operate the
Facility as then required pursuant to such substitute agreement
and the other Project Contracts));
whereupon such substitute Project Participant shall be
deemed to be a Project Participant hereunder; or
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(g) Any Project Participant shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a
substantial part of its property, (ii) admit in writing its
inability, or be generally unable, to pay its debts as such debts
become due, (iii) make a general assignment for the benefit of its
creditors, (iv) commence a voluntary case under the Bankruptcy Code
(as now or hereafter in effect), (v) file a petition seeking to
take advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding up, or composition or readjustment of
debts, (vi) fail to controvert in a timely and appropriate manner,
or acquiesce in writing to, any petition filed against such Project
Participant in an involuntary case under the Bankruptcy Code, or
(vii) take any partnership or corporate action for the purpose of
effecting any of the foregoing provided, however, that in the case
of any Project Participant (other than SECI, the Partnership, NYSEG
or the Operator) the events specified in clauses (i) through (vii),
above shall not be an Event of Default if, during the 30 days
immediately following the occurrence of any such event, the
Partnership diligently proceeds to enter into an agreement with a
substitute Project Participant as set forth below and within 30
days of such event:
(1) a substitute Project Participant shall have entered
into an agreement with the Partnership in substantially the form
of such Basic Document and containing, in the reasonable
judgment of the Required Lenders, terms not materially less
favorable to the Project than the terms contained in such Basic
Document;
(2) in the reasonable judgment of the Required Lenders,
such substitute Project Participant shall be as financially
sound as the replaced Project Participant (and the guarantor, if
any, of the obligations of such Project Participant) was on the
date of execution of the Original Loan Agreement;
(3) the Agent shall have received fully executed
counterparts of such agreement;
(4) the Agent shall have received a consent from the
Partnership and such substitute Project Participant and an
opinion of counsel for such substitute Project Participant, each
in form and substance reasonably satisfactory to the Agent; and
(5) all Governmental Approvals and other consents and
approvals required in connection with the execution, delivery
and performance of such substitute
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agreement shall have been duly obtained, or made, and shall be
in full force and effect (other than any such Governmental
Approvals or other consents and approvals which are obtainable
in the ordinary course of business and which are not required
for either Borrower or such substitute Project Participant to
execute or deliver such substitute agreement or to perform its
obligations under such substitute agreement which are then
required to be performed by it (including the obligation of the
Partnership to operate the Facility as then required pursuant to
such substitute agreement and the other Project Contracts));
whereupon such substitute Project Participant shall be deemed to be a
Project Participant hereunder; or
(h) A proceeding or case shall be commenced without the application
or consent of any Project Participant in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution,
winding-up, or the composition or readjustment of debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of
such Project Participant under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts or (iii)
a warrant of attachment, execution or similar process against all or a
substantial part of the assets of such Project Participant, any such
proceeding or case shall continue undismissed, or any order, judgment or
decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 60 or more days, or any
order for relief against such Project Participant shall be entered in an
involuntary case under the Bankruptcy Code provided, however, that the
commencement of a proceeding referred to above in clauses (i) through
(iii) against a Project Participant (other than SECI, the Partnership,
NYSEG or the Operator) shall not be an Event of Default if, during the 90
days immediately following the commencement of a proceeding referred to
above in clauses (i) through (iii) the Partnership diligently proceeds to
enter into an agreement with a substitute Project Participant as set forth
below and within 30 days after the lapse of the 60 day period referred to
above;
(1) a substitute Project Participant shall have entered
into an agreement with the Partnership in substantially the form
of such Basic Document and containing, in the reasonable
Judgment of the Required Lenders, terms not materially less
favorable to the Project than the terms contained in such Basic
Document;
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(2) in the reasonable judgment of the Required Lenders,
such substitute Project Participant shall be as financially
sound as the replaced Project Participant (and the guarantor, if
any, of the obligations of such Project Participant) was on the
date of execution of the Original Loan Agreement;
(3) the Agent shall have received fully executed
counterparts of such agreement;
(4) the Agent shall have received a consent from the
Partnership and such substitute Project Participant and an
opinion of counsel for such substitute Project Participant, each
in form and substance reasonably satisfactory to the Agent; and
(5) all Governmental Approvals and other consents and
approvals required in connection with the execution, delivery
and performance of such substitute agreement shall have been
duly obtained or made, and shall be in full force and effect
(other than any such Governmental Approvals or other consents
and approvals which are obtainable in the ordinary course of
business and which are not required for either Borrower or such
substitute Project Participant to execute or deliver such
substitute agreement or to perform its obligations under such
substitute agreement which are then required to be performed by
it (including the obligation of the Partnership to operate the
Facility as then required pursuant to such substitute agreement
and the other Project Contracts));
whereupon such substitute Project Participant shall be deemed to be a
Project Participant hereunder; or
(i) A judgment or judgments for the payment of money in excess of
$250,000 shall be rendered against the Partnership, SECI (other than a
judgment under the SECI Loan Documents) or North Country and such judgment
or judgments shall remain in effect and unstayed and unbonded and
unsatisfied for a period of 30 or more consecutive days; or
(j) (i) Any provision of any Basic Document (other than the
provisions referred to in paragraph (k) below) shall at any time for any
reason cease to be valid and binding or in full force and effect or any
party thereto shall so assert in writing and the effect thereof shall, in
the reasonable judgment of the Agent, reasonably be expected to have a
Material Adverse Effect; or (ii) any provision of any Basic Document
(other than the provisions referred to in paragraph (k) below) shall be
declared to be null and void or the validity or enforceability thereof
shall be contested by any party thereto or any Governmental Authority and
the
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effect thereof shall, in the reasonable judgment of the Agent,
reasonably be expected to have a Material Adverse Effect; or (iii) any
Project Participant shall deny that it has any further liability or
obligation under any Basic Document to which it is a party and in the
case of such assertion, contest or denial, the Agent shall have
determined that such action could reasonably be expected to have a
Material Adverse Effect; provided, however, that any such failure
described in clauses (i) through (iii) above by or affecting a Project
Participant (other than the Partnership, the Operator or NYSEG) shall
not be an Event of Default if, during the 30 days immediately
following any such event, the Partnership diligently proceeds to
enter into an agreement with a substitute Project Participant as set
forth below and within 30 days of such failure:
(A) a substitute Project Participant shall have entered
into an agreement with the Partnership in substantially the form
of such Basic Document and containing, in the reasonable
judgment of the Required Lenders, terms not materially less
favorable to the Project than the terms contained in such Basic
Document.
(B) in the reasonable judgment of the Required Lenders,
such substitute Project Participant shall be as financially
sound as the replaced Project Participant (and the guarantor, if
any, of the obligations of such Project Participant) was on the
date of execution of the Original Loan Agreement;
(C) the Agent shall have received fully executed
counterparts of such agreement;
(D) the Agent shall have received a recognition agreement
from the Partnership and such substitute Project Participant and
an opinion of counsel for such substitute Project Participant,
each in form and substance reasonably satisfactory to the
Agent; and
(E) all Governmental Approvals and other consents and
approvals required in connection with the execution, delivery
and performance of such substitute agreement shall have been
duly obtained or made, and shall be in full force and effect
(other than any such Governmental Approvals or other consents
and approvals which are obtainable in the ordinary course of
business and which are not required for either Borrower or such
substitute Project Participant to execute or deliver such
substitute agreement or to perform its obligations under such
substitute agreement which are then required to be performed by
it (including the obligation of the Partnership to operate the
Facility as then required
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pursuant to such substitute agreement and the other
Project contracts));
whereupon such substitute Project Participant shall be deemed to be a
Project Participant hereunder; or
(k) Any Collateral Security Document shall cease, for any
reason, to be in full force and effect or any party thereto shall so
assert in writing; any Collateral Security Document shall cease to be
effective to grant a perfected Lien to the Agent for the ratable
benefit of the Lenders, the Letter of Credit Issuer and the Swap
Counterparty on the Collateral described therein with the priority
purported to be created thereby; or
(1) SECI shall, other than in accordance with section 13.2 of
the Amended and Restated Partnership Agreement, at any time cease to
be the managing general partner of the Partnership, or, except as
contemplated by the SECI Term Loan Agreement, SECI shall transfer,
sell, assign, mortgage, pledge or otherwise dispose of its equity
interest in the Partnership without the Required Lenders' prior
written consent, provided that, notwithstanding the foregoing, (x)
the appointment by the GE Capital Limited Partner of a substitute
managing general partner pursuant to Section 13.2(b) of the Amended
and Restated Partnership Agreement which is not GE capital or an
Affiliate of GE Capital or (y) any transfer (except as collateral
security for the SECI Term Loan) by SECI (or any subsequent
transferee of such interest) of its general partnership interest in
the Partnership to any Person which is not GE Capital or an Affiliate
of GE Capital shall require the reasonable consent of the Required
Lenders, and such consent shall not be withheld if, in the reasonable
opinion of the Required Lenders, such Person is (i) a Person which,
individually or on a consolidated basis, has a tangible net worth of
at least $50,000,000, (ii) a Person that has not been convicted or
pleaded guilty or no contest to any criminal act within the five
years immediately preceding such transfer, (iii) a Person that has
demonstrated knowledge and experience in managing and operating
independent power projects of the type and size of the Facility, (iv)
a Person which, individually or as part of a consolidated group, has
not commenced any case or other proceeding, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of
debtors and (v) a Person that shall not have had any past, pending or
threatened lawsuit against any Lender or any Partner (any such Person
meeting the criteria set forth in clauses (i) through (v) above being
hereinafter referred to as a "Permitted Transferee") (for purposes of
this paragraph (1), the term "GE Capital" shall mean General Electric
Capital Corporation and its successors); or
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(m) Falcon and its Affiliates shall cease to directly or
indirectly own 100% of the voting securities of and economic
interests in SECI or Falcon Power Operating Company, except for any
transfer to GE Capital (but with respect to Falcon Power Operating
Company, only so long as GE Capital is a Lender or a Partner) or to
an assignee or designee of GE Capital, provided that any transfer
(except as collateral security for the SECI Term Loans) by Falcon (or
any subsequent transferee of such interests) of the voting securities
and economic interests in SECI or Falcon Power Operating Company to
any Person which is not an Affiliate of GE Capital shall require the
reasonable consent of the Required Lenders; such consent shall not be
withheld if, in the reasonable opinion of the Required Lenders, such
assignee or designee shall be a Permitted Transferee (for purposes of
this paragraph (m), the term "GE Capital" shall mean General Electric
Capital Corporation and its successors); or
(n) (i) Any Person shall engage in any "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan, (ii) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist
with respect to any Plan, or (iii) a Reportable Event shall occur
with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to
terminate any Single Employer Plan, which Reportable Event or
institution of proceedings is, in the reasonable opinion of the
Agent, likely to result in the termination of such Plan for purposes
of Title IV of ERISA, or (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, or (v) the Partnership,
North Country or any Commonly Controlled Entity shall, or is, in the
reasonable opinion of the Agent, likely to incur any liability in
connection with a withdrawal from, or the insolvency or
reorganization of, a Multiemployer Plan, or (vi) any other event or
condition shall occur or exist with respect to a Plan; and in each
case in clauses (i) through (vi) above, such event or condition,
together with all other such events or conditions, if any, could
subject the Partnership or North Country to any tax, penalty or other
liabilities in the aggregate material in relation to the business,
operations, property or financial or other condition of the
Partnership or North Country; or
(o) The Facility shall cease to be a Qualifying Facility; or
(p) An Event of Loss shall have occurred; or
(q) (i) Any Governmental Approval required to be obtained by the
Partnership pursuant to Section 7.8 shall be
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revoked, terminated, withdrawn, suspended, modified or withheld or
shall cease to be in full force and effect, and the Required Lenders
shall have determined that such revocation, termination, withdrawal,
suspension, modification, withholding or cessation could reasonably
be expected to have a Material Adverse Effect; or (a) any proceeding
which could reasonably be expected to have a Material Adverse Effect
shall be commenced by or before any Governmental Authority for the
purpose of so revoking, terminating, withdrawing, suspending,
modifying or withholding any such Governmental Approval and the
Required Lenders shall have determined that such proceeding could
reasonably be expected to have a Material Adverse Effect and such
proceeding shall not have been dismissed or stayed within 180 days,
or notice shall be given by such Governmental Authority for such
purpose and shall have remained uncontested for 30 days; or
(r) The Partnership shall abandon the Project or otherwise cease
to diligently pursue the construction of the Project for a period
longer than 30 consecutive days; or
(s) The Surety Bond Arrangements Cash Collateral Agreement shall
cease, for any reason, to be in full force and effect or the
Partnership shall so assert in writing, or the Surety Bond
Arrangements cash Collateral Agreement shall cease to be effective to
grant a perfected Lien to the Surety Bond Arranger on the Surety Bond
Arrangements Collateral with the priority purported to be created
thereby; in each case unless either (x) all obligations of the Surety
Bond Arranger under the Surety Bond Arrangements shall have been
discharged in accordance with the terms hereof or (y) the Surety Bond
Arrangements Cash Collateral Agreement shall have been terminated in
accordance with the terms thereof.
Notwithstanding any other provision of this Agreement, in no event
shall the existence of a Default or an Event of Default under the SECI Term
Loan Agreement or any other SECI Loan Document constitute a Default or Event of
Default hereunder unless the events giving rise to a Default or Event of
Default under the SECI Term Loan Agreement or such other SECI Loan Document
would independently give rise to a Default or Event of Default hereunder.
Upon the occurrence of and during the continuance of any Event of
Default, the rights, powers and privileges provided in this paragraph and all
other remedies available to the Agent, any Lender, the Letter of Credit Issuer
or the Surety Bond Arranger under this Agreement, any Collateral Security
Document or the Surety Bond Arrangements Cash Collateral Agreement or by
statute or by rule of law may be exercised by such Agent or Lender, the Letter
of Credit Issuer or the Surety Bond Arranger
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at any time and from time to time (subject to the terms of any
intercreditor agreement) whether or not the Loans or other obligations shall be
due and payable, and whether or not the Agent, the Letter of Credit Issuer
(with respect to the Project Letters of Credit Reserve Account) or the Surety
Bond Arranger (with respect to the Surety Bond Arrangements Cash Collateral
Agreement) shall have instituted any foreclosure or other action for the
enforcement of any of the Basic Documents and, in the case of Events of Default
(j) and (q) above, the required determination having been made by the Agent or
the Lenders exercising any remedies hereunder. For the purpose of carrying out
the provisions and exercising the rights, powers and privileges granted by this
paragraph, the Borrowers hereby irrevocably constitute and appoint the Agent
and (with respect to the Surety Bond Arrangements Cash Collateral Agreement
only) the Surety Bond Arranger their true and lawful attorneys-in-fact to
execute, acknowledge and deliver any instruments and to do and to perform any
acts such as are referred to in this paragraph in the name and on behalf of the
Borrowers. Such powers of attorney are powers coupled with an interest and
cannot be revoked.
In the event that the Agent shall have foreclosed on or sold any or
all of the Collateral, the Agent shall apply the proceeds of any such
foreclosure or sale as follows:
first, to the payment in full of the expenses of such sale,
disposition or realization, including all expenses, liabilities and
advances incurred or made by the Agent in connection therewith,
including reasonable attorneys' fees;
second, to, the payment of obligations of the Partnership owing to
the swap Counterparty under the Swap Agreement and the payment in full
of all of the Obligations (including Obligations in respect of the Letters
of Credit) owing to the Lenders, the Letter of Credit Issuer and the
Letter of Credit Participants;
third, to the payment of Obligations owing to the Agent in its
capacities as such, under the Loan Documents; and
fourth, to the Borrowers.
In the event that the Surety Bond Arranger shall have foreclosed on
or sold any or all of the Surety Bond Arrangements Collateral, the Security
Bond Arranger shall apply the proceeds of any such foreclosure or sale as
provided in the Surety Bond Arrangements Cash Collateral Agreement.
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SECTION 10 THE AGENT AND RELATIONS AMONG
LENDERS, ETC.
10.1 Appointment of Agent, Powers and Immunities. Each Lender, the
Letter of Credit Issuer and the Surety Bond Arranger hereby irrevocably
appoints and authorizes the Agent to act as its agent hereunder and under the
other Basic Documents with such powers as are expressly delegated to the Agent
by the terms of this Agreement and the other Basic Documents, together with
such other powers as are reasonably incidental thereto. The Agent shall not
have any duties or responsibilities except those expressly set forth in this
Agreement or in any other Basic Document, or be a trustee for any Lender or the
Letter of Credit Issuer or the Surety Bond Arranger. Notwithstanding anything
to the contrary contained herein, the Agent shall not be required to take any
action which is contrary to this Agreement or any other Basic Document or
applicable law. Neither the Agent, the Letter of Credit Issuer, the Surety Bond
Arranger nor any Lender nor any of their respective affiliates shall be
responsible to any other Lender, the Letter of Credit Issuer or the Surety Bond
Arranger for any recitals, statements, representations or warranties made by
either of the Borrowers or North Country contained in this Agreement or any
other Basic Document or in any certificate or other document referred to or
provided for in, or received by any Lender, the Surety Bond Arranger or the
Letter of Credit Issuer under, this Agreement or any other Basic Document, for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement, the Notes, the other Basic Documents or any other document
referred to or provided for herein or therein or for any failure by either of
the Borrowers to perform its obligations hereunder or thereunder. The 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. Neither the Agent nor any of its directors, officers,
employees or agents shall be responsible for any action taken or omitted to be
taken by it or them hereunder or under any other Basic Document or in
connection herewith or therewith, except for its or their own gross negligence
or willful misconduct.
10.2 Reliance by Agent. The Agent shall be entitled to rely upon any
certificate, notice or other document (including any cable, telegram, telecopy
or telex) believed by it to be genuine and correct and to have been signed or
sent by or on behalf of the proper Person or Persons, and upon advice and
statements of legal counsel, independent accountants and other experts selected
by the Agent. As to any matters not expressly provided for by this Agreement,
the Agent shall not be required to take any action or exercise any discretion,
but the Agent shall be required to act or to refrain from acting upon
instructions of the Required Lenders and shall in all cases be fully protected
in acting, or in refraining from acting, hereunder or under any other Basic
Document in accordance with
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the instructions of the Required- Lenders, and such instructions Of the
Required Lenders and any action taken or failure to act pursuant thereto shall
be binding on all of the Lenders.
10.3 Defaults. The Agent shall not be deemed to have knowledge or
notice of the occurrence of a Default or an Event of Default unless the Agent
has received notice from a Lender or the Partnership referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "Notice of Default". In the event that the Agent receives such a
notice of the occurrence of a Default or an Event of Default the Agent shall
give notice thereof to the Lenders. The Agent shall take such action with
respect to such Default or Event of Default as shall be reasonably directed by
the Required Leaders; provided, that, unless and until the Agent shall have
received such directions, the 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 it shall deem advisable in the best interests of the
Lenders.
10.4 Rights as Lenders. With respect to its commitment to make Loans,
CS shall have the same rights and powers hereunder as any Lender and may
exercise the same as though it were not acting as the Agent and the term
"Lender" or "Lenders" shall, unless the context otherwise indicates, include CS
in its individual capacity. CS and its affiliates may (without having to
account therefor to any Lender) extend credit (on a secured or unsecured basis)
to and generally engage in any kind of lending, trust or other business with
either of the Borrowers or any of their affiliates, as if it were not acting
as the Agent.
10.5 Indemnification. Without limiting the obligations of the
Partnership, under Sections 11.5 and 11.6, the Lenders agree to indemnify the
Agent, ratably in accordance with the aggregate principal amount of the Loans
held by such Lender or, if no Loans are then outstanding, the respective
amounts of their Commitment Percentages, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements or any kind or nature whatsoever which may at any
time (including, without limitation, at any time following the payment of
principal of and/or interest on the Loans) be imposed on, incurred by or
asserted against the Agent in any way relating to or arising out of this
Agreement or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby (including the costs and
expenses which the Partnership is obligated to pay under Sections 11.5 and
11.6) or the enforcement of any of the terms hereof or thereof or of any such
other documents, provided, that no Lender shall be liable for any of the
foregoing to the extent they arise from the Agent's gross negligence or wilful
misconduct. The Agent shall be fully justified in refusing to take or to
continue to take any action hereunder unless it shall
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first be indemnified to its satisfaction by the Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action.
10.6 Non-Reliance on Agent and Other Lenders. Each Lender represents
that it has, independently and without reliance on the Agent, or any other
Lender, 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, the IDA and SECI General and its own decision to enter into
this Agreement and agrees that it will, independently and without reliance upon
the Agent or any other Lender, 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. Neither the
Agent nor any Lender shall be required to keep informed as to the performance
or observance by the Borrowers 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. Except for notices, reports and other
documents and information expressly required to be furnished to the Lenders by
the Agent hereunder, neither the Agent nor any Lender shall have any duty or
responsibility to provide any Lender with any credit or other information
concerning the Borrowers, or any affiliate of the Borrowers, which may come
into the possession of the Agent or such Lender or any of its or their
affiliates.
10.7 Resignation or Removal of Agent. Subject to the appointment and
acceptance of a successor Agent as provided below, the Agent may resign at any
time by giving notice thereof to the Lenders and the Partnership, and the Agent
may be removed at any time with or without cause by the Required Lenders. Upon
any such resignation or removal, the Required Lenders shall have the right to
appoint A successor Agent. If no successor Agent shall have been appointed by
the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Agent's giving of notice of resignation or the Required
Lenders' removal of the retiring Agent, then the retiring Agent may, on behalf
of the Lenders, appoint a successor Agent, which shall be (i) a bank with an
office (or having an affiliate with an office) in New York, New York having a
combined capital and surplus of not less than $500,000,000 and (ii) an Eligible
Assignee. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation or removal
hereunder as Agent, the provisions of this Section 10 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 Agent.
Amendment and Restatement
of Loan Agreement
<PAGE>
96
10.8 Authorization. The Agent is hereby authorized by the Lenders,
the Surety Bond Arranger and the Letter of Credit Issuer to execute, deliver
and perform each of the Basic Documents to which the Agent (whether as "Agent",
"Grantee" or "Mortgagee") is or is intended to be a party and each of the
Lenders, the Surety Bond Arranger and the Letter of Credit Issuer agrees to be
bound by all of the agreements of the Agent contained in the Basic Documents.
SECTION 11 MISCELLANEOUS
11.1 Amendments and Waivers. (a) No provision of this Agreement or of
any other Basic Document to which the Agent is a party may be amended,
supplemented, modified or waived, except in accordance with the terms of this
section 11. With the written consent of the Required Lenders, the Borrowers
and the Agent may, from time to time, enter into written amendments,
supplements or modifications hereto for the purpose of adding any provisions to
this Agreement or the Notes or any other Basic Document to which the Agent is a
party or changing in any manner the rights of the Agent or of the Borrowers
hereunder or thereunder, and the Agent, with the consent of the Required
Lenders, may execute and deliver to the Borrowers a written instrument waiving,
on such terms and conditions as the Agent may specify in such instrument, any
of the requirements of this Agreement or the Notes or any other Basic Document
to which the Agent is a party or any Default or Event of Default and its
consequences. Any such waiver and any such amendment, supplement or
modification shall be binding upon the Borrowers, the Lenders and all future
holders of the Notes; provided, however, that no such waiver and no such
amendment, supplement or modification shall (i) extend the maturity of any
Note, or reduce the rate or extend the time of payment of interest thereon, or
reduce the principal amount thereof, or change the amount or terms of any
Agency Fees or Letter of Credit Fees, or amend, modify or waive any provision
of this Section, or reduce the percentage specified in the definition of
Required Lenders or release any Collateral or amend any provision hereof which
would result in borrowings or payments by the Borrowers hereunder on a basis
other than pro rata among all the Lenders, in each case without the written
consent of all the Lenders, or (ii) amend, modify or waive any provision of
Section 10 without the written consent of the then Agent or (iii) amend, modify
or waive any provision of section 3 applicable to the Letter of Credit Issuer
without the written consent of the then Letter of Credit Issuer or (iv) amend,
modify or waive any provision of Section 3 applicable to the Surety Bond
Arranger without the written consent of the Surety Bond Arranger or (v) amend,
modify or waive Section 2.3(b) without the consent of the then Swap
Counterparty. Notwithstanding the foregoing, so long as (1) GE Capital is a
Partner of the Partnership, (2) GE Capital holds indebtedness of SECI in its
capacity as SECI Term Lender or (3) in the reasonable judgment of the Required
Lenders,
Amendment and Restatement
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<PAGE>
97
GE Capital otherwise maintains a comparable significant economic investment in
the Partnership which is junior in right of payment to the interest of the
Lenders hereunder and the Required Lenders reasonably believe that the holding
of such investment would cause GE Capital, in its capacity as such holder, to
take or maintain positions affecting the Partnership which are materially
different from the positions which would be taken or maintained by GE Capital
if its only investment in the Partnership were the holding of the Term Notes,
GE Capital shall not have the right to vote on any matter expressly requiring
the consent or waiver of the "Required Lenders"; provided, that (i) each Lender
agrees that in exercising its right to vote in instances when the right of GE
Capital to vote is so restricted, such Lender will not agree to any such
amendment, waiver or consent which, in such Lender's reasonable judgment, will
have an effect on GE Capital as a Lender which is different from the effect
which such amendment, waiver or consent will have on such Lender and (ii) the
Borrowers and the Lenders agree that any vote cast by any Lender in violation
of the immediately preceding clause (i) shall be void and of no force or
effect; provided, further, that the foregoing limitation on the voting rights
of GE Capital as a Lender shall not apply to any Permitted Assignee of GE
Capital unless such Permitted Assignee meets any of the tests set forth in
clauses (1), (2) or (3) above. The term "GE Capital" as used in this Section
11.1(a) shall mean General Electric Capital Corporation and its successors.
(b) Notwithstanding the provisions of Section 11.1(a), the Partnership
may, without the consent of the Agent or the Lenders, modify the Construction
budget set forth in Schedule 5-A to the Original Loan Agreement solely in order
to change the characterization of any item therein, in connection with the
Project, as an IDA Building Cost, an IDA Development Cost or a Partnership
Development Cost or, in connection with the North Country Project, as an IDA
(North Country) Building Cost or an IDA (North Country) Development Cost.
11.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing, by telecopier
or, if available, by telex and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or when
deposited in the mail, first class postage prepaid, or in the case of
transmission by telecopier, when confirmation of receipt is obtained, or in the
case of telex notice, when sent, answerback received, addressed as follows in
the case of the Partnership, the IDA, the Agent, the Letter of Credit Issuer
and the Surety Bond Arranger and as set forth in Schedule 8 in the case of the
Lenders, or to such other address as may be hereafter notified by the
respective parties hereto and any future holders of the Notes:
Amendment and Restatement
of Loan Agreement
<PAGE>
98
The Partnership
or North Country: Five Post Oak Park
Suite 1400
Houston, Texas 77027
Attention: General Counsel
Telecopy: (713) 622-0045
The IDA: County of Clinton Industrial
Development Agency
2 Industrial Boulevard East
Plattsburgh, New York 12901
Attention: Chairman
Telecopy:
The Agent: Credit Suisse
Tower 49
12 East 49th Street
New York, New York 10017
Telecopy: (212) 238-5390
Amendment and Restatement
of Loan Agreement
<PAGE>
99
The Letter of
Credit Issuer and
Surety Bond
Arranger: General Electric Capital Corporation
1600 Summer Street
Stamford, Connecticut 06927
11.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Agent or the Lenders, any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
11.4 Survival. All representations and warranties made in this
Agreement and in any document, certificate or statement delivered pursuant
hereto or in connection herewith shall survive the execution and delivery of
this Agreement and the Notes.
11.5 Expenses and Taxes. Whether or not any Term Loan is made or any
of the other transactions contemplated by this Agreement are consummated, the
Partnership shall (without duplication of any such amounts as shall expressly
be required to be paid by the Partnership pursuant to the other provisions of
this Agreement):
(a) pay all reasonable expenses incurred by GE Capital with respect
to the negotiation, preparation, execution and delivery of this Agreement
and the other Basic Documents, any and all transactions contemplated
hereby or thereby and the preparation of any document reasonably required
hereunder or thereunder (other than expenses incurred by GE Capital
specifically relating to syndication which shall be for the account of GE
Capital and internal overhead expenses), including (without limiting the
generality of the foregoing) all reasonable fees and expenses of Simpson
Thacher & Bartlett, counsel for GE Capital, all reasonable fees and
expenses of the Independent Engineer, the Gas Consultant, insurance
consultants, all title and conveyancing charges, recording and filing fees
and taxes, mortgage taxes, intangible personal property taxes, escrow
fees, revenue and tax stamp expenses, insurance premiums (including title
insurance premiums), placement and other fees of investment bankers of the
Borrowers, court costs, and surveyors', appraisers', architects',
engineers', environmental, gas and other consultants', and accountants'
reasonable fees and disbursements,
Amendment and Restatement
of Loan Agreement
<PAGE>
100
(b) pay all reasonable expenses incurred by the Agent, the Lenders,
the Letter of Credit Issuer and the Surety Bond Arranger (other than
internal overhead expenses) with respect to (i) any amendments, waivers or
supplements to any of the Basic Documents, or (ii) any request of the
Borrowers for a consent, waiver or other action in connection with the
Assigned Contracts and with respect to enforcement of their rights and
remedies hereunder,
(c) pay the Agent for all its reasonable costs and expenses incurred
in connection with, and to pay, indemnify and hold the Agent harmless from
and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of
any kind or nature whatsoever arising out of or in connection with, the
enforcement or preservation of any rights under this Agreement and the
other Basic Documents and any such other documents, including without
limitation, reasonable fees and disbursements of counsel to the Agent
incurred in connection with the foregoing and in connection with advising
the Agent with respect to its rights and responsibilities under this
Agreement, the other Basic Documents and the documentation relating
thereto, and
(d) pay, indemnify, and hold each Lender, the Letter of Credit Issuer
and the Surety Bond Arranger harmless from and against, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other similar taxes
(and not taxes imposed on or measured by net income, overall gross
receipts or capital of such Lender, the Letter of Credit Issuer, the
Surety Bond Arranger or any franchise tax imposed on such Lender, the
Letter of Credit Issuer or the Surety Bond Arranger), if any, which may be
payable or determined to be payable in connection with the execution and
delivery of, or consummation of any of the transactions contemplated by,
or any amendment, supplement or modification of, or any waiver or consent
under or in respect of, this Agreement and the other Basic Documents and
any such other documents;
provided, that the Partnership shall have no obligation hereunder with respect
to indemnified liabilities of the Agent, any Lender, the Letter of Credit
Issuer or the Surety Bond Arranger or any of their respective Affiliates or any
of their respective officers and directors to the extent that such indemnified
liability resulted from the gross negligence or willful misconduct of the
Agent, such Lender, the Letter of Credit Issuer or the Surety Bond Arranger.
The agreements in this subsection shall survive repayment of the Notes and all
other amounts payable hereunder.
11.6 Indemnification. The Partnership agrees to pay, indemnify and
hold the Agent, each Lender, the Letter of Credit Issuer and the Surety Bond
Arranger and their respective
Amendment and Restatement
of Loan Agreement
<PAGE>
101
affiliates, directors and officers harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at any
time (including without limitation at any time following the payment of the
Notes) be imposed on, incurred by or asserted against any such Person in any
way relating to or arising out of this Agreement or the other Basic Documents,
or any documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby (all of the foregoing,
collectively, the "indemnified liabilities"), provided, that the Partnership
shall have no obligation hereunder to any such Person with respect to
indemnified liabilities arising from (i) the gross negligence or willful
misconduct of any such Person, (ii) legal proceedings commenced against any
such Person by any security holder or creditor of any such Person arising out
of and based upon rights afforded any such security holder or creditor solely
in its capacity as such, or (iii) legal proceedings commenced against any such
Person by any Permitted Assignee or Transferee. The agreements in this Section
shall survive repayment of the Notes and all other amounts payable hereunder.
11.7 Successors and Assigns; Transferees; Transferred Interests. (a)
This Agreement shall be binding upon and inure to the benefit of the Borrowers,
the Agent, the Letter of Credit Issuer, the Leaders, the Surety Bond Arranger,
all future holders of the Notes and their respective successors and assigns,
except that neither of the Borrowers may assign or transfer any of its rights
or obligations under this Agreement without the prior written consent of the
Lenders, the Letter of Credit Issuer and the Surety Bond Arranger.
(b) (i) Each Lender, in accordance with all Applicable Laws, may at
any time assign to one or more Persons (a "Permitted Assignee") all or a
portion of its interests, rights and obligations under this Agreement
(including, without limitation, interests in Letters of Credit, Loans at the
time owing to it and the Notes); provided that (i) at no one time shall there
be more than ten (10) Lenders in addition to GE Capital and its successors and
direct and indirect Permitted Assignees (GE Capital and any such successors and
Permitted Assignees being herein referred to as the "GE Capital Lenders"),
(ii) at no one time shall there be more than seven (7) GE Capital Lenders and
(iii) after giving effect to any such assignment, both the transferor Lender
(unless such Lender shall have transferred all of its interests hereunder) and
each Permitted Assignee of such transferor Lender shall hold Loans in a
principal amount equal to at least the lesser of (x) $10,000,000 and (y)
4.88687782% of the aggregate principal amount of all the Loans outstanding
immediately before giving effect to such assignment.
(ii) The parties to each such assignment shall execute and deliver to
the Agent, for its acceptance and recording in the
Amendment and Restatement
of Loan Agreement
<PAGE>
102
Register referred to in paragraph (iii) of this Section 11.7, an assignment
substantially in the form of Exhibit E (an "Assignment and Acceptance"),
together with any Note or Notes subject to such assignment. Upon its receipt of
an Assignment and Acceptance executed by an assigning Leader and a Permitted
Assignee, together with any Note or Notes subject to such assignment and the
written consent to such assignment, if required, the Agent shall, if such
Assignment and Acceptance has been completed, (x) accept such Assignment and
Acceptance, (y) record the information contained therein in the Register and
(z) give prompt notice thereof to the Partnership. Within five Business Days
after notice of execution and delivery of such assignment, the Borrowers; at
the expense of the Partnership and North Country, shall execute and deliver to
the Agent in exchange for the assigning Lender's surrendered Note or Notes a
new Note or Notes, to the order of such Permitted Assignee in an amount
reflecting the portion of the Term Loans assumed by it pursuant to such
assignment and a new Note or Notes to the order of the assigning Lender in an
amount reflecting the portion of the Term Loans retained by it hereunder. Such
new Note or Notes shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Note or Notes, shall be dated
the date of such surrendered Note or Notes and shall otherwise be in
substantially the form of Exhibit A-1, A-2 or A-3, as the case may be.
Cancelled Notes shall be returned to the Borrowers by the Agent after
confirming delivery of the new Note or Notes to such Permitted Assignee. In
addition, the Partnership shall use its reasonable efforts to provide to the
Agent reliance letters covering the opinions and reports required to be
delivered on or prior to the Construction Loan Closing Date. Upon (x) the
execution, delivery and recording of such assignment, (y) delivery of an
executed copy thereof to the Partnership and (z) payment by the Permitted
Assignee of the purchase price specified therein, (1) such Permitted Assignee
shall be a Lender party hereto and, to the extent provided in such assignment
(but in no event in excess of the amount assigned), shall have the rights and
obligations of a Lender and a Letter of Credit Participant hereunder and (2)
the assigning Lender shall, to the extent provided in such assignment with
respect to the interests, rights and obligations of such Lender so assigned, be
released from its obligations under this Agreement.
(iii) The Agent shall maintain at its address referred to in Section
11.2 a copy of each Assignment and Acceptance delivered to it and a register
for the recordation of the names and addresses of the Lenders and the principal
amount of the Term Loan held by each Lender from time to time (the
"Register"). The entries in the Register shall be conclusive in the absence of
manifest error, and the Borrowers, the Agent and the Lenders may treat each
Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrowers or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
Amendment and Restatement
of Loan Agreement
<PAGE>
103
(c) The Borrowers acknowledge that each Lender may at any time grant
participations in Letters of Credit or in this Agreement and the Collateral
Security Documents (collectively, "Participations") to one or more Persons
(such Persons being herein called "Transferees"); provided, however, that (i)
such Lender's obligations under this Agreement and under any Collateral
Security Document shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iii) the Transferees shall be entitled to the benefit of the
provisions contained in Sections 4.5, 4.7, 4.8 and 4.9, and (iv) the Borrowers
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement and under any
Collateral Security Documents.
(d) The Borrowers authorize each Lender to disclose to any prospective
Permitted Assignee pursuant to paragraph (b) of this Section 11.7 or
prospective Transferee pursuant to paragraph (c) of this Section 11.7 all
financial or other necessary information in such Lender's possession concerning
the Borrowers, any Partner or the Project which has been delivered to such
Lender by or on behalf of the Borrowers pursuant to this Agreement or any other
Basic Document or which has been delivered to such Lender by or on behalf of
the Borrowers or any Affiliate of the Borrowers in connection with such
Lender's credit evaluation of the Borrowers and the Project prior to or after
entering into this Agreement, provided, however, that if any such information
furnished to such Lender, prospective Assignee or prospective Transferee is
marked in writing as being confidential information, such Lender, prospective
Assignee or prospective Transferee shall hold such information confidential,
except that such information may be disclosed (i) to the Agent's and Lenders',
prospective Assignee's or prospective Transferee's employees, officers,
directors and other personnel engaged in the transactions contemplated by the
Basic Documents from time to time, (ii) to the Agent's and Lenders' prospective
Assignee's or prospective Transferee's counsel, independent certified public
accountants or independent insurance advisors or insurance examiners or
engineers or consultants who agree to hold such information confidential, (iii)
as may be required by any statute, court or administrative order or decree or
governmental ruling or regulation, (iv) as may be requested by any Governmental
Authority or (v) as may he necessary in connection with the enforcement of any
provision of any Basic Document.
(e) Each Lender may assign and pledge all or any portion of the Term
Notes held by it and the Term Loans owing to 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 Term Notes and Term Loans made by the Borrowers to the assigning
and/or the pledging Lender in
Amendment and Restatement
of Loan Agreement
<PAGE>
104
accordance with the terms of this Agreement shall satisfy the Borrowers'
obligations hereunder in respect of such assigned Term Notes and Term Loans to
the extent of such payment. No such assignment shall release the assigning
Lender from its obligations hereunder.
11.8 No Recourse. (a) The obligations and agreements of the IDA
contained herein and any other instrument or document executed in connection
therewith or herewith, and any other instrument or document supplemental
thereto or hereto, shall be deemed the obligations and agreements of the IDA
and not of any member, officer, agent or employee of the IDA in his individual
capacity, and the members, officers, agents and employees of the IDA shall not
be liable personally hereon or thereon or be subject to any personal liability
or accountability based upon or in respect hereof or thereof or of any
transaction contemplated hereby or thereby. The obligations and agreements of
the IDA contained herein and therein shall not constitute or give rise to an
obligation of the State of New York or Clinton County, New York and neither the
State or New York nor Clinton County, New York shall be liable hereon or
thereon, and, further such obligations and agreements shall not constitute or
give rise to a general obligation of the IDA, but rather shall constitute
limited obligations of the IDA payable solely from the revenues of the IDA
derived and to be derived from the lease, sale or other disposition of the
Project (except for revenues derived by the IDA from the Unassigned Rights (as
defined in the Installment Sale Agreements)) or by recourse to the Project.
(b) Subject to Section 11.8 (a), there shall be full recourse to the
Borrowers and all of their assets for the liabilities of the Borrowers under
this Agreement and the Notes and their other Obligations, but in no event shall
there be any recourse against any partner, including SECI, or any officer,
director, employee, shareholder or holder of any equity interest in the
Partnership or any partner, or any affiliate thereof, nor shall any partner,
including SECI, or any officer, director, employee, shareholder or holder of
any equity interest in the Partnership or any partner, or any affiliate
thereof, be personally liable or obligated for such liabilities and Obligations
of the Partnership except as may be specifically provided in any other Basic
Document to which such Person is a party. Nothing herein contained shall limit
or be construed to limit the liabilities and obligations of any such Person in
accordance with the terms of any other Basic Document creating such
liabilities and obligations to which such Person is a party.
11.9 Severability. Any provision hereof which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and without affecting the
validity or enforceability of any provision in any other jurisdiction.
Amendment and Restatement
of Loan Agreement
<PAGE>
105
11.10 Headings. The headings of the various sections and paragraphs of
this Agreement are for convenience of reference only, do not constitute a part
hereof and shall not affect the meaning or construction of any provision
hereof.
11.11 Counterparts. This Agreement may be executed by one or more of
the parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
11.12 The Lenders, the Letter of Credit Issuer and the Surety Bond
Arranger Sole Beneficiaries. All conditions of the obligations of the Lenders
to make Loans and to take participating interests in Letters of Credit
hereunder, all conditions of the obligations of the Letter of Credit Issuer to
issue the Letters of Credit hereunder and all conditions to the obligation of
the Surety Bond Arranger to enter into the Surety Bond Arrangements as
contemplated hereby are imposed solely and exclusively for the benefit of the
Lenders, the Letter of Credit Issuer and the Surety Bond Arranger and their
respective assigns and no other Person shall have standing to require
satisfaction of such conditions in accordance with their terms or be entitled
to assume that the Lenders will refuse to make Loans and to take participating
interests in Letters of Credit, that the Letter of Credit Issuer will refuse to
issue the Letters of Credit or that Surety Bond Arranger will refuse to enter
into and maintain the Surety Bond Arrangements in the absence of strict
compliance with any or all of such conditions and no Person shall, under any
circumstances, be deemed to be a beneficiary of such conditions, any or all of
which may be freely waived in whole or in part by the Lenders, the Letter of
Credit Issuer and the Surety Bond Arranger at any time if in their sole
discretion it deems it advisable to do so. Inspections and approvals of Plans
and Specifications, the Project and the workmanship and materials used therein
impose no responsibility or liability of any nature whatsoever on the Agent,
the Lenders, the Surety Bond Arranger, the Gas Consultant or the Independent
Engineer, and no Person shall, under any circumstances, be entitled to rely
upon such inspections and approvals by the Agent, the Lenders, the Surety Bond
Arranger, the Gas Consultant or the Independent Engineer for any reason. The
Lenders are obligated hereunder solely to make Loans and to take participating
interests in Letters of Credit, the Letter of Credit Issuer is obligated
hereunder solely to issue the Letters of Credit and the Surety Bond Arranger is
obligated hereunder solely to enter into the Surety Bond Arrangements if and to
the extent required by this Agreement.
11.13 Governing Law. This Agreement and the Notes and the rights and
obligations of the parties under this Agreement and the Notes shall be governed
by, and construed and interpreted in accordance with, the law of the State of
New York.
Amendment and Restatement
of Loan Agreement
<PAGE>
106
11.14 Submission to Jurisdiction; Waivers. (a) Each of the Borrowers
hereby irrevocably and unconditionally:
(i) Submits for itself and its property in any legal action or
proceeding relating to this Agreement or any other Basic Document, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the State of New York,
the courts of the United States of America for the Southern District of
New York, and appellate courts from any thereof;
(ii) Consents that any such action or proceeding may be brought in
such courts, and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in any inconvenient court and agrees not
to plead or claim the same;
(iii) Agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Borrower at its address set forth in Section 11.2 or at such other address
of which the Agent shall have been notified pursuant thereto; and
(iv) Agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction.
(b) The Borrowers, the Agent, the Letter of Credit Issuer, the Surety
Bond Arranger and each Lender hereby irrevocably and unconditionally waive
trial by jury in any legal action or proceeding referred to in paragraph (a)
above.
11.15 Maximum Interest Rate. Anything to the contrary notwithstanding,
the Lenders shall not charge, take or receive and the Borrowers shall not be
obligated to pay to the Lenders, any amounts constituting interest on the Loans
in excess of the maximum rate permitted by applicable law.
11.16 Release of Collateral. Following the payment in full of all
Obligations, the Agent shall release the Collateral under the Collateral
Security Documents to the Partnership and the IDA, as the case may be.
11.17 Consent. The parties hereto agree that Amended and Restated
Appendix A shall amend and restate Appendix A to all of the Basic Documents of
which Appendix A is a part or in which Appendix A is incorporated by reference.
Amendment and Restatement
of Loan Agreement
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
SARANAC POWER PARTNERS, L.P.
By: Saranac Energy Company, Inc., its
general partner
By: /s/ Martin H. Young Jr.
------------------------------------
Title:
NORTH COUNTRY GAS PIPELINE CORPORATION
By: /s/ Martin H. Young Jr.
------------------------------------
Title:
COUNTY OF CLINTON INDUSTRIAL DEVELOPMENT
AGENCY
By: /s/ Robert M. Garron
------------------------------------
Title:
GENERAL ELECTRIC CAPITAL CORPORATION,
as a Lender and as Letter of Credit Issuer
By: /s/ illegible
------------------------------------
Title:
CREDIT SUISSE, as Agent, a Co-Agent and a Lender
By:
------------------------------------
Title:
ABN-AMRO BANK, N.V., as a Co-Agent and
a Lender
By:
------------------------------------
Title:
Amendment and Restatement
of Loan Agreement
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly
authorized officers as of the' day and year first above written.
SARANAC POWER PARTNERS, L.P.
By: Saranac Energy Company, Inc.,
its general partner
By:
------------------------------------
Title:
NORTH COUNTRY GAS PIPELINE CORPORATION
By:
------------------------------------
Title:
COUNTY OF CLINTON INDUSTRIAL
DEVELOPMENT AGENCY
By:
------------------------------------
Title:
GENERAL ELECTRIC CAPITAL CORPORATION, as a
Lender and as Letter of Credit Issuer
By:
------------------------------------
Title:
CREDIT SUISSE, as Agent, a Co-Agent and a
Lender
By: /s/ M. Hurd /s/ PP Schultheiss
------------------------------------
Title: Associate Associate
ABN-AMRO BANK, N.V., as a Co-Agent and
a Lender
By:
------------------------------------
Title:
Amendment and Restatement
of Loan Agreement
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
SARANAC POWER PARTNERS, L.P.
By: Saranac Energy Company, Inc.,
its general partner
By:
------------------------------------
Title:
NORTH COUNTRY GAS PIPELINE CORPORATION
By:
------------------------------------
Title:
COUNTY OF CLINTON INDUSTRIAL
DEVELOPMENT AGENCY
By:
------------------------------------
Title:
GENERAL ELECTRIC CAPITAL CORPORATION, as a
Lender and as Letter of Credit Issuer
By:
------------------------------------
Title:
CREDIT SUISSE, as Agent, a Co-Agent and a
Lender
By:
------------------------------------
Title: Associate
ABN-AMRO BANK, N.V., as a Co-Agent and
a Lender
By: /s/ Robert S. Mudge
------------------------------------
Title: Robert S. Mudge
Vice President
Amendment and Restatement
of Loan Agreement
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers
as of the day and year first above written.
SARANAC POWER PARTNERS, L.P.
By: Saranac Energy Company, Inc.,
its general partner
By:
------------------------------------
Title:
NORTH COUNTRY GAS PIPELINE CORPORATION
By:
------------------------------------
Title:
COUNTY OF CLINTON INDUSTRIAL
DEVELOPMENT AGENCY
By:
------------------------------------
Title:
GENERAL ELECTRIC CAPITAL CORPORATION, as a
Lender and as Letter of Credit Issuer
By:
------------------------------------
Title:
CREDIT SUISSE, as Agent, a Co-Agent and a
Lender
By:
------------------------------------
Title: Associate
ABN-AMRO BANK, N.V., as a Co-Agent and
a Lender
By: /s/ illegible
------------------------------------
Title:
Amendment and Restatement
of Loan Agreement
<PAGE>
103
NATIONAL WESTMINSTER BANK PLC, as a Co-
Agent and a Lender
By: /s/ Weber
------------------------------------
Title: Vice President
THE FUJI BANK, LIMITED, NEW YORK BRANCH, as a
Co-Agent and a Lender
By: /s/ Toru Maeda
------------------------------------
Title: Toru Maeda
Joint General Manager
THE SUMITOMO BANK, LIMITED,
asLead Manager and Lender
By:
------------------------------------
Title:
Amendment and Restatement
of Loan Agreement
<PAGE>
NATIONAL WESTMINSTER BANK PLC, as a
Co-Agent and a Lender
By:
------------------------------------
Title:
THE FUJI BANK, LIMITED, NEW YORK BRANCH, as a
Co-Agent and a Lender
By:
------------------------------------
Title:
THE SUMITOMO BANK, LIMITED, as
Lead Manager and a Lender
By: /s/ illegible
------------------------------------
Title: Senior Vice President
Amendment and Restatement
of Loan Agreement
<PAGE>
1
AMENDED AND RESTATED
SECURITY DEPOSIT AGREEMENT
AMENDED AND RESTATED SECURITY DEPOSIT AGREEMENT, dated as of October 7,
1994, among (i) SARANAC POWER PARTNERS, L.P., a Delaware limited partnership
(the "Partnership"), of which SARANAC ENERGY COMPANY, INC., a Delaware
corporation, is the general partner (the "General Partner" or "SECI"), (ii)
CREDIT SUISSE, as agent (in such capacity, the "Agent") (x) for the lenders
parties to the Loan Agreement referred to below (the "Lenders") and GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation ("GE Capital"), as the
letter of credit issuer (in such capacity, the "Letter of Credit Issuer") and
the surety bond arranger (in such capacity, the "Surety Bond Arranger") party to
the Loan Agreement referred to below and (y) with respect to the Collateral
Security Documents (as defined in the Loan Agreement), (iii) GE Capital, as the
lender under the SECI Term Loan Agreement referred to below (in such capacity,
the "SECI Term Lender"), as the swap counterparty under the Swap Agreement
referred to below (in such capacity, the "Swap Counterparty"), as the agent
under the Original Loan Agreement (in such capacity, the "Original Agent") and
as a limited partner of the Partnership (in such capacity, the "GE Capital
Limited Partner"), (iv) TPC SARANAC PARTNER ONE, INC., a Delaware corporation
("TPC One"), (v) TPC SARANAC PARTNER TWO, INC., a Delaware corporation ("TPC
Two") and, together with TPC One, the "Other Limited Partners"), (vi) the
General Partner and (vii) THE FUJI BANK AND TRUST COMPANY, a bank organized
under the laws of the State of New York, as agent for the Agent, the Lenders, GE
Capital, the Other Limited Partners and the General Partner under this Amended
and Restated Security Deposit Agreement (in such capacity, the "Security
Agent").
W I T N E S S E T H :
WHEREAS, unless otherwise defined herein, all terms that are defined in
Amended and Restated Appendix A hereto shall have the meanings therein assigned
to such terms;
WHEREAS, in order to finance the costs of developing, constructing and
equipping the Project, the Partnership, North Country and the IDA entered into
the Loan Agreement pursuant to which the Lenders made Construction Loans and
Terms Loans to, and the Letter of Credit Issuer issued or will issue letters of
credit for the account of, the Partnership;
WHEREAS, the Partnership and the Swap Counterparty have entered into
the Swap Agreement;
WHEREAS, at the request of the Partnership, the Surety Bond Arranger
has entered into the Surety Bond Arrangements;
Amended and Restated
Security Deposit Agreement
<PAGE>
2
WHEREAS, (i) the obligations of the Borrowers under the Loan Agreement
and the other Loan Documents (other than reimbursement and fee obligations in
respect of the Senior Debt Service Reserve "B" Letter of Credit and the Surety
Bond Arrangements Reimbursements Obligations), including their obligations to
repay the Term Loans with interest thereon, and (ii) the obligations of the
Partnership under the Swap Agreement are secured by, among other things, a first
assignment of and prior perfected security interest in all of the revenues of
the Partnership pursuant to the terms and provisions of the Security Agreement;
WHEREAS, in order to give effect to said assignment and security
interest, the Partnership, GE Capital, as Original Agent, Lender and Letter of
Credit Issuer, and the Security Agent entered into the Security Deposit
Agreement, dated as of the Conformed Agreement Date (the "Original Security
Deposit Agreement"), pursuant to which the Partnership agreed that certain of
its revenues would be paid directly to the Security Agent, as agent for the
Original Agent, the Construction Lenders and the Letter of Credit Issuer, and
held by the Security Agent as collateral security for the obligations referred
to in the preceding recital and distributed by the Security Agent as provided
therein;
WHEREAS, pursuant to the Capital Contribution Agreement, the GE Capital
Limited Partner made a capital contribution to the Partnership on the Initial
Capital Contribution Date in exchange for a limited partnership interest in the
Partnership and agreed, subject to the satisfaction of certain other conditions
precedent, to make additional capital contributions to the Partnership on or
prior to the Second Capital Contribution Date;
WHEREAS, on the Initial Capital Contribution Date, SECI, the GE Capital
Limited Partner and the Other Limited Partners executed and delivered the
Amended and Restated Partnership Agreement;
WHEREAS, it is a condition precedent to the making by the GE Capital
Limited Partner of its capital contributions on the Second Capital Contribution
Date that, among other things, the parties hereto shall have executed and
delivered this Agreement, which provides for the deposit, investment and
disbursement of revenues, cash, payments, insurance and condemnation proceeds,
securities, investments and other amounts during the term of the Partnership;
WHEREAS, the SECI Term Lender and SECI are parties to the SECI Term
Loan Agreement, pursuant to which the SECI Term Lender has agreed to make SECI
Term Loans to SECI;
Amended and Restated
Security Deposit Agreement
<PAGE>
3
WHEREAS, the obligations of SECI under the SECI Term Loan Agreement and
the other SECI Loan Documents, including its obligations to repay the SECI Term
Loans with interest thereon, are secured by, among other things, a security
interest in SECI's rights as the general partner and as a limited partner of the
Partnership pursuant to the terms and provisions of the SECI Collateral Security
Documents;
WHEREAS, pursuant to the terms of the Original Security Deposit
Agreement, upon the satisfaction of the conditions precedent to the Second
Capital Contribution Date (including, without limitation, the execution and
delivery of this Agreement), the terms and conditions of the accounts created
pursuant to the Original Security Deposit Agreement are to be governed by this
Agreement;
WHEREAS, the parties to the Original Security Deposit Agreement have
agreed to amend and restate the Original Security Deposit Agreement as
hereinafter set forth; and
WHEREAS, the Fuji Bank and Trust Company has agreed to act as security
agent for the Secured Parties, the Partnership, the Other Limited Partners and
SECI pursuant to the terms of this Agreement;
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.1 Incorporation of Definitions by Reference, etc. (a) All
terms in Appendix A not otherwise defined herein shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto, accounting terms not defined in Appendix A or
otherwise defined herein and accounting terms partly defined in Appendix A or
otherwise partly defined herein to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section,
schedule, exhibit and appendix references are to this Agreement unless otherwise
specified.
Amended and Restated
Security Deposit Agreement
<PAGE>
4
(d) References to agreements defined herein or in Appendix A shall
include such agreements as they may be amended, supplemented or otherwise
modified from time to time in accordance with the provisions of the Basic
Documents.
(e) Terms defined in Appendix A or otherwise defined herein by
reference to any other agreement, document or instrument shall have the meanings
assigned to them in such agreement, document or instrument whether or not such
agreement, document or instrument is then in effect.
SECTION 1.2 Certain Defined Terms. The following terms shall have the
following meanings (such definitions to be equally applicable to both singular
and plural forms of the terms defined):
"Accounts" means the collective reference to the twenty cash collateral
accounts established by the Security Agent pursuant to and more particularly
described in Section 2.2.
"Base Reserve Debt Account" means the special account designated by
that name established by the Security Agent pursuant to Section 2.2.
"Base Reserve Equity Account" means the special account designated by
that name established by the Security Agent pursuant to Section 2.2.
"Completion Account" means the special account designated by that name
established by the Security Agent pursuant to Section 2.2.
"Current Account" means the special account designated by that name
established by the Security Agent pursuant to Section 2.2.
"Distribution Reserve Account" means the special account designated by
that name established by the Security Agent pursuant to Section 2.2.
"Insurance and Condemnation Proceeds Account" means the special account
designated by that name established by the Security Agent pursuant to
Section 2.2.
"Insurance and Condemnation Proceeds Deposits" means all cash, cash
equivalents, instruments, investments and securities at any time on deposit
in the Insurance and Condemnation Proceeds Account.
"Major Maintenance Costs" means all costs incurred by the Partnership
or the Operator for labor, materials and other direct expenses for any
overhaul of, or major maintenance procedure for, the Facility which requires
Amended and Restated
Security Deposit Agreement
<PAGE>
5
significant disassembly or shutdown of the Facility pursuant to
manufacturers' guidelines or recommendations, engineering or operating
considerations or the requirements of any applicable Governmental Approval,
all as contemplated in the Operation and Maintenance Agreement.
"Major Maintenance Required Balance" means, as of any Distribution
Date, the sum of all Major Maintenance Required Contributions required
through such date (regardless of whether they were actually made).
"Major Maintenance Required Contribution" means, with respect to any
Monthly Transfer Date from and after the Second Capital Contribution Date,
initially an amount equal to $208,333.33 (such amount to be (i) increased on
each anniversary of the Date of Commercial Operation by a percentage equal
to the percentage by which the management fee payable to the Operator
pursuant to Section 5.1 of the Operation and Maintenance Agreement is
escalated pursuant to Section 5.2 of the Operation and Maintenance Agreement
and (ii) adjusted annually, if necessary, in connection with the approval of
the Partnership Operating Budget).
"Major Maintenance Reserve Account" means the special account
designated by that name established by the Security Agent pursuant to
Section 2.2.
"Monthly Transfer Date" has the meaning assigned to such term in
Section 4.1.
"Project Expense Accrual Account" means the special account designated
by that name established by the Security Agent pursuant to Section 2.2.
"Project Expense Accrual Account Contribution" means the amounts
identified by the Partnership in Item 3 of a Project Certificate delivered
pursuant to Section 4.1(a) to be deposited into the Project Expense Accrual
Account in respect of any Project Expense which (i) the Partnership elects
to accrue, (ii) is paid on a periodic basis (but not more frequently than
once per calendar quarter) and (iii) is contained in the Partnership
Operating Budget in effect at the time such contribution is made; provided,
however, that in no event shall any amount exceed an amount equal to the
Project Expense in respect of which such amount is being accrued divided by
the number of Monthly Transfer Dates during the period from and including
the date such contribution is made to and including the date such Project
Expense is required to be paid; and provided, further, that the Partnership
agrees to elect to accrue in approximately equal amounts on a monthly basis
amounts required to pay in full when due Project Expenses in respect of
property taxes and insurance.
Amended and Restated
Security Deposit Agreement
<PAGE>
6
"Project Letters of Credit Required Balance" means an amount equal to
the aggregate stated amount of all issued and outstanding Project Letters of
Credit.
"Project Letters of Credit Required Contribution" means, with respect
to any Distribution Date occurring on or after the date twelve years after
the Date of Commercial Operation, and until such time as the Project Letters
of Credit Required Balance shall be on deposit in the Project Letters of
Credit Reserve Account, and so long as any Project Letter of Credit remains
outstanding, an amount equal to 20% (or such lesser amount as is necessary
to achieve the Project Letters of Credit Required Balance) of the
Distributable Cash distributable to the Other Partners pursuant to Section
4.3(b) of the Amended and Restated Partnership Agreement.
"Project Letters of Credit Reserve Account" means the special account
designated by that name established by the Security Agent pursuant to
Section 2.2.
"Retention Account" means the special account designated by that name
established by the Security Agent pursuant to Section 2.2.
"Revenue Account" means the special account designated by that name
established by the Security Agent pursuant to Section 2.2.
"Revenues" means all revenues and all other payments at any time
received by or on behalf of the Partnership including, without limitation,
Project Revenues, Special Payments and dividends, distributions and other
payments (including, without limitation, payments made by North Country in
respect of principal and interest on intercompany advances received by North
Country from the Partnership) from North Country (other than (i) the
proceeds of capital contributions received from the GE Capital Limited
Partner, TPC One and TPC Two pursuant to the Capital Contribution Agreement,
(ii) the proceeds of insurance or of a Taking payable into the Insurance and
Condemnation Proceeds Account pursuant to Section 4.6, (iii) payments
received by the Partnership under the Swap Agreement payable into the Senior
Debt Service Account, (iv) Special Payments payable into the Completion
Account and (v) the proceeds of the Capital Contributions, if any, made or
deemed to have been made by SECI to the Partnership pursuant to Section 2.5
of the SECI Term Loan Agreement or Section 8.6 of the Amended and Restated
Partnership Agreement), including, without limitation, all interest and
other income on funds on deposit in the Accounts (other than the
Distribution Reserve Account, the Retention Account, the SECI Debt Service
Account and the SECI Reserve Account), all payments received
Amended and Restated
Security Deposit Agreement
<PAGE>
7
by the Partnership under the Power Purchase Agreement and the Steam
Supply Agreement and all other payments received by the Partnership from the
sale of electricity, heat and/or steam produced by the Facility, all
payments in respect of business interruption insurance and all payments
received from any other source whatsoever.
"SECI Debt Service Account" means the special account designated by
that name established by the Security Agent pursuant to Section 2.2.
"SECI Default" means a "Default" as such term is defined in the SECI
Term Loan Agreement.
"SECI Event of Default" means an "Event of Default" as such term is
defined in the SECI Term Loan Agreement.
"SECI Installment Payment Date" means an "Installment Payment Date" as
such term is defined in the SECI Term Loan Agreement.
"SECI Interest Payment Date" means an "Interest Payment Date" as such
term is defined in the SECI Term Loan Agreement.
"SECI Ratio" has the meaning assigned to such term in the SECI Term
Loan Agreement.
"SECI Reserve Account" means the special account designated by that
name established by the Security Agent pursuant to Section 2.2.
"Secured Parties" means the collective reference to the Agent, the
Lenders, the Letter of Credit Issuer (other than in its capacity as issuer
of the Senior Debt Service Reserve "B" Letter of Credit), the Swap
Counterparty and the SECI Term Lender.
"Senior Debt Service Account" means the special account designated by
that name established by the Security Agent pursuant to Section 2.2.
"Senior Debt Service Coverage Account" means the special account
designated by that name established by the Security Agent pursuant to
Section 2.2.
"Senior Debt Service Letter of Credit" means a letter of credit issued
by the Senior Debt Service Letter of Credit Issuer in favor of the Agent,
for the ratable benefit of the Lenders and for the account of the GE Capital
Limited Partner, substantially in the form of Exhibit B, in a stated amount
equal to the amount that, pursuant to the provisions of Sections 4.2(a) and
(b), is required to be transferred to
Amended and Restated
Security Deposit Agreement
<PAGE>
8
the Senior Debt Service Account on a Monthly Transfer Date. Such Senior
Debt Service Letter of Credit will be drawn in full by the Agent on each
Installment Payment Date that immediately follows the delivery of such
Senior Debt Service Letter of Credit and the proceeds of such drawing will
be applied to the payment of the principal of and interest on the Term Loans
due on such Installment Payment Date.
"Senior Debt Service Letter of Credit Issuer" means GE Capital, so long
as it maintains a Standard & Poor's credit rating of "A" or better and in
the event that it does not maintain such rating or elects to assign the
Senior Debt Service Letter of Credit, GE Capital until a successor or
assignee which is a financial institution with a Standard & Poor's credit
rating of "A" or better and which is reasonably acceptable to the Required
Lenders issues a Senior Debt Service Letter of Credit, in either case as
issuer of the Senior Debt Service Letter of Credit, it being understood that
the Senior Debt Service Letter of Credit Issuer shall be an entity that
maintains at all times a Standard & Poor's credit rating of "A" or better
and if the Senior Debt Service Letter of Credit Issuer is no longer rated
"A" or better by Standard & Poor's, it will be replaced by an entity with a
Standard & Poor's credit rating of "A" or better.
"Senior Debt Service Reserve Account" means the special account
designated by that name established by the Security Agent pursuant to
Section 2.2.
"Senior Debt Service Reserve Letters of Credit" means the Senior Debt
Service Reserve "A" Letter of Credit and the Senior Debt Service Reserve "B"
Letter of Credit.
"Senior Debt Service Reserve 'A' Letter of Credit" means a letter of
credit issued by the Senior Debt Service Reserve Letter of Credit Issuer in
favor of the Agent, for the ratable benefit of the Secured Parties (other
than the SECI Term Lender) and for the account of the Partnership,
substantially in the form of Exhibit C, in a stated amount equal to
$6,600,000.
"Senior Debt Service Reserve 'B' Letter of Credit" means a letter of
credit issued by the Senior Debt Service Reserve Letter of Credit Issuer in
favor of the Agent, for the ratable benefit of the Secured Parties (other
than the SECI Term Lender) and for the account of the Partnership,
substantially in the form of Exhibit D, in a stated amount equal to the
lesser of (i) the Base Reserve Amount and (ii) the excess, if any, of (A)
the sum of (1) the aggregate amount of transfers that have been made from
the Base Reserve Debt Account to the Base Reserve Equity Account and
immediately withdrawn from the Base Reserve Equity Account
Amended and Restated
Security Deposit Agreement
<PAGE>
9
to make Level 1 Distributions to the GE Capital Limited Partner and (2)
the aggregate amount of drawings made under any Base Reserve Letter of
Credit to make Level 1 Distributions to the GE Capital Limited Partner over
(B) the sum of (1) the aggregate amount of deposits made into the Base
Reserve Debt Account pursuant to Section 4.2(d)(ii) and (2) the aggregate
amount of reinstatements of the stated amount of any Base Reserve Letter of
Credit made after any drawings thereof pursuant to Section 4.9(b).
"Senior Debt Service Reserve Letter of Credit Issuer" means GE Capital,
so long as it maintains a Standard & Poor's credit rating of "A" or better
and in the event that it does not maintain such rating or elects to assign a
Senior Debt Service Reserve Letter of Credit, GE Capital until a successor
or assignee which is a financial institution with a Standard & Poor's credit
rating of "A" or better and which is reasonably acceptable to the Required
Lenders issues a Senior Debt Service Reserve Letter of Credit, in either
case as issuer of the Senior Debt Service Reserve "A" Letter of Credit and
the Senior Debt Service Reserve "B" Letter of Credit, it being understood
that the Senior Debt Service Reserve Letter of Credit Issuer shall be an
entity that maintains at all times a Standard & Poor's credit rating of "A"
or better and if the Senior Debt Service Reserve Letter of Credit Issuer is
no longer rated "A" or better by Standard & Poor's, it will be replaced by
an entity with a Standard & Poor's credit rating of "A" or better.
"Special Payments" means all liquidated damage payments made by any
contractor (including, without limitation, the Contractor) to the
Partnership pursuant to any Assigned Contract (including, without
limitation, the Construction Contract) relating to the engineering of,
procurement of services, equipment, supplies or other materials for or
related to the construction or repair of the Project.
"Standard & Poor's" means Standard & Poor's Corporation.
"Steam Reserve Account" means the special account designated by that
name established by the Security Agent pursuant to Section 2.2.
"Swap Counterparty Account" means the special account designated by
that name established by the Security Agent pursuant to Section 2.2.
"Taking" means a taking of title to, or use or occupancy of, all or any
part of the Project as a result of the exercise of the right of condemnation
or power of eminent domain or similar power or the exercise by a
Amended and Restated
Security Deposit Agreement
<PAGE>
10
governmental body of a non-contractual right to purchase all or any
part of the Project, or a sale or other transfer of all or any part of the
Project in lieu of condemnation or exercise of power of eminent domain.
"Tomen Distribution Account" means the special account designated by
that name established by the Security Agent pursuant to Section 2.2.
"Value" means, for cash, cash equivalents and Permitted Investments,
the value thereof determined in accordance with Section 7.1.
"Wind-up Account" means the special account designated by that name
established by the Security Agent pursuant to Section 2.2.
"Working Capital Account" means a checking account established by the
Security Agent in the name of the Partnership pursuant to Section 2.2(b) and
used for the payment by the Partnership of various minor costs and expenses
specified in Section 4.1(b) which are not otherwise directly provided for in
this Agreement; the Working Capital Account is not an "Account" for purposes
of this Agreement other than for purposes of Sections 3.5, 3.6 and 4.20 and
Articles VI, VII, VIII and IX.
ARTICLE II
Appointment of Security Agent; Establishment of Accounts
SECTION 2.1 Appointment of Security Agent. The Fuji Bank and Trust
Company is hereby appointed by the Secured Parties as security agent hereunder,
and the Security Agent hereby agrees to act as such and to accept all revenues,
cash, payments, insurance and condemnation proceeds, other amounts, and
Permitted Investments to be delivered to or held by the Security Agent pursuant
to the terms of this Agreement. The Security Agent shall hold and safeguard the
Accounts (and the revenues, cash, payments, insurance and condemnation proceeds,
instruments, securities and other amounts on deposit therein) during the term of
this Agreement and shall treat the revenues, cash, payments, insurance and
condemnation proceeds, instruments, securities and other amounts in the Accounts
as funds, instruments and securities (i) in the case of all Accounts (other than
the Distribution Reserve Account, the Retention Account, the Project Letters of
Credit Reserve Account (except as provided in clause (ii) below), the Swap
Counterparty Account (except as provided in clause (iii) below), the SECI
Reserve Account and the SECI Debt Service Account), pledged by the Partnership
to the Agent, the Lenders, the Letter of Credit Issuer (other than in its
capacity as issuer of the Senior Debt Service Reserve "B" Letter of
Amended and Restated
Security Deposit Agreement
<PAGE>
11
Credit) and the Swap Counterparty, as collateral securing the Obligations, in
accordance with the provisions hereof, (ii) in the case of the Project Letters
of Credit Reserve Account, pledged by the Partnership to the Letter of Credit
Issuer, as collateral securing the Obligations (other than those relating to the
Senior Debt Service Reserve Letters of Credit) owing to the Letter of Credit
Issuer, in accordance with the provisions hereof, (iii) in the case of the Swap
Counterparty Account, pledged by the Partnership to the Swap Counterparty, as
collateral securing the Obligations owing to the Swap Counterparty in accordance
with the provisions hereof, (iv) in the case of the SECI Reserve Account, the
SECI Debt Service Account, the Distribution Reserve Account (to the extent of
SECI's interest therein) and the Retention Account (to the extent of SECI's
interest therein), pledged by SECI in favor of the SECI Term Lender, as
collateral securing to the SECI Obligations, in accordance with the provisions
hereof, (v) in the case of the Distribution Reserve Account and the Retention
Account, held for the benefit of the GE Capital Limited Partner and the Other
Partners and (vi) in the case of the Tomen Distribution Account, held for the
benefit of the Tomen Limited Partners.
SECTION 2.2 Creation of Accounts. (a) The Security Agent hereby
establishes the following twenty special, segregated and irrevocable cash
collateral accounts (a) in the case of all Accounts (other than the Distribution
Reserve Account, the Retention Account, the Project Letters of Credit Reserve
Account (except as provided in clause (b) below), the Swap Counterparty Account
(except as provided in clause (c) below), the Tomen Distribution Account, the
SECI Reserve Account and the SECI Debt Service Account), in the name of the
Agent for the benefit of the Secured Parties (other than the SECI Term Lender),
(b) in the case of the Project Letters of Credit Reserve Account, in the name of
the Letter of Credit Issuer for its own benefit, (c) in the case of the Swap
Counterparty Account, in the name of the Agent for the benefit of the Swap
Counterparty, (d) in the case of the SECI Reserve Account and the SECI Debt
Service Account, in the name of the SECI Term Lender for its own benefit, (e) in
the case of the Distribution Reserve Account and the Retention Account, in the
name of the GE Capital Limited Partner for the benefit of the Partners, and (f)
in the case of the Tomen Distribution Account, in the name of the Tomen Limited
Partners for their own benefit, which shall be maintained at all times until the
termination of this Agreement:
(1) Revenue Account,
(2) Current Account,
(3) Project Expense Accrual Account,
(4) Completion Account,
(5) Major Maintenance Reserve Account,
(6) Distribution Reserve Account,
(7) Retention Account,
(8) Base Reserve Debt Account,
Amended and Restated
Security Deposit Agreement
<PAGE>
12
(9) Base Reserve Equity Account,
(10) SECI Reserve Account,
(11) SECI Debt Service Account,
(12) Project Letters of Credit Reserve Account,
(13) Steam Reserve Account,
(14) Insurance and Condemnation Proceeds Account,
(15) Wind-up Account,
(16) Senior Debt Service Account,
(17) Senior Debt Service Coverage Account,
(18) Senior Debt Service Reserve Account,
(19) Swap Counterparty Account, and
(20) Tomen Distribution Account.
(b) The Security Agent hereby establishes the Working Capital Account
in the name of the Partnership, which shall be maintained at all times until the
termination of this Agreement.
SECTION 2.3 Security Interest. (a)(i) In order to secure the payment
and performance by the Borrowers when due of all of their Obligations, this
Agreement is intended to create, and the Partnership hereby pledges to, and
creates in favor of, the Agent for its benefit and for the benefit of the
Lenders, the Letter of Credit Issuer and the Swap Counterparty, a security
interest in and to the Accounts (other than the Distribution Reserve Account,
the Retention Account, the Project Letters of Credit Reserve Account (except as
provided below), the Swap Counterparty Account (except as provided below), the
Tomen Distribution Account, the SECI Reserve Account and the SECI Debt Service
Account). All moneys, cash equivalents, instruments, investments and securities
at any time on deposit in any of such Accounts shall constitute collateral
security for the payment and performance by the Borrowers when due of the
Obligations and shall at all times be subject to the sole dominion and control
of the Agent, acting through the Security Agent, and shall be held in the
custody of the Security Agent for the purposes of, and on the terms set forth
in, this Agreement.
(ii) In order to secure the payment and performance by the Borrowers
when due of all of their Obligations to the Letter of Credit Issuer, this
Agreement is intended to create, and the Partnership hereby pledges to, and
creates in favor of the Letter of Credit Issuer, a security interest in and to
the Project Letters of Credit Reserve Account. All moneys, cash equivalents,
instruments, investments and securities at any time on deposit in the Project
Letters of Credit Reserve Account shall constitute collateral security for the
payment and performance by the Borrowers when due of the Obligations (other than
those relating to the Senior Debt Service Reserve Letters of Credit) owing to
the Letter of Credit Issuer and shall at all times be subject to the sole
dominion and control of the Letters of Credit Issuer, acting through the
Security Agent, and shall be held in the custody of the Security Agent for the
purposes of, and on the terms set forth in, this Agreement.
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(iii) In order to secure the payment and performance by the Borrowers
when due of all of their Obligations to the Swap Counterparty, this Agreement is
intended to create, and the Partnership hereby pledges to, and creates in favor
of the Agent for the benefit of the Swap Counterparty, a security interest in
and to the Swap Counterparty Account. All moneys, cash equivalents, instruments,
investments and securities at any time on deposit in the Swap Counterparty
Account shall constitute collateral security for the payment and performance by
the Borrowers when due of the Obligations owing to the Swap Counterparty and
shall at all times be subject to the sole dominion and control of the Agent,
acting through the Security Agent, and shall be held in the custody of the
Security Agent for the purposes of, and on the terms set forth in, this
Agreement.
(iv) For the purpose of perfecting the security interest of the Agent,
the Lenders, the Letter of Credit Issuer and the Swap Counterparty in and to
such Accounts and all cash, investments and securities at any time on deposit in
such Accounts, the Security Agent shall be deemed to be the agent of the Agent,
the Lenders, the Letter of Credit Issuer and the Swap Counterparty.
(b) In order to secure the payment and performance by SECI when due of
all of the SECI Obligations, this Agreement is intended to create, and SECI
hereby pledges to, and creates in favor of the SECI Term Lender, a security
interest in and to the SECI Reserve Account, the SECI Debt Service Account, the
Distribution Reserve Account (to the extent of SECI's interest therein) and the
Retention Account (to the extent of SECI's interest therein) and all cash, cash
equivalents, instruments, investments and other securities at any time on
deposit in such Accounts. All moneys, cash equivalents, instruments, investments
and securities at any time on deposit in such Accounts shall constitute
collateral security for the payment and performance by SECI when due of the SECI
Obligations and shall at all times be subject to the sole dominion and control
of the SECI Term Lender, acting through the Security Agent, and shall be held in
the custody of the Security Agent for the purposes of, and on the terms set
forth in, this Agreement. For the purpose of perfecting the security interest of
the SECI Term Lender in and to such Accounts, the Security Agent shall be deemed
to be the agent of the SECI Term Lender.
(c) Neither the Partnership nor SECI shall have any rights or powers
with respect to any amounts in the Accounts or any part thereof except (i) as
provided in Article IV and (ii) the right to have such amounts applied in
accordance with the provisions hereof and of the other Loan Documents and, in
the case of SECI, the SECI Loan Documents.
SECTION 2.4 Location of the Accounts. The Accounts shall be maintained
by the Security Agent at its corporate trust
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office located in New York City until the Security Agent gives written notice to
the other parties to this Agreement setting forth a different location of the
Accounts; provided, however, that such location shall be in the State of New
York.
ARTICLE III
Deposits into Accounts
SECTION 3.1 Deposits on Second Capital Contribution Date. (a) On the
Second Capital Contribution Date, after making all payments required to be made
on such date pursuant to Sections 4.2 and 4.3 of the Original Security Deposit
Agreement, the Security Agent shall transfer all remaining amounts, if any, on
deposit in the accounts maintained pursuant to the Original Security Deposit
Agreement to the Revenue Account.
(b) On the Second Capital Contribution Date, the Original Agent shall
transfer to the Security Agent for deposit in the Completion Account, from the
proceeds of the Construction Loans made by the Construction Lenders on such
date, the amount referred to in clause (u) of the definition of Certified
Construction Costs in Appendix A.
SECTION 3.2 Revenues and Insurance and Condemnation Proceeds. (a)
Except as otherwise provided in Sections 3.1 and 3.3, the Partnership shall
instruct each Person from whom it receives any Revenues (other than any Person
from whom $20,000 or less is expected to be payable to the Partnership in a
calendar year, unless the aggregate amount of Revenues of all such Persons
exceeds $250,000 in a calendar year, in which case all Revenues in excess of
$250,000 in a calendar year from all such Persons shall be paid as hereinafter
provided) to pay such Revenues directly to the Security Agent for deposit in the
Revenue Account, and if the Partnership shall receive any Revenues it shall
deliver such Revenues in the exact form received (but with the Partnership's
endorsement, if necessary) to the Security Agent for deposit in the Revenue
Account not later than the third Business Day after the Partnership's receipt
thereof. The Security Agent shall have the right to receive all Revenues
directly from the Persons owing the same. All Revenues received by the Security
Agent shall be deposited in the Revenue Account.
(b) The Partnership shall deposit in the Insurance and Condemnation
Proceeds Account all payments in respect of casualty to or loss of property
received by it from any insurer pursuant to the property or casualty insurance
maintained by the Partnership and all awards and proceeds in respect of a
Taking.
SECTION 3.3 Deposits into Senior Debt Service Account; Senior Debt
Service Reserve Account; Base Reserve Debt Account. (a)(i) Any payments made by
the Swap Counterparty under the Swap
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Agreement shall be deposited upon receipt into the Senior Debt Service Account.
(ii) Any amounts drawn under the Senior Debt Service Letter of Credit,
if any, as a result of a loss of or reduction in the rating of the Senior Debt
Service Letter of Credit Issuer shall be deposited upon receipt into the Senior
Debt Service Account.
(b) Any amounts drawn under either Senior Debt Service Reserve Letter
of Credit as a result of a loss of or reduction in the rating of the Senior Debt
Service Reserve Letter of Credit Issuer shall be deposited upon receipt into the
Senior Debt Service Reserve Account.
(c) Any amounts drawn under the Base Reserve Letter of Credit for the
benefit of the GE Capital Limited Partner shall be deposited upon receipt into
the Base Reserve Equity Account.
SECTION 3.4 Additional Deposits into Completion Account. Any Special
Payments received by the Partnership pursuant to the Construction Contract shall
be deposited into the Completion Account and amounts released pursuant to
Section 10(b) of the Surety Bond Arrangements Cash Collateral Agreement.
SECTION 3.5 Information to Accompany Amounts Delivered to Security
Agent; Deposits Irrevocable. (a) All amounts delivered to the Security Agent by
the Partnership shall be accompanied by information in reasonable detail
specifying the source of the amounts and the Account or Accounts into which such
amounts are to be deposited. If the Security Agent shall be unable to determine
the source of any payments received or the Account or Accounts into which such
payments are to be deposited, the Security Agent shall hold such amounts in the
Revenue Account until identified by the Partnership.
(b) Any deposit made into any Account hereunder shall, absent manifest
error, be irrevocable and the amount of such deposit and any instrument or
security held in such Account hereunder and all interest thereon shall be held
by the Security Agent and applied solely as provided herein.
SECTION 3.6 Books of Account; Statements. (a) The Security Agent shall
maintain books of account for the Partnership, SECI, the Agent, the Letter of
Credit Issuer, the Swap Counterparty and the SECI Term Lender on a cash basis
and record therein all deposits into and transfers to and from the Accounts and
all investment transactions effected by the Security Agent pursuant to Article
V. The Security Agent shall make such books of account available during normal
business hours with reasonable advance notice for inspection and audit by the
Partnership, SECI, the Agent, the Letter of Credit Issuer, the
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Swap Counterparty or the SECI Term Lender and their respective representatives.
(b) Not later than the fifteenth Business Day of each month, the
Security Agent shall deliver to the Partnership, SECI, the Agent, the Letter of
Credit Issuer, the Swap Counterparty and the SECI Term Lender, a statement
setting forth the transactions in each Account during the preceding month and
specifying the Revenues, Special Payments, Insurance and Condemnation Proceeds
Deposits, Permitted Investments and other amounts held in each Account at the
close of business on the first Business Day of such month and the value thereof
at such time.
ARTICLE IV
Payments from Accounts
SECTION 4.1 Revenue Account--Monthly Transfers with Respect to Project
Expenses. (a) On or before the twentieth day of each month, the Partnership
shall deliver to the Security Agent a Project Certificate (with appropriate
insertions) signed by a Responsible Officer of the Managing General Partner
(with a copy to the GE Capital Limited Partner) and countersigned by a
Responsible Officer of the Agent and, until the First GE Capital Flip Date, the
GE Capital Limited Partner, requesting distributions to be made from the Revenue
Account. Each of the Agent and the GE Capital Limited Partner agrees that it
shall countersign each such certificate presented to it which is in compliance
with the Partnership Operating Budget and the Loan Documents. On the last
Business Day of each month (each such date, a "Monthly Transfer Date"), the
Security Agent shall distribute, from the cash available in the Revenue Account,
(i) (A) directly to the Operator and each Person to which an amount in excess of
$250,000 is due and payable, the amounts identified as Project Expenses (other
than the Project Expenses on account of which amounts have already been
deposited or are to be deposited contemporaneously into the Major Maintenance
Reserve Account, the Current Account or the Project Expense Accrual Account)
then due and owing in Item 1 of the Project Certificate referred to above, or
(B) to the Partnership for the benefit of the Persons entitled thereto, all
other Project Expenses (other than the Project Expenses on account of which
amounts have already been deposited or are to be deposited contemporaneously
into the Major Maintenance Reserve Account, the Current Account or the Project
Expense Accrual Account) then due and owing in Item 1 of the Project Certificate
referred to above, (ii) to the Current Account, the amounts identified as
Project Expenses expected to be due and owing prior to the next Monthly Transfer
Date in Item 2 of the Project Certificate referred to above (other than the
Project Expenses on account of which amounts have already been deposited or are
to be deposited contemporaneously into the Major Maintenance Reserve Account or
the Project Expense
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Accrual Account), (iii) to the Project Expense Accrual Account, the amount
identified as the Project Expense Accrual Account Contribution in Item 3 of the
Project Certificate referred to above, (iv) so long as (A) no prepayments of any
of the Loans are required to be made by the Partnership on such Monthly Transfer
Date or during the Quarterly Period in which such Monthly Transfer Date occurs
pursuant to Section 4.2(a) of the Loan Agreement and (B) the Partnership has
performed its obligations under Section 4.1(b) to the Working Capital Account,
an amount equal to $50,000 minus the amount then on deposit in the Working
Capital Account as specified in Item 10 of the Project Certificate, (v) until
the amount on deposit in the Major Maintenance Reserve Account is equal to or
greater than the Major Maintenance Required Balance as of such Monthly Transfer
Date, to the Major Maintenance Reserve Account, the greater of (A) the Major
Maintenance Required Contribution and (B) the amount which equals the positive
difference, if any, between the Major Maintenance Required Balance as of such
Monthly Transfer Date and the amount then on deposit in the Major Maintenance
Reserve Account, (vi) directly to the Agent, all Agency Fees then due and
payable to the Agent under the Loan Agreement which are specified in Item 9 of
the Project Certificate, (vii) directly to the Security Agent, all fees,
expenses and other costs then due and payable to the Security Agent hereunder
which are specified in Item 9 of the Project Certificate, (viii) directly to the
Swap Counterparty, all expenses and other amounts then due and payable to the
Swap Counterparty under Sections 1(d) (in respect of deduction or withholding
for taxes), 4(e) (in respect of stamp or similar taxes) and 11 (in respect of
expenses) of the Swap Agreement which are specified in Item 9 of the Project
Certificate, (ix) to the extent not included in any of the foregoing clauses (i)
through (viii), directly to the Persons specified in Item 9 of the Project
Certificate, all expenses then due and payable to such Persons under Sections
3.13 and 11.5 of the Loan Agreement.
(b) The Partnership covenants and agrees that all amounts from time to
time on deposit in the Working Capital Account shall be used by it only to pay
Project Expenses or to enable North Country to pay Project Expenses related to
the North Country Project.
(c) For purposes of this Section 4.1, cash available in the Revenue
Account shall not include any check or other instrument which may be deposited
therein until the final collection thereof.
SECTION 4.2 Revenue Account--Monthly Transfers. On each Monthly
Transfer Date, the Security Agent shall distribute, as directed by the
Partnership from the cash available in the Revenue Account (after making all
transfers required by Section 4.1), the following amounts in the following order
of priority:
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(a) first, pro rata to (i) the Senior Debt Service Account, an amount
equal to one-third of the interest and (except as provided in Section 4.2(b))
other amounts payable in respect of the Term Loans which are due and payable on
the next succeeding Installment Payment Date (together with any deficiency in
accumulation of such amount during any preceding month or months since the last
Installment Payment Date) minus one-third of the amount, if any, payable by the
Swap Counterparty to the Partnership under the Swap Agreement (unless the Swap
Counterparty is in default under the Swap Agreement) on the next succeeding
Installment Payment Date unless, with respect only to the first and second
Monthly Transfer Dates of the three month period ending on the next Installment
Payment Date, the Security Agent shall have received a notice from the Agent
stating that a Senior Debt Service Letter of Credit has been issued and
delivered to the Agent in accordance with Section 4.3(c) and specifying the
stated amount thereof, in which case the Security Agent shall distribute to the
GE Capital Limited Partner (from the amount otherwise to be deposited into the
Senior Debt Service Account pursuant to this clause (i)) an amount equal to such
stated amount (such distribution to be treated in accordance with Section 4.17
of the Amended and Restated Partnership Agreement), (ii) the Letter of Credit
Issuer, an amount equal to all Letter of Credit Fees, interest and (except as
provided in Sections 4.1(a), 4.2(b) and 4.2(c)) other amounts payable to the
Letter of Credit Issuer under the Loan Agreement and in respect of the Letters
of Credit then due and payable by the Borrowers, (iii) the Swap Counterparty
Account, an amount equal to one-third of all amounts, if any, payable by the
Partnership to the Swap Counterparty under the Swap Agreement (except as
provided in Sections 4.1(a) and 4.2(b) which are due and payable on the next
succeeding Installment Payment Date (together with any deficiency in
accumulation of such amount during any preceding month or months since the last
Installment Payment Date) and (iv) the Surety Bond Arranger, an amount equal to
the sum of (1) the excess of the Surety Bond Arranger Fee then due and payable
by the Partnership to the Surety Bond Arranger under the Loan Agreement over the
amount of such Surety Bond Arranger Fee paid from funds available under the
Surety Bond Arrangements Cash Collateral Agreement and (2) expenses, interest
and other amounts (other than principal payments in respect of the Surety Bond
Arrangements Reimbursement Obligations) then due and payable by the Partnership
to the Surety Bond Arranger under the Loan Agreement and the Surety Bond
Arrangements Cash Collateral Agreement;
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(b) second, pro rata to (i) the Senior Debt Service Account, an amount
equal to:
(x) one-third of the aggregate scheduled principal amount of the
Term Loans which is due and payable on the next succeeding Installment
Payment Date (together with any deficiency in accumulation of such
amount during any preceding month or months since the last Installment
Payment Date); less (y) any increase in the Value of the Senior Debt
Service Account which occurred during the preceding month as a result
of earnings on the amounts on deposit therein;
unless, with respect to the first and second Monthly Transfer Dates of the three
month period ending on the next Installment Payment Date, the Security Agent
shall have received a notice from the Agent stating that a Senior Debt Service
Letter of Credit has been issued and delivered to the Agent in accordance with
Section 4.3(c) and specifying the stated amount thereof, in which case the
Security Agent shall distribute to the GE Capital Limited Partner (from the
amount otherwise to be deposited in the Senior Debt Service Account pursuant to
this clause (i)) an amount equal to such stated amount (such distribution to be
treated in accordance with Section 4.17 of the Amended and Restated Partnership
Agreement), (ii) the Senior Debt Service Account, an amount equal to any
prepayments on the Term Loans which are then due and payable, (iii) the Letter
of Credit Issuer, all amounts then due and payable (including, without
limitation, any prepayments) in respect of reimbursement obligations relating to
the Project Letters of Credit, and (iv) the Swap Counterparty, all amounts then
due and payable pursuant to Section 6(e) of the Swap Agreement;
(c) third, if there shall have been a drawing on either the Senior Debt
Service Reserve "A" Letter of Credit or the Senior Debt Service Reserve "B"
Letter of Credit (other than a drawing as a result of a loss of or a reduction
in the rating of the Senior Debt Service Reserve Letter of Credit Issuer) or a
withdrawal from the Senior Debt Service Reserve Account pursuant to Section
4.9(a), (x) first, to the Senior Debt Service Reserve Letter of Credit Issuer,
an amount equal to the aggregate amount of all unreimbursed drawings under the
Senior Debt Service Reserve "A" Letter of Credit, (y) second, to the Senior Debt
Service Reserve Letter of Credit Issuer, an amount equal to the aggregate amount
of all unreimbursed drawings under the Senior Debt Service Reserve "B" Letter of
Credit and (z) third, to the Senior Debt Service Reserve Account, an amount
equal to all withdrawals therefrom pursuant to Section 4.9(a) until such
withdrawals have been replenished;
Amended and Restated
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(d) fourth, in the following order of priority, (provided that (I) the
Security Agent shall not make any payments to the Partners or any of the
payments described in clauses (v) through (x) below if (i) the certificate of
the Managing General Partner described below states that a Default or Event of
Default has occurred and is continuing or (ii) the Agent has notified the
Security Agent that a Default or Event of Default has occurred and is continuing
and (II) if (i) the certificate of Managing General Partner described below
states that a Special Event has occurred and is continuing and (ii) the Security
Agent has not received either of the notices referred to in subclauses (i) and
(ii) of clause (I) of this proviso, the Security Agent shall distribute all
amounts that would otherwise be distributable to the Partners pursuant to this
Section 4.2(d) in accordance with Section 4.16(d))(x) subject to Section 4.2(e),
directly to the Partners, Distributable Cash in the amount distributable to the
Partners pursuant to Section 4.3(a) of the Amended and Restated Partnership
Agreement, and (y) subject to Section 4.2(e), directly to the Partners,
Distributable Cash in such amounts as are distributable to the Partners pursuant
to Section 4.3(b) and/or Section 4.6(b) (in respect of Net Cash from Sales or
Refinancing) and/or Section 4.13 and/or Section 4.14 of the Amended and Restated
Partnership Agreement and, in the case of each of clauses (x) and (y) above,
accompanied by a certificate of a Responsible Officer of the Managing General
Partner (with a copy to the Agent, the SECI Term Lender and the GE Capital
Limited Partner), setting forth the amounts so distributable and the amounts, if
any, required to be deposited in the Accounts specified below and the
calculations (including, without limitation, the Debt Service Coverage Ratio,
the Ratio and the SECI Ratio) used in determining such amounts and stating
whether any Special Event, Default or Event of Default has occurred and is
continuing; provided, however, that:
(i) if a withdrawal from the Base Reserve Debt Account or a
drawing under any Base Reserve Letter of Credit shall have occurred
pursuant to Section 4.9(a), until the amount of such withdrawal has
been replenished in the Base Reserve Debt Account or the stated amount
of such Base Reserve Letter of Credit has been reinstated in an amount
equal to the amount of such drawing, the amount of Distributable Cash
to be distributed on each Distribution Date from the cash in the
Revenue Account to each Partner pursuant to Sections 4.3(a), 4.3(b),
4.13 and 4.14 of the Amended and Restated Partnership Agreement that
corresponds to 100% of such Distributable Cash distributable to each
such Partner, shall not be distributed to each such Partner on such
Distribution Date but shall instead be
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transferred to and retained in the Base Reserve Debt Account and
applied as provided in Section 4.9;
(ii) subject to the availability of Distributable Cash after
application (if any) thereof pursuant to Section 4.2(d)(i), if a
transfer of cash from the Base Reserve Debt Account to the Base Reserve
Equity Account and a withdrawal of such cash from the Base Reserve
Equity Account or a drawing under any Base Reserve Letter of Credit
shall have occurred pursuant to Section 4.9(b), until the amount of
such withdrawal has been replenished in the Base Reserve Debt Account
or the stated amount of such Base Reserve Letter of Credit has been
reinstated in an amount equal to the amount of such drawing, the amount
of Distributable Cash to be distributed on each Distribution Date from
the cash in the Revenue Account to each Partner pursuant to Sections
4.3(a), 4.3(b), 4.13 and 4.14 of the Amended and Restated Partnership
Agreement that corresponds to 100% of such Distributable Cash
distributable to each such Partner, shall not be distributed to each
such Partner on such Distribution Date but shall instead be transferred
to and retained in the Base Reserve Debt Account and applied as
provided in Section 4.9;
(iii) subject to the availability of Distributable Cash after
application (if any) thereof pursuant to Sections 4.2(d)(i) and (ii),
during the period from and including the date of occurrence of a Steam
Host Event, as certified to the Security Agent in a certificate of the
Agent, to but excluding the date of receipt by the Security Agent of
either written notice from the Agent described in Section 4.15(a), 100%
of all Distributable Cash to be distributed from the cash in the
Revenue Account to each Partner pursuant to Sections 4.3(a), 4.3(b),
4.13 and 4.14 of the Amended and Restated Partnership Agreement and
100% of all Net Cash from Sales or Refinancing to be distributed from
the cash in the Revenue Account to each Partner pursuant to Section
4.6(b) of the Amended and Restated Partnership Agreement in respect of
each Distribution Date occurring during the continuance of such Steam
Host Event shall not be distributed to such Partner on each such
Distribution Date but instead shall be transferred to and retained in
the Steam Reserve Account and applied as provided in Section 4.15;
(iv) subject to the availability of Distributable Cash after
application (if any) thereof pursuant to Sections 4.2(d)(i), (ii) and
(iii), in the event that the Debt Service Coverage Ratio for any
Measurement Period with respect to any Distribution Date on or after
December 31, 1994 shall be less than 1.20 to
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1.00, as certified to the Security Agent in a certificate of the
Agent, 100% of the Distributable Cash to be distributed from the cash
in the Revenue Account to the Partners pursuant to Sections 4.3(a),
4.3(b), 4.13 and 4.14 of the Amended and Restated Partnership Agreement
in respect of each of the three Distribution Dates immediately after
the end of such Measurement Period and 100% of the Net Cash from Sales
or Refinancing to be distributed to the Partners pursuant to Section
4.6(b) of the Amended and Restated Partnership Agreement in respect of
the period commencing with the end of such Measurement Period and
ending on the third Distribution Date occurring immediately after the
end of such Measurement Period shall not be distributed to the Partners
on each such Distribution Date but shall instead be transferred to and
retained in the Senior Debt Service Coverage Account and applied as
provided in Section 4.11(a);
(v) subject to the availability of Distributable Cash after
application (if any) thereof pursuant to Sections 4.2(d)(i), (ii),
(iii) and (iv), until the sum of (1) the amount on deposit in the Base
Reserve Debt Account or, after the Loan Agreement is no longer in
effect, the Base Reserve Equity Account and (2) the then stated amount
of the Base Reserve Letter of Credit, if any, is equal to or greater
than the Base Reserve Amount, the amount of Distributable Cash to be
distributed from the cash in the Revenue Account to the Other Partners
pursuant to Section 4.3(b) of the Amended and Restated Partnership
Agreement that corresponds to 23.7% of such Distributable Cash
distributable to each such Other Partner on each Distribution Date
shall not be distributed to each such Other Partner on such
Distribution Date but shall instead be deposited and retained in the
Base Reserve Debt Account and applied as provided in Section 4.9;
(vi) subject to the availability of Distributable Cash after
application (if any) thereof pursuant to Sections 4.2 (d)(i), (ii),
(iii), (iv) and (v), in the event that the Ratio for any Quarterly
Period ending on or after December 31, 1994 shall be less than the
respective values set forth below, as certified in a certificate of the
GE Capital Limited Partner, the amount of Distributable Cash to be
distributed from the cash in the Revenue Account to the Other Partners
pursuant to Section 4.3(b) of the Amended and Restated Partnership
Agreement in respect of each of the three Distribution Dates
immediately after the end of such Measurement Period, in each case that
corresponds to the percentage set forth opposite each such value below,
shall not be distributed to such Other Partners
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on each such Distribution Date but shall instead be transferred to
and retained in the Distribution Reserve Account and applied as
provided in Section 4.11(b):
Ratio Percentage Retained
----- -------------------
1.40 to 1.00 20%
1.30 to 1.00 25%
1.20 to 1.00 98%
(vii) subject to the availability of Distributable Cash after
application (if any) thereof pursuant to Sections 4.2(d)(i), (ii),
(iii), (iv), (v) and (vi), in the event that the Security Agent shall
have received written notice from the GE Capital Limited Partner that,
but for the provisos to any of Sections 13.1(b), (c), (d), (f) or (m),
or the lapse of either the 180 day or 30 day period referred to in
clause (ii) of Section 13.1(t), of the Amended and Restated Partnership
Agreement, a Special Event would occur and be continuing, 98% of the
amount of Distributable Cash to be distributed from the cash in the
Revenue Account to the Other Partners pursuant to Sections 4.3(b) and
4.13 of the Amended and Restated Partnership Agreement on such
Distribution Date shall not be distributed to such Other Partners on
such Distribution Date but shall instead be transferred to and retained
in the Retention Account and applied as provided in Section 4.10;
(viii) subject to the availability of Distributable Cash after
application (if any) pursuant to Sections 4.2(d)(i), (ii), (iii), (iv),
(v), (vi) and (vii), until the amount on deposit in the Project Letters
of Credit Reserve Account is equal to the Project Letters of Credit
Required Balance as of such Distribution Date, 98% of the amount of
Distributable Cash to be distributed on each Distribution Date from the
cash in the Revenue Account to each Other Partner pursuant to Section
4.3(b) of the Amended and Restated Partnership Agreement that
corresponds to each such Other Partner's allocable share of the Project
Letters of Credit Required Contribution (determined by multiplying the
Project Letters of Credit Required Contribution by the Allocation
Percentage of each Other Partner in such Distributable Cash) shall not
be distributed to each such Other Partner on such Distribution Date but
shall instead be transferred to and retained in the Project Letters of
Credit Reserve Account and applied as provided in Section 4.12;
(ix) for so long as any amounts are due and payable under the SECI
Term Loan Agreement, the amount of Distributable Cash to be distributed
from the cash
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in the Revenue Account to SECI pursuant to Sections 4.3 and 4.13
of the Amended and Restated Partnership Agreement on each Distribution
Date and Net Cash from Sales or Refinancing to be distributed to SECI
pursuant to Section 4.6(b) of the Amended and Restated Partnership
Agreement, as certified in a certificate of a Responsible Officer of
the SECI Term Lender, shall be reduced by the amounts specified in
clauses (A) and (B) below and such amounts specified in such clauses
shall be transferred to and retained in the SECI Debt Service Account
and applied as provided in Section 4.13:
(A) first, an amount equal to one-third of the interest
and fees and other amounts payable in respect of the SECI Term
Loan which are due and payable on the next succeeding SECI
Interest Payment Date (together with any deficiency in
accumulation of such amount during any month or months since the
last SECI Interest Payment Date); and
(B) second, an amount equal to one-third of the principal
amount of the SECI Term Loans which is due and payable on the
next succeeding SECI Installment Payment Date (together with any
deficiency in accumulation of such amount during any preceding
month or months since the last SECI Installment Payment Date);
and
(x) subject to the availability of Distributable Cash after
application pursuant to Section 4.2(d)(ix), (A) for so long as any
amounts are due and payable under the SECI Term Loan Agreement, in the
event that the SECI Ratio for any Measurement Period occurring prior to
the First Tomen Flip Date shall be less than the respective values set
forth below, as certified in a certificate of a Responsible Officer of
the SECI Term Lender or a certificate of a Responsible Officer of SECI,
the amount of Distributable Cash to be distributed from the cash in the
Revenue Account to SECI pursuant to Sections 4.3 and 4.13 of the
Amended and Restated Partnership Agreement on each of the three
Distribution Dates immediately after the end of such Measurement Period
and Net Cash from Sales or Refinancing to be distributed to SECI
pursuant to Section 4.6(b) of the Amended and Restated Partnership
Agreement for the period commencing with the end of such Measurement
Period and ending with the third Distribution Date occurring
immediately after the end of such Measurement Period, in each case that
corresponds to the percentage set forth opposite each
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such value below shall not be distributed to SECI but shall
instead be transferred to and retained in the SECI Reserve Account and
applied as provided in Section 4.14:
SECI Ratio Percentage Retained
---------- -------------------
1.80 to 1.00 30%
1.60 to 1.00 100%; and
(B) for so long as any amounts are due and payable under
the SECI Term Loan Agreement, in the event that the SECI Ratio
for any Measurement Period occurring from and after the First
Tomen Flip Date shall be less than the respective values set
forth below, as certified in a certificate of the SECI Term
Lender or a certificate of a Responsible Officer of SECI, the
amount of Distributable Cash to be distributed from the cash in
the Revenue Account to SECI pursuant to Sections 4.3 and 4.13 of
the Amended and Restated Partnership Agreement on each of the
three Distribution Dates immediately after the end of such
Measurement Period and Net Cash from Sales or Refinancing to be
distributed to SECI pursuant to Section 4.6(b) of the Amended and
Restated Partnership Agreement for the period commencing with the
end of such Measurement Period and ending with the third
Distribution Date occurring immediately after the end of such
Measurement Period, in each case that corresponds to the
percentage set forth opposite each such value (as such values may
be adjusted in connection with an adjustment to the Capped Term
Allocation Percentage pursuant to Section 3.4 of the Amended and
Restated Partnership Agreement) below shall not be distributed to
SECI but shall instead be transferred to and retained in the SECI
Reserve Account and applied as provided in Section 4.14:
SECI Ratio Percentage Retained
---------- -------------------
1.70 to 1.00 30%
1.55 to 1.00 100%;
provided, that, if the SECI Term Lender shall have notified the
Security Agent that a SECI Default or SECI Event of Default has
occurred and is continuing, notwithstanding the provisions of
clause (ix) above and the foregoing provisions of this clause
(x), all amounts otherwise required to be distributed to SECI
pursuant to this Section 4.2(d) shall be transferred instead to
the SECI Term Lender.
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(e) The amount of Distributable Cash to be distributed from the cash in
the Revenue Account to the Tomen Limited Partners pursuant to Sections 4.3,
4.4 and 4.5 of the Amended and Restated Partnership Agreement on each
Distribution Date which does not occur on the last Business Day in a
Quarterly Period shall be transferred to and retained in the Tomen
Distribution Account and applied as provided in Section 4.21.
SECTION 4.3 Senior Debt Service Account; Swap Counterparty Account. (a)
On each Installment Payment Date or any other date on which any interest on or
principal of the outstanding Term Loans becomes due and payable pursuant to the
Loan Agreement or the Notes, first, the Security Agent shall distribute to the
Agent for payment of such principal or interest, from the cash available in the
Senior Debt Service Account, an amount equal to (i) the amount of such interest
and principal then due and payable minus (ii) the aggregate stated amount of all
Senior Debt Service Letters of Credit for which the Security Agent has received
notice from the Agent pursuant to Section 4.3(c) since the date of the next
preceding Installment Payment Date, and second, the Agent shall make a drawing
under the Senior Debt Service Letters of Credit in the aggregate amount
available to be drawn thereunder. Any amounts drawn under the Senior Debt
Service Letters of Credit shall be applied by the Agent to the payment of
principal and interest on the Loans due and payable on such Installment Payment
Date.
(b) On each Installment Payment Date or any other date on which any
interest or other amounts become due and payable to the Swap Counterparty
pursuant to the Swap Agreement, the Security Agent shall distribute to the Swap
Counterparty for payment of such interest or other amounts, from the cash
available in the Swap Counterparty Account, an amount equal to the aggregate
amount of such interest and other amounts then due and payable, as set forth in
a certificate of the Swap Counterparty delivered to the Security Agent (with a
copy to the Agent).
(c)(i) On any Monthly Transfer Date that is not an Installment Payment
Date, provided that on such date no Event of Default has occurred and is
continuing, the GE Capital Limited Partner may cause the Senior Debt Service
Letter of Credit Issuer to issue a Senior Debt Service Letter of Credit in favor
of the Agent in a stated amount equal to all or a portion of the amount that,
pursuant to the provisions of Sections 4.2(a) and (b), is required to be
transferred to the Senior Debt Service Account on such Monthly Transfer Date,
and expiring not earlier than the tenth Business Day following the next
Installment Payment Date. Any reimbursement obligations of the account party in
respect of a Senior Debt Service Letter of Credit shall not be secured by the
assets of any of the Partnership, SECI, North Country, SECI
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Holdings, FSPC or the Operator or the interest of any other person in such
person.
(ii) Upon receipt of a Senior Debt Service Letter of Credit meeting the
requirements of paragraph (i) above, the Agent shall notify the Security Agent
of the issuance thereof and the stated amount thereof.
SECTION 4.4 Completion Account. The Security Agent shall pay Certified
Construction Costs described in the Completion Budget on account of which
amounts have been deposited in the Completion Account out of cash available in
the Completion Account as such Certified Construction Costs become due and
payable in the amounts and as set forth in Item 8 of the Project Certificate.
Upon receipt of a certificate from the Independent Engineer, countersigned by a
Responsible Officer of the Agent and the GE Capital Limited Partner, stating
that the Project is complete and all items described in the Completion Budget
have been completed in accordance with the Construction Contract, the Security
Agent shall distribute all remaining amounts in the Completion Account directly
to SECI in partial payment of the Success Fee.
SECTION 4.5 Intentionally Omitted.
SECTION 4.6 Insurance and Condemnation Proceeds Account. (a) The
Insurance and Condemnation Proceeds Deposits shall be accumulated in the
Insurance and Condemnation Proceeds Account and held therein until paid to or
upon the order of the Partnership as provided in paragraph (b) of this Section
4.6, or returned to the Partnership as provided in Section 9.2.
(b)(i) If the amount of Insurance and Condemnation Proceeds Deposits of
the Partnership is less than $250,000, such amount shall be paid over to or upon
the order of the Partnership, as the case may be, to reimburse it for, or to
pay, the cost of repairing, rebuilding or otherwise replacing the damaged or
destroyed or lost or condemned property in respect of which such moneys were
received, upon the receipt by the Security Agent of: a certificate of a
Responsible Officer of the Managing General Partner, countersigned by the Agent,
(A) containing the plans and specifications setting forth in reasonable detail
the work done or proposed to be done and materials purchased or to be purchased
by way of the renewal, repair, rebuilding or other replacement of the damaged or
destroyed or lost or condemned property and (B) stating the specific amount
requested to be paid over to or upon the order of the Partnership, as the case
may be, or that such amount is requested to reimburse the Partnership for, or to
pay, costs actually incurred to repair, rebuild or replace property and that
such amount, together with amounts remaining in the Insurance and Condemnation
Proceeds Account for such purpose and other funds of the Partnership available
for such purpose, are sufficient to pay in full the costs of such
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renewal, repair, rebuilding or other replacement. The Agent shall countersign
such certificate if (w) no Default or Event of Default has occurred and is
continuing, (x) the Agent shall have received an opinion of counsel,
satisfactory in every regard to the Agent, stating that all Governmental
Approvals required in connection with the work done or proposed to be done have
been obtained and (y) the Agent shall have received (I) evidence of any lien
waivers requested to be obtained by the Agent, and (II) evidence, satisfactory
to the Agent, that the Lien of the Collateral Security Documents is in full
force and effect; or
(ii) if the amount of Insurance and Condemnation Proceeds Deposits is
more than $250,000, such amount shall be paid over to the Persons entitled
thereto from time to time (as set forth in the certificate referred to below) to
pay the cost of repairing, rebuilding or otherwise replacing the damaged or
destroyed or lost or condemned property in respect of which such moneys were
received, upon the receipt by the Security Agent of a certificate of a
Responsible Officer of the Managing General Partner countersigned by the Agent,
(A) containing the plans and specifications setting forth in reasonable detail
the work done or proposed to be done and the materials purchased or to be
purchased by way of the renewal, repair, rebuilding or other replacement of the
damaged or destroyed or lost or condemned property and (B) stating the specific
amounts requested to be paid, the Persons to whom and the dates on which such
amounts are to be paid, that such amounts will be used to pay costs actually
incurred to repair, rebuild or replace property and that such amounts, together
with amounts remaining in the Insurance and Condemnation Proceeds Account for
such purpose and other funds of the Partnership available for such purpose, are
sufficient to pay in full the costs of such renewal, repair, rebuilding or other
replacement. The Agent shall countersign such certificate if (w) no Default or
Event of Default has occurred and is continuing, (x) the Agent shall have
received an opinion of counsel, satisfactory in every regard to the Agent,
stating that all Governmental Approvals required in connection with the work
done or proposed to be done have been obtained, (y) in the reasonable opinion of
the Agent, the matters referred to in such certificate can be accomplished in
the manner provided for in such certificate and (z) the Agent shall have
received (I) evidence of any lien waivers requested to be obtained by the Agent,
and (II) evidence, satisfactory to the Agent, that the Lien of the Collateral
Security Documents is in full force and effect; or
(iii) if the Agent has determined that the conditions described in
clauses (i) or (ii), as applicable, of this Section 4.6(b) have not been
satisfied, such proceeds shall be applied by the Security Agent upon the written
direction of the Agent to the payment of Obligations or to the Partnership to
reimburse it for, or to pay, the cost of repairing, rebuilding or otherwise
replacing the damaged or destroyed or lost or condemned
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property in respect of which such moneys were received as the Agent shall elect;
and
(iv) in the event that any amounts remain in the Insurance and
Condemnation Proceeds Account after application thereof in accordance with this
Section 4.6(b), the Security Agent shall pay such amounts to the Agent for
application in accordance with the other Loan Documents.
(c) If the Agent shall at any time notify the Security Agent that an
Event of Loss has occurred, the Security Agent shall withdraw the Insurance and
Condemnation Proceeds Deposits from the Insurance and Condemnation Proceeds
Account and deliver the same to the Agent to be applied to the payment of the
obligations of the Borrowers under the Loan Agreement in accordance with the
provisions of the Loan Agreement and the Collateral Security Documents.
SECTION 4.7 Major Maintenance Reserve Account; Project Expense Accrual
Account; Current Account. (a) The Security Agent shall, from and to the extent
of the cash available in the Major Maintenance Reserve Account, pay the Major
Maintenance costs identified in Item 6 of the Project Certificate delivered to
the Security Agent pursuant to Section 4.1, directly to the Persons designated
in such certificate.
(b) The Security Agent shall, from and to the extent of cash available
in the Project Expense Accrual Account, pay Project Expenses identified in Item
7 of the Project Certificate delivered to the Security Agent pursuant to Section
4.1 and for which the Partnership has previously deposited reserves in the
Project Expense Accrual Account, directly to the Persons designated in such
certificate.
(c) The Security Agent shall, from and to the extent of cash available
in the Current Account, pay Project Expenses identified in Item 2 of the Project
Certificate delivered in connection with the making of the deposit in the
Current Account on the most recent Monthly Transfer Date, directly to the
Persons designated in such certificate.
SECTION 4.8 Release of Excess Amounts in Major Maintenance Reserve
Account. If on a Monthly Transfer Date the amount on deposit in the Major
Maintenance Reserve Account is in excess of the Major Maintenance Required
Balance, the Security Agent shall transfer such excess to the Revenue Account.
SECTION 4.9 Base Reserve Debt Account; Base Reserve Equity Account. (a)
To the extent that the cash available in the Revenue Account, the Senior Debt
Service Account and the Swap Counterparty Account, and under the Senior Debt
Service Letters of Credit, is insufficient to make any payments described in
Section 4.1(a)(vi), (vii), (viii) or (ix) or Section 4.2(a) or
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4.2(b) (the amount of any such shortfall being herein called the "Senior Debt
Service Deficiency Amount"), first, upon written direction from the Agent, the
Security Agent shall distribute to the Agent, from the cash available in the
Base Reserve Debt Account, an amount equal to the Senior Debt Service Deficiency
Amount, as set forth in a certificate of the Agent delivered to the Security
Agent, second, the Agent shall make a drawing under the Base Reserve Letter of
Credit in an amount equal to the lesser of (x) the amount available to be drawn
thereunder and (y) the excess of the Senior Debt Service Deficiency Amount over
the aggregate amount set forth in clause first of this paragraph, third, the
Agent shall make a drawing under the Senior Debt Service Reserve "B" Letter of
Credit (or, if necessary, upon written direction from the Agent, the Security
Agent shall make a distribution to the Agent from the Senior Debt Service
Reserve Account) in an amount equal to the lesser of (x) the amount available to
be drawn thereunder (or the cash available in the Senior Debt Service Reserve
Account, as the case may be) and (y) the excess of the Senior Debt Service
Deficiency Amount over the sum of the amounts set forth in clauses first and
second of this paragraph, and fourth, the Agent shall make a drawing under the
Senior Debt Service Reserve "A" Letter of Credit (or, if necessary, upon written
direction from the Agent, the Security Agent shall make a distribution to the
Agent from the Senior Debt Service Reserve Account) in an amount equal to the
lesser of (x) the amount available to be drawn thereunder (or the cash available
in the Senior Debt Service Reserve Account, as the case may be) and (y) the
excess of the Senior Debt Service Deficiency Amount over the sum of the amounts
set forth in clauses first, second and third of this paragraph. Any of the
foregoing amounts withdrawn from the Base Reserve Debt Account or the Senior
Debt Service Reserve Account, or drawn under the Base Reserve Letter of Credit
or the Senior Debt Service Reserve Letters of Credit, shall be applied by the
Agent to the payment of the Senior Debt Service Deficiency Amount in the order
of priority set forth in Sections 4.1(a)(vi), (vii), (viii) and (ix), 4.2(a) and
4.2(b).
(b) Subject to Section 4.9(a), if after giving effect to all transfers
required to be made pursuant to Sections 4.1(a) and 4.2(a), (b), (c) and (d)(i),
(ii), (iii) and (iv), (i) on the last Distribution Date of any Quarterly Period
the amount of Distributable Cash on such Distribution Date is insufficient to
make the scheduled Level 1 Distribution distributable to the Partners on such
Distribution Date and any shortfall in the Level 1 Distribution distributable to
the Partners on any prior Distribution Date (the aggregate amount of any such
shortfall being herein called the "Level 1 Deficiency Amount") and (ii) no
Default or Event of Default shall have occurred and be continuing, all as
certified in writing to the Security Agent and the Agent by the Managing General
Partner, first, the Security Agent shall promptly transfer from the Base Reserve
Debt Account to the Base Reserve Equity Account, from the cash available in such
Account, an amount equal to the Level 1 Deficiency Amount,
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as notified to the Security Agent and the Agent by the GE Capital Limited
Partner, and second, the Agent shall make a drawing under the Base Reserve
Letter of Credit in an amount equal to the lesser of (x) the amount available to
be drawn thereunder and (y) the excess of the Level 1 Deficiency Amount over the
amount transferred to the Base Reserve Equity Account pursuant to clause first
above. Any such amount drawn under the Base Reserve Letter of Credit shall be
deposited in the Base Reserve Equity Account. Upon receipt by the Security Agent
of a notice from the Agent stating that a Senior Debt Service Reserve "B" Letter
of Credit has been issued and delivered to the Agent in a stated amount equal to
at least the sum of the amount transferred to the Base Reserve Equity Account
pursuant to clause first above and the amount drawn under the Base Reserve
Letter of Credit pursuant to clause second above, the Security Agent shall
promptly withdraw from the Base Reserve Equity Account an amount equal to such
stated amount and distribute such amount to the Partners for payment of the
amounts described in this paragraph. The Agent agrees to provide the foregoing
notice to the Security Agent promptly after receipt by the Agent of a Senior
Debt Service Reserve "B" Letter of Credit in the stated amount specified above.
(c) If on any Distribution Date, (i) the sum of (x) the amounts on
deposit in the Base Reserve Debt Account (so long as the Loan Agreement is in
effect) and the Base Reserve Equity Account plus (y) the aggregate undrawn
amount of the Base Reserve Letters of Credit, if any, exceed the Base Reserve
Amount following any application thereof pursuant to Sections 4.9(a) and (b),
and (ii) no Default or Event of Default or Special Event shall have occurred and
be continuing, all as certified in writing by the Managing General Partner and
confirmed in writing by the Agent and the GE Capital Limited Partner, the
Security Agent shall promptly withdraw the amount of such excess of the Base
Reserve Amount and transfer such amount to the Partners entitled thereto.
(d) So long as no Event of Default or Special Event shall have occurred
and be continuing, the Partnership or the Managing General Partner shall have
the option, at any time, to cause a Base Reserve Letter of Credit to be issued
by the Base Reserve Letter of Credit Issuer in a stated amount equal to the cash
otherwise required to be deposited in the Base Reserve Debt Account pursuant to
Section 4.2(d)(v), or equal to the amount then on deposit in the Base Reserve
Debt Account. Upon notice from the Agent and the GE Capital Limited Partner to
the Security Agent stating that a Base Reserve Letter of Credit has been issued
and delivered to the Agent, for the benefit of the Secured Parties and the GE
Capital Limited Partner, in a stated amount not less than the amount referred to
above in this Section 4.9(d) and expiring not earlier than one year after the
issuance thereof, and setting forth the application (in accordance with Section
4.2) of the amounts then required to be deposited, or
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amounts then on deposit, in the Base Reserve Debt Account, the Security Agent
shall withdraw from the Base Reserve Debt Account an amount equal to the stated
amount of such Base Reserve Letter of Credit and distribute such amount to the
Other Partners entitled thereto in accordance with such notice. Such letter of
credit shall provide that the Agent may make a drawing thereunder upon the
occurrence and during the continuance of an Event of Default, whereupon the
proceeds of such drawing shall be applied by the Agent to the payment of the
obligations of the Borrowers under the Loan Agreement and the other Loan
Documents (other than the Partnership Agreement and the Capital Contribution
Agreement) in accordance with the provisions of the Loan Agreement and the other
Loan Documents.
(e) At any time after a drawing has been made under a Senior Debt
Service Letter of Credit, the GE Capital Limited Partner may notify the Agent
and the Senior Debt Service Letter of Credit Issuer in writing that it would
like to arrange for the cancellation of such Senior Debt Service Letter of
Credit. Upon receipt of such request, the Agent agrees to deliver a Cancellation
Certificate in the form of Annex C to such Senior Debt Service Letter of Credit
to the Senior Debt Service Letter of Credit Issuer and to notify the Security
Agent of such cancellation.
SECTION 4.10 Retention Account. (a) If (i) amounts shall be on deposit
in the Retention Account and (ii) the event or events specified in any of
Sections 13.1(b), (c), (d), (f), (m) or (t) of the Amended and Restated
Partnership Agreement that, but for the provisos to any of such Sections (or in
the case of Section 13.1(t), but for the lapse of the 30 or 180 day periods
referred to in clause (ii) of such Section), would cause a Special Event to
occur and be continuing, shall be cured, as certified in writing by the Managing
General Partner and confirmed in writing by the GE Capital Limited Partner, the
Security Agent shall promptly withdraw the amounts on deposit in the Retention
Account and distribute such amounts directly to the Other Partners entitled
thereto as if the deposits into the Retention Account had not occurred.
(b) If the Security Agent shall have received written notice from the
GE Capital Limited Partner that a Special Event has occurred and is continuing,
the Security Agent shall promptly withdraw the amounts on deposit in the
Retention Account and distribute such amounts to the GE Capital Limited Partner
as provided in Section 13.2(c) of the Amended and Restated Partnership
Agreement.
SECTION 4.11 Senior Debt Service Coverage Account; Distribution Reserve
Account. (a)(i) If the Security Agent shall have received written notice from
the Agent that, as of the end of any six consecutive Measurement Periods, the
Debt Service Coverage Ratio is less than the value specified in Section
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4.2(d)(iv) for each of such six consecutive Measurement Periods, the Security
Agent shall promptly withdraw amounts on deposit in the Senior Debt Service
Coverage Account and deliver the same to the Agent to be applied by the Agent to
the payment of the obligations of the Partnership under, and in accordance with,
Section 4.2(a)(ii) of the Loan Agreement.
(ii) If, as of the end of any six consecutive Measurement Periods, (x)
the Debt Service Coverage Ratio shall be equal to or greater than the value
specified in Section 4.2(d)(iv) for each of such six consecutive Measurement
Periods, as certified in writing by the Managing General Partner and confirmed
in writing by the Agent, but (y) the Ratio for any Quarterly Period during which
Distributable Cash was required to be deposited or maintained in the Senior Debt
Service Coverage Account shall not be equal to or greater than the value
specified in Section 4.2(d)(vi), as certified in writing by the Managing General
Partner and confirmed in writing by the GE Capital Limited Partner, the Security
Agent shall promptly withdraw amounts on deposit in the Senior Debt Service
Coverage Account, including without limitation all interest and other income
from the funds on deposit therein, and (1) (I) distribute directly to the GE
Capital Limited Partner such amounts as the GE Capital Limited Partner would
have been entitled to had the deposits into the Senior Debt Service Coverage
Account not occurred, as certified in writing by the Managing General Partner
and confirmed in writing by the GE Capital Limited Partner and (II) distribute
directly to the Other Partners such amounts as the Other Partners would have
been entitled to pursuant to Section 4.3(a) of the Amended and Restated
Partnership Agreement had the deposits into the Senior Debt Service Coverage
Account not occurred and (2) transfer the remaining balance in the Senior Debt
Service Coverage Account directly to the Distribution Reserve Account.
(iii) If, as of the end of any six consecutive Measurement Periods, the
Debt Service Coverage Ratio shall be equal to or greater than the value
specified in Section 4.2(d)(iv) for each of such six consecutive Measurement
Periods and the Ratio for each Quarterly Period occurring during such three
consecutive Measurement Periods shall be equal to or greater than the value
specified in Section 4.2(d)(vi), all as certified in writing by the Managing
General Partner and confirmed in writing by the Agent and the GE Capital Limited
Partner, the Security Agent shall promptly withdraw amounts on deposit in the
Senior Debt Service Coverage Account, including without limitation all interest
and other income from the funds on deposit therein, and distribute such amounts
directly to the Partners entitled thereto, as certified in writing by the
Managing General Partner and confirmed in writing by the GE Capital Limited
Partner, as if the deposits into the Senior Debt Service Coverage Account had
not occurred.
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(b) (i) If the Security Agent shall have received written notice from
the GE Capital Limited Partner that as of the end of any three consecutive
Quarterly Periods, the Ratio is less than the value specified in Section
4.2(d)(vi) for each of such Quarterly Periods, the Security Agent shall promptly
withdraw amounts on deposit in the Distribution Reserve Account and deliver the
same to the GE Capital Limited Partner which, in the case of such amounts as
would have otherwise been distributed to the Other Partners, will be treated as
an early distribution of the Level 1 Distributions to the extent required for
the GE Capital Limited Partner to achieve the Base Term Return.
(ii) If, as of the end of any three consecutive Quarterly Periods, the
Ratio shall be equal to or greater than the value specified in Section
4.2(d)(vi) for each of such three consecutive Quarterly Periods, all as
certified in writing by the Managing General Partner and confirmed in writing by
the GE Capital Limited Partner, the Security Agent shall promptly withdraw
amounts on deposit in the Distribution Reserve Account, including without
limitation all interest and other income from the funds on deposit therein, and
distribute such amounts directly to the Other Partners entitled thereto, as
certified in writing by the Managing General Partner and confirmed in writing by
the GE Capital Limited Partner, as if the deposits into the Distribution Reserve
Account had not occurred.
SECTION 4.12 Project Letters of Credit Reserve Account. (a) Upon
receipt of a certificate signed by the Letter of Credit Issuer, and
countersigned by a Responsible Officer of the Agent, stating that a draw has
been made under a Project Letter of Credit and that the amount of such drawing
has not been paid to the Agent or the Letter of Credit Issuer and specifying the
amount which has not been so reimbursed, the Security Agent shall pay to the
Letter of Credit Issuer, from the amounts on deposit in the Project Letters of
Credit Reserve Account, an amount equal to the amount specified in such
certificate.
(b) All amounts remaining in the Project Letters of Credit Reserve
Account after the payment of items contemplated in Section 4.12(a) and the
cancellation of the Project Letters of Credit shall be distributed to the Other
Partners entitled thereto, as certified in writing by the Managing General
Partner and confirmed in writing by the Agent and the Letter of Credit Issuer,
as if deposits into the Project Letters of Credit Reserve Account had not
occurred.
SECTION 4.13 SECI Debt Service Account. (a) On each SECI Interest
Payment Date and SECI Installment Payment Date or any other date on which any
interest on or principal of the outstanding SECI Term Loans becomes due and
payable pursuant to the SECI Term Loan Agreement or the SECI Term Note, the
Security Agent shall distribute to the SECI Term Lender for payment of such
principal or interest, from the cash available in the SECI
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Debt Service Account, an amount equal to the amount of such interest and
principal then due and payable, as set forth in a certificate of the SECI Term
Lender delivered to the Security Agent.
(b) On each date on which any prepayment of the outstanding SECI Term
Loans becomes due and payable pursuant to the SECI Term Loan Agreement or the
SECI Term Note, the Security Agent shall distribute to the SECI Term Lender,
from the cash available in the SECI Debt Service Account, after payments
pursuant to (a) above, an amount equal to such prepayment then due and payable,
as set forth in a certificate of the SECI Term Lender delivered to the Security
Agent.
SECTION 4.14 SECI Reserve Account. (a) If the Security Agent shall
receive written notice from the SECI Term Lender that, as of the end of any
three consecutive Measurement Periods, the SECI Ratio is less than the value
specified in Section 4.2(d) (x) for each of such Measurement Periods, the
Security Agent shall promptly withdraw amounts on deposit in the SECI Reserve
Account and deliver the same to the SECI Term Lender to be applied by the SECI
Term Lender to the payment of the obligations of SECI under, and in accordance
with, the provisions of the SECI Term Loan Agreement.
(b) Upon request of SECI, (i) if, as of the end of any three
consecutive Measurement Periods, the SECI Ratio shall be equal to or greater
than the value specified in Section 4.2(d) (x) for each of such Measurement
Periods, and (ii) no SECI Default or SECI Event of Default shall have occurred
and be continuing, all as certified in writing by SECI and confirmed in writing
by the SECI Term Lender, the Security Agent shall promptly withdraw amounts on
deposit in the SECI Reserve Account, including without limitation all interest
and other income from the funds on deposit therein, and deliver the same to
SECI.
SECTION 4.15 Steam Reserve Account. (a) (i) If the Security Agent shall
have received written notice from the Agent that a Steam Host Event has ceased
to exist either as a result of (x) the substitute facility described in the
Alternative Steam Plan commencing commercial operation or (y) the Required
Lenders and the GE Capital Limited Partner determining, in their reasonable
judgment, that the Alternative Steam Plan can be implemented substantially on
the terms and the timetable described therein, the Security Agent, subject to
the provisions of Sections 4.15(b) and 4.15(a) (ii), shall promptly withdraw
amounts on deposit in the Steam Reserve Account, including without limitation
all interest and other income from the funds on deposit therein, and transfer
such amounts to the Revenue Account.
(ii) If the Security Agent shall have received written notice from the
Agent that the amount on deposit in the Steam
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Reserve Account is equal to or greater than the amount then required to complete
the Alternative Steam Plan and required to be funded from amounts on deposit in
the Steam Reserve Account as set forth in clause (vii) of the definition of
Alternative Steam Plan in Appendix A (such required amount, the "Required
Alternative Steam Plan Amount"), the Security Agent, subject to the provisions
of Section 4.15(b), shall promptly withdraw all amounts on deposit in the Steam
Reserve Account in excess of the Required Alternative Steam Plan Amount and
transfer such excess amounts to the Revenue Account.
(iii) The Security Agent may rely on a certificate of the Managing
General Partner, confirmed in writing by the GE Capital Limited Partner, as to
the amounts to be transferred to the Revenue Account from the Steam Reserve
Account pursuant to paragraphs (i) and (ii) of this Section 4.15(a). The Agent
shall give any notice specified in paragraph (i) or (ii) of this Section 4.15(a)
promptly after receiving evidence satisfactory to the Agent that the conditions
specified in clause (x) or (y) of paragraph (i) of this Section 4.15(a) or the
conditions specified in paragraph (ii) of this Section 4.15(a), as the case may
be, have been satisfied.
(b) If the Security Agent shall have received written notice from the
Managing General Partner, confirmed in writing by the Agent and the GE Capital
Limited Partner, that all or a portion of the cash available in the Steam
Reserve Account is to be applied towards the development, construction and
completion of a substitute facility in compliance with the Alternative Steam
Plan, first, the Security Agent shall promptly withdraw, from the cash available
in the Steam Reserve Account, such amounts as shall be specified in such written
notice and second, the Agent shall make a drawing on the Letter of Credit
described in paragraph (c) below in an amount equal to the excess of the amount
to be so applied over the amount set forth in clause first above, and, in each
case, distribute such amount to the Persons specified in such written notice.
(c) The GE Capital Limited Partner, with the consent of the General
Partner, shall have the option, at any time, to request GE Capital to issue a
letter of credit for the benefit of the Agent, for the account of a Person other
than the Partnership and the reimbursement obligations in respect of which are
not secured by the assets of any of the Partnership, SECI, North Country, SECI
Holdings, FSPC or the Operator or the interest if any other person in such
person, in form and substance reasonably satisfactory to the Required Lenders,
in a stated amount equal to all or a portion of the cash then available in the
Steam Reserve Account and, upon issuance of such letter of credit, as certified
by the Agent to the Security Agent, the Security Agent shall distribute to the
GE Capital Limited Partner, from the cash available in the Steam Reserve
Account, an amount equal to the stated amount of such letter of credit. Such
letter of credit
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shall expire no earlier than the date on which the Agent delivers the notice
specified in Section 4.15(a), and shall provide that the Agent may make a
drawing thereunder (i) if the notice specified in Section 4.15(a) is delivered
by the Agent, whereupon the proceeds of such drawing shall be distributed to the
Partners entitled thereto or (ii) if the development, construction and
completion of the substitute facility described in the Alternative Steam Plan
are to be financed in compliance with the Alternative Steam Plan with the
amounts which were otherwise required to be deposited in the Steam Reserve
Account, upon receipt by the Agent of the written notice of the Managing General
Partner (confirmed in writing by the Agent and the GE Capital Limited Partner)
specified in Section 4.15(b), whereupon the proceeds of such drawing shall be
distributed to the Persons specified in such written notice or (iii) upon the
occurrence and during the continuance of an Event of Default, whereupon the
proceeds of such drawing shall be applied by the Agent to the payment of the
obligations of the Borrowers under the Loan Agreement and the other Loan
Documents (other than the Partnership Agreement and the Capital Contribution
Agreement) in accordance with the provisions of the Loan Agreement and the other
Loan Documents.
SECTION 4.16 Events of Default, Tax Indemnity Events; SECI Events of
Default and Special Events. (a) Upon notice to the Security Agent from the Agent
that an Event of Default shall have occurred and be continuing, the Security
Agent shall, at the written direction of the Agent, promptly withdraw amounts on
deposit in the Accounts specified in such written direction (other than the
Project Letters of Credit Reserve Account, the Distribution Reserve Account, the
Retention Account, the Tomen Distribution Account, the SECI Reserve Account and
the SECI Debt Service Account) and deliver the same to the Agent to be applied
by the Agent to the payment of the obligations of the Borrowers under the Loan
Agreement and the other Loan Documents (other than the Partnership Agreement and
the Capital Contribution Agreement) in accordance with the provisions of the
Loan Agreement and the other Loan Documents.
(b) Subject to Section 4.16(a), and provided that the Agent shall not
have notified the Security Agent in writing that a Default shall have occurred
and be continuing, upon notice to the Security Agent from the GE Capital Limited
Partner that a Tax Indemnity Event shall have occurred, the Security Agent
shall, at the written direction of the GE Capital Limited Partner, pay over to
the GE Capital Limited Partner all amounts otherwise distributable to SECI under
Section 4.2(d) (but subject to the provisions of Sections 4.2(d) (i) through
(ix)) until the GE Capital Limited Partner shall notify the Security Agent that
the Tax Indemnity Amount equals zero. When the Tax Indemnity Amount equals zero,
the GE Capital Limited Partner agrees promptly to give notice to such effect to
the Security Agent.
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(c) Upon notice to the Security Agent from the SECI Term Lender that a
SECI Event of Default shall have occurred and be continuing, the Security Agent
shall, at the written direction of the SECI Term Lender, promptly withdraw
amounts on deposit in the SECI Reserve Account and the SECI Debt Service Account
and deliver the same to the SECI Term Lender to be applied by the SECI Term
Lender to the payment of the obligations of SECI under the SECI Term Loan
Agreement and the other SECI Loan Documents in accordance with the provisions of
the SECI Term Loan Agreement and the other SECI Loan Documents.
(d) Subject to Section 4.16(a), and provided that the Agent shall not
have notified the Security Agent in writing that a Default shall have occurred
and be continuing, upon notice to the Security Agent from the GE Capital Limited
Partner that a Special Event has occurred and is continuing, the Security Agent
shall, at the written direction of the GE Capital Limited Partner, pay over to
the GE Capital Limited Partner and the Other Partners such amounts as are
otherwise required to be distributed to the Partners pursuant to Section 4.2(d)
(but subject to the provisions of Sections 4.2(d) (i) through (ix)) in the
amounts required to be distributed to the Partners pursuant to Section 4.7 of
the Amended and Restated Partnership Agreement until the GE Capital Limited
Partner shall notify the Security Agent that the GE Capital Limited Partner
shall have received such amounts as are distributable to the GE Capital Limited
Partner pursuant to Section 4.7 of the Amended and Restated Partnership
Agreement or that no Special Event shall be continuing. When the conditions
specified in the foregoing sentence have been satisfied, the GE Capital Limited
Partner agrees promptly to give notice to such effect to the Security Agent.
(e) Upon notice to the Security Agent from the Letter of Credit Issuer
that an Event of Default has occurred and is continuing, the Security Agent
shall, at the written direction of the Letter of Credit Issuer, promptly
withdraw amounts on deposit in the Project Letters of Credit Reserve Account and
deliver the same to the Letter of Credit Issuer to be applied by the Letter of
Credit Issuer to the payment of the obligations of the Partnership in respect of
the Project Letters of Credit in accordance with the provisions of the Loan
Agreement.
SECTION 4.17 Events of Default; Special Events. (a) Notwithstanding any
other provision of this Agreement which requires the Security Agent to follow
the written instructions of any other party hereto with respect to deposits
into, transfers to or withdrawals from, any of the Accounts (other than the
Project Letters of Credit Reserve Account, the Distribution Reserve Account, the
Retention Account, the Tomen Distribution Account, the SECI Reserve Account and
the SECI Debt Service Account), upon receipt by the Security Agent of written
notice from the Agent stating that an Event of Default has occurred and is
continuing, the Security Agent shall thereafter distribute
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cash from the Accounts (other than the Project Letters of Credit Reserve
Account, the Distribution Reserve Account, the Retention Account, the Tomen
Distribution Account, the SECI Reserve Account and the SECI Debt Service
Account) in accordance with the other provisions hereof only upon the express
written instructions of the Agent (which instructions shall comply with the
terms of this Agreement and may provide that such amounts be applied to the
payment of the Obligations or that the Security Agent continue to follow the
instructions of the Managing General Partner) until notified in writing by the
Agent that such Event of Default has been waived by the Agent or cured. The
Agent shall give such notice of waiver or cure promptly after the granting of
such waiver or receiving evidence satisfactory to the Agent that such Event of
Default has been cured.
(b) Subject to Sections 4.16(a) and 4.17(a), but notwithstanding any
other provision of this Agreement which requires the Security Agent to follow
the written instructions of any other party hereto with respect to deposits
into, transfers to or withdrawals from, any of the Accounts (other than the
Project Letters of Credit Reserve Account, the Tomen Distribution Account, the
SECI Reserve Account and the SECI Debt Service Account), upon receipt by the
Security Agent of written notice from the GE Capital Limited Partner stating
that a Special Event has occurred and is continuing, the Security Agent shall
thereafter distribute cash from the Accounts (other than the Project Letters of
Credit Reserve Account, the Tomen Distribution Account, the SECI Reserve Account
and the SECI Debt Service Account) in accordance with the other provisions
hereof only upon the express written instructions of the GE Capital Limited
Partner (which instructions shall comply with the terms of this Agreement and
may provide that the Security Agent continue to follow the instructions of the
Managing General Partner) until notified in writing by the GE Capital Limited
Partner that such Special Event has been waived by the GE Capital Limited
Partner or cured. The GE Capital Limited Partner shall give such notice of
waiver or cure promptly after the granting of such waiver or receiving evidence
satisfactory to the GE Capital Limited Partner that such Special Event has been
cured.
(c) Notwithstanding any other provision of this Agreement which
requires the Security Agent to follow the written instructions of any other
party hereto with respect to deposits into, transfers to or withdrawals from the
SECI Reserve Account or the SECI Debt Service Account, upon receipt by the
Security Agent of written notice from the SECI Term Lender stating that a SECI
Event of Default has occurred and is continuing, the Security Agent shall
thereafter distribute cash from the SECI Reserve Account and the SECI Debt
Service Account in accordance with the other provisions hereof only upon the
express written instructions of the SECI Term Lender (which instructions shall
comply with the terms of this Agreement and may provide that such amounts be
applied to the payment of the SECI Obligations or that
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the Security Agent continue to follow the instructions of the Managing General
Partner) until notified in writing by the SECI Term Lender that such SECI Event
of Default has been waived by the SECI Term Lender or cured. The SECI Term
Lender shall give such notice of waiver or cure promptly after the granting of
such waiver or receiving evidence satisfactory to the SECI Term Lender that such
SECI Event of Default has been cured.
(d) Notwithstanding any other provision of this Agreement which
requires the Security Agent to follow the written instructions of any other
party hereto with respect to deposits into, transfers to or withdrawals from the
Project Letters of Credit Reserve Account, upon receipt by the Security Agent of
written notice from the Letter of Credit Issuer stating that an Event of Default
has occurred and is continuing, the Security Agent shall thereafter distribute
cash from the Project Letters of Credit Reserve Account in accordance with the
other provisions hereof only upon the express written instructions of the Letter
of Credit Issuer (which instructions shall comply with the terms of this
Agreement and may provide that such amounts be applied to the payment of the
Obligations in respect of the Project Letters of Credit or that the Security
Agent continue to follow the instructions of the Managing General Partner) until
notified in writing by the Letter of Credit Issuer that such Event of Default
has been waived by the Letter of Credit Issuer or cured. The Letter of Credit
Issuer shall give such notice of waiver or cure promptly after the granting of
such waiver or receiving evidence satisfactory to the Letter of Credit Issuer
that such Event of Default has been cured.
(e) So long as the obligations of the Borrowers under the Loan
Agreement and the other Loan Documents shall remain outstanding, if the Security
Agent shall receive inconsistent instructions from the Agent, the GE Capital
Limited Partner, the Letter of Credit Issuer and the SECI Term Lender, the
Security Agent shall rely on the instructions of the Agent.
SECTION 4.18 Certain Payments. Notwithstanding anything to the contrary
contained herein, in the event that on any Monthly Transfer Date or Distribution
Date there are insufficient funds on deposit in any Account to pay principal,
interest, reimbursement obligations, fees, distributions and/or other amounts
due and payable from such Account on such Monthly Transfer Date or Distribution
Date to the Agent, the Lenders, the Letter of Credit Issuer, the Swap
Counterparty and/or the Security Agent pursuant to any of the Loan Documents,
and thereafter funds are deposited into the Revenue Account, the Security Agent
shall distribute such funds to the Agent for the payment of such principal,
interest, reimbursement obligations, fees or other amounts, such payments to be
made in the same order of priority as they would have been made had such funds
been on deposit in the applicable Account on such Monthly Transfer Date or
Distribution Date.
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SECTION 4.19 Wind-up Account. (a) Subject to the provisions of Section
4.17, but notwithstanding any other provision of this Agreement, upon receipt of
notice from the Managing General Partner and the GE Capital Limited Partner that
the Partnership shall be dissolved in accordance with the terms of the Amended
and Restated Partnership Agreement, the Security Agent shall transfer to the
Wind-up Account all amounts in all the Accounts (other than the Tomen
Distribution Account, the SECI Debt Service Account and the SECI Reserve
Account) and all amounts subsequently received by the Security Agent.
(b) On any date specified in a certificate of a Responsible Officer of
the Managing General Partner, countersigned by a Responsible Officer of the GE
Capital Limited Partner (the "Wind-up Date") (which date shall not be earlier
than five Business Days following the date of receipt by the Security Agent of
the certificate of a Responsible Officer of the GE Capital Limited Partner
specified in Section 4.19(a)), the Security Agent shall transfer, from and to
the extent of cash available in the Wind-up Account, to the Partners such
amounts, certified in such certificate, as are required to be distributed
pursuant to Section 13.4(c) of the Amended and Restated Partnership Agreement.
SECTION 4.20 Delivery of Officer's Certificates; Timing of Payments.
(a) Each of the certificates of a Responsible Officer required to be delivered
hereunder shall be delivered not later than 1:00 p.m., New York City time, on
the day on which the Security Agent is required to make transfers hereunder. Any
certificate of a Responsible Officer delivered later than the time specified
herein shall nevertheless be considered valid and shall be honored by the
Security Agent on or as promptly after the date otherwise specified herein for
payment as is practicable, subject to the availability of cash in the applicable
Account.
(b) Subject to (i) the timely receipt of a certificate of a Responsible
Officer as prescribed in Section 4.20(a), (ii) the availability of cash in the
applicable Account and (iii) other circumstances beyond the control of the
Security Agent, the Security Agent shall make any payment hereunder required
(except for transfers between Accounts) by means of wire transfer of immediately
available funds, to the address of the payee set forth on Schedule I or, in the
case of payments to be made pursuant to Section 4.1(a), to the address of the
payee set forth in the Project Certificate, to be received prior to 3:00 p.m.,
New York City time, on the date specified herein for such payment, or by such
other means of payment, to such other address or at such later time as shall be
specified in the certificate of a Responsible Officer of such payee.
(c) Each Partner shall deliver to each other Partner, simultaneously
with the delivery thereof to the Security Agent, a
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true copy of each certificate of a Responsible Officer of such Partner delivered
by such Partner pursuant to this Agreement.
SECTION 4.21 Tomen Distribution Account. On each Distribution Date
which occurs on the last Business Day of a Quarterly Period, the Security Agent,
after making the transfer described in Section 5.1(e), shall promptly withdraw
all amounts on deposit in the Tomen Distribution Account and transfer such
amounts to the Tomen Limited Partners entitled thereto.
ARTICLE V
Investment
SECTION 5.1 Investments. (a) Any cash held by the Security Agent in any
Account (other than the Project Letters of Credit Reserve Account, the
Distribution Reserve Account, the Retention Account, the Tomen Distribution
Account, the SECI Reserve Account and the SECI Debt Service Account), shall be
invested by the Security Agent from time to time as directed in writing by the
Managing General Partner (or, if the Agent shall have notified the Security
Agent that a Default or an Event of Default under the Loan Agreement has
occurred and is continuing, by the Agent or, if no such notice shall have been
received from the Agent and the GE Capital Limited Partner shall have notified
the Security Agent that a Special Event has occurred and is continuing, by the
substitute Managing General Partner appointed by the GE Capital Limited Partner)
in Permitted Investments. Any income or gain realized as a result of any such
investment shall be held as part of the applicable Account and reinvested as
provided herein. The Security Agent shall have no liability for any loss
resulting from any such investment or sale thereof other than any reason of its
willful misconduct or negligence. Any such investment may be sold (without
regard to maturity date) by the Security Agent whenever necessary to make any
distribution required by this Agreement. The Security Agent will promptly notify
the Agent and the Partnership of any loss resulting from such investment.
(b) Any cash held by the Security Agent in the SECI Reserve Account and
the SECI Debt Service Account shall be invested by the Security Agent from time
to time as directed in writing by SECI (or, if the SECI Term Lender shall have
notified the Security Agent that a SECI Default or a SECI Event of Default has
occurred and is continuing, by the SECI Term Lender) in Permitted Investments.
Any income or gain realized as a result of any such investment shall be held as
part of the applicable Account and reinvested as provided herein. The Security
Agent shall have no liability for any loss resulting from any such investment or
sale thereof other than by reasons of its willful misconduct or negligence. Any
such investment may be sold (without regard to maturity date) by the Security
Agent whenever
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necessary to make any distribution required by this Agreement. The Security
Agent will promptly notify the SECI Term Lender and the SECI of any loss
resulting from any such investment.
(c) Any cash held by the Security Agent in the Distribution Reserve
Account and the Retention Account shall be invested by the Managing General
Partner (or, if the GE Capital Limited Partner shall have notified the Security
Agent that a Special Event has occurred and is continuing, by the substitute
Managing General Partner appointed by the GE Capital Limited Partner) in
Permitted Investments. Any income or gain realized as a result of any such
investment shall be held as part of the Distribution Reserve Account and the
Retention Account and reinvested as provided herein. The Security Agent shall
have no liability for any loss resulting from any such investment or sale
thereof other than by reason of its willful misconduct or negligence. Any such
investment may be sold (without regard to maturity date) by the Security Agent
whenever necessary to make any distribution required by this Agreement. The
Security Agent will promptly notify the GE Capital Limited Partner and the
Partnership of any loss resulting from any such investment.
(d) Any cash held by the Security Agent in the Project Letters of
Credit Reserve Account shall be invested by the Security Agent from time to time
as directed in writing by the Managing General Partner (or, if the Letter of
Credit Issuer shall have notified the Security Agent that a Default or an Event
of Default under the Loan Agreement has occurred and is continuing, by the
Letter of Credit Issuer or, if not such notice shall have been received from the
Letter of Credit Issuer and the GE Capital Limited Partner shall have notified
the Security Agent that a Special Event has occurred and is continuing, by the
substitute Managing General Partner appointed by the GE Capital Limited Partner)
in Permitted Investments. Any income or gain realized as a result of any such
investment shall be held as part of the applicable Account and reinvested as
provided herein. The Security Agent shall have no liability for any loss
resulting from any such investment or sale thereof other than by reason of its
willful misconduct or negligence. Any such investment may be sold (without
regard to maturity date) by the Security Agent whenever necessary to make any
distribution required by this Agreement. The Security Agent will promptly notify
the Letter of Credit Issuer and the Partnership of any loss resulting from any
such investments.
(e) Any cash held by the Security Agent in the Tomen Distribution
Account shall be invested by the Security Agent from time to time as directed in
writing by the Managing General Partner (or, if the Agent shall have notified
the Security Agent that a Default or an Event of Default under the Loan
Agreement has occurred and is continuing, by the Agent or, if no such notice
shall have been received from the Agent and the GE Capital
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Limited Partner shall have notified the Security Agent that a Special Event has
occurred and is continuing, by the substitute Managing General Partner appointed
by the GE Capital Limited Partner) in Permitted Investment maturing not later
than the date such case is to be distributed to the Tomen Limited Partners
pursuant to Section 4.21. Any income or gain realized as a result of any such
investment shall be held in such Account and be reinstated as provided herein,
and on each Distribution Date which occurs on the last Business Day of a
Quarterly Period, all amounts in such Account in excess of the sum of the
transfers to such Account pursuant to Section 4.2(e) during such Quarterly
Period shall be transferred to the Revenue Account. The Security Agent shall
have no liability for any loss resulting from any such investment or sale
thereof other than by reason of its willful misconduct or negligence. Except as
may otherwise be directed by the Tomen Limited Partners pursuant to a written
notice delivered to the Security Agent, any such investment may be sold (without
regard to maturity date) by the Security Agent whenever necessary to make any
distribution required under Section 4.21. The Security Agent will promptly
notify the Agent, the Partnership and the Tomen Limited Partners of any loss
resulting from any such investment.
ARTICLE VI
Security Agent
SECTION 6.1 Rights, Duties, etc. (a) The acceptance by the Security
Agent of its duties hereunder is subject to the following terms and conditions
which the parties to this Agreement hereby agree shall govern and control with
respect to its rights, duties, liabilities and immunities:
(i) it shall act hereunder as an agent only and shall not be
responsible or liable in any manner whatsoever for soliciting any funds or
for the sufficiency, correctness, genuineness or validity of any funds,
securities or other amounts deposited with or held by it;
(ii) it shall be protected in acting or refraining from acting upon any
written notice, certificate, instruction, request or other paper or
document, as to the due execution thereof and the validity and effectiveness
of the provisions thereof and the validity and effectiveness of the
provisions thereof and as to the truth of any information therein contained,
which the Security Agent in good faith believes to be genuine;
(iii) it shall not be liable for any error of judgment or for any act
done or step taken or omitted except in the case of its gross negligence,
willful misconduct or bad faith;
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(iv) it may consult with and obtain advice from counsel of its own
choice in the event of any dispute or question as to the construction of any
provision hereof or otherwise in connection with its duties as Security
Agent hereunder, and any action taken or omitted by the Security Agent in
reasonable reliance upon such opinion shall be full justification and
protection to its;
(v) it shall have no duties as Security Agent except those which are
expressly set forth herein and in any modification or amendment hereof;
provided, however, that no such modification or amendment hereof shall
affect its duties unless it shall have given its prior written consent
thereto;
(vi) it may execute or perform any duties hereunder (other than the
holding of the Accounts) either directly or through agents or attorneys;
(vii) it may engage or be interested in any financial or other
transactions with any party hereto and may act on, or as depositary, trustee
or agent for, any committee or body of holders of obligations of such
Persons as freely as if it were not Security Agent hereunder;
(viii) it shall have no right of set-off against any Account;
(ix) it hereby waives any and all Liens which may arise from time to
time in its favor on any Account or any other amounts received by its
pursuant to this Agreement; and
(x) it shall not be obligated to take any action which in its
reasonable judgment would involve it in expense or liability unless it has
been furnished with an indemnity reasonable satisfactory to it.
(b) No implied covenants or obligations shall be read into this
Agreement. If in one or more instances the Security Agent takes any action or
assumes any responsibility not specifically delegated to it hereunder, neither
the taking of such action nor the assumption of such responsibility shall be
deemed to be an express or implied undertaking on the part of the Security Agent
that it will take the same or similar action or assume the same or similar
responsibility in any other instance.
(c) The Security Agent shall not be under any liability for interest on
any funds received by its pursuant to any of the provisions of this Agreement.
(d) The Security Agent shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice,
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request, consent, order, approval, bond or other paper or document, unless
requested in writing to do so by the Agent; provided, however, that if the
payment within a reasonable time to the Security Agent of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Security Agent, not reasonably assured to the Security
Agent by the security afforded to it by the terms of this Agreement, the
Security Agent may require reasonable indemnity against such expense or
liability as a condition to taking any such action. The reasonable expense of
every such examination shall be paid by the Partnership or, if paid by the
Security Agent, shall be repaid by the Partnership upon demand from the
Partnership's own funds.
SECTION 6.2 Resignation or Removal. (a) The Security Agent may at any
time resign by giving notice to each other party to this Agreement, such
resignation to be effective upon the appointment of a successor Security Agent
as hereinafter provided.
(b) The Agent may remove the Security Agent at any time by giving
notice to each other party to this Agreement, such removal to be effective upon
the appoint of a successor Security Agent as hereinafter provided.
(c) In the event of any resignation or removal of the Security Agent, a
successor Security Agent, which (i) shall be a bank or trust company organized
under the laws of the United States of America or of the State of New York,
having a capital and surplus of not less than $100,000,000, and shall in any
event maintain an office in the State of New York where it will hold the
Accounts, and (ii) shall be acceptable to the Agent, the SECI Term Lender and
the GE Capital Limited Partner, shall be selected by the Partnership (or, if a
Default or Event of Default shall have occurred and be continuing, by the Agent
or the GE Capital Limited Partner) and appointed by the Agent on behalf of
itself and the Secured Parties. If a successor Security Agent shall not have
been appointed, or shall not have accepted its appointment, as Security Agent
hereunder within 45 days after such notice of resignation of the Security Agent
or such notice of removal of the Security Agent, the Security Agent, the Agent
or the GE Capital Limited Partner may apply to any court of competent
jurisdiction to appoint a successor Security Agent to act until such time, if
any, as a successor Security Agent shall have accepted its appointment as above
provided. Any successor Security Agent so appointed by such court shall
immediately and without further act be superseded by any successor Security
Agent appointed by the Agent on behalf of itself and the Secured Parties as
above provided. Any such successor Security Agent shall deliver to each party to
this Agreement a written instrument accepting such appointment hereunder and
thereupon such successor Security Agent shall succeed to all the rights and
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duties of the Security Agent hereunder and shall be entitled to receive the
Account from the predecessor Security Agent.
ARTICLE VII
Determinations
SECTION 7.1 Value. Cash and Permitted Investments on deposit from time
to time in the Accounts shall be valued by the Security Agent as follows:
(a) cash shall be valued at the face amount thereof; and
(b) Permitted Investments shall be valued at the amount which the
Security Agent would have received at such time if the Security Agent had
liquidated such Permitted Investments (at then prevailing market prices).
SECTION 7.2 Other Determinations. The Partnership, the Agent, GE
Capital, the SECI Term Lender and the Security Agent may establish procedures
not inconsistent with this Agreement pursuant to which the Security Agent may
conclusively determine, for purposes of this Agreement, the amounts from time to
time to be distributed or paid by the Security Agent from cash available in the
Accounts.
ARTICLE VIII
Representations and Warrants
SECTION 8.1 Representations. Each Partner represents and warrants, for
the benefit of each other Partner, the Agent, the Lenders, the Letter of Credit
Issuer, the Swap Counterparty and the SECI Term Lender, that each certificate of
a Responsible Officer delivered by such Partner in connection with this
Agreement shall be true and correct in all material respects and that the
amounts of money certified thereby shall be the proper amounts to be set forth
in such certificates of a Responsible Officer.
SECTION 8.2 Indemnification. (a) The Managing General Partner hereby
undertakes to indemnify and hold harmless each Partner, the Agent, the Lenders,
the Letter of Credit Issuer, the Swap Counterparty and the SECI Term Lender from
and against any and all expenses imposed on, incurred by or asserted against
such Person in any way relating to or arising out of any inaccuracy in any
certificate of a Responsible Officer delivered by the Managing General Partner.
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(b) The GE Capital Limited Partner hereby undertakes to indemnify and
hold harmless the Partnership from and against any and all expenses imposed on,
incurred by or asserted against the Partnership arising solely out of the
issuance or use of the Senior Debt Service Letter of Credit or any draw or
attempt to draw thereunder.
ARTICLE IX
Miscellaneous
SECTION 9.1 Fees and Indemnification of Security Agent. The Partnership
agrees to pay the reasonable fees of the Security Agent as compensation for its
services under this Agreement. In addition, the Partnership assumes liability
for, and agrees to indemnify, protect, save and keep harmless the Security Agent
and its officers, employees, successors, assigns, agents and servants from and
against, any and all claims, liabilities, obligations, losses, damages,
penalties, costs and expenses that may be imposed on, incurred by, or asserted
against, at any time, the Agent or its officers and employees and in any way
relating to or arising out of the execution and delivery of this Agreement, the
establishment of the Accounts, the acceptance of deposits, the purchase or sale
of Permitted Investments, the retention of cash and Permitted Investments or the
proceeds thereof and any payment, transfer or other application of cash or
Permitted Investments by the Security Agent in accordance with the provisions of
this Agreement, or as may arise by reason of any act, omission or error of the
Security Agent made in good faith in the conduct of its duties; except that the
Partnership shall not be required to indemnify, protect, save and keep harmless
the Security Agent against (a) its own gross negligence, active or passive, or
willful misconduct and (b) any claims which the Agent, GE Capital, the SECI Term
Lender, the GE Capital Limited Partner or the Tomen Limited Partners (solely
with respect to the Tomen Distribution Account) may have against the Security
Agent as a result of a failure by the Security Agent to perform its obligations
hereunder. The indemnities contained in this Section 9.1 shall survive the
termination of this Agreement.
SECTION 9.2 Termination. This Agreement shall terminates upon written
notice by the Partnership, the Agent, the GE Capital Limited Partner, the Letter
of Credit Issuer, the Swap Counterparty and the SECI Term Lender to the Security
Agent; provided, that upon payment in full of the Obligations, as notified in
writing by the Agent, the Letter of Credit Issuer and the Swap Counterparty to
the Security Agent, the Accounts listed in numbers (8), (12), (16), (17), (18)
and (19) of Section 2.2(a) shall be closed by the Security Agent and any
remaining amounts, together with any interest thereon, on deposit in such
Accounts, shall be transferred to the Revenue Account; provided, further,
Amended and Restated
Security Deposit Agreement
<PAGE>
49
that if at the time of delivery of the notice referred to in the foregoing
proviso, either the GE Capital Limited Partner or the SECI Term Lender shall
have delivered a written notice to the Security Agent that a Special Event has
occurred and is continuing or that a SECI Event of Default has occurred and is
continuing, as the case may be, the Security Agent shall transfer such remaining
amounts in accordance with Sections 4.16(d) and 4.16(c), respectively. Upon
termination of this Agreement, except following a transfer pursuant to Section
4.19, the Security Agent shall transfer any remaining amounts, together with any
interest thereon, on deposit in the Accounts to the party or parties specified
in such notice. Any liability or obligation hereunder arising prior to the
termination of this Agreement shall survive such termination.
SECTION 9.3 Agreement Regarding Letters of Credit. The Agent, the
Partnership and GE Capital intend that the Letters of Credit issued by GE
Capital in favor of the Agent pursuant to this Agreement and the Loan Agreement
shall constitute in all respects letters of credit as such term in commonly used
in the commercial banking business, it being understood that the obligations of
GE Capital under such Letters of Credit are independent of and shall not be
affected by the occurrence of any Default or Event of Default, any choice of
remedies under the Collateral Security Documents by the Agent, any invalidity,
irregularity or unenforceability of or any modification to the terms of this
Agreement, the Loan Agreement or the release or granting of any security
interest by the Partnership in favor or the Agent, and that GE Capital, in its
capacity as issuer of such Letters of Credit, hereby waives notice of any of the
foregoing (except to the extent provided for or required by the terms of any
draw certificate under such Letter of Credit) and waives any right to assert any
counterclaim or set-off rights against any beneficiary of any such Letter of
Credit in connection with its obligations under such Letters of Credit.
SECTION 9.4 Severability. If any one or more of the covenants or
agreements provided in this Agreement on the part of the parties hereto to be
performed should be determined by a court of competent jurisdiction to be
contrary to law, such covenant or agreement shall be deemed and construed to be
severable from the remaining covenants and agreements herein contained and shall
in no way affect the validity of the remaining provisions of this Agreement.
SECTION 9.5 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
SECTION 9.6 Amendments. This Agreement may not be modified or amended
without the prior written consent of each of the parties hereto, other than the
Original Agent.
Amended and Restated
Security Deposit Agreement
<PAGE>
50
SECTION 9.7 Applicable Law. This Agreement shall in all respects be
governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 9.8 Notices. Unless otherwise specifically provided herein, all
notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof to be given to any
Person shall be in writing and shall become effective, if mailed, upon the
earlier of (i) receipt by the addressee and (ii) five Business Days after being
deposited in the United States mail, proper postage for first-class mail affixed
thereto or, if delivered by hand or courier service or in the form of a telex,
telecopy or telegram, when received and shall be directed to the address,
telecopy or telex number of such Person designated pursuant to the Loan
Agreement, the Swap Agreement, the SECI Term Loan Agreement or the Amended and
Restated Partnership Agreement, as the case may be, or in the case of the
Security Agent, to Two World Trade Center, 81st Floor, New York, New York 10048,
Attention: Trust Administration Department, telephone number, 212-898-2520,
facsimile number, 212-321-2468, telex number, 425-777 FUJ TRUI, or to such other
address, or telecopy number as may be specified from time to time by such Person
or the Security Agent.
SECTION 9.9 Limited Liability. There shall be full recourse to the
Partnership and all of its assets for the liabilities of the Partnership under
this Agreement and its other Obligations, but in no event shall any officer,
shareholder, director, employee or holder of any equity interest in the
Partnership or any Affiliate of any thereof, be personally liable or obligated
for such liabilities and Obligations of the Partnership except as may be
specifically provided in any other Basic Document to which such Person is a
party. Nothing herein contained shall limit or be construed to limit the
liabilities and obligations of any such Person in accordance with the terms of
any other Basic Document creating such liabilities and obligations to which
such Person is a party.
SECTION 9.10 Benefit of Agreement. This Agreement shall inure to the
benefit of, and be enforceable by, the parties hereto and their respective
successors and permitted assigns, and no other Person shall be entitled to any
of the benefits of this Agreement.
Amended and Restated
Security Deposit Agreement
<PAGE>
51
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement
to be duly executed by their duly authorized officers, all as of the day and
year first above written.
SARANAC POWER PARTNERS, L.P.
By: Saranac Energy Company, Inc.,
its general partner
By: /s/ Martin H. Young, Jr.
--------------------------------------
Title: Senior Vice President
SARANAC ENERGY COMPANY, INC.
By: /s/ Martin H. Young, Jr.
--------------------------------------
Title: Senior Vice President
TPC SARANAC PARTNER ONE, INC.
By: /s/ Keichi Matsuzuka
--------------------------------------
Title: Chief Financial Officer
TPC SARANAC PARTNER TWO, INC.
By: /s/ Keichi Matsuzuka
--------------------------------------
Title: Chief Financial Officer
Amended and Restated
Security Deposit Agreement
<PAGE>
52
CREDIT SUISSE, as Agent
By: /s/ PP Hurd
--------------------------------------
Title: Associate
By: /s/ PP Schultheiss
--------------------------------------
Title: Associate
GENERAL ELECTRIC CAPITAL
CORPORATION, as Original Agent,
Letter of Credit Issuer, Swap
Counterparty, SECI Term Lender and GE
Capital Limited Partner
By: /s/ illegible
--------------------------------------
Title: Manager Operations
THE FUJI BANK AND TRUST COMPANY
By: /s/ Sharon Moore
--------------------------------------
Title: Vice President
Amended and Restated
Security Deposit Agreement
<PAGE>
INSTALLMENT SALE AGREEMENT
THIS INSTALLMENT SALE AGREEMENT made and entered into as of December 29,
1992, by and between County of Clinton Industrial Development Agency (the
"Issuer"), a public benefit corporation duly organized and existing under the
Constitution and laws of the State of New York (the "State"), and Saranac Power
Partners, L.P., a limited partnership formed under and pursuant to the laws of
the State of Delaware (the "Company").
WITNESSETH:
WHEREAS, the New York State Industrial Development Agency Act, being Title
1 of Article 18-A of the General Municipal Law, Chapter 24 of the Consolidated
Laws of the State of New York, as amended (hereinafter referred to as the
"Enabling Act") authorizes the creation of industrial development agencies for
the benefit of the several counties, cities, villages and towns in the state of
New York and empowers such agencies, among other thing, to acquire, construct,
reconstruct, lease, improve, maintain, equip and furnish real and personal
property, whether or not now in existence or under construction, which shall be
suitable for, among others, manufacturing, warehousing, research, commercial or
industrial purposes, in order to advance the job opportunities, health, general
prosperity and economic welfare of the people of the State of New York and to
improve their recreation opportunities, prosperity and standard of living; and
WHEREAS, the Enabling Act further authorizes each such agency to lease or
sell its projects, to charge and collect rent, or the purchase price therefor,
to issue its bonds for the purpose of carrying out any of its corporate
purposes and, as security for the payment of the principal and redemption price
of, and interest on, any such bonds, to mortgage any or all of its facilities
and to pledge the revenues and receipts therefrom to the payment of such bonds;
and
WHEREAS, pursuant to and in accordance with the provisions of the Enabling
Act, Chapter 225 of the 1971 Laws of the State of New York, as amended (said
chapter and the Enabling Act being hereinafter collectively referred to as the
"Act") created the Agency for the benefit of Clinton County, New York and the
inhabitants thereof; and
WHEREAS, (i) the Company has acquired and will acquire fee title to,
leasehold interests in and certain easements to various parcels of real
property located in Clinton County, New York (such rights, title and interests
collectively referred to as the Land, as more specifically defined hereinbelow)
and has undertaken (a) to construct on the Land a 240MW natural gas-fired
cogeneration facility and related transmission lines and electric energy
interconnection facilities (the "Facility"), and (b) to acquire and install
certain Equipment (as hereinafter defined) (the Land, the Facility and the
Equipment being hereinafter collectively referred to as the "Project
Facility"); and (ii) the Issuer will sell or lease the Project Facility to the
Company under this installment sale agreement (hereinafter referred to as the
"Agreement") between the Issuer and the Company; and
<PAGE>
WHEREAS, the Company submitted and application to the Issuer, and the
Issuer by a resolution has accepted such application, for the Issuer to issue
notes (the "Bonds") for the purposes of financing a portion of the costs of a
project (the "Project") consisting of (i) the acquisition, construction,
installation and equipping of the Project Facility, and (ii) the sale and/or
lease of the Project Facility to the Company; and
WHEREAS, the Issuer by resolution adopted on September 16, 1992 (the
"Inducement Resolution") determined to issue up to $400,000,000 aggregate
principal amount of its Bonds for the purposes of financing a portion of the
cost of the Project and by resolution adopted on December 29, 1992 (the "Bond
Resolution") determined to issue its Bonds for such purpose; and
WHEREAS, the Company, the Issuer, North Country Gas Pipeline Corporation,
a New York corporation ("North Country"), certain lending institutions (the
"Lenders") and General Electric Capital Corporation, as Agent to the Lenders,
have entered into a loan agreement dated as of December 29, 1992 (the "Loan
Agreement") pursuant to which the Lenders have agreed to make certain
extensions of credit, including, but not limited to, the loans to be evidenced
by the Bonds; and
WHEREAS, the Issuer proposes to undertake the Project, appoint the Company
as agent of the Issuer to undertake the acquisition, construction, and
installation of the Project Facility and sell the Project Facility to the
Company, and the Company desires to act as agent of the Issuer to undertake the
acquisition, construction and installation of the Project Facility and purchase
the Project Facility from the Issuer, all pursuant to the terms and conditions
hereinafter set forth; and
WHEREAS, the providing of the Project Facility and the sale of the Project
Facility to the Company pursuant to this Agreement is for a proper purpose to
wit, to advance the job opportunities, health, general prosperity and economic
welfare of the inhabitants of the State pursuant to the provisions of the
Enabling Act;
WHEREAS, this Agreement sets forth the terms and conditions pursuant to
which the Issuer agrees to sell and the Company agrees to purchase the Project
Facility; and
WHEREAS, all things necessary to constitute this Agreement a valid and
binding agreement by and between the parties hereto in accordance with the
terms hereof, have been done and performed, and the creation, execution and
delivery of this Agreement have in all respects been duly authorized;
NOW, THEREFORE, in consideration of the promises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
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<PAGE>
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1. DEFINITIONS. In addition to the words and terms elsewhere
defined in this Agreement, the following words and terms as used herein shall
have the following meanings unless the context or use clearly indicates another
or different meaning or intent, and any other words and terms not otherwise
defined in this Agreement shall have the same meanings when used herein as
assigned in Appendix A of the Loan Agreement, a copy of which is attached
hereto, unless the context or use clearly indicates another or different
meaning or intent:
"Acquisition", when used with reference to the Project Facility, means
acquisition, construction, installation and equipping.
"Agent" means General Electric Capital Corporation, as Agent as more
particularly described in the Loan Agreement, and any successor agent.
"Agreement" means this Installment Sale Agreement between the Issuer and
the Company and any modifications, alterations and supplements hereto made in
accordance with the provisions hereof.
"Assignment to Company" means an assignment agreement in form and
substance reasonably satisfactory to the Issuer and the Company pursuant to
which the Issuer shall assign to the Company (i) the Easements and (ii) the
Leases.
"Assignment to Issuer" means the assignment and assumption of agreements
dated the Closing Date, given by the Company to the Issuer conveying all of the
Company's right, title and interest in and to the G-P Leases and the Easements,
and improvements thereon, to the Issuer.
"Assignment to NYSEG" means an assignment agreement in form and substance
reasonably satisfactory to the Issuer and the Company pursuant to which the
Issuer shall assign to NYSEG the NYSEG Easements.
"Authorized Representative" means the Person or Persons at the time
designated to act on behalf of the Issuer or the Company, as the case may be,
by written certificate containing the specimen signature of each such Person
and signed on behalf of (A) the issuer by its Chairman or Vice Chairman, or
such other person as may be authorized by resolution of the Issuer, and (B) the
Company by the President or any Vice President of its General Partner, or such
other persons as may be authorized by the Company.
"Bill of Sale to Company" means the bill of sale in form and substance
reasonably satisfactory to the Issuer and the Company pursuant to which the
Issuer shall convey the Issuer's interest in the Equipment to the Company.
3
<PAGE>
"Bill of Sale to G-P" means a bill of sale in form and substance
reasonably satisfactory to the Issuer and the Company pursuant to which the
Issuer shall convey its interest in the G-P Equipment to Georgia Pacific.
"Bill of Sale to Issuer" means the bill of sale dated the Closing Date
from the Company to the Issuer conveying the Company's right, title and
interest in the Equipment.
"Bill of Sale to NYSEG" means a bill of sale in form and substance
reasonably satisfactory to the Issuer and the Company pursuant to which the
Issuer shall convey its right, title and interest in the NYSEG Equipment to
NYSEG.
"Bond Documents" means, collectively, the Bonds, this Agreement, the Loan
Agreement, the Saranac PILOT Mortgage, the IDA Building Loan Mortgage, the IDA
Development Loan Mortgage, the Partnership/North Country Development Loan
Mortgage, the NYSEG Subordinated Mortgage, the Georgia-Pacific Mortgage and
Security Agreement, the Partnership Security Agreement, the IDA North Country
Security Agreement, the Partnership Development Loan Note, the Saranac PILOT
Agreement, the Assignments to Issuer, the Bills of Sale to Issuer, the Deed to
Issuer, the [Site Transmission Line] Short-Form Construction Loan Agreement,
the [Pipeline] Short-Form Construction Loan Agreement, the Security Deposit
Agreement, the IDA (North Country) Building Loan Mortgage, the IDA (North
Country) Building Loan Note, the IDA (North Country) Development Loan Mortgage,
the IDA (North Country) Development Loan Note, the IDA (North Country)
Installment Sale Agreement, the North Country PILOT Agreement, the North
Country PILOT Mortgage and the Construction Contract.
"Bonds" means the IDA Building Loan Note and the IDA Development Loan
Note.
"Budgets" means, collectively, the IDA Development Loan Budget and the IDA
Building Loan Budget.
"Closing Date" means the Conformed Agreement Date as defined in the Loan
Agreement.
"Completion Date" means the date the Acquisition of the Project Facility
is certified as being complete in accordance with this Agreement.
"Cost(s) of the Project", "Cost" or "Costs" means all fees, costs and
allowances which the Issuer or the Company may properly pay or accrue for the
Project Facility, and which, under generally accepted accounting principles,
are chargeable to the capital account of the Project Facility or could be so
charged either with a proper election to capitalize such costs or, but for a
proper election, to expense such costs, including (without limitation) the
following costs:
(a) Fees and expenses incurred in preparing the plans and specifications
for the Project Facility (including any
4
<PAGE>
preliminary study or planning or any aspect thereof); any labor, services,
materials and supplies used or furnished in Land acquisition, improvement and
construction; any Equipment for the Project Facility; and any acquisition
necessary to provide utility services or other services, including, trackage to
provide the Project Facility with public transportation facilities, roadways,
parking lots, water supply, sewage and waste disposal facilities; all interests
in real and tangible personal property deemed necessary by the Company and
acquired in connection with the Project Facility; insurance as required under
the Loan Agreement or herein; payment of fees and commissions payable to GECC
pursuant to the Loan Agreement; and payments of miscellaneous expenses
incidental to any of the foregoing items.
(b) The fees for architectural, engineering, legal counsel and supervisory
and consulting services in connection with the Project Facility;
(c) Any fees and expenses incurred in connection with perfecting and
protecting title to the Project Facility and any fees and expenses incurred in
connection with preparing, recording or filing such documents, instruments or
financing statements as either the Company or the Issuer may deem desirable to
perfect or protect the rights of the Issuer or the Lenders under the Bond
Documents or the Loan Documents;
(d) The legal, accounting or financing advisory fees and expenses, any
fees and expenses of the Issuer, Agent, Lenders, filing fees, and printing and
engraving costs, including, without limitation, fees and expenses of bond
counsel and the counsel to the Issuer and special counsel to the Issuer,
incurred in connection with the authorization and issuance of the Bonds, and
the preparation of the Bond Documents and all other documents in connection
with the authorization and issuance of the Bonds;
(e) Interest to accrue on the Bonds during construction of the Project
Facility;
(f) Any administrative or other fees charged by the Issuer or
reimbursement thereto of expenses in connection with the Project until the
Completion Date;
(g) Payment of taxes including property taxes, assessments and other
charges, if any, or payments in lieu of taxes with respect thereof, or
reimbursement thereof if paid by the Company, and
(h) Any other costs and expenses relating to the Project which could
constitute costs or expenses for which the Issuer may expend Bond proceeds
under the Act.
"Deed to the Company" means a deed in form and substance reasonably
satisfactory to the Issuer and the Company pursuant to which the Issuer shall
convey its right, title and interest in the Fee Premises to the Company.
5
<PAGE>
"Deed to G-P" means a deed in form and substance reasonably satisfactory
to the Issuer, the Company and Georgia Pacific pursuant to which the Issuer
shall convey all of its right, title and interest in the G-P Premises to
Georgia Pacific.
"Deed to Issuer" means the deed dated the Closing Date given by the
Company to the Issuer conveying all of the Company's interest in the Fee
Premises to the Issuer.
"Deed to NYSEG" means a deed in form and substance reasonably satisfactory
to the Issuer, the Company and NYSEG pursuant to which the Issuer shall convey
all of its right, title and interest in the NYSEG Fee Premises to NYSEG.
"Easement Premises" means the portions of the Land covered by the
Easements.
"Easements" means the agreements described on Exhibit A-1 attached hereto
and the easements and licenses to be obtained upon the completion of the
condemnation proceeding described on Exhibit A-2 hereto; provided, however,
that from and after the execution and delivery of the Assignment to NYSEG, the
term Easements shall not include the NYSEG Easements.
"Equipment" means all machinery and equipment to be installed in or
utilized in connection with the construction of the Project Facility; provided,
however, that (i) from and after the execution and delivery of the Bill of Sale
to G-P, the term Equipment shall not include the G-P Equipment and (ii) from
and after the execution and delivery of the Bill of Sale to NYSEG, the term
Equipment shall not include the NYSEG Equipment.
"Eminent Domain" means the taking of title to, or the temporary use of,
the Project Facility or any part thereof pursuant to eminent domain or
condemnation proceedings or by any settlement or compromise of such
proceedings, or any voluntary conveyance of the Project Facility or any part
thereof during the pendency of, or as a result of a threat of, such
proceedings.
"Event of Default" shall have the meaning set forth in Section 10.1
hereof.
"Fee Premises" means the portions of the Land described on Exhibit B
attached hereto; provided, however, that (i) from and after the execution and
delivery of the Deed to G-P, the term Land shall not include the G-P Premises,
and (ii) from and after the execution and delivery of the Deed to NYSEG, the
term Land shall not include the NYSEG Fee Premises.
"GECC" shall have the same meaning as "GE Capital" as set forth in the
Loan Agreement.
"Georgia Pacific" means the Georgia-Pacific Corporation, a Georgia
corporation.
6
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"G-P Equipment" means the portion of the Equipment located on the G-P
Premises.
"G-P Leases" means the leases between the Company and Georgia Pacific
described in Exhibit C attached hereto.
"G-P Premises" means the portions of the Land described in Exhibit D
attached hereto.
"Governmental Authorities" means the United States of America, the State
and any political subdivision thereof, and any agency, department, commission,
court, board, bureau or instrumentality of any of them.
"IDA Building Loan Note" shall have the same meaning as set forth in the
Loan Agreement.
"IDA Development Loan Note" shall have the same meaning as set forth in
the Loan Agreement.
"Installment Purchase Payments" means the payments made by the Company to
the Issuer in accordance with Section 5.2 hereof.
"Issuer Representative" means any one of the persons at the time
designated to act on behalf of the Issuer by written certificate furnished to
the Company containing the specimen signatures of such persons and signed on
behalf of the Issuer by its Chairman or Vice chairman.
"Land" shall mean, collectively, the Fee Premises, the Leasehold Premises
and the Easement Premises.
"Leasehold Premises" means the portions of the Land described in Exhibit E
attached hereto.
"Lenders" means the financial institutions parties to the Loan Agreement
from time to time.
"Lien" shall have the meaning as set forth in the Loan Agreement.
"Loan Agreement" means the Loan Agreement dated as of the Closing Date by
and among the Borrowers, the Lenders and the Agent.
"Loan Agreement Permitted Lien" shall have the meaning as set forth in the
Loan Agreement.
"Mortgage" shall mean collectively the IDA Building Loan Mortgage, the IDA
Development Loan Mortgage and the Partnership Development Loan Mortgage.
"Net Proceeds", when used with respect to any proceeds of insurance or
proceeds resulting from Eminent Domain, means the gross proceeds therefrom less
all expenses (including attorneys' fees) incurred in realization thereof.
7
<PAGE>
"North Country" means the North Country Gas Pipeline Corporation, a New
York corporation.
"North Country PILOT Agreement" shall have the meaning as set forth in the
Loan Agreement.
"NYSEG" means New York State Electric & Gas Corporation, a New York
corporation.
"NYSEG Easements" means the portion of the Easements described on Exhibit
F attached hereto.
"NYSEG Equipment" means the portion of the Equipment located on the land
covered by the NYSEG Easements and the NYSEG Fee Premises.
"NYSEG Fee Premises" means the portion of the Fee Premises described on
Exhibit G attached hereto.
"Permitted Encumbrances" shall have the same meaning as Loan Agreement
Permitted Liens as set forth in the Loan Agreement.
"PILOT Agreements" shall mean collectively the Saranac PILOT Agreement and
the North Country PILOT Agreement.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Saranac PILOT Agreement" shall have the meaning as set forth in the Loan
Agreement.
"Saranac PILOT Mortgage" shall have the meaning as set forth in the Loan
Agreement.
"State" means the State of New York.
"Unassigned Rights" means (i) the indemnification rights of the Issuer
granted pursuant to Sections 8.6, 8.7 and 12.14 of this Agreement, (ii) the
monies due and to become due the Issuer for its own account or to the members,
officers, agents and employees of the Issuer for their own account pursuant to
Sections 5.2, 6.8, 8.6, 10.3 and 10.5 of this Agreement, (iii) the rights of
the Issuer to receive notices, reports and other statements hereunder, (iv) the
right of the Issuer to provide consents or receive notices hereunder, (v) the
rights of access and inspection provided to the Issuer hereunder, (vi) the
rights of the Issuer under Sections 12.4 and 12.5 hereof, (vii) the right of
the Issuer to receive the covenants of the Company under Section 2.2(h) and (i)
hereof, (viii) the rights of the Issuer under Sections 3.1(f), 3.1(g), 6.2,
6.4, 8.8, 8.13, 8.17, 8.18, 9.3 and 10.3 of this Agreement, and (ix) the right
to enforce the foregoing pursuant to Article X of this Agreement.
Section 1.2. RULES OF CONSTRUCTION. Unless the context clearly indicates
to the contrary, the following rules shall apply to the construction of this
Agreement.
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(a) Capitalized terms used but not defined in this Agreement shall have
the meaning ascribed to them in the Loan Agreement.
(b) Words importing the singular number shall include the plural number
and vice versa.
(c) The table of contents, captions and headings herein are solely for
convenience of reference only and shall not constitute a part of this Agreement
nor shall they affect its meaning, construction or effect.
(d) Words of the masculine gender shall be deemed and construed to include
correlative words of the feminine and neuter genders, and words of the neuter
gender shall be deemed and construed to include correlative words of the
masculine and feminine genders.
(e) All references in this Agreement to particular Articles or Sections
are references to Articles and Sections of this Agreement, unless otherwise
indicated.
ARTICLE II
REPRESENTATIONS
Section 2.1. REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE ISSUER. The
Issuer represents and warrants as follows:
(a) The issuer is an industrial development agency within the meaning of
the Act, is duly established under the provisions of the Act and is authorized
by the Act to acquire the Project Facility and to enter into this Agreement and
the transactions contemplated herein and to carry out its obligations
hereunder, has been duly authorized by its governing body to execute, deliver
and perform this Agreement and to carry out its obligations hereunder, and will
do or cause to be done all things necessary to preserve and keep this Agreement
in full force and effect. The Project Facility will constitute a "project" as
that term is defined in the Act.
(b) The Issuer has all requisite power, authority and legal right to
execute and deliver the Bond Documents to which it is a party and all other
instruments and documents to be executed and delivered by the Issuer pursuant
thereto, to perform the provisions thereof and to carry out the transactions
contemplated by the Bond Documents, including the issuance of the Bonds. All
corporate action on the part of the Issuer which is required for the execution,
delivery and performance by the Issuer of the Bond Documents has been duly
authorized and effectively taken, and such execution, delivery and performance
by the Issuer do not contravene applicable law or any contractual restriction
binding on or affecting the Issuer, nor will the same constitute a default by
the Issuer under any of the foregoing.
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(c) The Issuer has duly approved the issuance of the Bonds and the
Acquisition of the Project Facility; no other authorization or approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required as a condition to the performance by the Issuer or
its obligations under any Bond Documents.
(d) The bonds shall be issued under and pursuant to the provisions of the
Loan Agreement and shall finance the Costs of the Project.
(e) This Agreement is, and each other Bond Document to which the Issuer is
a party when delivered will be, legal valid and binding special obligations of
the Issuer enforceable against the Issuer in accordance with its terms.
(f) There is no default of the Issuer in the payment of the principal of
or interest on any of its indebtedness for borrowed money or under any
instrument or instruments or agreements under and subject to which any
indebtedness for borrowed money has been incurred which does or could affect
the validity and enforceability of the Bond Documents or the ability of the
Issuer to perform its obligations thereunder, and, to the knowledge of the
Issuer, no event has occurred and is continuing under the provisions of any
such instrument or agreement which constitutes or, with the lapse of time or
the giving of notice, or both, would constitute such a default.
(g) There is not pending or, to the knowledge of the Issuer, threatened
any action or proceeding before any court, governmental agency or arbitrator
(i) to restrain or enjoin the issuance or delivery of the Bonds, (ii) in any
way contesting or affecting the authority for the issuance of the Bonds, or the
validity of any of the Bond Documents, or (iii) in any way contesting the
existence or powers of the Issuer.
(h) In connection with the authorization and issuance of the Bonds, the
Issuer has complied with all provisions of the Constitution and laws of the
State, including the Act.
(i) The Issuer has not assigned, encumbered or pledged and will not
assign, encumber or pledge its interest in this Agreement or the Project
Facility (or any part thereof) for any purpose other than as contemplated under
the Loan Agreement or the Bond Documents.
(j) The Issuer is not in default under any of the provisions of the laws
of the State, where any such default would affect the issuance, validity or
enforceability of the Bonds or the transactions contemplated by this Agreement
or the Loan Agreement.
(k) So long as any Bonds shall remain unpaid, the Issuer will, upon
request of the Agent and provided it shall be furnished with indemnification as
set forth in Section 12.5 below and with sufficient funds to pay all costs and
expenses (including
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attorneys' fees) reasonably incurred by it as such costs and expenses accrue:
(i) take all action and do all things which it is authorized by law to
take and do in order to perform and observe all covenants and agreements on
its part to be performed and observed under the Bond Documents; and
(ii) execute, acknowledge where appropriate, and deliver from time to
time all such instruments and documents as are necessary or desirable to
carry out the intent and purpose of the Bond Documents.
(l) The Issuer has been induced to enter into this Agreement by the
undertaking of the Company to develop the Project Facility in the County of
Clinton, New York.
(m) The Issuer shall cooperate with the Company in the filing by the
Company, as agent of the Issuer, of such applications, returns and other
information with any Governmental Authority as is required by any applicable
law or regulation; provided, however, that the Company shall bear all costs of
preparing, gathering and filing such documents.
(n) The Issuer agrees to promptly record all deeds, and/or assignments, as
appropriate, at its own expense (subject to reimbursement as contemplated by
Sections 2.2(j) and 5.2(c)) and upon the direction of the Company, upon the
transfer of title to the Company, NYSEG or Georgia Pacific of portions of the
Project Facility in accordance with Section 5.1(b) hereof.
Section 2.2. REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE COMPANY. The
Company represents, warrants and covenants as follows:
(a) (i) The Company is a limited partnership duly organized and validly
existing and in good standing under the laws of the state of Delaware, is duly
qualified to do business in the State, and has full partnership and other legal
power and authority to execute, deliver and perform the covenants on its part
contained in the Bond Documents and the Basic Documents to which it is a party,
and has duly authorized the execution, delivery and performance of the Bond
Documents and the Basic Documents to which it is a party and has duly approved
such Bond Documents and Basic Documents.
(ii) Saranac Energy Company, Inc. is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
is duly qualified to do business in the State, and is the only general partner
of the Partnership.
(b) The execution and delivery of the Bond Documents and Basic Documents
to which it is a party, consummation of the transactions contemplated hereby
and thereby, and the fulfillment of or compliance with the terms and conditions
hereof and thereof will not conflict with or constitute a breach of or a
default under
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the Company's agreement of limited partnership or the articles of incorporation
or bylaws of the general partner of the Company or any agreement or instrument
to which the Company or the general partner of the Company is a party, or any
existing law, administrative regulation, court order or consent decree to which
the Company is subject, or by which it or any of its property is bound, or
result in the creation or imposition of any prohibited lien, charge or
encumbrance upon any of the property or assets of the Company or the general
partner of the Company under the terms of any instrument or agreement to which
the Company or such general partner is a party or by which it is bound.
(c) There is no action, suit, proceeding, inquiry or investigation, at law
or in equity, before or by any court, public board or body, pending or, to the
best of the Company's knowledge, threatened against or affecting the Company or
any of its partners, wherein an unfavorable decision, ruling or finding would
materially adversely affect the transactions contemplated by this Agreement or
that would adversely affect, in any way, the validity or enforceability of any
of the Bond Documents or the Basic Documents or any other agreement or
instrument to which the Company is a party and that is to be used or
contemplated for use in the consummation of the transactions contemplated
hereby.
(d) No consent, authorization, approval or action is required to be made,
obtained or complied with prior to the execution, delivery and performance by
the Company of its obligations hereunder or under the other Bond Documents and
Project Documents that has not been made, obtained or complied with, other than
the Governmental Approvals and other consents and approvals listed in Schedules
4 and 3 of the Loan Agreement. Each of this Agreement, the other Bond Documents
and the other Basic Documents to which the Company is a party has been duly
executed and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the rights of creditors generally and by general principal of equity.
(e) The Company will fully and faithfully perform all the material duties
and obligations that it is required to perform pursuant to the Bond Documents
to which it is a party and the other Basic Documents and will perform or cause
to be performed, for and on behalf of the Issuer, each and every affirmative
obligation of the Issuer under and pursuant to the Mortgage and each Basic
Document to which the Issuer is a party to the extent any such duties and
obligations are reasonably capable of performance by the Company. The Company
shall defend, indemnify and hold the Issuer and its officers, directors,
members, agents, and employees harmless from any liability or expense resulting
from any failure by the Company to comply with this paragraph.
(f) No further authorizations, consents or approvals of governmental
bodies or agencies are required in connection with the execution and delivery
by the Company of this Agreement or the
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other Bond Documents or Basic Documents to which the Company is a party or in
connection with the carrying out by the Company of its obligations under this
Agreement or the other Bond Documents or Basic Documents to which the Company
is a party.
(g) The financing of the Project Facility as provided under the Loan
Agreement, and the participation of the Issuer therein have induced the Company
to locate its Project Facility in the jurisdiction of the Issuer. The providing
of the Project Facility by the Issuer and the sale thereof by the Issuer to the
Company (and, as provided herein, the conveyance of (i) the NYSEG Easements,
the NYSEG Fee Premises and the NYSEG Equipment to NYSEG and (ii) the G-P
Premises and the G-P Equipment to Georgia-Pacific) hereby will not result in
the removal of an industrial or manufacturing plant or commercial activity of
the Company or its general partner from one area of the State to another area
of the State or in the abandonment of one or more plants or facilities of the
Company or its general partner located within the State.
(h) After the Company completes the Acquisition of the Project, the
Company shall utilize the Project as a "project" within the meaning of the Act
until the conveyance of the Project Facility to the Company in accordance
herewith.
(i) The Project Facility will be acquired, constructed installed and
operated in such manner as to conform in all material respects with all
applicable zoning, planning, building, environmental and other regulations of
any governmental authorities having jurisdiction of the Project Facility. The
Company shall defend, indemnify and hold the Issuer and its officers,
directors, members, agents, and employees harmless from any liability or
expense resulting from any failure by the Company to comply with this
paragraph.
(j) The Company shall promptly reimburse the Issuer for any expenses,
including, but not limited to, legal, accounting or filing fees, incurred in
connection with the fulfillment of the covenant contained herein above in
Section 2.1(n).
(k) The Company shall comply in all material respects with all mitigating
measures, requirements and conditions, if any, identified in (i) the Findings
Statement adopted by the Issuer and (ii) the documents accepted by the State
Department of Environmental Conservation as the final environmental impact
statement with respect to the Project Facility.
(l) All proceeds of the Bonds shall be used to pay Costs of the Project.
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ARTICLE III
ACQUISITION OF THE PROJECT
Section 3.1. ACQUISITION OF THE LAND; CONSTRUCTION OF THE FACILITY;
ACQUISITION AND INSTALLATION OF THE EQUIPMENT.
(a) The Company shall, on behalf of the Issuer, and with due diligence,
(1) acquire the Land or cause the Land to be acquired, (2) construct the
Facility or cause the Facility to be constructed, and (3) acquire and install
the Equipment or cause the acquisition and installation of the Equipment, all
in accordance with the Plans and Specifications. The approval of the Issuer
shall not be required for changes in the Plans and Specifications which do not
substantially alter the purpose and description of the Project Facility as set
forth in the Exhibits hereto.
(b) In the event that the Company desires to amend or supplement the
Project Facility and such amendment or supplement substantially alters the
purpose and description of the Project Facility as described in the Exhibits
hereto, the Issuer will enter into such amendment or supplement upon receipt
of:
(i) a certificate of an Authorized Representative of the Company
describing in detail the proposed changes and stating that they will not
have the effect of disqualifying the Project Facility as a cogeneration
project that may be financed pursuant to the Act and that they will not
violate any permits in existence relating to the Project Facility or that
such permits will be amended to permit such changes;
(ii) a copy of the proposed form of amended or supplemented Exhibits
hereto; and
(iii) the written consent of the Agent.
(c) Title to all materials, equipment, machinery and other items of
Property intended to be incorporated or installed in and to become part of the
Project Facility shall vest in the Issuer immediately upon deposit on the Land
or incorporation or installation in the Facility, whichever shall first occur.
The Company shall execute, deliver and record or file all instruments necessary
or appropriate to so vest title in the Issuer and shall take all action
necessary or appropriate to protect such title against claims of any third
Persons.
(d) The Issuer shall enter into, and accept the assignment of such
contracts as the Company may request in order to effectuate the purposes of
this Section 3.1, provided, however, that the liability of the Issuer
thereunder shall be subject to Sections 12.4 and 12.5 hereof.
(e) The Issuer hereby appoints the Company its true and lawful agent and
the Company hereby accepts such agency, (1) to acquire the Land, construct the
Facility, and acquire and install
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the Equipment in accordance with the Plans and Specifications, (2) to make,
execute, acknowledge and deliver any contracts; orders, receipts, writings and
instructions with any other Persons, and in general to do all things which may
be requisite or proper, all for the acquisition, construction and equipping of
the Project Facility with the same powers and with the same validity as the
Issuer could do if acting in its own behalf, (3) to pay all fees, costs and
expenses incurred in the acquisition, construction and equipping of the Project
Facility from funds made available therefor in accordance with the Loan
Agreement, (4) to apply for all permits and licenses, (5) to request on behalf
of the Issuer, and receive for the purpose of paying the Costs of the Project,
advances of funds pursuant to the Loan Agreement, (6) to ask, demand, sue for,
levy, recover and receive all such sums of money, debts, dues and other demands
whatsoever which may be due, owing and payable to the Issuer under the terms of
any contract, order, receipt or writing in connection with the acquisition,
construction, equipping and installation of the Project Facility, and to
enforce the provisions of any contract, agreement, obligation, bond or other
performance security, (7) to take all actions necessary or in the opinion of
the Company desirable for the construction and, to the extent permitted by law,
the operation, use, repair and maintenance of the Project Facility for its
intended purposes, including, to the extent permitted by law, the institution
and prosecution of a condemnation proceeding to obtain all necessary or
riparian rights necessary for the Project Facility, (8) to the extent permitted
by law, to obtain, negotiate, execute and deliver agreements, contracts and/or
leases for the management, maintenance and operation of the Project Facility
and the sale of electric power generated at the Project Facility to third
persons, and (9) to appoint sub-agents of the Issuer to do any or all of the
foregoing. The agency designation granted hereby shall be irrevocable and shall
vest the Company with complete authority and discretion with respect to the
matters referred to above and, prior to the occurrence of an Event of Default,
the Issuer shall not have the right to interfere with, direct or control the
Company in the performance of the foregoing duties. In order to facilitate the
securing of an exemption from State sales and use taxes as such exemption may
be in existence during the period in which this Agreement is in effect and the
Project is being constructed and the Equipment installed, the Issuer hereby
agrees to provide to the Company any letter or certificate reasonably requested
by the Company for such purpose, to the extent permitted under New York law,
and the Company agrees to pay or reimburse the Issuer for any costs, including
reasonable legal fees, incurred in connection therewith. Notwithstanding the
first sentence of this paragraph (e) and anything in this Agreement to the
contrary, the Issuer shall not provide any letter or certificate to the Company
securing any State sales and use tax exemption for the Project Facility for the
period beginning on the Construction Loan Maturity Date and ending on the date
of termination of this Agreement.
(f) The Company shall give, or cause to be given, all notices and comply
or cause compliance with all laws, ordinances, municipal rules and regulations
and requirements of all
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Governmental Authorities applying to or affecting the conduct of work on the
Project Facility, and the Company will defend, indemnify and save the Issuer
and its officers, members, agents, servants and employees harmless from all
fines and penalties due to failure to comply therewith. All permits and
licenses necessary for the prosecution of work on the Project Facility shall be
procured or caused to be procured promptly by the Company.
(g) The Company, as agent for the Issuer, in compliance with Section 13 of
the Lien Law of the State (but without conceding the applicability of such
Section 13), covenants that it (i) will hold the right to receive the proceeds
of the IDA Building Loan Note as a trust fund to be applied first for the
purpose of paying the "cost of improvements" (as such item is defined in
subdivision 5 of Section 2 of the Lien Law) and (ii) will apply the same first
to the payment of the "cost of improvement" before using any part of the total
of same for any other purposes.
Section 3.2. AGREEMENT TO PROCURE FINANCING. To facilitate the provision
of funds to finance the Project Facility, the Issuer agrees to execute and
deliver the Bond Documents and other Basic Documents to which it is a party and
any certificates or letters reasonably required thereby, subject to the payment
or reimbursement of any reasonable costs incurred by the Issuer in accordance
with the terms of this Agreement.
Section 3.3. DISBURSEMENTS OF LOAN PROCEEDS. The Company, on behalf of
itself and as agent of the Issuer, shall qualify for, obtain and apply advances
of funds under the Loan Agreement sufficient to permit the Acquisition of the
Project Facility in accordance with the terms of the Loan Agreement. The
Company shall not agree to, or accept any modification or waiver of, the
provisions of the Loan Agreement if such modification or waiver would result in
proceeds of the Bonds being used to pay costs that are not Costs of the
Project.
Section 3.4. ESTABLISHMENT OF COMPLETION DATE. The Company will proceed
with due diligence to complete the Acquisition of the Project Facility.
Completion of the Acquisition of the Project Facility shall be evidenced as set
forth in the Loan Agreement.
Section 3.5. COMPLETION BY THE COMPANY.
(a) In the event that the proceeds of the IDA Building Loan Note and the
IDA Development Loan Note are not sufficient to pay in full all costs of
acquiring the Land, constructing the Facility and acquiring and installing the
Equipment in accordance with the Loan Agreement, the Company agrees, for the
benefit of the Issuer and the Agent, subject to Section 12.1 hereof, to
complete such acquisition, construction, installation and equipping and to pay
all such sums as may be in excess of the proceeds of the IDA Building Loan Note
and the IDA Development Loan Note. Title to all portions of the Facility
constructed or of the Equipment installed or acquired pursuant to the previous
sentence at Company's expense shall immediately upon such construction,
installation or acquisition vest in the Issuer. The Company shall execute,
deliver
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and record or file such instruments as the Issuer may reasonably request in
order to perfect or protect the Issuer's title to such portions of the Facility
and Equipment.
(b) No payment by the Company pursuant to this Section 3.5 shall entitle
the Company to any reimbursement for any such expenditure from the Issuer or
the Agent or to any diminution or abatement of any amounts payable by the
Company under this Agreement.
Section 3.6. REMEDIES TO BE PURSUED AGAINST CONTRACTORS, SUBCONTRACTORS,
MATERIALMEN AND THEIR SURETIES. In the event of a default by any contractor,
subcontractor or materialman under any contract made by it in connection with
the construction of the Facility or the acquisition and installation of the
Equipment or in the event of a breach of warranty or other liability with
respect to any materials, workmanship, or performance guaranty, the Company may
proceed, either separately or in conjunction with others, to exhaust the
remedies of the Company and the Issuer against the contractor, subcontractor or
materialman so in default and against each surety for the performance of such
contract. The Company may, in its own name or in the name of the Issuer,
prosecute or defend any action or proceeding or take any other action involving
any such contractor, subcontractor, materialman or surety which the Company
deems reasonably necessary, and in such event the Issuer hereby agrees, at the
Company's sole expense, to cooperate fully with the Company and to take all
action necessary to effect the substitution of the Company for the Issuer in
any such action or proceeding. The Company shall advise the Issuer of any
actions or proceedings taken hereunder. The proceeds of any recovery secured by
the Company as a result of any action pursued against a contractor,
subcontractor, materialman or their sureties pursuant to this Section 3.6 shall
be used to complete the Project Facility and shall thereafter be payable to the
Company.
ARTICLE IV
[RESERVED]
ARTICLE V
AGREEMENT TO CONVEY PROJECT; PAYMENT PROVISIONS
Section 5.1. INSTALLMENT SALE.
(a) The Company has conveyed or will convey to the Issuer (i) by deed
pursuant to the Deed to Issuer, dated the Closing Date, its right, title and
interest in and to the Fee Premises and all improvements thereon, including,
without limitation, the Facility, and (ii) by assignment pursuant to the
Assignment to Issuer, dated the Closing Date, its right, title and interest in
and to the Leasehold Premises and the Easement Premises, and all improvements
thereon. The Company agrees that
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such title shall be free and clear of all liens except for Loan Agreement
Permitted Liens. All right, title and interest of the Company in and to any
Equipment has been or will be conveyed to the Issuer by the Bill of Sale to
Issuer, dated the Closing Date.
(b) In consideration of the Company's covenant herein to make Installment
Purchase Payments, and in consideration of the other covenants of the Company
contained herein, including the covenant to make additional and other payments
required hereby, the Issuer hereby agrees to (i) convey to NYSEG all of the
Issuer's right, title and interest to the NYSEG Fee Premises, the NYSEG
Easements and the NYSEG Equipment, pursuant to the Deed to NYSEG, Assignment to
NYSEG and the Bill of Sale to NYSEG, upon the request of the Company made in
accordance with the provisions of the Loan Agreement, and (ii) convey to
Georgia-Pacific the G-P Premises and the G-P Equipment, pursuant to the Deed to
G-P and the Bill of Sale to G-P upon the request of the Company made in
accordance with the provisions of the Loan Agreement, and (iii) on the earlier
of (x) termination of this Agreement pursuant to Section 10.2 hereof, or (y) on
the date of the termination of the Saranac PILOT Agreement, sell and convey to
the Company, and the Company hereby agrees to purchase and acquire from the
Issuer, all of the Issuer's right, title and interest in the Project Facility,
pursuant to the Deed to the Company, the Assignment to the Company, the Bill of
Sale to the Company, and such other sale, transfer or conveyancing documents as
may be reasonably requested by the Company, with title to pass to the Company
on the date on such date; provided, however, that if the Loan Agreement shall
be in effect, the Agent shall have consented thereto. To obligation of the
Issuer under this Section 5.1(b) to convey the Project Facility to the Company
shall be subject to there being no Event of Default existing hereunder, or any
other event which would, but for the giving of notice, the passage of time, or
both, be any such Event of Default. The Company covenants to promptly record or
cause to be recorded the sale, transfers or conveyancing documents for the
conveyances set forth above in clauses (i), (ii) and (iii) above.
(c) Until title to the Project Facility shall be conveyed to the Company
in accordance with the provisions of Section 5.1(b) above, the Company shall
have, and the Issuer does hereby grant unto the Company, a present possessory
right to enter upon, use, maintain, operate, construct, rehabilitate, lease and
otherwise deal with the Project Facility, subject, however, to the terms, and
provisions of this Agreement and the Loan Agreement. So long as no Event of
Default shall exist hereunder, the foregoing present possessory right shall be
irrevocable and is hereby deemed to be coupled with an interest.
(d) Subsequent to the Closing Date, the Company shall be entitled to use
the Project Facility in any manner not otherwise prohibited by the Bond
Documents or other Project Documents, provided that such use causes the Project
Facility to qualify or continue to qualify as a "project" under the Act.
Section 5.2. AMOUNTS PAYABLE. The Company here by agrees to pay the sum of
the following amounts as hereinafter set forth:
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(a) The Company, on its behalf and on behalf of the Issuer, agrees to pay
all amounts due under the Bonds and the Loan Agreement in accordance with the
terms thereof; provided, however, that if no amounts remain outstanding under
the Loan Agreement, the Company shall pay to the Issuer one dollar ($1.00) per
annum on January 1 of each calendar year until the termination of this
Agreement.
(b) The Company shall pay the amounts referenced in Section 6.2 herein.
(c) The Company will also pay when due and payable the fees and reasonable
expenses of the Issuer and the officers, members, agents (except for the
Company) and employees thereof, including any filing or recordation fees and
related reasonable legal fees incurred by the Issuer, related to the issuance
of the Bonds and the ownership, sale or financing of the Project Facility (or
portions thereof) or in connection with the carrying out of the Issuer's duties
and obligations as contemplated under any Bond Document or other Basic
Document, or any other such fee or expense of the Issuer or its officers,
members, agents (except for the Company) and employees, the payment of which is
not otherwise provided for under this Agreement, including without limitation,
reasonable attorneys' fees and expenses.
(d) The Company shall pay all rents and other amounts from time to time
payable under the G-P Leases.
(e) In the event the Company shall fail to make any of the payments
required in this Section 5.2, the item or installment so in default shall
continue as an obligation of the Company until the amount in default shall have
been fully paid; provided, however, that all amounts due under subsections (b)
and (c) above shall accrue interest at the lesser of (i) 24 percent (24%) per
annum and (ii) the maximum rate permitted by law and all amounts due under
subsection (a) above shall accrue interest at the rates set forth in the Loan
Agreement.
Section 5.3. UNCONDITIONAL OBLIGATIONS. Subject to Section 12.1, the
obligation of the Company to make the payments required by Section 5.2 above
shall be absolute and unconditional. The Company shall pay all such amounts
without abatement, diminution or deduction (whether for taxes or otherwise)
regardless of any cause or circumstance whatsoever including, without
limitation, any defense, set-off, recoupment or counterclaim that the Company
may have or assert against the Issuer or any other Person, or the conveyance of
title to the Project Facility pursuant to this Agreement. The Company agrees it
will not:
(a) suspend, discontinue or abate any payment required by this
Agreement; or
(b) fail to observe any of its other covenants or agreements in this
Agreement; or
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(c) terminate this Agreement for any cause whatsoever including, without
limiting the generality of the foregoing, failure to acquire the Land
or complete construction of the Facility or acquisition and
installation of the Equipment, any defect in the title, design,
operations, merchantability, fitness or condition of the Project
Facility or any part thereof or in the suitability of the Project
Facility or any part thereof for the Company's purposes or needs,
failure of consideration, destruction of or damage to, condemnation
of title to or the use of all or any part of the Project Facility,
commercial frustration of purpose, any change in the tax or other
laws of the United States of America or of the State or any political
subdivision of either, or any failure of the Issuer to perform and
observe any agreement, whether expressed or implied, or any duty,
liability or obligation arising out of or in connection with this
Agreement.
Nothing contained in this Agreement shall be construed to release the
Issuer from the performance of any of the covenants or agreements on its part
contained in this Agreement and, in the event the Issuer shall fail to perform
or observe any such covenant or agreement, the Company may institute such
action against the Issuer as the Company may deem necessary to compel
performance (subject to Sections 12.4 and 12.5 hereof) of such covenant or
agreement.
Section 5.4. PREPAYMENTS. The Company may prepay all or any part of the
amounts required to be paid by it under Section 5.2 herein at any time, subject
to the provisions contained in the Loan Agreement.
Section 5.5. [Reserved].
Section 5.6. [Reserved].
Section 5.7. INTEREST RATES. The Company is hereby granted the right to
designate from time to time changes in the Interest Rate on the Bonds in the
manner and to the extent set forth in the Loan Agreement.
Section 5.8. RIGHTS AND OBLIGATIONS OF COMPANY UPON DISCHARGE OF LIEN OF
MORTGAGE. Subject to the provisions of the Mortgage, in the event that the
Bonds and all sums outstanding under this Agreement, the Loan Agreement and the
other Bond Documents shall have been paid in full, the Issuer shall request the
Company to do all acts and execute all documents as may be reasonably necessary
to discharge the lien of the Mortgage on the Project Facility, and the Company
shall perform such acts and execute such documents, and, at the request of the
Company, the Issuer shall also do all acts and execute all documents as may be
reasonably necessary to discharge the lien of the Mortgage on the Project
Facility.
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ARTICLE VI
MAINTENANCE, TAXES AND INSURANCE
Section 6.1. COMPANY'S OBLIGATIONS TO MAINTAIN AND REPAIR.
(a) Except in an Event of Loss, and except to the extent impractical for
any period during construction of the Facility or during which the Company is
pursuing with due diligence the restoration of the Project Facility in
accordance with the Loan Agreement, the Company agrees that during the term of
this Agreement it will keep and maintain the Project Facility in good
condition, repair and working order in accordance with sound electric
generation practice, ordinary wear and tear excepted, at its own cost, and will
make or cause to be made from time to time all repairs thereto (including
external and structural repairs) and renewals and replacements thereto which
are necessary to maintain the Project Facility or any part thereof in good
working order.
(b) So long as title to the Project Facility shall be held by the Issuer,
the Company may, after providing the Issuer with prior written notice, make, at
its expense, such alterations of or additions to the Project Facility or any
part thereof from time to time as the Company in its discretion may determine
to be desirable for its uses and purposes, as permitted by the Loan Agreement;
provided, however, that (1) such alterations or additions are effected with due
diligence, in a good and workmanlike manner and in compliance with all
applicable legal requirements, (2) such alterations or additions are promptly
and fully paid for by the Company in accordance with the terms of the
applicable contract(s) therefor, and in a manner such that the Project Facility
shall at all times be free of any mortgage, Lien, encumbrance, security
interest or claim except for Loan Agreement Permitted Liens, (3) such
alterations or additions do not change the nature of the Project Facility so
that it does not constitute a "project" under the Act, (4) such alterations or
additions are performed in full compliance with the Loan Agreement, (5) the
provisions of Article 8 of the Environmental Conservation Law, Chapter 43-B of
the Consolidated Laws of New York, as amended, are satisfied with respect to
such alteration or addition, and (6) the Issuer is furnished with an agreement
by the Company reasonably satisfactory to the Issuer requiring the Company to
make payments in lieu of taxes with respect to such alteration or addition. Any
evidences of indebtedness of the Issuer issued in connection with any such
alterations or additions shall be in accordance with all policies and
requirements of the Issuer in effect at such time. All alterations of and
additions to the Project Facility shall constitute a part of the Project
Facility subject to this Agreement and the Mortgage, and the Company shall
deliver to the Issuer appropriate documents as may be necessary to convey title
to such property to the Issuer, free and clear of all liens and encumbrances
other than Loan Agreement Permitted Liens.
(c) Neither the Issuer nor the Company shall be under any obligation to
renew, repair or replace any inadequate,
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obsolete, worn out, unsuitable, undesirable or unnecessary portions of the
Project Facility.
(d) The Issuer shall be under no obligation to replace, maintain or effect
repairs of the Project Facility or to furnish any utilities or services for the
Project Facility, and the Company hereby agrees to assume full responsibility
therefor.
Section 6.2. TAXES AND OTHER CHARGES.
(a) The Company will pay and discharge or cause to be paid and discharged
all taxes, payments in lieu of taxes, including the PILOT Payments (as defined
in the Saranac PILOT Agreement) assessments, governmental charges or levies and
all utility and other charges incurred in the operation, maintenance, use,
occupancy and upkeep of the Project Facility imposed upon it or in respect of
the Project Facility not later than the date payment of same is required
pursuant to the Loan Agreement and the Saranac PILOT Agreement as well as all
lawful claims which, if unpaid, might become a lien or charge upon such
property and assets or any part thereof, except such that are contested in good
faith by the Company in accordance with the requirements of the Loan Agreement
and the Saranac PILOT Agreement.
(b) It is recognized that under the provisions of the Act the Issuer is
required to pay no taxes or assessments upon any of the Property acquired by it
or under its jurisdiction, control or supervision or upon its activities. It is
not the intention, however, of the parties hereto that the Project Facility be
treated as exempt from real property taxation, and accordingly, the parties
have entered into the Saranac PILOT Agreement. Until the expiration of the
Saranac PILOT Agreement, the Company and the Issuer agree that the Company
shall make all payments due under the Saranac PILOT Agreement. In the event
that (i) the Project Facility would be subject to real property taxation if
owned by the Company but shall be deemed exempt from real property taxation due
to the involvement of the Issuer therewith, and (ii) the Saranac PILOT
Agreement is not entered into, or if entered into shall for any reason no
longer be in effect, the Issuer and the Company hereby agree that the Company,
or any subsequent user of the Project Facility under this Agreement, shall in
such event be required to make or cause to be made payments in lieu of taxes to
or for the benefit of the school district or school districts, city, town,
county, village and other political units wherein the Project Facility is
located having taxing powers (such political units are hereinafter collectively
referred to as the "Taxing Entities") in such amounts as would result from
taxes being levied on the Project Facility by the Taxing Entities if the
Project Facility were privately owned by the Company and not deemed owned by or
under the jurisdiction, control or supervision of the Issuer, but with
appropriate reductions similar to the tax exemptions and credits, if any, which
would be afforded to the Company if it were the owner of the Project Facility.
It is agreed that the Issuer, in cooperation with the Company, (w) shall
endeavor to cause the Project Facility to be valued for purposes of determining
the amounts due hereunder as if owned by the Company as aforesaid by
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the appropriate officer or officers of any of the Taxing Entities as may from
time to time be charged with responsibility for making such valuations, (x)
shall endeavor to cause to be appropriately applied to the valuation or
valuations so determined the respective tax rate or rates of the Taxing
Entities that would be applicable to the Project Facility if so privately
owned, (y) shall endeavor to cause the appropriate officer or officers of the
Taxing Entities charged with the duty of levying and collecting such taxes to
submit to the Company, when the respective levies are made for purposes of such
taxes upon property privately owned as aforesaid, statements specifying the
amounts and due dates of such taxes which the Taxing Entities would receive if
such property were so privately owned by the Company and not deemed owned by or
under the jurisdiction, control or supervision of the Issuer, and (z) shall
file with the appropriate officer or officers any accounts or tax returns
furnished to the Issuer by the Company for the purpose of such filing. In the
event the Company shall fail to make or cause to be made any such payment in
lieu of taxes or taxes, the amount or amounts so in default shall continue as
an obligation of the Company until fully paid, and the Company hereby agrees to
pay or cause to be paid the same, together with interest thereon, at the same
rate per annum as provided for in the Saranac PILOT Agreement, or, if taxes, as
if such amounts were delinquent taxes.
Section 6.3. LIENS. The Company may create or permit to remain a Lien
against its interest in the Project Facility, provided the same constitutes a
Loan Agreement Permitted Lien; and provided further, however, that the Company
shall provide the Issuer with written notice of any such Lien within thirty
(30) days after the Company learns of such Lien.
Section 6.4. INSURANCE. (a) The Company will during the term of this
Agreement continuously insure, or cause to be insured, and pay, or cause to be
paid, all premiums relating thereto, the Project Facility in accordance with
requirements of the Loan Agreement, and, if no Loan Agreement is in effect, in
accordance with the customary standards of businesses of like size and type
(taking into account the policies and amounts required under the Loan
Agreement, which shall be considered customary as of the Closing Date),
including, but not limited to, title, required workers' compensation, adequate
public liability, personal injury or death, workmen's compensation as legally
required, builder's risk all risk, during the construction of the Project
Facility, and full cash replacement value casualty insurance, all policies with
adequate cancellation and alteration notice provisions in the reasonable
opinion of the Issuer. All insurance policies required under this Agreement
shall be carried with insurance companies qualified under the laws of the State
in financially sound companies selected by the Company and satisfactory to the
Issuer, and such policies shall provide at least thirty (30) days written
notice to the Company and the Issuer prior to cancellation, lapse, reduction in
policy limit or material change in coverage (except that, to the extent
customary, only ten (10) days written notice shall be required in the
circumstance of non-payment of premium). All claims on such insurance
regardless of amount may be adjusted by the Company with the insurers. The
proceeds of all insurance
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policies for loss or damage to the Project Facility shall be payable to the
Issuer and the Company as their interests may appear (subject to the rights, if
any, of the Agent), provided that any such policy may be written or endorsed as
to make payments on all claims for losses payable directly to the Company. The
Issuer shall be a named insured under any public liability insurance policies.
The Net Proceeds of such liability insurance shall be applied toward
extinguishment or satisfaction of the liability with respect to which such
insurance proceeds may be paid. Notwithstanding the above in this Section 6.4,
so long as the Loan Agreement is in effect, the Company shall comply with the
terms of the Loan Agreement and the Security Deposit Agreement relating to
insurance coverage and the use of insurance proceeds.
(b) The Company shall require the Contractor, any replacement therefor,
and all Subcontractors to maintain all forms of insurance with respect to their
employees at the Project Facility required by law.
(c) THE ISSUER DOES NOT IN ANY WAY REPRESENT THAT THE INSURANCE SPECIFIED
HEREIN, WHETHER IN SCOPE OR IN LIMITS OF COVERAGE, IS ADEQUATE OR SUFFICIENT TO
PROTECT THE COMPANY'S BUSINESS OR INTERESTS.
(d) Certificates of insurance reasonably satisfactory in form and
substance to the Issuer to evidence all insurance required hereby shall be
delivered to the Issuer on or before the Closing Date. Prior to the expiration
of any such policy, the Company shall furnish to the Issuer evidence that the
policy has been renewed or replaced or is no longer required by this Agreement.
Section 6.5. REMODELING AND IMPROVEMENTS. The Company may remodel the
Project Facility or make substitutions, additions, modifications or
improvements thereto from time to time as it, in its discretion, deems
desirable, provided that any such remodeling, substitutions, additions,
modifications or improvements do not materially alter the character of the
Project Facility as an enterprise permitted by the Act or violate any
governmental permits of the Project Facility. The cost of such remodeling,
substitutions, additions, modifications or improvements shall be paid by the
Company.
Section 6.6. EQUIPMENT. The Company may from time to time substitute
machinery and equipment for any Equipment in accordance with the provisions of
the Loan Agreement, the Mortgage and the covenants contained in this Agreement
and the Loan Agreement. Any such substituted machinery and equipment shall
become a part of the Project Facility and be included under the terms of this
Agreement.
The Company may also sell, scrap, trade-in or otherwise dispose of, any
Equipment, without substitution therefor so long as the removal of the
Equipment to be purchased or otherwise disposed of will not materially alter
the character of the Project Facility as an enterprise permitted by the Act and
under the governmental permits required to construct or operate the Project
Facility.
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Section 6.7. INSTALLATION OF COMPANY'S OWN MACHINERY AND EQUIPMENT. The
Company may, from time to time in its sole discretion and at its own expense,
install additional machinery, equipment and other tangible personal property in
the Facility and title thereto shall remain in the Company.
Section 6.8. ADVANCES BY ISSUER. In the event the Company shall fail:
(a) to keep the Project Facility in the condition as required by Section
6.1;
(b) to pay all taxes or their equivalent, assessments or other
governmental or utility charges as required by Section 6.2;
(c) to pay or cause to be satisfied and discharged any Liens filed or
established against the Project Facility as required by Section 6.3; or
(d) to maintain the insurance required by Section 6.4, and the Agent does
not make such payments on behalf of the Company, the Issuer may (but unless
satisfactorily indemnified shall be under no obligation to) take such action as
may be necessary to cure such failure after first giving 60 days notice in
writing to the Company and the Agent, including the advancement of amounts of
money, and all amounts so advanced therefor by the Issuer shall become an
additional obligation of the Company to the one making the advance, which
amounts the Company agrees to pay on demand.
ARTICLE VII
EMINENT DOMAIN AND DAMAGE AND DESTRUCTION
Section 7.1. PROVISIONS RESPECTING EMINENT DOMAIN. In case of any damage
to or destruction of all or any part of the Project Facility exceeding
$500,000, the Company shall give prompt written notice thereof to the Issuer.
In case of a taking or proposed taking of all or any part of the Project
Facility or any right therein by Eminent Domain, the party upon which notice of
such taking is served shall give prompt written notice to the other. Each such
notice shall describe generally the nature and extent of such damage,
destruction, taking, loss, proceedings or negotiations.
Section 7.2. DAMAGE AND DESTRUCTION. If the Project Facility, or any
material portion thereof, shall be damaged or destroyed by fire, flood,
windstorm or other casualty, or title to, or the temporary use of, the Project
Facility, or any portion thereof, shall have been taken by the power of Eminent
Domain, the Company shall cause, subject to the provisions of Section 7.3
herein and the provisions of the Loan Agreement, the Net Proceeds from
insurance or condemnation or an amount equal thereto to be used for the repair,
reconstruction, restoration or improvement of the Project Facility.
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Section 7.3. REPAIR OF THE PROJECT.
(a) Notwithstanding Sections 7.1 and 7.2 herein,
(i) the Issuer shall have no obligation to replace, repair, rebuild,
restore or relocate the Facility or the Equipment;
(ii) there shall be no abatement or reduction in the amounts payable by
the Company under this Agreement (whether or not the Facility or the
Equipment are replaced, repaired, rebuilt, restored or relocated); or
(iii) subject to the provisions in the Loan Agreement and except as
otherwise provided in subsections (f) or (g) of this Section 7.3, the
Company shall promptly replace, repair, rebuild, restore, or relocate
(within the County of Clinton) the Facility to substantially the same
condition and value as an operating entity with such changes,
alterations and modifications as may be desired by the Company and
approved by the Issuer (which approval shall not be unreasonably
withheld or delayed), provided that such changes, alterations or
modifications do not so change the nature of the Project Facility so
that it does not constitute a "project", as such term is defined in
the Act, or conform with its operating permits.
(b) Except in an Event of Loss (and as hereinafter otherwise provided),
the Company shall cause all Net Proceeds of insurance and of any award in any
condemnation or Eminent Domain proceeding to be paid to and held in accordance
with the Loan Agreement; provided, however, that following the termination of
the Loan Agreement, such Net Proceeds shall be held by a mutually agreeable
escrow agent to be used (subject to subparagraph (e) below) solely for the
repair, reconstruction, restoration or improvement of the Project Facility.
(c) Except in an Event of Loss, in the event such Net Proceeds are not
sufficient to pay in full the costs of such replacement, repair, rebuilding,
restoration or relocation, the Company shall nonetheless complete so much of
the work, and pay from its own moneys that portion of the costs thereof in
excess of such Net Proceeds, as shall be required in the judgment of an
independent architect to restore the Project Facility to an operating economic
unit capable of serving as a natural gas-fired cogeneration facility similar in
size to the original Project Facility.
(d) All such replacements, repairs, rebuilding, restoration and
relocations made pursuant to this Section 7.3,
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whether or not requiring the expenditure of the Company's own money, shall
automatically become a part of the Project Facility as if the same were
specifically described herein.
(e) Any balance of such Net Proceeds remaining after payment of all the
costs of such replacement, repair, relocation, rebuilding or restoration shall
be used only as set forth in the Basic Documents, or, if the Basic Documents
shall no longer be in effect, such balance shall be paid over to the Company
for its purposes.
(f) In the event any condemnation or Eminent Domain award, or damage to
the Project Facility, exceeds $30,000,000 in value or amount, the Company shall
not be obligated to replace, repair, relocate, rebuild, or restore the Project
Facility, and the Net Proceeds of the insurance shall not be applied as
provided in subsections (a) through (e) of this Section 7.3, if the Company
shall notify the Issuer (in writing, promptly upon making its conclusion and
before notifying any other Person except for the Agent) that, in its sole
judgment, it does not deem it practical to so replace, repair, relocate,
rebuild or restore the Project Facility. If the Net Proceeds is less than the
amount necessary to prepay the Bonds in full, including accrued interest and
prepayment penalty, if any, there shall be no abatement or reduction in the
amount payable by the Company under this Agreement.
(g) If the entire amount of the Bonds, accrued interest thereon and
prepayment penalty, if any, and all other sums outstanding in connection with
the Bond Documents, have been fully paid, together with all other amounts due
hereunder, all such Net Proceeds, or the surplus thereof, shall be paid to the
Company for its purposes.
(h) The Company and the Issuer acknowledge that a mortgage and security
interest in the Net Proceeds of insurance carried pursuant to this Agreement
and the Net Proceeds of any condemnation or similar awards will be granted by
the Issuer and the Company to the Agent pursuant to the Collateral Security
Documents, and the Company consents thereto. Notwithstanding anything in this
Article VII to the contrary, while the Loan Agreement remains in effect, the
provisions of the Loan Agreement and the other Bond Documents, and not this
Article VII, shall govern all matters with respect to insurance and Eminent
Domain, including the applications of proceeds thereof.
(i) The Issuer hereby appoints the Company as its true and lawful agent,
and the Company hereby accepts such agency, to replace, repair, rebuild and
restore the Project Facility as provided in the Loan Agreement and in
accordance with all Applicable Laws, and in consideration of such acceptance
the Issuer hereby assigns to the Company all its right to receive payments from
the Net Proceeds of any insurance settlement or condemnation or similar award
for the payment or reimbursement of the cost of such replacement, repair,
rebuilding and restoration.
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ARTICLE VIII
SPECIAL COVENANTS
Section 8.1. ACCESS TO THE PROPERTY AND INSPECTION. The Issuer, the Agent,
and their respective agents and employees, shall have the right, at all
reasonable times during normal business hours upon the furnishing of reasonable
notice to the Company under the circumstances and upon compliance with the
Company's reasonable safety and confidentiality policies, to enter upon and
examine and inspect the Project Facility and to examine and copy the books and
records of the Company insofar as such books and records relate to the Project
Facility or the Bond Documents.
Section 8.2. AGREEMENT TO PROVIDE INFORMATION. The Company and the General
Partner of the Company agree to provide and certify or cause to be certified
such financial and other information concerning the Company, the Project
Facility and the General Partner of the Company, as the Issuer from time to
time reasonably considers necessary or appropriate, including, but not limited
to, (i) such information as to enable Issuer to make any reports required by
any law, statute, rule or governmental regulation, (ii) all information
relating to the compliance of the Company with all environmental laws,
statutes, rules and regulations of all applicable Governmental Authorities, and
(iii) all pleading and other material information relating to any material
litigation concerning the Company, its general partner or the Project Facility.
Section 8.3. FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS.
(a) Subject to the provisions of the Loan Agreement, the Issuer and the
Company agree that they will, from time to time, execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered, such supplements
and amendments hereto and such further instruments as may reasonably be
required for carrying out the intention or facilitating the performance of this
Agreement.
(b) The Issuer (at the Company's direction and expense) shall cause this
Agreement to be kept recorded and filed in such manner and in such places as
may be required by law to fully preserve and protect the security of the
Lenders and to perfect the security interest created by the Loan Agreement.
Section 8.4. RECORDING AND FILING; OTHER INSTRUMENTS.
(a) The Company covenants that it will cause continuation statements to be
filed as required by law in order fully to preserve and to protect the rights
of the Issuer in the assignment of certain rights of the Issuer under this
Agreement and otherwise under the Mortgage. The Company covenants that it will
cause a certificate, with filings attached, to be delivered to the Issuer not
earlier than 60 nor later than 30 days prior to each anniversary date occurring
at five-year intervals after the
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issuance of the Bonds to the effect that all Financing Statements, notices and
other instruments required by applicable law, including this Agreement, have
been recorded or filed or re-recorded or re-filed in such manner and in such
places required by law in order fully to preserve and to protect the rights of
the Issuer under this Agreement and otherwise under the Mortgage.
(b) The Issuer shall, at the request of the Company, file and re-file and
record and re-record or shall cause to be filed and re-filed and recorded and
re-recorded all instruments, including, without limitation, the Mortgage,
required to be filed and re-filed and recorded or re-recorded and shall
continue or cause to be continued the liens of such instruments for so long as
this Agreement shall remain in effect.
Section 8.5. [Reserved]
Section 8.6. INDEMNITY AGAINST CLAIMS. The Company will pay and discharge
and will indemnify and hold harmless the Issuer from any taxes, assessments,
impositions, claims, reasonable fees and expenses of attorneys and consultants
incurred by the Issuer, and other charges in respect of the Project Facility or
the issuance of the Bonds. If any claim of any thereof is asserted, or any such
lien or charge upon payments, or any such taxes, assessments, impositions or
other charges, are sought to be imposed, the Issuer will give prompt written
notice to the Company; provided, however, that the failure to provide such
notice will not relieve the Company of the Company's obligations and liability
under this Section 8.6 and will not give rise to any claim against or liability
of the Issuer. The Company shall have the right to assume the defense thereof,
with counsel reasonably acceptable to the person on behalf of which the Company
undertakes a defense, with full power to litigate, compromise or settle the
same in its sole discretion. The Company covenants and agrees to pay or to
reimburse the Issuer, its members, attorneys or consultants for all reasonable
costs incurred in connection with any investigation or defense relating to the
Project Facility.
Section 8.7. RELEASE AND INDEMNIFICATION. The Company shall at all times
protect, indemnify and hold the Issuer, the members of the Issuer, and the
attorneys, agents and employees of the Issuer harmless against any and all
liability, losses, damages, costs, expenses, taxes, causes of action, suits,
claims, demands and judgments of any nature arising or in connection with the
development, Acquisition or operation of the Project Facility or the financing
of the Project Facility, including, without limitation, all claims or liability
resulting from entering into or performing in accordance with or in connection
with the Bond Documents or Basic Documents or any loss or damage to property or
any injury to or death of any person that may be occasioned by any cause
whatsoever pertaining to the Project Facility or the use thereof, including
without limitation any lease thereof or assignment of its interest in this
Agreement, such indemnification to include reasonable expenses and attorneys'
fees incurred by the Issuer, its directors, members, officers, attorneys,
agents and employees in connection therewith; provided, that such indemnity
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shall be effective only to the extent of any loss that may be sustained by the
Issuer, its directors, members, officers, attorneys, agents and employees in
excess of the Net Proceeds received by it or them from any insurance carried
with respect to such loss, if applicable, and provided, further that the
benefits of this Section 8.7 shall not inure to any person other than the
Issuer, its directors, members, officers, attorneys, agents and employees; and
provided, further that such loss, damage, death, injury, claims, demands or
causes shall not have resulted from the gross negligence or intentional or
willful misconduct of, the Issuer or such directors, members, officers,
attorneys, agents (other than the Company or any of its subagents) or
employees.
Section 8.8. COMPLIANCE WITH LAWS. The Company agrees to comply in all
material respects with all applicable zoning, planning, building, environmental
and other statutes, laws, ordinances, orders, rules, requirements and
regulations of all Governmental Authorities having jurisdiction of the Project
Facility and to operate the Project Facility as a "project" under the Enabling
Act.
Section 8.9. [Reserved]
Section 8.10. Reserved]
Section 8.11. [Reserved]
Section 8.12. [Reserved]
Section 8.13. MAINTENANCE OF EXISTENCE.
(a) So long as the Loan Agreement is in effect the Company agrees that it
will maintain its existence as a limited partnership, will not dissolve or
otherwise dispose of all or substantially all of its assets (except in a
foreclosure action on the Mortgage), will not consolidate with or merge into
another entity or permit one or more other entities to consolidate with or
merge into it, sell any interests in the Limited Partnership other than to the
Tomen Limited Partners or the GE Capital Limited Partner, or admit any
additional General Partner, except with the consent of the Agent in accordance
with the provisions of the Loan Agreement and reasonable advance notice to the
Issuer;
(b) If the Loan Agreement is not in effect, any general partner of the
Company as of the termination of the Loan Agreement shall remain a general
partner of the Company (and shall not sell its interests as general partner
except in accordance with the agreement of limited partnership) and the Company
agrees that it will continue to be a limited partnership either organized under
the laws of or duly qualified to do business as a foreign limited partnership
in the State, will maintain its existence, will not dissolve or otherwise
dispose of all or substantially all of its assets and will not consolidate with
or merge into another entity or permit one or more entities to consolidate with
or merge into it except as permitted under its agreement of limited
partnership; provided, that the Company and its general partner may, without
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violating the foregoing, consolidate with or merge into another entity, or
permit one or more entities to consolidate with or merge into it, or transfer
all or substantially all of its assets to another such entity (and thereafter
dissolve or not dissolve, as the Company may elect) if the entity surviving
such merger or resulting from such consolidation, or the entity to which all or
substantially all of the assets of the Company are transferred, as the case may
be:
(i) is a limited partnership, general partnership or corporation
organized under the laws of the United States of America, or any state,
district or territory thereof, and qualified to do business in the State;
(ii) shall expressly in writing assume all of the obligations of the
Company contained in this Agreement;
(iii) has a consolidated tangible net worth (after giving effect to such
consolidation, merger or transfer) of not less than the consolidated
tangible net worth of the Company and its consolidated subsidiaries
immediately prior to such consolidation, merger or transfer; and
(iv) provided that no Event of Default has occurred and is continuing
hereunder.
(d) The foregoing limitations on transfer of assets shall not apply from
and after any foreclosure of the Project Facility by the Agent or its nominee
or subsidiary.
The term "consolidated tangible net worth," as used in this Section 8.13,
shall mean the difference obtained by subtracting total consolidated
liabilities (not including as a liability any capital or surplus item) from
total consolidated tangible assets of the Company and all of its consolidated
subsidiaries, computed in accordance with generally accepted accounting
principles. Prior to any such consolidation, merger or transfer the Issuer
shall be furnished a certificate from the chief financial officer of the
Company or his deputy stating that in the opinion of such officer none of the
covenants in this Agreement will be violated as a result of said consolidation,
merger or transfer.
Section 8.14. GRANT OF EASEMENTS; LIENS.
(a) If no Event of Default shall have occurred and be continuing, the
Company may:
(i) at any time or times grant easements, licenses, rights-of-way
(including the dedication of public highways) and other rights or
privileges in the nature of easements with respect to any part of the
Project Facility with or without consideration, (if with consideration, the
proceeds shall be retained by the Company); or
(ii) secure the release of existing easements, licenses, rights-of-way
and other rights and privileges.
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(b) The Company shall not permit or create or suffer to be permitted or
created any Lien, except for Loan Agreement Permitted Liens, upon the Project
Facility or any part thereof.
Section 8.15. NO WARRANTY OF CONDITION OR SUITABILITY BY ISSUER. The
Company recognizes that the Issuer does not deal in goods of the kind
comprising components of the Project Facility or otherwise hold itself out as
having knowledge or skill peculiar to the practices or goods involved in the
Project Facility, and that the Issuer is not one to whom such knowledge or
skill may be attributed by its employment of an agent or broker or other
intermediary who by his occupation holds himself out as having such knowledge
or skill. The Company further recognizes that since the components of the
Project Facility have been and are to be designated and selected by the
Company, THE ISSUER HAS NOT MADE AN INSPECTION OF THE PROJECT FACILITY OR OF
ANY FIXTURE OR OTHER ITEM CONSTITUTING A PORTION THEREOF, AND, EXCEPT AS
OTHERWISE PROVIDED HEREIN, THE ISSUER MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED OR OTHERWISE, WITH RESPECT TO THE SAME OR TO THE LOCATION,
USE, DESCRIPTION, DESIGN, MERCHANTABILITY, FITNESS FOR USE FOR ANY PARTICULAR
PURPOSE, CONDITION OR DURABILITY THEREOF, TO THE QUALITY OF THE MATERIAL OR
WORKMANSHIP THEREIN, IT BEING AGREED THAT ALL RISKS INCIDENT THERETO ARE TO BE
BORNE BY THE COMPANY. IN THE EVENT OF ANY DEFECT OR DEFICIENCY OF ANY NATURE IN
THE PROJECT FACILITY OR ANY FIXTURE OR OTHER ITEM CONSTITUTING A PORTION
THEREOF, WHETHER PATENT OR LATENT, THE ISSUER SHALL HAVE NO RESPONSIBILITY OR
LIABILITY WITH RESPECT THERETO. THE PROVISIONS OF THIS SECTION HAVE BEEN
NEGOTIATED AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY
WARRANTIES OR REPRESENTATIONS BY THE ISSUER, EXPRESS OR IMPLIED (TO THE EXTENT
PERMITTED BY APPLICABLE LAW), WITH RESPECT TO THE PROJECT FACILITY OR ANY
FIXTURE OR OTHER ITEM CONSTITUTING A PORTION THEREOF, WHETHER ARISING PURSUANT
TO THE U.C.C. OR ANOTHER LAW NOW OR HEREAFTER IN EFFECT OR OTHERWISE.
Section 8.16. PERMITTED CONTESTS. The Company may, at its expense and in
its name and behalf or in the name and behalf of the Issuer, in good faith
contest any:
(a) taxes, assessments and other charges referred to in Section 6.2;
(b) lien, encumbrance or charge referred to in Section 6.3; or
(c) regulation or other requirement referred to in Section 8.8. In the
event of such contest, the Company may permit said taxes, assessments or other
charges so contested to remain unpaid or such lien, encumbrance or charge to
remain unsatisfied and undischarged during the period of such contest and any
appeal therefrom. The Issuer shall cooperate fully with the Company in any such
contest, except where the Issuer is an adverse party to the Company.
Each such contest shall be promptly prosecuted to a final conclusion. No
such contest shall subject the Issuer to the risk
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of any material civil liability (other than the charge being contested) or any
criminal liability, and the Company shall give such reasonable security to the
Issuer as may be demanded by the Issuer to insure compliance with the foregoing
provisions of this Section. The foregoing shall not constitute a waiver by the
Issuer of any civil or criminal remedies otherwise available to the Issuer
against the Company.
Section 8.17. PROMOTION OF EMPLOYMENT. The Company, recognizing the intent
of the Act to provide employment, agrees during the term of this Agreement to
exercise good faith to maintain and operate or cause to be maintained and
operated an enterprise permitted by the Act and thereby to provide employment
in such operations not inconsistent with the best interest of the Company and
the Issuer in achieving the purpose set forth in the Act; provided, however,
that the Company shall not be deemed guilty or chargeable with any breach of
any agreement contained in this Section 8.17 unless and until the Company has
failed for a continuous period of one year (strikes, war, acts of God, fire,
acts of government and other casualties not under Company's control excepted)
to comply with the provisions of this Section.
Section 8.18. NOTICE AND CERTIFICATES TO ISSUER. The Company hereby agrees
to provide the Issuer with the following:
(a) On or before January 1 and July 1 of each year during which any of the
Bonds are outstanding, a certificate of an Authorized Representative that: (i)
all payments required under this Agreement have been made, and (ii) any
applicable third party credit support will continue in full force during the
succeeding twelve months, or explaining why not;
(b) Within one hundred twenty (120) days of the end of the fiscal year of
the Company, (i) a certificate of the Company to the effect that all payments
have been made under this Agreement and that, to the best of its knowledge,
there exists no Event of Default or unmatured default, and (ii) the audited
annual financial report of the Company;
(c) Upon knowledge of an Event of Default under this Agreement, notice of
such Event of Default, such notice to include a description of the nature of
such event and what steps are being taken to remedy such Event of Default;
(d) At the time of filing the certificate referred to in subparagraph (a)
above, a certificate, either stating all the steps, actions and proceedings to
be taken which are reasonably necessary to maintain in force in connection with
the Project Facility, or that no such steps, actions or proceedings are
necessary to maintain such security. Such certificate shall also describe the
recording, filing, re-recording and re-filing of the Collateral Security
Documents and the execution and filing of any financing statements and
continuation statements that will be required to maintain the lien and priority
of any security interest in personal property granted in connection with the
Project Facility for the next year.
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ARTICLE IX
ASSIGNMENT, LEASE AND SALE
Section 9.1. RESTRICTIONS ON TRANSFER OF ISSUER'S RIGHTS. The Issuer
agrees that, except for the assignment of its rights as contemplated under this
Agreement, it will not during the term of this Agreement sell, assign, transfer
or convey its interests in this Agreement except (i) as provided in Section
5.1, Section 9.2 and Article X below, (ii) with the consent of the Company, and
(iii) if the Loan Agreement is in effect, with the consent of the Agent.
Section 9.2. MORTGAGING BY THE COMPANY AND THE ISSUER.
(a) The Company and the Issuer shall mortgage to the Agent their
respective rights, titles and interests in and to the Project Facility to
secure the Bonds as more particularly set forth in the Loan Agreement and the
Mortgage.
(b) If the Agent commences an action to foreclose the Mortgage (or any
mortgage included in the definition thereof), the Agent may, at its option,
name as defendants in such foreclosure action either (i) the Company or (ii)
both the Company and the Issuer. If both the Company and the Issuer are named
as defendants in such foreclosure action, (x) this Agreement shall terminate on
the date that title to the Project Facility ceases to be held by the Issuer
pursuant to such foreclosure action and (y) Issuer shall join in any referee's
deed or similar conveyance necessary or advisable in order to convey Issuer's
right, title and interest in and to the Project Facility to the purchaser at
the foreclosure sale in such foreclosure action; provided, however, that prior
to naming the Issuer as a defendant, the Agent shall offer to enter into an
agreement with the Taxing Entities (as defined in the Saranac PILOT Agreement)
preserving the substance of the Saranac PILOT Agreement. If the Issuer is not
named in such foreclosure action, this Agreement shall remain in effect and,
upon divestiture of the Company's vendee's interest hereunder pursuant to such
foreclosure action, the Issuer shall recognize and attorn to the entity
succeeding to the Company's vendee's interest at the conclusion of such
foreclosure action; provided, however, that all amounts owned to the Issuer
under this Agreement shall have been paid as provided in Section 10.8.
(c) Except as provided in subsection (a) above, Section 9.3 below, or as
permitted by the Loan Agreement, neither the Company nor the Issuer shall
mortgage, pledge or assign their respective rights, titles or interests in and
to the Project Facility or any portion thereof.
Section 9.3. SALE OR LEASE OF THE PROJECT FACILITY. The Company may sell
or lease the Project Facility or any part thereof in accordance with the
provisions of the Loan Agreement, provided that such sale or lease shall not
release the Company of any of its obligations under this Agreement, and the
Company shall remain as
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fully bound as though no sale or lease had been made. Performance by any buyer
or lessee shall be considered as performance by the Company; provided, however,
that the Company may assign this Agreement by a written assignment agreement,
and be thereby relieved of further obligation hereunder in connection with a
transaction involving merger, consolidation or transfer as permitted under
Section 8.13, provided
(a) the requirements thereof are met; and
(b) the party to which such assignment is made is the entity surviving
such merger or resulting from such consolidation or is the entity to which all
or substantially all of the assets of the Company is transferred, and such
party shall execute an assumption agreement having the effect of not altering
the material terms of this Agreement and the obligations of such assignee to
fulfill them.
The Company shall, within ten days after the delivery of the requisite
agreements and approvals, furnish or cause to be furnished to the Issuer a true
and complete copy of each such agreement of sale or lease or assignment and
assumption of assignment.
ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
Section 10.1. EVENTS OF DEFAULT DEFINED.
(a) The term "Event of Default" as used herein shall mean any one or more
of the following events;
(i) (x) Failure by the Company to make any payments required to be paid
pursuant to Section 5.2(b) and (c) hereof; provided, any such failure
remains uncured for a period of twenty (20) days following written notice
of same to the Company, and (y) Failure by the Company to make any payments
under Section 5.2(a) hereof, which failure has led the Agent or its nominee
or subsidiary to enforce material remedies against the Company;
(ii) The occurrence and continuance of an Event of Default (as defined in
the Saranac PILOT Agreement or North Country PILOT Agreement, as the case
may be) beyond the expiration of any applicable notice and cure period
shall have occurred and be continuing under the Saranac PILOT Agreement or
the North Country PILOT Agreement;
(iii) From and after the date that the Loan Agreement shall no longer be
in effect, any representation by or on behalf of the Company contained in
this Agreement or in any instrument furnished in compliance with or in
reference to this Agreement proves
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<PAGE>
false or misleading in any material respect as of the date of the making or
furnishing thereof and has a material adverse effect upon the Project
Facility in the reasonable opinion of the Company;
(iv) Failure by the Company to observe or perform any of its other
covenants, conditions, payments or agreements under this Agreement for a
period of 30 days after written notice, specifying such failure and
requesting that it be remedied, is given to the Company by the Issuer
(unless such notice is not required due to actual knowledge of such failure
by the Company); provided, that such period shall be extended for such
period as the Company is diligently proceeding to cure such default and
such default is susceptible of cure;
(v) From and after the date that the Loan Agreement shall no longer be in
effect, the Company shall (i) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, assignee,
sequestrator, trustee, liquidator or similar official of the Company or of
all or a substantial part of its property, (ii) admit in writing its
inability, or be generally unable, to pay its debts as such debts become
due, (iii) make a general assignment for the benefit of its creditors, (iv)
commence a voluntary case under the Federal Bankruptcy Code (as now or
hereafter in effect), (v) file a petition seeking to take advantage of any
other federal or state law relating to bankruptcy, insolvency,
reorganization, arrangement, winding-up or composition or adjustment of
debts, (vi) fail to controvert in a timely or appropriate manner, or
acquiesce in writing to, any petition filed against the Company in an
involuntary case under said Federal Bankruptcy Code, or (vii) take any
corporate action for the purpose of effecting any of the foregoing; unless
in any event any such petition or case is dismissed or stayed within 90
days of filing;
(vi) From and after the date that the Loan Agreement shall no longer be
in effect, a proceeding or case shall be commenced, without the application
or consent of the Company, in any court of competent jurisdiction, seeking
(i) the liquidation, reorganization, arrangement, dissolution, winding-up
or composition or adjustment of debts of the Company, (ii) the appointment
of a trustee, receiver, custodian, assignee, sequestrator, liquidator or
similar official of the Company or of all or any substantial part of its
assets, or (iii) similar relief in respect of the Company under any law
relating to bankruptcy, insolvency, reorganization, arrangement, winding-up
or 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
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of 90 days from the commencement of such proceeding or case or the date
of such order, judgment or decree, or an order for relief against the
Company shall be entered in an involuntary case under said Federal
Bankruptcy Code;
(vii) If any insurance policy required to be maintained pursuant to the
Loan Agreement or this Agreement shall be canceled or terminated or shall
lapse and shall not have been replaced prior to the effective date of such
cancellation, termination or lapse by a policy covering the same matters
and that complies with the requisite criteria herein;
(viii) The occurrence and continuance of an Event of Default (as defined
in the Loan Agreement) under the Loan Agreement; provided, any such Event
of Default has led the Agent or its nominee or subsidiary to enforce
material remedies against the Company;
(ix) the Company shall fail to operate the Project Facility as a
"project" under the Enabling Act or shall fail to comply with any other
covenant contained herein (except for the covenants listed in subparagraph
(x) below), within thirty (30) days of written notice by the Issuer to the
Company; provided that such period shall be extended for such additional
period as the Company is diligently proceeding to cure such default and
such default is susceptible to cure; or
(x) The Company shall violate Sections 8.13 or 9.3 hereinabove.
(b) Notwithstanding the provisions of subparagraph (a) above, and subject
to the provisions of the Loan Agreement, in the event that the performance by
either party hereto of its obligations under this Agreement is delayed due to
the following events of force majeure: (i) an act of God, or (ii) an act of
nature, or (iii) the imposition of any restrictions by any governmental
authority, or (iv) war, military operations or national emergencies, or (v)
weather, or (vi) any other cause beyond the control of the parties, then and in
that event all time limitations and performance dates herein shall be
appropriately extended by the parties, upon notice to the other party hereto by
the party whose performances is delayed of such condition causing the delay,
for a period equal to the number of days that the performance of said
obligations is delayed; provided, that in no event shall such delay be deemed
to extend the time for performance by said party for more than ninety (90) days
in the aggregate. The extension of such time limitations and performance dates
for such period pursuant to this subsection (b) shall not be deemed an Event of
Default under this Section 10.1. Notwithstanding anything to the contrary in
this subsection (b), any event of force majeure shall not excuse, delay or in
any way diminish the obligations of the Company to make the payments required
by Sections 5.2, 5.4 and 6.2 herein and observe the covenants, obtain the
insurance policies and provide the indemnity as required by this Agreement.
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Section 10.2. REMEDIES ON DEFAULT. Upon the occurrence and during the
continuance of an Event of Default under this Agreement, the Issuer may take
any one or more of the following remedial steps:
(a) By written notice declare all payments pursuant to Section 5.2(a)
hereof and all other amounts payable hereunder immediately due and payable,
whereupon the same shall become immediately due and payable without
presentment, demand, protest or any other notice whatsoever, all of which are
hereby expressly waived by the Company; provided, however, that if the Loan
Agreement is still in effect, the Issuer shall receive the Agent's prior
written consent;
(b) In the event any of the Bonds shall at the time be unpaid, have access
to and inspect, examine and make copies of books and records and any and all
accounts, data and income tax and other tax returns of the Company only,
however, insofar as they relate to the Project Facility;
(c) Take whatever other action at law or in equity may appear necessary or
desirable to collect the amounts payable pursuant hereto then due and
thereafter to become due or to enforce the performance and observance of any
obligation, agreement or covenant of the Company under this Agreement or to
secure possession of the Project Facility; provided, however, that the Agent
provides its prior written consent, except that no such consent is necessary or
required with respect to enforcement of Sections 5.2(b) and (c), 5.4 or 6.2
hereinabove;
(d) Take possession of and operate the Project Facility upon thirty (30)
days notice to the Company, with the prior written consent of the Agent; or
(e) Terminate this Agreement and convey the Project Facility to the
Company; provided, the Issuer shall give ninety (90) days notice to the Agent
prior to such conveyance.
In the enforcement of the remedies provided in this Section 10.2, the
Issuer may treat all reasonable expenses of enforcement, including, without
limitation, legal, accounting and advertising fees and expenses, as additional
amounts payable by the Company then due and owing.
No action taken pursuant to this Section 10.2 (including repossession of
the Project Facility) shall relieve the Company from its obligation to make all
payments required by Section 5 of this Agreement.
Section 10.3. APPLICATION OF AMOUNTS REALIZED IN ENFORCEMENT OF REMEDIES.
Except as otherwise paid to the Agent in accordance with the terms of the Loan
Agreement, any amounts collected pursuant to action taken under Section 10.2
shall be paid to the Issuer.
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<PAGE>
Section 10.4. NO REMEDY EXCLUSIVE. No remedy herein conferred upon or reserved
to the Issuer is intended to be exclusive of any other available remedy or
remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Agreement or now or hereafter
existing at law or in equity or by statute. No delay or omission to exercise
any right or power upon and during the continuance of an Event of Default under
this Agreement shall impair any such right or power or shall be construed to be
a waiver thereof, but any such right and power may be exercised from time to
time and as often as may be deemed expedient provided such Event of Default is
then continuing.
Section 10.5. AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES. Upon the
occurrence and during the continuance of an Event of Default under this
Agreement, if the Issuer employs attorneys or incurs other expenses for the
collection of amounts payable hereunder or for the enforcement of the
performance or observance of any covenants or agreements on the part of the
Company herein contained, whether or not suit is commenced, the Company agrees
that it will on demand therefor pay to the Issuer the reasonable fees of such
attorneys and such other reasonable expenses so incurred by the Issuer.
Section 10.6. ISSUER AND COMPANY TO GIVE NOTICE OF DEFAULT. The Issuer and
the Company severally covenant that they will, at the expense of the Company,
promptly give to the Agent, and to each other, written notice of any Event of
Default under this Agreement of which they shall have actual knowledge or
written notice, but the Issuer shall not be liable for failing to give such
notice.
Section 10.7. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. In the event
that any agreement contained herein should be breached by either party and
thereafter be waived by the other party, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder.
Section 10.8. NOTICE TO AGENT. Before exercising any of its remedies
pursuant to Section 10.2 hereof, the Issuer shall give to the Agent a notice
that a specified Event of Default hereunder remains unremedied and that the
Issuer is entitled to exercise such remedies, and the Agent shall have the
right to remedy any Event of Default within a period of ninety (90) days after
the service of such notice and the Issuer will postpone the exercise of any of
its remedies provided for in Section 10.2 hereof for such period or periods of
time as may be necessary for the Agent, with the exercise of due diligence, to
extinguish the Company's interest under this Agreement and to perform or cause
to be performed all of the covenants and agreements to be performed by the
Company as aforesaid. Upon such extinguishment of the Company's interest under
this Agreement and such performance by the Agent, the Issuer's right to
exercise any remedies provided for in Section 10.2 hereof, based upon the
occurrence, existence and continuance of any Event of Default hereunder which
cannot with the exercise of due diligence be remedied by the Agent, shall be,
and be deemed to be, waived. Nothing herein contained shall be deemed to
require
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<PAGE>
the Agent to continue with any foreclosure or other proceedings or, in the
event that the Agent shall acquire possession of the Project Facility, to
continue such possession, if the Event of Default in respect of which the
Issuer shall have given such notice shall have been remedied to the
satisfaction of the Agent and possession of the Project Facility shall have
been restored to the Company.
Nothing herein contained shall affect the right of the Issuer, upon the
occurrence (and during the continuance) of any Event of Default by Agent
hereunder arising after the Agent obtains possession of the Project Facility,
to exercise any right or remedy herein reserved to the Issuer.
ARTICLE XI
[RESERVED]
ARTICLE XII
MISCELLANEOUS
Section 12.1. LIMITATIONS WITH RESPECT TO OBLIGATIONS OF THE COMPANY.
Anything contained herein to the contrary notwithstanding, the Issuer hereby
agrees that there shall be no recourse against the Company or any partner or
affiliate of the Company nor any shareholder, partner, officer, director, agent
or representative of any thereof for any liability to the Issuer arising in
connection with any breach or default under this Agreement by the Company
except to the extent the same is enforced against the rights, title and
interest of the Company in the Project Facility, and the Issuer shall look
solely to the rights, title and interest of the Company relating to the Project
Facility in enforcing its rights against the Company under and in connection
with this Agreement; provided, that (a) the foregoing provisions of this
Section shall not constitute a waiver, release or discharge of any of the
obligations arising under, or of any of the terms, covenants, conditions, or
provisions of, this Agreement, but the same shall continue until fully paid,
discharged, observed, or performed, (b) the foregoing provisions of this
Section shall not limit or restrict the right of the Issuer to name the Company
or any other Person as a defendant in any action or suit for a judicial
foreclosure or for the exercise of any other remedy under or with respect to
this Agreement, or for injunction or specific performance, and (c) the Issuer
is not waiving any right it may have against any such partner, shareholder,
officer, director, agent or representative of the Company or any partner or
affiliate thereof arising from any misrepresentation by, or tort by, such
Person. In addition, nothing contained in this Section shall limit in any way
the ability of the Issuer from enforcing its rights or the rights of the
Company against any Person other than the Company under this Agreement.
Section 12.2. SUBORDINATION TO MORTGAGES. This Agreement and all rights of
the Issuer and the Company hereunder are and shall be
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subject and subordinate to the lien of the Mortgage and the Saranac PILOT
Mortgage. The subordination of the lien of this Agreement to the lien of the
Mortgage and the Saranac PILOT Mortgage shall be automatic, without the
execution of any further subordination agreements by the Company. Nonetheless,
if the Agent requires any further written subordination agreements, the Company
and the Issuer agree to execute, acknowledge and deliver the same.
Section 12.3. NOTICES. Except as otherwise provided herein, it shall be
sufficient service or giving of any notice, request, complaint, demand or other
paper if the same shall be duly mailed by registered or certified mail, postage
prepaid, addressed as set forth below, or by telecopy or courier with written
evidence of receipt by the addressor, to the Issuer, the Company, the Agent or
to any other Person set forth therein. The Issuer, the Company and the Agent by
notice given hereunder may designate any different addresses to which
subsequent notices, certificates or other communications shall be sent. A
duplicate copy of each notice, certificate or other communication given
hereunder by one party to another shall also be given to each of the other
parties listed herein.
<TABLE>
<S> <C>
To the Issuer: County of Clinton Industrial Development Agency
2 Industrial Boulevard West
Plattsburgh, New York 12901
Attention: Chairman
With a copy to: Moser & Moser
50 Broadway
New York, New York 10004
To the Company: Saranac Power Partners, L.P.
Five Post Oak Park, Suite 1400
Houston, TX 77027
Attention: President
To the Agent: General Electric Capital Corporation
1600 Summer Street
Stamford, CT 06927-1560
Attention: Vice President,
Energy Project Operations
</TABLE>
Section 12.4. ISSUER, DIRECTORS, MEMBERS, ATTORNEYS, OFFICERS, EMPLOYEES
AND AGENTS OF ISSUER NOT LIABLE. No recourse shall be had for the enforcement
of any obligation, promise or agreement of the Issuer contained herein or
contemplated hereby or in or contemplated by the other Bond Documents or Basic
Documents or for any claim based hereon or thereon or otherwise in respect
hereof or thereof against any director, officer, agent (other than the
Company), attorney or employee, as such, in his individual capacity, past,
present or future, of the Issuer or of any successor entity, either directly or
through the Issuer or any successor entity whether by virtue of any
constitutional provision,
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statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise. No personal liability whatsoever shall attach to, or be incurred by,
any director, officer, agent (other than the Company), attorney or employee as
such, past, present or future, of the Issuer or any successor entity, either
directly or through the Issuer or any successor entity, under or by reason of
any of the obligations, promises or agreements entered into between the Issuer
and the Company, whether herein contained or to be implied herefrom as being
supplemental hereto; and all personal liability of that character against every
such director, officer, agent (other than the Company), attorney and employee
is, by the execution of this Agreement and as a condition of, and as part of
the consideration for, the execution of this Agreement, expressly waived and
released.
Section 12.5. SPECIAL OBLIGATION. Notwithstanding any representation or
statement to the contrary contained herein or in any of the other Bond
Documents or Basic Documents, the obligations and agreements of the Issuer
contained herein or contemplated hereby and in or contemplated by any other
Bond Document or Basic Document, and in any other therewith, and any other
instrument or document supplemental thereto shall be deemed the obligations and
agreements of the Issuer, and not of any member, officer, agent (other than the
Company) or employee of the Issuer in his individual capacity, and the members,
officers, agents (other than the Company) and employees shall not be liable
personally hereof or thereon or be subject to any personal liability or
accountability based upon or in respect hereof or thereof or of any transaction
contemplated hereby or thereby. The obligations and agreements of the Issuer
contained herein shall not constitute or give rise to an obligation of the
State or County of Clinton, New York and neither the State nor County of
Clinton New York shall be liable thereon, and further, such obligations and
agreements shall not constitute or give rise to a general obligation of the
Issuer, but rather shall constitute limited obligations of the Issuer payable
solely from the revenues of the Issuer derived and to be derived from the sale
or other disposition of the Project Facility (except for revenues derived by
the Issuer with respect to the Unassigned Rights). The Issuer shall not be
obligated to take any action pursuant to any provision hereof and no order or
decree of specific performance with respect to any of the obligations of the
Issuer hereunder shall be sought or enforced against the Issuer unless (1) the
party seeking such order or decree shall first have requested the Issuer in
writing to take the action sought in such order or decree of specific
performance, and 10 days shall have elapsed from the date of receipt of such
request, and the Issuer shall have refused to comply with such request (or if
compliance therewith would reasonably be expected to take longer than 10 days,
if the Issuer shall have failed to institute and diligently pursue action to
cause compliance with such request) or failed to respond within such notice
period, and (2) if the Issuer refused to comply with such request and the
Issuer's refusal to comply is based on its reasonable expectation that it will
incur fees and expenses, the party seeking such order or decree shall have
placed in an account with the Issuer an amount or undertaking sufficient to
cover such reasonable fees and expenses, and (3) if the Issuer refuses to
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<PAGE>
comply with such request and the Issuer's refusal to comply is based on its
reasonable expectation that it or any of its members, officers, agents (other
than the Company) or employees shall be subject to potential liability, the
party seeking such order or decree shall (a) agree to indemnify and hold
harmless the Issuer and its members, officers, agents (other than the Company)
and employees against any liability incurred as a result of its compliance with
such demand and (b) if requested by the Issuer shall furnish to the Issuer
satisfactory security to protect the Issuer and its members, officers, agents
(other than the Company) and employees against all liability, expected to be
incurred as a result of compliance with such request.
The principal of, prepayment penalty, if any, and interest on the Bonds
shall be payable solely from the funds pledged for their payment in accordance
with the Loan Agreement.
Section 12.6. IF PERFORMANCE DATE NOT A BUSINESS DAY. If the last date for
performance of any act or the exercising of any right, as provided in this
Agreement, shall not be a Business Day, such payment may be made or act
performed or right exercised on the next succeeding Business Day.
Section 12.7. BINDING EFFECT. This Agreement shall inure to the benefit of
and shall be binding upon the Issuer, the Company, and their respective
successors and assigns. No assignment of this Agreement by the Company shall
relieve the Company of its obligations hereunder.
Section 12.8. SEVERABILITY. In the event any provision of this Agreement
shall be held invalid or unenforceable by any court of competent jurisdiction,
such holding shall not invalidate or render unenforceable any other provision
hereof.
Section 12.9. AMENDMENTS, CHANGES AND MODIFICATIONS. Subsequent to the
issuance of the Bonds and prior to payment of the Bonds, this Agreement may not
be effectively amended, changed, modified, altered or terminated except by an
instrument in writing signed by the parties hereto, with the written consent of
the Agent.
Section 12.10. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in several counterparts, each of which shall be an original and all of which
shall constitute but one and the same instrument.
Section 12.11. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State.
Section 12.12. NO THIRD-PARTY BENEFICIARY. It is specifically agreed
between the parties executing this Agreement that it is not intended by any of
the provisions of any part of this Agreement to establish in favor of the
public or any member thereof, other than as expressly provided herein, the
rights of a third-party beneficiary hereunder, or to authorize anyone not a
party to this Agreement to maintain a suit for personal injuries or property
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<PAGE>
damage pursuant to the terms or provisions of this Agreement. The duties,
obligations and responsibilities of the parties to this Agreement with respect
to third parties shall remain as imposed by law.
Section 12.13. TERM OF THIS AGREEMENT. This Agreement shall be in full
force and effect from the date hereof and shall continue in effect, unless
earlier terminated as set forth hereinabove, until the date title to the
Project Facility is conveyed to the Company in accordance with Section
5.1(b)(iii) hereof.
Section 12.14. SURVIVAL OF OBLIGATIONS. The obligations of the Company to
make the payments required by this Agreement and to provide the indemnity
required by this Agreement shall survive the termination of this Agreement and
the full payment of the Bonds, and all such other payments due hereunder after
such termination shall be made upon demand of the party to whom such payment is
due. The obligations of the Company with respect to the Unassigned Rights shall
survive the termination of this Agreement until the expiration of the period
stated in the applicable statute of limitations.
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<PAGE>
IN WITNESS WHEREOF, the Issuer and the Company have caused this Agreement
to be executed in their respective legal names and the signatures of duly
authorized persons to be attested, all as of the date first above written.
COUNTY OF CLINTON INDUSTRIAL
DEVELOPMENT AGENCY
By: /s/ illegible
---------------------------------------
(Vice) Chairman
Saranac Power Partners, L.P.
By: SARANAC ENERGY COMPANY, INC.,
its General Partner
By: /s/ illegible
---------------------------------------
Name:
Title: President
<PAGE>
AMENDED AND RESTATED
TERM LOAN AGREEMENT
THIS AMENDED AND RESTATED TERM LOAN AGREEMENT, dated as of December 30,
1988 (the "Agreement"), is made by and among KANSALLIS-OSAKE-PANKKI, a bank
organized and existing under the laws of Finland, acting through its New York
branch ("KOP"), CREDIT SUISSE, a bank organized and existing under the laws of
Switzerland, acting through its New York branch ("CS") as lenders (KOP and CS
are hereinafter referred to sometimes as a "Term Lender" and collectively as
"Term Lenders"), POWER RESOURCES, INC., a corporation organized and existing
under the laws of the State of Texas, as borrower ("Borrower"), and CREDIT
SUISSE, a bank organized and existing under the laws of Switzerland, acting
through its New York branch, as agent, ("Agent"), in respect of a term loan in
the maximum principal sum of ONE HUNDRED SIXTY-FIVE MILLION DOLLARS
($165,000,000).
WHEREAS, the Borrower, the Term Lenders and the Agent have entered into
that certain Term Loan Agreement dated as of December 31, 1986 (the "Original
Term Loan Agreement"); and
WHEREAS, the Borrower, the Term Lenders and the Agent desire to amend and
restate the Original Term Loan Agreement as herein provided;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged hereby, the parties hereto agree to amend
and restate the Original Term Loan Agreement as follows:
ARTICLE 1 - DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings assigned to them:
Accounts.
The term "Accounts" means the Additional Collateral Account, the Debt
Protection Account, the Maintenance Reserve Account, the Project Control Account
and the Special Operating Account.
<PAGE>
Additional Collateral Account.
The term "Additional Collateral Account" means the account established by
Borrower at the Agent in accordance with Section 4.2 hereof.
Adjusted CD Rate.
The term "Adjusted CD Rate" shall mean, on any day, the sum (rounded
upwards to the nearest 1/100th of 1%) as determined by the Agent of (i) the rate
obtained by dividing (x) the weighted average of the Certificate of Deposit Base
Rate of each of the Co-Managers for such day by (y) an amount equal to 1 minus
the maximum stated reserve requirement (expressed as a decimal) as specified in
Regulation D that would be applicable during the Interest Period to which such
Adjusted CD Rate is to apply to a new U.S. dollar nonpersonal time deposit in
the United States (with a maturity equal to the Interest Period for which an
Adjusted CD Rate is being determined) of a member bank of the Federal Reserve
System in New York City with deposits exceeding one billion dollars (including,
without limitation, any marginal, emergency, supplemental, special or other
reserves applicable to such liability), plus (ii) the then maximum daily net
annual assessment rate as calculated by the Agent for determining the then
current annual assessment payable by a Co-Manager to the Federal Deposit
Insurance Corporation for insuring such U.S. dollar deposits in the United
States.
Adjusted CP Rate.
The term "Adjusted CP Rate" shall mean, on any day, the sum (rounded
upwards to the nearest 1/100th of 1%) as determined by the Agent of (i) the rate
obtained by dividing (x) the weighted average of the Commercial Paper Base Rate
of each of the Co-Managers for such day by (y) an amount equal to 1 minus the
maximum stated reserve requirement (expressed as a decimal) as specified in
Regulation D that would be applicable during the Interest Period to which such
Adjusted CP Rate is to apply to new U.S. dollar commercial paper in the United
States (with a maturity equal to the Interest Period for which an Adjusted CP
Rate is being determined) of a member bank of the Federal Reserve System in New
York City with deposits exceeding one billion dollars (including, without
limitation, any marginal, emergency, supplemental, special or other reserves
applicable to such liability).
Advance
The term "Advance" means (i) a disbursement by Term Lenders of any of the
proceeds of the Term Loan pursuant to the
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<PAGE>
terms of this Agreement or (ii) an issuance of any Letter of Credit by the
Letter of Credit Bank, each of which disbursements or issuances is to be made in
accordance with the terms of this Agreement.
Affidavit of Borrower.
The term "Affidavit of Borrower" means a sworn affidavit of Borrower in the
form attached hereto as part of Exhibit A, to the effect that:
(i) the representations and warranties of Borrower contained in
Article 3 of this Agreement, in the other Loan Instruments and in the Project,
Documents are complete and correct on the date of such Affidavit of Borrower as
though made on and as of such date;
(ii) the covenants of Borrower contained in Article 4 of this
Agreement, in the other Loan Instruments and in the Project Documents required
to be complied with by Borrower on such date have all been fully complied with
by Borrower; and
(iii) no Default or Event of Default, or event which with the giving
of notice or lapse of time, or both, would become such an Event of Default, has
occurred and is continuing or will result from the issuance of the Advance then
being requested.
Agency Fee.
The term "Agency Fee" means the non-refundable annual fee of Fifty Thousand
dollars ($50,000) to be paid in advance by the Borrower to Agent. The annual
Agency Fee shall be paid on the date hereof and on each anniversary of this
Agreement and shall be deemed earned when paid.
Agent.
The term "Agent" means the party named Agent in the first paragraph of this
Agreement, or any successor Agent selected pursuant to Section 6.7, acting as
Agent for the Term Lenders hereunder.
Alternative Financing Proceeds.
The term "Alternative Financing Proceeds" has the meaning set forth in
Section 2.13(b) hereof.
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Applicable Lending Office.
The term "Applicable Lending Office" means the office of a Term Lender in
which the Term Loan is booked for such Term Lender's record-keeping purposes.
Application for Advance.
The term "Application for Advance" means a written application to Agent,
substantially in the form of Exhibit A hereto, by Borrower and containing an
Affidavit of Borrower and other documents as Agent may reasonably request.
Approved Budget.
The term "Approved Budget" means a budget prepared by Borrower and approved
by Agent and the Independent Engineer covering the entire term of this Agreement
and specifying by principal items for each year of such budget the Projected
Gross Revenues and Projected Operating Costs. The Approved Budget is attached
hereto as Exhibit C and incorporated herein by reference.
Assurance Obligations.
The term "Assurance Obligations" has the meaning set forth in Section 7.14
hereof.
Availability Period.
The term "Availability Period" means the period commencing on the date of
this Agreement and terminating on the day preceding the first anniversary of the
date of this Agreement.
Banking Day.
The term "Banking Day" means any day that is not a Saturday, Sunday or
legal holiday in the State of New York or the State of Texas, or a day on which
banking institutions chartered by the State of New York, the State of Texas or
the United States are legally required or authorized to close, and, when used in
connection with LIBOR, means a day on which deposits in Dollars may be dealt in
on the London interbank market.
Base Requirement.
The term "Base Requirement" has the meaning set forth in Section 2.3(m).
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Borrower.
The term "Borrower" means the party named Borrower in the first paragraph
of this Agreement.
Calculation Date.
The term "Calculation Date" means the second Term Loan Repayment Date and
each subsequent Term Loan Repayment Date.
Calculation Period.
The term "Calculation Period" has the meaning set forth in Section 4.2
hereof.
Certificate.
The term "Certificate" has the meaning set forth in Section 4.13 hereof.
Certificate of Deposit Base Rate.
The term "Certificate of Deposit Base Rate" shall mean, on any day, the sum
(rounded upward to the nearest 1/100th of 1%) as determined by the Agent to be
the weighted average of the prevailing rates per annum offered at 10:00 a.m.
(New York City time) (or as soon thereafter as practicable) on the first day of
such Interest Period by the Co-Managers for the purchase at face value of
certificates of deposit of the Co-Managers for a period and in an amount
comparable to the Interest Period and Principal Amount of the Advance or the
amount of the Term Loan with respect to which Borrower has chosen the
Certificate of Deposit Rate which shall be made by the Agent and outstanding
during such Interest Period.
Closing Fee.
The term "Closing Fee" means the non-refundable fee equal to 0.375% of the
Term Loan Commitment to be paid by Borrower to the Term Lenders on the date
hereof.
Code.
The term "Code" has the meaning set forth in Section 4.16 hereof.
Co-Managers.
The term "Co-Managers" means KOP and CS.
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Commercial Code.
The term "Commercial Code" means the Uniform Commercial Code as in force in
the State of Texas.
Commercial Paper Base Rate.
The term "Commercial Paper Base Rate" shall mean, on any day, the sum
(rounded upward to the nearest 1/100th of 1%) as determined by the Agent to be
the weighted average of the prevailing rates per annum offered at 10:00 a.m.
(New York City time) (or as soon thereafter as practicable) on the first day of
such Interest Period by the Co-Managers for the commercial paper of each such
Co-Manager for a period and in an amount comparable to the Interest Period and
Principal Amount of the Advance or the amount of the Term Loan with respect to
which Borrower has chosen the Commercial Paper Base Rate which shall be made by
the Agent and outstanding during such Interest Period.
Commitment Fee.
The term "Commitment Fee" means the commitment fee to be paid by Borrower
for any portion of the Term Loan Commitment which is not advanced, at the rate
of one-quarter of one percent (0.25%) per annum, calculated and payable in
accordance with Section 2.6 hereof.
Construction Lenders.
The term "Construction Lenders" means the "Construction Lenders" as defined
in the Construction Loan Agreement.
Construction Loan Agreement.
The term "Construction Loan Agreement" means that certain Construction Loan
Agreement, dated as of December 31, 1986, by and among KOP and CS as
Construction Lenders, the Borrower and CS as Agent.
Contractor.
The term "Contractor" means Hawker Siddeley Power Engineering, Inc., a
Delaware corporation, as contractor pursuant to the Turnkey Contract.
Debt.
The term "Debt" of any person means at any date, without duplication, (i)
all obligations of such person for
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borrowed money, (ii) all obligations of such person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligation of such
person to pay the deferred purchase price of property or services, except trade
accounts payable arising in the ordinary course of business, and (iv) all debt
of others guaranteed by such person, whether or not secured by a lien or other
security interest on any asset of such person.
Debt Protection Account.
The term "Debt Protection Account" means the interest bearing account
established by Borrower at KOP in accordance with the terms of Section 4.3 of
this Agreement.
Debt Protection Amount.
The term "Debt Protection Amount" has the meaning set forth in Section
4.3(b) hereof.
Debt Service.
The term "Debt Service" means, for any period, an amount equal to the
aggregate of (i) principal and interest actually due on the Term Loan during
such period pursuant to this Agreement, such amount to be adjusted for any
amounts retained in or application of funds from the Additional Collateral
Account pursuant to Section 4.2 hereof, (ii) LOC Fees actually due and payable
on all Letters of Credit during such period pursuant to this Agreement and any
placement costs (including underwriting, marketing, remarketing and legal fees)
incurred by Borrower in connection with a financing arrangement supported by a
Letter of Credit and (iii) other amounts which Borrower is obligated to pay
during such period to Term Lenders pursuant to this Agreement and the other Loan
Instruments, all as calculated by Agent.
Debt Service Coverage Ratio.
The term "Debt Service Coverage Ratio" means, for any period, the ratio of
(i) Net Revenues during such period to (ii) the Debt Service for such period,
as calculated by Borrower in form and substance reasonably satisfactory to
Agent. A sample calculation of a Debt Service Coverage Ratio is attached hereto
as Exhibit D.
Debtor Relief Laws.
The term "Debtor Relief Laws" means any applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, insolvency,
reorganization or similar laws
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affecting the rights or remedies of creditors generally, as in effect from
time to time.
Default.
The term "Default" means the occurrence of any of the Events of Default in
Section 5.1, and the failure of such Event of Default to be remedied during the
applicable grace period, if any.
Default Interest.
The term "Default Interest" means interest payable pursuant to Section
2.5(b) of this Agreement.
Default Interest Rate.
The term "Default Interest Rate" means the Term Loan Interest Rate then in
effect for each Advance plus one and twenty-five hundredths per cent (1.25%).
Deposit Amount.
The term "Deposit Amount" has the meaning set forth in Section 4.2 hereof.
Discretionary Cash Flow.
The term "Discretionary Cash Flow" means, for any period, Net Revenues for
such period less Debt Service for such period.
ERISA.
The term "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
Event of Default.
The term "Event of Default" means the occurrence of any of the events and
occurrences set forth in Section 5.1 hereof."
Facility.
The term "Facility" means the natural gas fired cogeneration facility
constructed by Contractor for Borrower on property near Big Spring, Howard
County, Texas, for the purpose of supplying electric energy and capacity to TUEC
and steam to Fina, pursuant to, and as more fully described in, the Turnkey
Contract, the O&M Contract and the other Project Documents.
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Federal Funds Margin.
The term "Federal Funds Margin" means with respect to interest on the Term
Loan (i) from the date hereof to the day before the fifth anniversary of the
date hereof, ninety-five hundredths per cent (0.95%), (ii) from the fifth
anniversary of the date hereof to the day before the twelfth anniversary of the
date hereof, one and ten hundredths per cent (1.10%), and (iii) on or after the
twelfth anniversary of the date hereof, one and thirty-five hundredths per cent
(1.35%).
Federal Funds Rate.
The term "Federal Funds Rate" means, for each Interest Period, for each
Advance (or, where the context so requires, the aggregate of the Advances then
outstanding), the per annum rate of interest equal to the average of the Term
Federal Funds rates offered to Prime Banks at 11 a.m. New York time two (2)
Banking Days prior to the commencement of such Interest Period, as reported by
Prebon and Garven or other reputable sources, for such period chosen by the
Borrower as is available, plus, in the case of each such period of seven (7)
days or less, the Federal Funds Margin or, in the case of each such period in
excess of seven (7) days, the Interest Margin.
FERC Qualifying Facility Certificate.
The term "FERC Qualifying Facility Certificate" means the certification of
the Facility granted by the Federal Energy Regulatory Commission pursuant to 18
C.F.R. Section 292.207(b), (1986), or such self-qualification certificate
pursuant to 18 C.F.R. Section 292.207(a) as may be acceptable in form and
substance to the Agent.
Fina.
The term "Fina" means Fina Oil and Chemical Company, a corporation
organized and existing under the laws of the State of Delaware, owning and
operating an oil refinery near Big Spring, Howard County, Texas.
Final Maturity Date.
The term "Final Maturity Date" means the date fifteen (15) years from the
date hereof; provided, however, that if either a firm power sales contract or a
steam sales contract, in each case reasonably satisfactory to the Term Lenders,
is not in effect on or at any time after September 30, 2003, such date shall be
the Final Maturity Date.
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Financial Statements.
The term "Financial Statements" means the information which Borrower is
required to furnish to Agent pursuant to Section 4.9 hereof and such additional
financial information as shall be reasonably required by Agent from time to time
including, without limitation, operating statements with respect to the Property
and Facility and other reasonable financial information regarding Borrower and
the other parties to the Project Documents as Borrower may reasonably be able to
obtain.
Financing Statements.
The term "Financing Statements" means the Form UCC-1 and UCC-3 financing
statements and such other documents, instruments or certificates required to be
filed with the appropriate offices of Governmental Authorities for the
perfection of the security interests granted hereunder and under the Security
Documents.
First Advance.
The term "First Advance" means the first Advance of the Term Loan made by
the Term Lenders to or for the account of the Borrower pursuant to the terms and
conditions of this Agreement.
Fixed Offered Rate.
The term "Fixed Offered Rate" means, for each Interest Period, for each
Advance (or where the context so requires, the aggregate of the Advances then
outstanding) a rate per annum equal to the weighted average of the rates of
interest paid by CS on a medium-term deposit note, as described in a Supplement
dated July 31, 1987 to an offering circular dated July 31, 1987 or a comparable
succeeding note offering, and by KOP from time to time on a comparable
medium-term deposit note for that period of three hundred sixty-six (366) days
or two through fifteen years (but ending no later than the final Term Loan
Repayment Date) which the Borrower shall determine at a rate which the
Co-Managers would offer to a third party on a medium-term deposit note of like
duration and amount, such weighted average to reflect the proportionate amount
of each Co-Managers Term Loan Commitment, or if such rate is not available or
reasonably satisfactory to the Borrower, such other medium-term or long-term
fixed-rate funding as may be available, for the periods set forth herein, as
selected by Borrower and agreed to by the Co-Managers.
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FSGC.
The term "FSGC" means Falcon Seaboard Gas Company, a corporation organized
and existing under the laws of the State of Texas.
FSOC.
The term "FSOC" means Falcon Seaboard Oil Company, a corporation organized
and existing under the laws of the State of Texas, and the sole shareholder of
Borrower.
FSOC Guaranty.
The term "FSOC Guaranty" has the meaning set forth in Section 4.3(h)
hereof.
Governmental Authority.
The term "Governmental Authority" means the government of any federal,
state, municipal or other political subdivision in which the Property and the
Facility are located, and any other government or political subdivision thereof
exercising jurisdiction over the Property, the Facility, Borrower or any other
party to any of the Project Documents or other Loan Instruments, including all
agencies and instrumentalities of such governments and political subdivisions.
Governmental Requirements.
The term "Governmental Requirements" means all Laws, ordinances, statutes,
codes, rules, regulations, orders and decrees of any Governmental Authority,
including, without limitation, all authorizations, consents, approvals,
registrations, exemptions, permits and licenses with or from any Governmental
Authority, applicable to the Property, the Facility, Borrower or any other party
to any of the Project Documents or other Loan Instruments.
Gross Revenues.
The term "Gross Revenues" means, for any period, the total amounts actually
received by Borrower from operation of the Facility including, without
limitation, payments made by Fina and TUEC.
Indemnified Part
The term "Indemnified Party" has the meaning set forth in Section 4.31
hereof.
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Independent Engineer.
The term "Independent Engineer" means (i) with respect to the Facility,
Calpine Corporation or such other engineering firm as is mutually agreed upon by
the Agent and the Borrower or (ii) with respect to the resource and fuel-related
requirements of the Facility, Stone & Webster, Inc. or such other engineering
firm as is mutually agreed upon by the Agent and the Borrower.
Insurance Policies.
The term "Insurance Policies" means the insurance policies specified in
Article XII of the O&M Contract, the insurance policies specified in Article XIV
of the TUEC Agreement, the insurance policies specified in Article XIII of the
Steam Agreement and such other insurance policies as Agent may reasonably
require and are reasonably commercially available for risks and/or contingencies
that are not covered to the reasonable satisfaction of Agent by existing
policies. All Insurance Policies shall (1) conform to the relevant provisions
of the O&M Contract, the TUEC Agreement and/or the Steam Agreement; (2) be
issued by companies and in form and substance reasonably satisfactory to Agent;
(3) have Agent, for the account of the Term Lenders, named as an additional
insured or, if applicable, a lenders' loss payable (provided, however, that
Agent and Term Lenders shall be named as beneficiaries of the worker's
compensation policy); and (4) have a provision giving Agent thirty (30) days'
prior notice of cancellation or of material change in the coverage.
Interest Margin.
The term "Interest Margin" means with respect to interest on the Term Loan:
(i) from the date hereof to the day before the fifth anniversary of the date
hereof, eighty-five hundredths per cent (0.85%); (ii) from the fifth anniversary
of the date hereof to the day before the twelfth anniversary of the date hereof,
one per cent (1.00%); and (iii) on or after the twelfth anniversary of the date
hereof, one and twenty-five hundredths per cent (1.25%);.
Interest Payment Date.
The term "Interest Payment Date" means with respect to interest on the Term
Loan and the LOC Fees, each Term Loan Repayment Date and the final date of each
Interest Period.
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Interest Period.
The term "Interest Period" means, in the first instance, the period
commencing on and including the date of an Advance and, in the case of each
subsequent and successive Interest Period applicable thereto, on the last day of
the immediately preceding Interest Period, and ending
(i) in the case of an Interest Period using LIBOR, on the same day in
the first, third, sixth or twelfth calendar month thereafter,
(ii) in the case of an Interest Period based on the Federal Funds
Rate, on the day selected by the Borrower and as made available by the
Co-Managers,
(iii) in the case of an Interest Period based on the Short Term Rate,
on the day selected by the Borrower in accordance with the provisions of
this Agreement and as made available by the Co-Managers, and
(iv) in the case of an Interest Period based on the Fixed Offered
Rate, on the next day in the first year thereafter, or the same day in the
second through fifteenth year thereafter, or as otherwise available,
in each case counting the first but not the last day of each such Interest
Period. Borrower shall select each Interest Period by giving written notice of
such selection to Agent at least three (3) Banking Days before the first day of
such Interest Period;
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, in the case of an Interest Period using LIBOR, such Banking Day
falls in another calendar month, in which case such Interest Period shall
end on the next 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 in which such Interest Period ends) shall end on
the last Banking Day of such calendar month in which the Interest Period
ends;
(c) at no time shall the outstanding principal amount of the Term Loan
accrue interest pursuant to
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more than twenty (20) Interest Periods (each variation in time or in the
basis upon which interest is calculated constituting an Interest Period)
unless agreed to by the Agent; and
(d) No Interest Period shall extend beyond the Final Maturity Date.
Interest Rate Hedge Agreement.
The term "Interest Rate Hedge Agreement" means an interest rate swap
agreement or an interest rate cap or collar agreement or a fixed offered rate
private placement on terms and conditions acceptable to Agent and which are
reasonably consistent with standard interest rate swap, cap or collar agreements
at the time such agreement is made or the standard terms and provisions
applicable to such a private placement at the time such arrangement is entered
into, for a period which ends no later than the Final Maturity Date.
Law.
The term "Law" means any constitution or treaty, any law, ordinance,
decree, regulation, order, rule, judicial or arbitral decision and any voluntary
restraint, policy or guideline not having the force of law with which such party
must reasonably comply, or any of the provisions of such Laws binding on or
affecting the party referred to in the context in which the term is used.
Letter of Credit.
The term "Letter of Credit" means an irrevocable direct-pay letter of
credit issued pursuant to Section 2.13 hereof.
Letter of Credit Bank.
The term "Letter of Credit Bank" means Credit Suisse or any other financial
institution acceptable to Agent and Borrower, as issuer of Letters of Credit in
accordance with the provisions hereof.
LIBOR.
The term "LIBOR" means, for each Advance (or where the context so requires,
the aggregate of the Advances then outstanding), for Interest Periods of one
(1), three (3), six (6) and twelve (12) months, as selected by Borrower, or such
other period as requested by Borrower and approved by Agent, for the principal
amount of the Term Loan then outstanding, the
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per annum rate of interest at which dollar deposits in the amount of such
outstanding principal amount are, or would be, offered for such Interest Period
in the London interbank market at 11 a.m. London time two (2) Banking Days prior
to the commencement of such Interest Period, as reported in the Reuter's Monitor
for such date under the page code "LIBOR," and in case of variations in rates,
the arithmetic average thereof rounded upward if necessary to the nearest
one-sixteenth of one percent (1/16%), calculated by Agent; provided, however,
that if such reported rate is unavailable, "LIBOR" shall mean, for each Interest
Period, for each Advance (or, where the context so requires, the aggregate of
Advances then outstanding), the per annum rate of interest at which dollar
deposits in the amount of such Advance are, or would be, offered by KOP and CS
to prime banks in the London interbank market at 11 a.m. London time two (2)
Banking Days prior to the commencement of such Interest Period, and in the case
of variations in rates, the weighted average thereof rounded upward if necessary
to the nearest one-sixteenth of one percent (1/16%) calculated by Agent.
Loan Instruments.
The term "Loan Instruments" means this Agreement, the Security Documents,
the Term Note(s), the Letter(s) of Credit, the Financing Statements and such
other instruments evidencing, securing or pertaining to the Term Loan
Commitment, as shall from time to time be executed and delivered to Term Lenders
or to Agent by Borrower, or any other party, pursuant to this Agreement,
including, without limitation, the Operating Budget.
Loan Obligations.
The term "Loan Obligations" has the meaning set forth in Section 7.14
hereof.
LOC Fee.
The term "LOC Fee" means the Interest Margin.
LOC Fronting Fee.
The term "LOC Fronting Fee" means the letter of credit fronting fee to be
paid by Borrower on the outstanding portion of any Letter of Credit at the rate
of 0.15% per annum, calculated and payable in accordance with Section 2.6
hereof.
LOC Reimbursement Obligation,
The term "LOC Reimbursement Obligation" means the obligation of the
Borrower to reimburse the Term Lenders for
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any liabilities incurred by such Term Lenders as account parties in connection
with any Letters of Credit issued Pursuant to the provisions of this Agreement.
L/C.
The term "L/C" has the meaning set forth in Section 4.3(g) hereof.
Maintenance Reserve Account.
The term "Maintenance Reserve Account" means the interest bearing account
established by Borrower with the Agent in accordance with the terms of Section
4.4 of this Agreement.
Majority Lenders.
The term "Majority Lenders" means, prior to the date of the First Advance,
Term Lenders whose aggregate Term Loan Commitment percentages exceed seventy
percent (70%) of the total Term Loan Commitment, and after the date of the First
Advance means Term Lenders which have advanced more than seventy percent (70%)
of the outstanding Term Loan.
Mortgage.
The term "Mortgage" means each of (i) the Amended and Restated Deed of
Trust, Security Agreement and Assignment of Rents dated as of December 29, 1988
by Borrower in favor of Agent for the benefit of the Term Lenders, and (ii) the
Deed of Trust, Security Agreement and Assignment of Rents dated as of even date
herewith by Borrower in favor of Agent for the benefit of the Term Lenders,
securing the payment of, inter alia, the Term Note(s), all amounts due in
connection with the Letters of Credit, payment and performance of all
obligations specified in the Mortgage and this Agreement, and evidencing a valid
and enforceable first-priority perfected lien on the Property and the Facility.
Net Revenues.
The term "Net Revenues" means, for any period, the difference between Gross
Revenues of Borrower and Operating Costs of the Facility.
O&M Contract
The term "O&M Contract" means that certain Operation and Maintenance
Agreement, dated December 30, 1988, by and between Borrower and Operator, as
approved by Agent, as the same may be from time to time amended, including all
Exhibits thereto.
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Operating Budget.
The term "Operating Budget" means an annual budget prepared by Borrower no
later than November 15 of each year and approved by Agent specifying by
principal items, for each month of such budget, the Projected Gross Revenues and
Projected Operating Costs. The Operating Budget shall be subject to review on an
annual basis or at such other times as Borrower or Agent shall reasonably
request.
Operating Costs.
The term "Operating Costs" means, for any period, the amounts actually
expended during such period for operation and maintenance of the Facility,
including, without limitation, taxes (including federal income taxes),
contributions to the Maintenance Reserve Account, premiums for Insurance
Policies, fuel costs and the Operator Fee pursuant to the O&M Contract.
Operating Costs do not include Debt Service.
Operator.
The term "Operator" means Falcon Power Operating Company, a corporation
organized and existing under the laws of the State of Texas, as Operator
pursuant to the O&M Contract.
Original Term Loan Agreement.
The term "Original Term Loan Agreement" means that certain Term Loan
Agreement, dated as of December 31, 1986, by and among KOP and CS, as Term
Lenders, Borrower and CS, as Agent.
Other Collateral.
The term "Other Collateral" has the meaning set forth in Section 7.14
hereof.
Participant.
The term "Participant" has the meaning set forth in Section 4.29 hereof.
Pay-Off Date.
The term "Pay-Off Date" has the meaning set forth in Section 7.14 hereof.
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Permitted Investments.
The term "Permitted Investments" means with respect to amounts of less than
$100,000, (a) deposit accounts of KOP or CS, as selected by Borrower, bearing
interest at prevailing money market rates, and (b) with respect to the Debt
Protection Account, time deposits or certificates of deposit with KOP or CS, as
determined by Borrower, up to a term not to exceed three (3) months; and for
amounts in excess of $100,000, investments maturing not more than 270 days from
the date made in any of: (a) direct obligations of the United States of America
or of any agency thereof, or obligations guaranteed as to principal and interest
by the United States of America; (b) bankers' acceptances and certificates of
deposit issued by the Agent, or any bank or trust company having capital,
surplus and undivided profits of at least $500,000,000 whose long-term debt is
given one of the two highest ratings by both Standard & Poor's Corporation and
Moody's Investors Service, Inc.; (c) obligations with the Agent, any bank or
trust company or bank holding company described in clause (b) above, in respect
of the repurchase of obligations of the type described in clause (a) hereof,
provided that such repurchase obligations shall be fully secured by obligations
of the type described in said clause (a) and the possession of such obligations
shall be transferred to, and segregated from other obligations owned by, the
Agent, any such bank or trust company or bank holding company; and (d)
commercial paper given one of the two highest ratings (without giving effect to
pluses or minuses) by both Standard & Poor's Corporation and Moody's Investors
Service, Inc., provided that not more than 25% of the Permitted Investments
owned by the Borrower at any time shall consist of commercial paper of the
second highest rating; provided, however, in each case, that an investment shall
be a Permitted Investment only if Agent may maintain the perfected security
interest in favor of the Term Lenders in the funds so invested.
Permitted Liens.
The term "Permitted Liens" has the meaning set forth in Section 4.10
hereof.
Plans.
The term "Plans" means the working drawings and specifications for the
construction of the Facility, including, without limitation, the project designs
constituting Exhibit A to the Turnkey Contract as provided by the Contractor,
the Special Conditions constituting Exhibit B1 to the Turnkey Contract and the
General Conditions constituting Exhibit B2 to the Turnkey Contract.
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Pledge Agreement.
The term "Pledge Agreement" means that certain Amended, Restated and
Consolidated Pledge Agreement dated as of even date herewith among Term Lenders,
Agent and Borrower, granting Term Lenders a pledge of the money contained in the
Accounts.
Prepayment Fee.
The term "Prepayment Fee" means the fee to be paid by Borrower to Agent for
the account of the Term Lenders, in the amount of three-eighths of one per cent
(0.375%) of the amount of any prepayments of the Term Loan prepaid pursuant to
Section 2.11 hereof on or before December 31, 1991.
Proceeds.
The term "Proceeds" has the meaning set forth in Section 4.13(b) hereof.
Process Agent.
The term "Process Agent" has the meaning set forth in Section 7.11 hereof.
Project Control Account.
The term "Project Control Account" has the meaning provided in Section
4.1(a) of this Agreement.
Project Documents.
The term "Project Documents" means all of the following, as any of them may
be amended from time to time:
(i) Turnkey Contract;
(ii) Compromise and Settlement Agreement, dated September 1, 1988,
between Borrower and Contractor, as amended by that certain First
Amendment to Compromise and Settlement Agreement dated
September ___, 1988;
(iii) O&M Contract;
(iv) Gas Supply Agreement, dated December 11, 1986, between FSOC and
Natural Gas Clearinghouse;
(v) Gas Supply Agreement, dated December 29, 1986, between FSOC and
Borrower;
(vi) Gas Supply Agreement, dated December 30, 1988, between FSGC and
Borrower;
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(vii) Fuel Purchase and Sale Agreement, dated November 21, 1986, between
Fina and Borrower;
(viii) Other gas supply arrangements and pledges or dedications of
Qualified gas reserves and substitutes therefor;
(ix) Water Supply Agreement, dated _____________________, between the
Colorado River Municipal Water District and Borrower;
(x) Lease Agreement, dated as of November 21, 1986, between Fina, as
lessor, and Borrower, as lessee, as amended by that certain First
Amendment to Lease Agreement dated as of December 29, 1986;
(xi) Steam Agreement;
(xii) TUEC Agreement;
(xiii) Tax Agreement;
(xiv) Confidentiality Agreement dated October 7, 1985, between FSOC and
TUEC;
(xv) Letter dated December 23, 1986 from Morgan Stanley Group Inc. to
FSOC;
(xvi) Insurance Policies; and
(xvii) Any other agreement executed in connection with the Facility or any
of the Project Documents.
Projected Debt Service.
The term "Projected Debt Service" means, for any period, as of any date of
calculation, an amount equal to the aggregate of (i) principal due on the Term
Loan, computed on the Scheduled Payment Basis, during such period, and interest
due on the Term Loan during such period, such amounts to be adjusted for any
credit or application of funds from the Additional Collateral Account, as the
case may be, pursuant to Section 4.2 hereof, (ii) fees due on the Letters of
Credit during such period pursuant to this Agreement and any placement costs
(including underwriting, marketing, remarketing and legal fees) expected to be
incurred by Borrower in connection with a planned financing arrangement
supported by a Letter of Credit; and (iii) principal, interest and fees which
Borrower is obligated to pay during such period to Term Lenders pursuant to the
Agreement or the other Loan Instruments, all as calculated by Agent. Interest
for purposes of computing Projected Debt
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Service shall be deemed to accrue at the then-current Term Loan Interest Rate.
Projected Gross revenues.
The term "Projected Gross Revenues" means, for any period, the total
projected amounts to be received from operation of the Facility (including,
without limitation, payments made by Fina and TUEC) based upon the energy,
capacity and steam sales prices projected for such period pursuant to the
Project Documents, the Facility's average availability and performance during
the prior six (6) months, including factors such as routine maintenance, TUEC
outages and other events affecting such availability and performance, and such
other factors as Borrower, Agent or Independent Engineer shall reasonably deem
relevant.
Projected Net Revenues.
The term "Projected Net Revenues" means, for any period, the difference
between Projected Gross Revenues of Borrower and Projected Operating Costs of
the Facility.
Projected Operating Costs.
The term "Projected Operating Costs" means, for any period, the total
amounts projected to be expended during such period for operation and
maintenance of the Facility including, without limitation, taxes (including
federal income taxes), premiums for Insurance Policies, contributions to the
Maintenance Reserve Account, fuel costs projected for such period and the
Operator Fee pursuant to the O&M Contract. Projected Operating Costs does not
include actual Debt Service or Projected Debt Service.
Property.
The term "Property" means the real property described in Exhibit A to the
Lease Agreement dated as of November 21, 1986 between Fina, as lessor, and
Borrower, as lessee, as amended by that certain First Amendment to Lease
Agreement dated December 29, 1986, together with the leasehold interest held in
such Property by Borrower, along with the Facility and all other property
constituting the "Mortgaged Property," as described in the Mortgage.
Regulation D.
The term "Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System and any
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successor regulation, in each case as in effect from time to time.
Regulation G.
The term "Regulation G" means Regulation G of the Board of Governors of the
Federal Reserve System and any successor regulation, in each case as in effect
from time to time.
Regulation U.
The term "Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System and any successor regulation, in each case as in effect
from time to time.
Regulation X.
The term "Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System and any successor regulation, in each case as in effect
from time to time.
Replacement Components.
The term "Replacement Components" has the meaning set forth in Section 4.5
hereof.
Required Alterations.
The term "Required Alterations" has the meaning set forth in Section 4.6
hereof.
Required Maintenance Amount.
The term "Required Maintenance Amount" means the amount described in
Section 4.4(b) hereof.
Revolving Loan Amount.
The term "Revolving Loan Amount" shall mean the portion of the Term Loan
Commitment in excess of One Hundred Ten Million dollars ($110,000,000).
Scheduled Payment Basis.
The term "Scheduled Payment Basis" means the principal of the Term Loan to
be repaid, based upon the principal repayment due pursuant to the schedule set
forth in Exhibit F
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plus interest due and payable, in accordance with the provisions of this
Agreement, on each Term Loan Repayment Date.
Security Agreement.
The term "Security Agreement" means that certain Amended and Restated
Assignment and Security Agreement, dated of even date herewith, among Term
Lenders, Agent and Borrower, granting to Term Lenders a security interest in the
Collateral, as therein defined.
Security Documents.
The term "Security Documents" means all of the following, as any of them
may be amended from time to time:
(i) Mortgage;
(ii) Security Agreement;
(iii) Pledge Agreement;
(iv) Financing Statements;
(v) Assignment of Insurance Policies;
(vi) Letter dated December 23, 1986 from FSOC to
TUEC; and
(vii) Any other agreement executed in connection with
the financing of the Facility or any of the Loan
Instruments.
Short Term Rate.
The term "Short Term Rate" means, for Interest Periods of up to 270 days,
as selected by the Borrower, for each Advance (or, where the context so
requires, the aggregate of the Advances then outstanding), the per annum
Adjusted CD Rate or Adjusted CP Rate offered by the Co-Managers, as available
and as determined solely by the Agent; provided, however, that if both the
Certificate of Deposit Base Rate and the Commercial Paper Base Rate are offered
by both Co-Managers, the Borrower may choose either such rate as the basis for
the Short Term Rate; provided further, that if only one of the Certificate of
Deposit Base Rate and the Commercial Paper Base Rate is offered by both
Co-Managers, such rate shall be the basis for the Short Term Rate; and provided
further, that if only one of the Co-Managers offers a Certificate of Deposit
Base Rate or a Commercial Paper Base Rate, the Short Term Rate shall be based
upon the weighted average of the rate offered by such
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Co-Manager and the best alternative comparable rate offered by the other
Co-Manager.
Special Operating Account.
The term "Special Operating Account" means the account of Borrower
specified in Section 4.1(c) of this Agreement.
Steam Agreement.
The Term "Steam Agreement" means that certain Steam Purchase and Sale
Agreement, dated as of November 21, 1986, by and between Borrower and Fina.
Substantial Subcontractors.
Subcontractors, materialmen and other parties who have supplied labor,
materials or services for the design, construction, testing, start-up and
operation of the Facility and whose contract or contracts with Contractor,
Operator or Borrower call for a payment or payments totaling at least $100,000,
or who otherwise might be entitled to claim a contractual or statutory lien
against the Property or the Facility in the amount $100,000 or more.
Tax Agreement.
The term "Tax Agreement" means that certain Tax Agreement dated as of even
date herewith between FSOC and Borrower.
Tax Benefits.
The term "Tax Benefits" means all those certain tax credits, deductions and
depreciation allowances derived from or in connection with the Facility.
Taxes.
The term "Taxes" means all taxes prescribed under the laws of the United
States or any political subdivision thereof imposed on Term Lenders or Agent or
on payments to be made to or received by any of them, including without
limitation stamp, transfer, withholding and turnover taxes, duties, penalties,
fees and other charges, except for (i) Taxes on or measured by income or assets
imposed by the United States or the jurisdiction of the principal office or the
branch thereof maintaining the Term Loan, (ii) Taxes that would not have been
imposed but for the existence of a connection between the Term Lender or Agent,
or a participant or sub-participant permitted by Section 4.29, and the
jurisdiction imposing such taxes
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(other than a connection arising solely by reason of this Agreement), and (iii)
any Taxes resulting from a failure of any Term Lender or Agent, or a participant
permitted by Section 4.29, (x) to act for purposes hereof through a branch in
the United States (y) to conduct its business, so that each payment received by
it hereunder is effectively connected with the conduct by it of a trade or
business through such branch, and (z) to provide appropriate documentation
(currently Internal Revenue Service Form 4224) to that effect.
Term Lenders.
The term "Term Lenders" means the Term Lenders named in the first paragraph
of this Agreement. Any subsequent financial institution approved by Borrower
(which approval shall not be unreasonably withheld), signing an addendum to this
Agreement agreeing to be bound by the terms hereof, shall also be considered a
Term Lender under this Agreement, and such Term Lender's proportionate share of
the Term Loan shall be evidenced on a revised Schedule I, which shall be
promptly furnished to Borrower. Any Term Lender may grant participations in the
Term Loan, as provided in Section 4.29 hereof, but the grant of such
participations shall not relieve any Term Lender of its obligations, or impair
the rights of any Term Lender hereunder.
Term Loan.
The term "Term Loan" means the aggregate of all Advances by the Term
Lenders to Borrower under this Agreement not to exceed, in the aggregate, the
Term Loan Commitment.
Term Loan Commitment.
The term "Term Loan Commitment" means the commitment of each Term Lender to
lend sums to Borrower during the Availability Period and to fund Letters of
Credit during the term of this Agreement up to but not exceeding the respective
amounts set forth for each Term Lender in Schedule I attached hereto and made a
part hereof and to maintain such Term Lender's proportionate share thereof,
subject to each of the terms and conditions of this Agreement; or where the
context so requires, the aggregate Term Loan Commitments for all Term Lenders up
to the aggregate amount of One Hundred Sixty-Five Million dollars
($165,000,000), subject to each of the terms and conditions of this Agreement.
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Term Loan Interest Rate.
The term "Term Loan Interest Rate" means, in the case of any Interest
Period, interest on the principal amount of each Advance, at that rate per annum
equal to:
(i) LIBOR plus the Interest Margin for such Interest Period; or
(ii) the Short Term Rate plus the sum of the Interest Margin plus
twelve and one-half (12.5) basis points for such Interest Period; or
(iii) the Federal Funds Rate for such Interest Period; or
(iv) the Fixed Offered Rate plus the Interest Margin for such Interest
Period;
each as selected by Borrower for each Interest Period, and notified to Agent at
least three (3) Banking Days prior to the commencement of such Interest Period.
In the event Borrower fails to provide such notice to Agent within such time,
the Term Loan Interest Rate for the next succeeding Interest Period shall be
determined by the Agent.
Term Loan Repayment Date.
The term "Term Loan Repayment Date" means, except as otherwise required
pursuant to Section 2.10, the last day of March, June, September and December,
commencing with the first of such dates on or after the date of the First
Advance.
Term Notes.
The term "Term Notes" means one or more negotiable promissory notes in the
form attached hereto as Exhibit B.
Title Company
The term "Title Company" means Southwest Title Company, 3103 Bee Cave Road,
Centre 1, Suite 100, Austin, Texas 78746, as agent for Transamerica Title
Insurance Company.
Title Insurance.
The term "Title Insurance" means a title insurance commitment, binder or
policy, as Agent may require, in the amount of One Hundred Sixty-Five Million
dollars ($165,000,000), insuring or committing to insure that the Mortgage
constitutes a valid lien covering the Property having
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the priority required by Agent and subject only to those exceptions and
encumbrances which Agent has approved, issued by the Title Company.
TUEC.
The term "TUEC" means Texas Utilities Electric Company, a corporation
organized and existing under the laws of the State of Texas.
TUEC Agreement.
The term "TUEC Agreement" means that certain Agreement dated July 30, 1986
between TUEC and FSOC, as amended on December 23, 1986 and May 27, 1988 and that
certain Assignment by FSOC to Borrower, with the consent of TUEC, dated December
23, 1986.
Turnkey Contracts
The term "Turnkey Contract" means the Turnkey Cogeneration Facility
Agreement, dated November 22, 1986, between Borrower and Contractor, as the same
may be from time to time amended, including all Exhibits thereto.
Unadvanced Commitment.
The term "Unadvanced Commitment" has the meaning set forth in Section 2.6
hereof.
ARTICLE 2 - ADVANCES OF THE TERM LOAN AND PAYMENTS
2.1 Term Loan Commitment.
Subject to the terms and conditions hereof, and provided that and Event of
Default, and the expiration of the applicable grace period, if any, has not
occurred, each Term Lender severally commits for its own account to make
Advances, to or for the account of Borrower in accordance with this Agreement,
during the Availability Period, and to fund Letters of Credit during the term of
this Agreement, up to its respective Term Loan Commitment, as set forth on
Schedule I, as the same may be revised from time to time, and totalling in the
aggregate the maximum amount of the total Term Loan Commitment. Subject to the
limitations on the amount of the Term Loan Commitment and to the provisions of
this Agreement, any amounts of the Revolving Loan Amount which Borrower prepays
during the Availability Period pursuant to Section 2.11 of this Agreement may be
reborrowed by Borrower. The Term Lenders
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shall have no obligations to make any Advance after the Availability Period.
During the Availability Period, the Borrower shall have the right, upon thirty
(30) days irrevocable written notice to the Agent and upon payment in full of
the Commitment Fee accrued through the date of such reduction, to reduce the
amount of the Term Loan Commitment not yet advanced hereunder; provided,
however, that all such reductions shall be in the amount of integral multiples
of One Million dollars ($1,000,000). All reductions of the Term Loan Commitment
pursuant to this provision shall be permanent.
2.2 Procedure for Advances.
(a) From time to time during the Availability Period, but not more
frequently than once per calendar month, Borrower may submit an Application for
Advance to Agent requesting an Advance. Each such Application for Advance shall
be submitted at least five (5) (but no more than thirty (30)) Banking Days prior
to the date on which such Advance is desired. Each Application for Advance shall
be properly executed, and, if signed by Borrower, shall constitute a
representation and warranty by Borrower that it is in compliance with all the
conditions precedent to such Advance specified in this Agreement. An Application
for Advance must request an Advance of at least One Million dollars ($1,000,000)
and must be in an integral multiple of one Million dollars ($1,000,000). An
Affidavit of Borrower shall be received by Agent prior to each Advance. Borrower
acknowledges that if it does not provide all necessary documentation on a timely
basis delays may result in making Advances, and Borrower irrevocably consents to
such delays.
(b) All sums advanced and disbursed hereunder shall be disbursed under and
shall be secured by the Loan Instruments. Subject to the other provisions of
this Agreement, Agent shall make Advances available to Borrower in immediately
available funds not later than 2:00 p.m. (New York time) on the day in question
for credit on such day to the Special Operating Account of Borrower or in the
case of Advances related to the issuance of Letters of Credit, the Letter of
Credit Bank shall issue Letters of Credit in favor of the appropriate party as
described in Section 2.13 hereof. Agent may, in its sole discretion, upon the
occurrence of an Event of Default or an event which with the passage of time,
the giving of notice or both would constitute an Event of Default, make payments
directly to Operator, Fina or any other party to a Project Document.
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2.3 Conditions to the First Advance.
The obligation of the Term Lenders to make available the First Advance is
subject to the fulfillment, to the satisfaction of Agent and its counsel, not
less than three (3) Banking Days prior to the date thereof, and to the continued
fulfillment of each such condition on the date of such Advance as if made on
each such date, of each of the following:
(a) The documents set forth in Exhibit E to this Agreement shall have been
duly executed and delivered by the party or parties thereto and shall in all
respects be satisfactory in form and substance to Agent;
(b) There shall have been no material adverse change in the condition
(financial or otherwise) of Borrower or any other party to any of the Loan
Instruments or Project Documents, that would materially adversely affect the
ability of Borrower to repay the Term Loan, there shall have been no material
adverse change in the security interests of the Term Lenders in the Collateral
or the Pledged Collateral (as defined in such agreements), and there shall have
been no material adverse change in the financial prospects, likely
profitability, or likely financial performance of the Facility from the date of
this Agreement that would impair the ability of Borrower to meet its obligations
hereunder, all as determined in good faith by Agent;
(c) The representations and warranties contained in Article 3 hereof shall
be true on and as of the date of the First Advance; there shall exist on the
date of the First Advance no Default or Event of Default under this Agreement;
and Borrower shall deliver to Agent a duly executed certificate, satisfactory in
form and substance to Agent, dated the date of the First Advance to both such
effects;
(d) Borrower shall have opened the Debt Protection Account and deposited
One Million dollars ($1,000,000) therein;
(e) Neither the execution and delivery and compliance with the terms of
this Agreement nor Borrower's ownership or operation of the Facility will cause
Borrower, Agent or Term Lenders to become subject to regulation by any
Governmental Authority as a "public utility," an "electric utility," an
"electric utility holding company," a "public utility holding company," or an
"electrical corporation" under any Law or Governmental Requirements (including,
without limitation, the Public Utility Holding Company Act of 1935, the Federal
Power Act and the Public Utility Regulatory Policies Act of 1978, each as
amended);
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(f) The execution and delivery and compliance with the terms of this
Agreement shall not violate any applicable Law or Governmental Requirement;
(g) The Security Documents and the delivery of the Pledged Collateral, as
defined in such documents, shall have created, as security for the obligations
of Borrower hereunder and under the Term Notes, valid and perfected
first-priority security interests in and liens on the collateral described
therein with priority dating from the date of this Agreement;
(h) The Facility shall be a "Qualifying Cogeneration Facility," as such
term is defined in the Public Utility Regulatory Policies Act of 1978, as
amended, and Borrower shall have self-certified as a Qualifying Cogeneration
Facility or shall have obtained a FERC Qualifying Facility Certificate, in full
force and effect on the date of the First Advance, from the Federal Energy
Regulatory Commission. The Facility, the Property, Borrower and Fina (with
respect to the Property) shall be in full compliance with all Governmental
Requirements including, without limitation, all applicable environmental,
pollution control and ecological laws, ordinances, rules and regulations. The
applicable environmental protection agency, pollution control board and/or other
Governmental Authorities having jurisdiction over the Property and the Facility
shall have issued all permits required to be obtained as of such date for the
operation of the Facility, and there shall be no impediment to procurement of
all other permits when required;
(i) Each of TUEC and Fina shall have executed and delivered to Borrower a
certificate, in form and substance reasonably satisfactory to Agent, not earlier
than fifteen (15) days prior to the date of the First Advance, attesting that
the TUEC Agreement or the Steam Agreement, as the case may be, is in full force
and effect;
(j) Agent shall have received an Operating Budget from Borrower, reasonably
acceptable in form and substance to Agent and Independent Engineer;
(k) Borrower shall have opened the Maintenance Reserve Account and
deposited Four Hundred Thousand dollars ($400,000) therein;
(l) Borrower shall have contracted, in the aggregate, for either (i) a
minimum of 12,800,000 MM BTUs for each year of this Agreement or (ii) such
amount of natural gas as may from time to time be reasonably deemed necessary by
the Co-Managers, after consultation with Borrower, or as Borrower may reasonably
recommend, subject to the reasonable approval of the Co-Managers in consultation
with the Independent Engineer, to
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meet in a timely manner all of its obligations under the TUEC Agreement and this
Agreement (the "Base Requirement"). The Base Requirement may be provided from
one or more of the following sources:
(i) National Gas Clearinghouse Inc., pursuant to that certain contract,
dated as of December 11, 1986, by and between National Gas Clearinghouse Inc.
and FSOC, as the same has been assigned and may be amended from time to time;
(ii) Certain Qualified gas reserves currently owned or controlled by FSGC
and more fully described on Exhibit G hereto, which, if owned, shall be pledged
or, if controlled, shall be dedicated to the Facility until such time and to the
extent necessary to fulfill the Base Requirement. For purposes of this Section
2.3(m), the term "Qualified" shall mean such natural gas reserves or natural gas
supply arrangements as are reasonably approved by the Independent Engineer and
the Agent; and
(iii) Qualified natural gas reserves or natural gas supply arrangements as
and when the same are acquired and/or entered into by FSGC, a wholly owned
subsidiary thereof or an affiliate thereof, including, without limitation, that
certain Purchase and Sale Agreement, dated November 21, 1986, by and between
Borrower and Fina;
provided, however, that Borrower shall have the right to substitute from time to
time alternative Qualified natural gas reserves or natural gas supply
arrangements.
All arrangements for the supply of natural gas to the Facility shall (i) be
on terms and conditions reasonably satisfactory to the Co-Managers, (ii) be
sufficient to supply the Facility's Base Requirement for a period of fifteen
(15) years commencing on the date hereof; (iii) include the execution and
delivery of transportation agreements as deemed necessary and reasonably
approved by Agent and Independent Engineer; and (iv) during any given year,
provide for the sale of natural gas at a price not in excess of the annual
weighted average price set forth opposite such year as provided on Exhibit H
hereto; and
(n) Borrower shall have prepared and submitted to Agent an Approved Budget
acceptable to Agent and the Independent Engineer.
2.4 Conditions to Subsequent Advances.
The obligation of the Term Lenders to make available any subsequent Advance
is subject to the fulfillment to the
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reasonable satisfaction of Agent and its counsel not less than three (3) days
prior to such Advance, and to the continued fulfillment of such conditions on
the date of each such Advance, of the following additional conditions precedent
and, if required by Agent, Borrower shall deliver to Agent evidence of such
fulfillment:
(a) All conditions precedent to the First Advance and each subsequent
Advance shall have been and shall remain satisfied (including any conditions
waived for the First Advance);
(b) No material adverse change in the financial condition of the Borrower
or any party to the Project Documents or other Loan Instruments shall have
occurred which (i) would impair the Borrower's ability to meet its obligations
under this Agreement or under the other Loan Instruments; or (ii) impair the
security interests of the Term Lenders in the collateral subject to the Security
Documents;
(c) The representations and warranties contained in Article 3 hereof shall
be true in all material respects on and as of each such date; the covenants
contained in Article 4 hereof shall have been complied with in all material
respects on such date; there shall exist no Event of Default, or an event which
with the passage of time, the giving of notice or both would become an Event of
Default, under this Agreement; and
(d) The Security Documents and the Title Insurance shall have been endorsed
and extended, if required under local rules, to cover each Advance with no
additional title exceptions objectionable to Agent.
2.5 Interest and Fees.
(a) Current Interest and LOC Fees.
Borrower shall be obligated to pay interest (and LOC Fees) to Agent for the
account of the Term Lenders in respect of each Interest Period (computed on the
basis of actual number of days elapsed and a year of 360 days, except with
respect to the Fixed Offered Rate) on the daily principal amount of the Term
Loan outstanding (or in the case of Letters of Credit, on the daily outstanding
portion of any Letters of Credit) during such Interest Period, in arrears, on
each Interest Payment Date, at the rate per annum equal to the Term Loan
Interest Rate(s) in effect on each such day (or in the case of Letters of
Credit, at the LOC Fee then in effect). Interest with respect to an Advance made
during an Interest Period shall be computed only from the date of such Advance.
Borrower hereby authorizes Term Lenders to make an Advance on each Term Loan
Repayment Date which occurs during the Availability Period in
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the amount of the principal, interest, fees and other amounts due on such date,
and credit the Term Loan balance by such amount, whether or not an Application
for Advance has been submitted by Borrower.
(b) Default Interest.
Upon the occurrence of an Event of Default, Borrower shall pay on demand by
Agent interest on the principal amount of the Term Loan outstanding and due and
payable (and shall pay fees on the outstanding portion of any Letter of Credit)
from and including the date of such event to the date such event is cured (after
as well as before judgment) at the Default Interest Rate (or in the case of
Letters of Credit, at a fee equal to 2.00% per annum), computed on the basis
described in sub-paragraph (a) above, so long as such past due amount remains
unpaid, which interest shall be payable on each Term Loan Repayment Date and
also on demand by Agent. In addition to the payment of such interest, Borrower
shall pay to Agent for the account of the Term Lenders any funding and yield
protection costs, as provided in Section 2.7 of this Agreement, resulting from
the failure of Borrower to pay any amounts under this Agreement when due.
Borrower hereby authorizes the Term Lenders to make an Advance on each Term Loan
Repayment Date which occurs during the Availability Period in the amount of
interest and other costs due on such date, and credit the Term Loan balance by
such amount, whether or not an Application for Advance has been submitted by
Borrower.
2.6 Other Fees.
Borrower shall pay to Agent for the account of the Term Lenders: (i) at the
time of the First Advance, the non-refundable Closing Fee; (ii) on the date of
any prepayment of the Term Loan, the Prepayment Fee(s), if any, in accordance
with the provisions of Section 2.11 hereof; and (iii) the Commitment Fee for any
portion of the Term Loan Commitment which is not advanced. Borrower shall pay to
the Letter of Credit Bank the LOC Fronting Fee for the outstanding portion of
any Letters of Credit and shall pay to the Agent the Agency Fee on the date
hereof and each anniversary thereof. The portion of the Term Loan Commitment
which is not advanced is referred to herein as the "Unadvanced Commitment". The
Commitment Fee shall be computed based upon the average daily balance of the
Unadvanced Commitment during each three (3) month period from the date hereof
payable in arrears on the last day of each such three (3) month periods and on
the last day of the Availability Period. The LOC Fronting Fee shall be computed
based upon the average daily balance of outstanding Letters of Credit during
each three (3) month period from the date hereof payable in arrears on the last
day of each such three (3) month periods
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and on the last Term Loan Repayment Date. Borrower hereby authorizes Agent to
make an Advance in the amount of the Commitment Fee or LOC Fronting Fee when due
and credit the Term Loan balance by such amount, whether or not an Application
for Advance has been submitted by Borrower.
2.7 Funding and Yield Protection.
(a) Taxes.
(i) Borrower shall make all payments of all amounts payable hereunder and
under the Term Notes net, free and clear of all Taxes, and shall reimburse each
Term Lender for the cost of any Taxes imposed on such Term Lender or on any
payment under or with respect to any aspect of the Term Loan, the Term Notes or
the Letters of Credit or the making, execution or enforcement thereof. Payments
to KOP or CS, each acting through its respective New York branch, are currently
not subject to any Taxes. Borrower is not obligated to pay any Taxes resulting
from a failure of any Term Lender or Agent to maintain a branch, or the failure
of any permitted participants to have and maintain a branch, in the United
States. If Borrower so requests within ten (10) days of receipt of notice of any
such Taxes, such Term Lender shall (consistent with its internal policies and
legal and regulatory restrictions) attempt to negotiate with Borrower an
assignment of such Term Lender's proportionate share of the Term Loan as further
provided below; provided, however, that Borrower shall promptly pay when due all
reasonable fees and expenses of such Term Lender incurred or to be incurred in
connection with such transfer or assignment; and provided further, that no such
transfer or assignment shall relieve Borrower of liability hereunder for amounts
imposed on such Term Lender or on any payment under or with respect to any
aspect of the Term Loan, the Term Notes or the Letters of Credit or the making,
execution or enforcement thereof.
(ii) If Borrower is prohibited or prevented by Law or otherwise from making
any such payment net, free and clear of any Taxes or from reimbursing any Term
Lender for the cost of any such Taxes (as provided above), then the amount of
such payment to be made by Borrower shall be increased by such additional amount
or amounts as may be necessary to ensure that each Term Lender shall receive a
net amount which after payment of any Taxes imposed shall be equal to the amount
each Term Lender would have received had no such imposition been made.
(iii) Borrower shall provide evidence that all Taxes imposed on all
payments under or with respect to the Term Loan, the Term Notes, the Letters of
Credit or any related instrument shall have been paid in full to the appropriate
authorities by
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delivery of official receipts or notarized copies thereof to Agent within thirty
(30) days after payment thereof. Borrower shall be entitled to make all filings,
pursue all remedies and appeals and take such other lawful action to prevent or
challenge the imposition of any Taxes, or to procure a refund of any Taxes paid;
provided, however, that Borrower shall indemnify and hold the Term Lenders
harmless, to the reasonable satisfaction of each Term Lender, for such Taxes
(and any penalties, interest or other charges attached thereto) and for any
liabilities, costs or expenses incurred by any Term Lender (including reasonable
fees and expenses of counsel) in connection with any such action by Borrower.
(iv) The Term Lenders and each of the Participants shall provide the
Borrower with the forms prescribed by the Internal Revenue Service of the United
States certifying such party's exemption from United States withholding taxes
with respect to all payments to be made to such party hereunder.
(b) Increased Costs.
If, with respect to this Agreement, the Term Loan or any of the other Loan
Instruments and/or to the making or the maintenance by any Term Lender of its
proportionate share of the Term Loan, including the obligations of any Term
Lender to reimburse the Letter of Credit Bank for such Term Lender's
proportionate share of the Letters of Credit when drawn, compliance by any Term
Lender with any direction, requirement or request from any regulatory authority
whether or not having the force of Law, with which such Term Lender must
reasonably comply, or if any change in the interpretation or application of any
Law or the enactment of any Law after the date hereof imposing or modifying any
reserve, deposit or similar requirement with respect to any class of assets or
liabilities of, deposits with or for the account of, or loans or letter of
credit by any Term Lender (or with respect to any change therein or in the
amount thereof), or any other condition or circumstance with respect to this
Agreement and/or to the maintenance by any Term Lender of its proportionate
share of, or obligations with respect to, the Term Loan or the Letters of Credit
(other than as a result of any tax or similar charge, whether domestic or
foreign, of the type described in Section 2.7(a)), shall result in any increase
in cost to any Term Lender in connection with or arising out of this Agreement,
the Term Loan, the Letters of Credit or any of the other Loan Instruments or in
any reduction in the amount of any payment receivable by such Term Lender
hereunder or thereunder, Borrower shall fully reimburse such Term Lender the
amount of such increase in cost or of such reduction in payment receivable
promptly after written notification thereof to Borrower and Agent by such Term
Lender. Each Term Lender shall
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(consistent with its internal policies and legal and regulatory restrictions)
use its best efforts to avoid such increased costs by giving Borrower prompt
notice thereof and granting Borrower the opportunity to convert to an
alternative arrangement in accordance with the provisions of this Agreement;
provided, however, that if Borrower so requests within ten (10) days of receipt
of the notification referred to above, such Term Lender shall (consistent with
its internal policies and legal and regulatory restrictions) attempt to
negotiate with Borrower an assignment of such Term Lender's proportionate share
of the Term Loan as further provided below; provided further, that Borrower
shall promptly pay when due all reasonable fees and expenses of such Term Lender
incurred or to be incurred in connection with such transfer or assignment; and
provided further, that no such transfer or assignment shall relieve Borrower of
liability hereunder for amounts incurred by such Term Lender pursuant to this
provision. In the event such Term Lender shall claim any additional amounts
payable pursuant to this Section 2.7 each affected Term Lender shall use its
best efforts (consistent with its internal policy and legal and regulatory
restrictions) to change the location of its Applicable Lending office so as to
eliminate the amount of any such costs or additional amounts which may
thereafter accrue; provided, however, that, without prejudice to the other
provisions of this Section 2.7, including without limitation this subsection
2.7(b), no such change shall be made if, in the reasonable judgment of such
affected Term Lender, such change would be disadvantageous to such Term Lender.
Borrower shall pay promptly when due all reasonable fees and expenses of such
Term Lender as incurred in connection with such alternative arrangement or
change of such Term Lender's Applicable Lending Office.
(c) Change of Law.
After the date hereof, if any change in applicable Law or in the
interpretation thereof by any Governmental Authority makes it unlawful for any
Term Lender to make or continue its proportionate interest in the Term Loan, or
for the Letter of Credit Bank to issue or maintain the Letters of Credit, then
such Term Lender or Letter of Credit Bank shall promptly give notice along with
evidence thereof to Borrower and Agent, and Borrower shall pay forthwith in the
manner set forth below all amounts outstanding, accrued or payable under this
Agreement and the Term Note(s) to such Term Lender or Letter of Credit Bank;
provided, however, that if Borrower so requests within ten (10) days of receipt
of the notice referred to above, such Term Lender shall (consistent with its
internal policies and legal and regulatory restrictions) attempt to negotiate
with Borrower an assignment of such Term Lender's proportionate share of the
Term Loan as further provided below; provided
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further, however, that Borrower shall promptly pay when due all reasonable fees
and expenses of such Term Lender incurred or to be incurred in connection with
such transfer or assignment. If a transfer or assignment is not agreed to by
Agent, Borrower and the affected Term Lender(s), then Borrower shall pay
forthwith in the manner set forth below all amounts outstanding, accrued or
payable under this Agreement and the Term Note(s) to such Term Lender(s).
(d) Non-Availability.
If at any time dollar deposits in the principal amount of any Term Lender's
proportionate interest in, or obligation under, the Term Loan are not available
for the next Interest Period to any Term Lender in the London interbank market,
such Term Lender shall so notify Agent, who shall so notify Borrower, and the
LIBOR basis for such Term Loan shall be suspended, or, at the Borrower's option,
the obligation of such affected Term Lender to advance or to continue its
proportionate interest in the Term Loan shall be suspended; provided, however,
that if the basis is changed to the Short Term Rate or the Federal Funds Rate,
Borrower shall pay any additional costs to the Term Lenders incurred as a result
of such change.
If at any time the Interest Rate (other than the Fixed Offered Rate) then
in effect does not serve as an accurate reference, in the reasonable judgment of
any Term Lender, for such Term Lender to determine the cost of advancing or
maintaining its respective proportionate interest in the Term Loan during any
Interest Period, then such Term Lender shall notify Agent, who shall so notify
Borrower, and interest on such Term Lender's proportionate share of the Term
Loan shall thereafter accrue at an Interest Rate determined by reference to
another basis (LIBOR, Short Term Rate or Federal Funds Rate); provided, however,
that if such other Interest Rate also does not serve as an accurate reference
for such Term Lender, then such Term Lender shall so notify Agent, who shall so
notify Borrower, and the obligation of such affected Term Lender to advance or
to maintain its proportionate interest in the Term Loan shall be suspended.
Borrower shall upon demand of Agent pay forthwith in the manner set forth
below all amount outstanding, accrued or payable hereunder owing to such
affected Term Lender(s).
(e) LIBOR Funding Costs.
The provisions of this subsection (e) of Section 2.7 shall apply in the
case of interest on the Debt of Borrower hereunder to which a Term Loan Interest
Rate based on LIBOR applies. Together with (i) any early repayment or prepayment
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of the Term Loan, the Letters of Credit or any portion thereof, or (ii) any
repayment or prepayment of such obligations or a portion thereof on a date other
than an Interest Payment Date or Term Loan Repayment Date, for any reason,
Borrower shall pay all interest accrued on the principal amount so repaid or
prepaid to the date of actual payment, plus all fees, expenses, liabilities and
losses incurred by any Term Lender as a consequence of such early repayment,
prepayment or termination. In the case of payment of any amount made prior to
the last day of the Interest Period applicable to such amount, Borrower shall
pay the amount by which the interest that would have been payable by Borrower to
such Term Lender (minus the Interest Margin) on the amount repaid or prepaid
from the date of repayment or prepayment until such last day of such Interest
Period exceeds the interest payable on a deposit of such amount at the rate as
offered to such Term Lender in the London interbank market or in certificates of
deposit, as the case may be, one (1) Banking Day after receipt for value of such
amount from Borrower for the period from the date two (2) Banking Days after
such receipt to the last day of such Interest Period, plus all other amounts
payable with respect to the Term Loan or the Letters of Credit, as the case may
be.
(f) Other Funding Costs.
The provisions of this subsection (f) of Section 2.7 shall apply in the
case of interest on the Debt of Borrower hereunder to which Term Loan Interest
Rate calculated on any basis other than LIBOR applies. Together with (i) any
early repayment or prepayment of the Term Loan or any portion thereof, or (ii)
any repayment of such obligations or a portion thereof on a date other than an
Interest Payment Date or Term Loan Repayment Date, for any reason, Borrower
shall pay all interest accrued on the principal amount so repaid or prepaid to
the date of actual payment, plus all fees, expenses, liabilities and losses
incurred by any Term Lender as a consequence of such early repayment or
prepayment, including, without limitation, any loss, cost or expense incurred by
such Term Lender by reason of liquidation or re-employment of deposits from
third parties in matching deposits in similar instruments for the remaining term
of the applicable Interest Periods in accordance with such Term Lender's
investment policies with respect to liquidation or re-employment of deposits
from third parties.
2.8 Term Note.
On or prior to the date of the First Advance, Borrower shall execute and
deliver to Agent for the account of the Term Lenders a duly executed Term Note,
with maturities and interest conforming to the Term Loan repayment provisions
set forth in this Agreement, all in the form attached hereto as Exhibit B
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and made a part hereof. At the reasonable request of Agent, Borrower will
execute and deliver one or more Term Notes, representing in the aggregate the
balance then outstanding of the Term Loan, payable to Agent or Term Lender(s),
in substitution for the Term Note(s) held prior thereto, which shall be
delivered simultaneously to Borrower for cancellation.
2.9 Conditions Precedent for the Benefit of Term Lenders and Agent.
All conditions precedent to the obligation of Term Lenders to make any
Advance are imposed hereby solely for the benefit of Term Lenders and Agent, and
no other party may require satisfaction of any such condition precedent or be
entitled to assume that Term Lenders will make any Advance in the absence of
strict compliance with such conditions precedent.
2.10 Repayment of the Term Loan.
(a) Borrower shall repay the Term Loan, plus accrued and unpaid interest
and fees thereon, to Agent for the pro rata account of the Term Lenders, in
sixty (60) consecutive quarterly installments, commencing on March 31, 1989 and
on each subsequent Term Loan Repayment Date. The amount of principal to be
repaid on each of the first four (4) Term Loan Repayment Dates shall be in an
amount equal to $625,000. The amount of principal to be repaid on each remaining
Term Loan Repayment Date shall be determined by multiplying by 25% the product
of the outstanding amount of the Term Loan immediately following the fourth Term
Loan Repayment Date and the percentage indicated on Exhibit F that corresponds
to the 12-month period from the date of the First Advance in which such Term
Loan Repayment Date occurs.
(b) Notwithstanding the provisions of Section 2.10(a) above, if on
September 30, 2003 the Borrower has not entered into binding agreements in form
and substance reasonably satisfactory to the Term Lenders for the sale of
electricity and steam produced by the Facility throughout the period of the
final Term Loan Repayment Date pursuant to Section 2.10(a), the final Term Loan
Repayment Date shall be September 30, 2003, and all of the then outstanding
principal amount of the Term Loan plus interest accrued and unpaid thereon shall
be due and payable on such date.
(c) In addition to payments pursuant to Section 2.10(a) above, on the final
day of any Interest Period which does not end on a Term Loan Repayment Date,
Borrower shall pay to Agent for the pro rata account of the Term Lenders all
accrued and unpaid interest on the Term Loan attributable to such Interest
Period.
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(d) All installments shall be rounded down to the nearest whole dollar,
except the final installment, which shall be in an amount equal to the
outstanding principal amount of the Term Loan, plus interest accrued and unpaid
thereon and fees accumulated and unpaid on any Letter of Credit.
2.11 Optional Prepayment of the Term Loan.
By giving irrevocable written notice, which is received by Agent at least
five (5) but not more than forty-five (45) Banking Days in advance, Borrower
may, at its option make prepayments on a Term Loan Repayment Date to Agent for
the account of the Term Lenders of either all the outstanding principal amount
of the Term Loan or from time to time any part thereof equal to One Million
dollars ($1,000,000) or whole number multiples thereof, all partial prepayments
to be applied, upon the direction of Borrower, pro rata against remaining
principal payments to minimize, to the extent reasonably practicable, any
increased costs to the Agent as described in Section 2.7 hereof; provided,
however, that together with all prepayments made prior to January 1, 1992,
except for those prepayments made pursuant to Sections 2.7, 2.10 or 4.2, or the
substitution of a Letter of Credit pursuant to Section 2.13 for all or a portion
of the Term Loan, Borrower shall pay to Agent for the account of the Term
Lenders a prepayment premium equal to three-eighths of one percent (0.375%) of
the amount of such prepayment; and provided, further, that Borrower shall have
no obligation to pay such prepayment premium for any amounts of the Revolving
Loan Amount prepaid by Borrower during the Availability Period; and provided,
further, that Borrower shall pay to Term Lenders all costs (as described in
Section 2.7 hereof), if any, which are incurred by Term Lenders as a result of a
prepayment of a portion of the Term Loan or, as the case may be, Term Lenders
shall pay to Borrower all Gain (as defined below), if any, resulting from such
prepayment. For purposes of this provision, "Gain" shall mean the negative
difference of the following two components: (i) the then present value of the
required principal and interest payments of the Term Loan that are avoided by
such prepayment, discounted at a rate equal to the sum of the yield on U.S.
Treasury obligations having a final maturity equal to the average life of the
principal payments avoided by such prepayment plus the Interest Margin and (ii)
the principal amount of the Term Loan then being prepaid.
2.12 General Terms of Payment.
(a) All sums payable to Agent or the Term Lenders hereunder shall be paid
without deduction, set-off or counterclaim in New York City in immediately
available funds not later than 1:00 p.m. (New York time) on the day in question
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to the Federal Reserve Bank of New York, for credit to the account of Credit
Suisse, New York Branch, ABA No. 0260-0917-9 (CR SUISSE NY), Attention: Loan
Department.
(b) Any payments made to Agent for its account or for the benefit of Term
Lenders shall be applied first against costs, expenses and indemnities due
hereunder; then against fees due to Agent and Term Lenders (other than LOC
Fees); then against Default Interest, if any; then against interest on the Term
Loan; then against any LOC Fees; and then against principal of the Term Loan.
(c) Whenever any payment hereunder shall be due, or any calculation shall
be made, on a day which is not a Banking Day, the date for payment or
calculation, as the case may be, shall be extended to the next succeeding
Banking Day, and any interest on any payment shall be payable for such extended
time at the specified rate. In no event shall this Section be deemed to modify
the definitions of Term Loan Repayment Date or Interest Period set forth in this
Agreement.
(d) All calculations of interest, fees, increased costs, funding costs,
gross up costs or other amounts due hereunder calculated by Agent shall be
conclusive as to the amount thereof absent manifest error. Agent shall promptly
provide Borrower with a certificate, as to the basis and amount of any
withholding or increased cost, setting forth the method of calculation of such
amounts, the assumptions made in making such calculation and the reason for such
withholding. At least five (5) Banking Days prior to the date on which a payment
is due from Borrower hereunder, Agent shall provide a notice to Borrower
specifying the amount due and the date on which such amount is due.
(e) If no due date is specified for the payment of any amount payable by
Borrower hereunder, such amount shall be due and payable not later than twenty
(20) days after receipt of written demand by Agent to Borrower for payment
thereof.
2.13 Letters of Credit.
(a) If Borrower obtains commitments, acceptable in form and substance to
Agent, for financing arrangements consisting of commercial paper or privately
placed medium-term or long-term debt, and if no Event of Default (or any event
that with the passage of time, giving of notice or both would constitute an
Event of Default) exists, upon the approval of the Agent the Letter of Credit
Bank shall upon Borrower's request support such arrangements through the
issuance of one or more Letters of Credit in accordance with the terms and
conditions of this Agreement; provided, however, that the
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Letter of Credit Bank shall be obligated to issue such Letters of Credit only if
and when such Letter of Credit Bank's regulations and lending limits permit the
issuance of such Letters of Credit. The Letter of Credit Bank shall use
reasonable efforts to issue such Letters of Credit within fifteen (15) Banking
Days (or sooner, if practicable) after receiving written notice from Borrower.
The Letter of Credit Bank agrees to cooperate, consistent with its internal
policies and procedures, in providing marketing information and in seeking the
highest possible credit agency rating with respect to any such commercial paper.
The Term Lenders shall be the account parties with respect to such Letters of
Credit, each Term Lender being obligated to reimburse the Letter of Credit Bank
in its proportionate share of such Letters of Credit as set forth on Schedule I
hereto. Borrower shall be unconditionally obligated to reimburse the LOC
Reimbursement Obligation with respect to such Letters of Credit.
(b) Borrower shall pay the proceeds of a financing arrangement supported by
a Letter of Credit (the "Alternative Financing Proceeds") to Agent for the
account of the Term Lenders to reduce all or a portion of the outstanding Term
Loan. Any payment made by Borrower to Agent pursuant to this Section 2.13(b)
shall be made contemporaneously with the issuance of the Letter of Credit.
(c) The stated amount of any Letter of Credit shall equal (i) the
Alternative Financing Proceeds of the financing arrangement associated with such
Letter of Credit (which may not exceed the outstanding principal balance of the
Term Loan), plus (ii) unless otherwise agreed to in writing by Borrower and the
Letter of Credit Bank, an amount representing interest on the proceeds of such
financing arrangement for a period not to exceed 210 days (or, in the case of
proceeds resulting from the issuance of commercial paper, 270 days), at a rate
not to exceed twelve per cent (12%) per annum, calculated on the basis of a year
of 365 days and the actual number of days elapsed.
(d) The agreement or arrangement through which Borrower obtains a financing
described in Section 2.13(a) shall be in a form and substance satisfactory to
Agent and: (i) shall provide that the repayment obligation under such financing
arrangement shall become due and payable on the date the beneficiary of the
related Letter of Credit receives written notice from Agent that an Event of
Default has occurred or that all amounts outstanding under the Term Note(s) are
due, and shall require such beneficiary to call upon the related Letter of
Credit on such date, and (ii) shall require Borrower to repay the LOC
Reimbursement Obligation under such financing arrangement, and require the
beneficiary of the related Letter of Credit to call upon such Letter of Credit,
in such a manner
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as to ensure that the outstanding balance of the Term Loan on each Term Loan
Repayment Date shall equal or exceed the principal amount which Borrower is
required to repay on the Term Loan on such date in accordance with Exhibit F.
(e) Each Letter of Credit issued by the Letter of Credit Bank shall have a
term of up to five (5) years. The expiration date of any such Letter of Credit
may, at the request of Borrower received by the Letter of Credit Bank at least
six (6) months prior to such expiration date, be extended by the Letter of
Credit Bank on each annual anniversary date of the issuance of such Letter of
Credit until and including December 30, 1998, to an anniversary date of up to
five (5) years succeeding such extension date, by written notice from the Letter
of Credit Bank on such extension date to the Borrower specifying the new
expiration date. Any Letter of Credit issued by the Letter of Credit Bank shall
expire on or before the final Maturity Date.
(f) Upon payment by the Letter of Credit Bank to a beneficiary under a
Letter of Credit: (i) each of the Term Lenders (other than the Letter of Credit
Bank) shall immediately reimburse the Letter of Credit Bank without further
notice or demand of any kind, in an amount equal to such Term Lender's
proportionate share (as set forth on Schedule I hereto) of such payment by the
Letter of Credit Bank to a beneficiary under a Letter of Credit, (ii) the
outstanding principal balance of the Term Loan shall be increased by an amount
equal to the Alternative Financing Proceeds of the financing arrangement
associated with such Letter of Credit, and (iii) Borrower shall immediately pay
Agent for the account of the Term Lenders, without demand or further notice of
any kind, an amount equal to such payment by the Letter of Credit Bank to the
beneficiary less the amount by which the outstanding principal balance of the
Term Loan was increased in connection with such payment; provided, however, if
there is more than one scheduled payment under a Letter of Credit, Agent and
Borrower shall agree before the issuance of such Letter of Credit on the
proportion of each such payment that will be allocated to increase the
outstanding principal balance of the Term Loan and the proportion of each such
payment that Borrower will immediately pay to Agent for the account of the Term
Lenders.
If Borrower fails to pay Agent for the account of the Term Lenders an
amount due under this Section 2.13(f), the amount not reimbursed shall bear
interest to the extent permitted by law, payable upon demand, at the Default
Interest Rate until such amount is paid in full.
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The obligations of the Term Lenders and Borrower to make each payment due
under the terms of this Section 2.13(f) shall be absolute, unconditional and
irrevocable, and shall not be affected by any condition or event, including,
without limitation: (a) any lack of validity or enforceability of this
Agreement, any Letter of Credit or any of the other Loan Instruments; (b) any
amendment or waiver of, or consent to departure from, all or any of the Loan
Documents, unless expressly agreed to by the Letter of Credit Bank in writing;
(c) the existence of any claim, set-off, defense or other right which Borrower
may have at any time against any beneficiary or any transferee of any Letter of
Credit (or any persons or entities for whom any such beneficiary or any such
transferee may be acting), Agent, the Letter of Credit Bank, the Term Lenders or
any other person or entity, whether in connection with this Agreement, any of
the other the Loan Instruments or any unrelated transactions; (d) any statement
or any other document presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect whatsoever, provided that such
presentment shall not have been the result of, or result in a payment due to,
gross negligence or willful misconduct of the Agent, the Letter of Credit Bank
or the Term Lenders; (e) payment by the Letter of Credit Bank under any Letter
of Credit against presentation of a draft or certificate which does not comply
with the terms thereof, provided such payment shall not have constituted gross
negligence or willful misconduct of the Letter of Credit Bank; or (f) any other
circumstances or happening whatsoever, whether or not similar to any of the
foregoing, provided that the same shall not have constituted gross negligence or
willful misconduct of the Letter of Credit Bank.
2.14 Interest Rate Hedge Agreement.
Provided that no Event of Default or event that with the passage of time,
giving of notice or both would constitute an Event of Default exists, upon the
approval of the Co-Managers, the Borrower may enter into one or more Interest
Rate Hedge Agreements with a third party so long as such agreement, in Agent's
reasonable judgment, will not have an adverse effect on the Term Lenders'
security under the Security Documents or Borrower's ability to meet its
obligations hereunder. The Agent agrees to intermediate the swap or hedge and
act as a counterparty for a fee to be determined by mutual agreement of the
Borrower and the Agent at the time the Borrower selects the counterparty. The
Agent's counterparty under such Interest Rate Hedge Agreement shall have at
least an "investment grade" rating and be acceptable to the Term Lenders. If the
swap or hedge is arranged during the twelve (12) month period beginning on the
date of this Agreement, the
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Agent's annual fee as counterparty shall be twelve and one-half (12.5) basis
points if the Agent's counterparty has an investment rating of at least "AA".
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower hereby represents and warrants and certifies to Agent and to the
Term Lenders that, as of the date of this Agreement, each of the following
representations and warranties is true and correct in all material respects and
does not omit to state any material fact necessary to make the contents thereof
not misleading.
3.1 Good Standing and Power.
Borrower is a corporation duly organized and existing in good standing
under the laws of the State of Texas with the power to own its property and to
carry on its business as now being conducted and is duly qualified to do
business in the State of Texas and in each other jurisdiction in which the
character of the properties owned or leased by it therein or in which the
transaction of its business makes such qualification necessary. The Borrower has
no subsidiaries.
3.2 Authority
Borrower has full power and authority to enter into and perform this
Agreement and each other Loan Instrument and all Project Documents to which it
is a party, and the entering into of this Agreement, each other Loan Instrument
and all Project Documents by Borrower has been duly authorized by all proper and
necessary corporate action.
3.3 Consents.
All authorizations, consents, approvals, registrations, exemptions, permits
and licenses with or from Governmental Authorities which are necessary for the
execution and delivery by Borrower of this Agreement, each other Loan Instrument
and all Project Documents to which Borrower is a party, and the performance by
Borrower of its obligations hereunder and thereunder (except for such items not
obtained, as explained on Exhibit 1, which items Borrower shall obtain as and
when necessary for the operation of the Facility) have been effected or obtained
and are in full force and effect.
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3.4 Binding Effect.
Assuming due authorization by the other parties hereto and thereto, this
Agreement constitutes, and each other Loan Instrument and Project Document when
executed and delivered will constitute, the valid and legally binding
obligations of Borrower and the other parties thereto, enforceable in accordance
with their respective terms. Enforcement of the Loan Instruments is subject to
no defenses, and, with respect to the First Advance, no basis exists for any
claims against Term Lenders or Agent under the Loan Instruments.
3.5 Financial Statements.
The Financial Statements of Borrower to be provided hereunder are or will
be true, correct and complete as of the dates specified therein and fully and
accurately present the financial condition of Borrower as of the dates and for
the periods specified. To the best of Borrower's knowledge, no material adverse
change has occurred in the financial condition of any of the other parties whose
Financial Statements Borrower is required to deliver hereunder since the date
hereof which would impair the ability of the Borrower to meet its obligations
hereunder.
3.6 Suits and Actions.
Except, as set forth on Exhibit J, there are no conditions, circumstances,
events, agreements, material actions, suits or proceedings pending, or to the
knowledge of Borrower threatened, in any court, at law or in equity, or before
or by any Governmental Authority against or affecting Borrower, the Property or
the Facility, or involving the validity, enforceability or priority of any of
the Loan Instruments or, to the best of Borrower's knowledge, involving any of
the parties to any of the Project Documents which could impair the ability of
such party to perform its obligations under such Project Document. The
consummation of the transactions contemplated hereby, and the performance of any
of the terms and conditions hereof and of the other Loan Instruments, will not
result in a breach of, or constitute a default in, any mortgage, deed of trust,
lease, promissory note, loan agreement, credit agreement, other agreement or any
rule, regulation, statute or judgment to which Borrower, FSGC or Operator is a
party or by which Borrower, FSGC or Operator may be bound or affected. None of
Borrower, FSGC or Operator is in default under any Governmental Requirements,
other than any non-compliance which does not impair (i) the ability of the
Borrower to meet its obligations hereunder or (ii) any of the security interests
granted to Term Lenders under any of the Security Documents.
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3.7 Disclosure.
There is no fact which Borrower knows or reasonably should have known
that Borrower has not disclosed to Term Lenders in writing that in the
reasonable opinion of Borrower would be reasonably likely to materially
adversely affect the Property, the Facility or the property, business or
financial condition of Borrower or FSGC.
3.8 Inducement to Term Lenders.
The representations and warranties contained in the Loan Instruments are
made by Borrower as an inducement to Term Lenders to make the Term Loan
Commitment hereunder and to advance and maintain the Term Loan, and Borrower
understands that Term Lenders are relying on such representations and warranties
and that such representations and warranties shall remain true and correct so
long as any part of the Term Loan remains outstanding and shall survive any (a)
bankruptcy proceedings involving Borrower or the Facility, (b) foreclosure of
the Mortgage, (c) conveyance of title to the Property (including the Facility)
in lieu of foreclosure of the Mortgage or (d) exercise of any other rights by
Term Lenders pursuant to any of the Security Documents.
3.9 Submissions.
To the best of Borrower's knowledge, the Loan Instruments and all
financial statements, budgets, schedules, opinions, certificates, confirmations,
Operator's statements, Fina statements, TUEC statements, FSOC statements,
agreements, Project Documents, and other materials submitted to the Term Lenders
in connection with or in furtherance of the Loan Instruments by or on behalf of
the Borrower (as of the date made or furnished) fully and fairly state the
matters with which they purport to deal, and neither misstate any material fact,
nor separately or in the aggregate fail to state any material fact necessary to
make the statements made not misleading in light of the circumstances under
which they were made.
3.10 Status of Parties.
None of Borrower, Term Lenders, Agent or Borrower will, solely as a
result of the participation by the parties separately or as a group, in the
transactions contemplated hereby and the ownership, use or operation of the
Facility contemplated hereunder, be deemed by any Governmental Authority to be,
or be subject to regulation as, a "public utility," an "electric utility," an
"electric utility holding company," "a public utility holding company," a
"holding company," or an
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"electrical corporation" or a subsidiary or affiliate of any of the foregoing
under any Law or Governmental Requirements (including, without limitation, the
Public Utility Holding Company Act of 1935, the Federal Power Act, and the
Public Utility Regulatory Policies Act of 1978, each as amended), and all
consents, orders, approvals, or filings necessary to accomplish this result
shall have been duly obtained or made.
3.11 Security Interests, Filing and Recordings.
On or before the date of the First Advance: (i) Borrower, as trustor,
shall execute and cause the recordation of the Mortgage; and (ii) Borrower, as
debtor, shall execute Financing Statements covering the security interest
transferred to and/or created in favor of Agent for the account of Term Leaders
by the Security Documents. In addition, Borrower shall, at its expense, take all
reasonable actions that have been requested by Agent or that Borrower knows are
necessary to maintain the perfection of the interests of Agent and Term Lenders
and shall furnish timely notice of the necessity of such action, together with
such instruments, in execution form, and such other information as may be
required to enable such person to take such action. Without limiting the
generality of the foregoing, Borrower shall execute or cause to be executed and
shall file or cause to be filed such Financing Statements, continuation
statements, and fixture filings and such Mortgage, deeds of trust, leases or
memoranda of leases in all places necessary or advisable (in the opinion of
counsel for Agent) to perfect and maintain such security interests and in all
other places that Agent shall reasonably request and shall promptly notify Agent
of any change in Borrower's chief executive office.
3.12 Operating Budget.
The Operating Budget attached hereto as Exhibit K is, to the best of
Borrower's knowledge, complete, fair and accurate.
3.13 Regulation U and X.
Neither the Borrower nor any of its subsidiaries is engaged principally,
or as one of its important activities, in the business of extending credit for
the purposes of purchasing or carrying margin stock, as that term is defined by
Regulation U. The execution, delivery and performance of this Agreement, the
Loan Instruments and the Project Documents in accordance with their respective
terms and the making of the Term Loan do not violate the provisions of
Regulation U or X.
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3.14 Base Requirement.
To the best of Borrower's knowledge, the Base Requirement is sufficient
to satisfy the fuel requirements needed by the Facility to enable Borrower to
meet in a timely manner all of its obligations under the TUEC Agreement and this
Agreement.
3.15 Environmental Issues.
(a) For the purposes of this Section 3.15, all terms used in this Section
3.15 which are not otherwise defined in this Section are used as defined- in
that certain Amended and Restated Deed of Trust, Security Agreement and
Assignment of Rents dated as of December 29, 1988 by Borrower in favor of Agent
for the benefit of the Term Lenders. Unless the context otherwise specifies or
requires, the following terms shall have the meaning herein specified:
(i) "Hazardous Materials" shall mean (a) any "hazardous waste" as
defined by the Resource Conservation and Recovery Act of 1976 (42 U.S.C.
Section 6901 et seq.), as amended from time to time, and regulations
promulgated thereunder; (b) any "hazardous substance" as defined by the
Comprehensive Environmental Response, Compensation and Liability Act of
1980 (42 U.S.C. Section 9601 et seq.) ("CERCLA"), as amended from time
to time, and regulations promulgated thereunder; (c) asbestos; (d)
polychlorinated biphenyls; (e) any substance the presence of which on
the Land is prohibited by any Legal Requirements; (f) any petroleum-based
products; (g) underground storage tanks for storing any material in
subparagraphs (a) - (f); and (g) any other substance which by any Legal
Requirements requires special handling of any federal, state or local
governmental entity in its collection, storage, treatment, or disposal.
(ii) "Hazardous Materials Contamination" shall mean the
contamination (whether presently existing or hereafter occurring) of the
Improvements, facilities, soil, groundwater, air or other elements on or
of the Land by Hazardous Materials, or the contamination of the
buildings, facilities, soil, groundwater, air or other elements on or of
any other property as a result of Hazardous Materials at any time
(whether before or after the date of this Agreement) emanating from the
Land.
(iii) "Unauthorized" shall mean not in compliance with all Legal
Requirements.
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(b) Grantor hereby represents and warrants that, to Grantor's knowledge,
no Unauthorized Hazardous Materials are now located on the Land and that Grantor
has never caused or permitted any Hazardous Materials to be disposed of on,
under or at the Land or any part thereof or ever caused or permitted any
Hazardous Materials to be placed, held, or located on the Land in an
Unauthorized manner. Grantor hereby represents and warrants that, to Grantor's
knowledge, no other person has ever caused or permitted any Hazardous Materials
to be placed, held, located or disposed of on, under or at the Land or any part
thereof except as follows:
Based upon a site assessment of the surface conducted by a reputable
environmental engineering consulting company, a portion of the surface of
the Land was found to have Hazardous Materials Contamination thereon.
Such Hazardous Materials Contamination was minor and was subsequently
properly and completely removed prior to construction of the
Improvements. To Grantor's knowledge, the Land is no longer subject
to Hazardous Materials Contamination.
To Grantor's knowledge, no part of the Land is being used for the disposal of
Hazardous Materials, and no part of the Land is affected by any Hazardous
Materials Contamination. To Grantor's knowledge, although the property adjoining
the Land may have been used for the processing, manufacturing or other handling
of Hazardous Materials, Grantor does not have any specific knowledge regarding
the conditions on such properties, except as follows:
Based upon a review of Texas Water Commission records, certain activities
by Ground Lessor, and its predecessor Cosden Oil and Chemical Company,
has caused groundwater contamination underneath the refinery adjacent to
the Land. Such groundwater contamination has apparently resulted from
surface impoundments and landfills located on the refinery site. A copy
of a letter from the attorney for Cosden Oil and Chemical Company to
the Texas Department of Water Resources dated April 23, 1985, summarizes
the position of Cosden Oil and Chemical Company with regard to such
matters. An engineering report entitled "Fina Oil and Chemical Company,
Big Spring Facility Proposal to Assess Ground-Water Quality Along Down-
gradient Property Boundary" dated April, 1988 and a Compliance Plan
between Fina and the Texas Water Commission was issued and was filed
with the Texas Water Commission. Based upon a
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review of such documents and other documents in the Texas Water
commission files, it appears that any groundwater contamination on the
refinery site is migrating to the South and East rather than the West
where the Land is located and any Hazardous Materials Contamination is
being removed by Fina pursuant to the Compliance Plan. Accordingly,
Grantor has a reasonable basis to believe that the groundwater under the
Land is not contaminated.
Since Grantor is solely a lessee of the surface and Ground Lessor remains
the fee simple owner of the Land, no environmental assessment of the
groundwater underneath the Improvements was conducted, especially since
Texas Water Commission records indicate that any nearby groundwater
contamination would migrate away from rather than toward the Land.
The enforcement action against Ground Lessor also resulted in the
establishment of a baseline which clearly establishes Ground Lessor as
the responsible party with respect to any groundwater contamination in
the event that there is any migration of contaminated groundwater under
the Land.
To Grantor's knowledge, no investigation, administrative order, consent order
and agreement, litigation or settlement with respect to Hazardous Materials or
Hazardous Materials Contamination is proposed, threatened, anticipated or in
existence with respect to the Land. To Grantor's knowledge, the Land is not
currently on, and to Grantor's knowledge, after diligent investigation and
inquiry, has never been on, any federal or state "Superfund" or "Superlien"
list.
(c) The representations and warranties of Borrower contained in this
Section 3.15 are made only as of the date of this Agreement.
ARTICLE 4 - COVENANTS AND AGREEMENTS OF BORROWER
Borrower hereby covenants and agrees that from the date of the First
Advance until all amounts payable or outstanding hereunder or under any of the
other Loan Instruments are paid in full, Borrower shall faithfully observe and
fulfill, and shall cause to be fulfilled and observed each and all of the
following covenants:
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4.1 Project Control Account.
(a) All Gross Revenues shall be deposited by Borrower in a special
depository account (the "Project Control Account") maintained by Borrower with
Credit Suisse, 100 Wall Street, New York, New York 10005 (Account No.
199605-02), and titled appropriately so as to identify the nature of such
account. Borrower has irrevocably instructed all parties paying Gross Revenues
to Borrower, and shall so instruct all other parties at any time paying Gross
Revenues to Borrower, to make such payments into the Project Control Account,
and all such parties have agreed to make all such payments into the Project
Control Account. The monies in the Project Control Account shall be invested in
Permitted Investments, selected by Borrower considering the timing of projected
withdrawals from such account.
(b) All monies while in the Project Control Account are hereby
irrevocably pledged by Borrower to Agent for the benefit of the Term Lenders.
Borrower hereby irrevocably authorizes Agent to make withdrawals from the
Project Control Account pursuant to the terms of this Agreement.
(c) From and after the date of the First Advance, Agent shall, on each
Term Loan Repayment Date, withdraw from the Project Control Account and pay to
the Letter of Credit Bank the LOC Fronting Fee.
(d) From and after the date of the First Advance, Agent shall, after
making the withdrawal specified in subpart (c) above, withdraw from the Project
Control Account on each anniversary of this Agreement and pay to the Agent the
Agency Fee.
(e) From and after the date of the First Advance, Agent shall, on the
last day of each month, after making the withdrawals specified in subpart (d)
above, or as requested by Borrower and reasonably agreed to by Agent, withdraw
from the Project Control Account, and transfer into a Special Operating Account
maintained by Borrower with the Agent (Account No. 19960503) (the "Special
Operating Account") or into any other account designated by Borrower, an amount
equal to the following month's Projected Operating Costs, determined by
reference to the Operating Budget; provided, however, that by written request
received by the Agent at least five (5) Banking Days prior to such date, the
Borrower may increase the amount set out in the Operating Budget for such
Projected Operating Costs by up to fifteen percent (15%) of the Operating
Budget, less any portion of such fifteen percent (15%) amount previously so
deposited, plus the amount of any non-discretionary payments.
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(f) From and after the date of the First Advance, Agent shall on the last
day of each month, after making the withdrawals specified in subpart (e) above,
withdraw from the Project Control Account, and transfer into a Maintenance
Reserve Account maintained by Borrower with the Agent (Account No. 19960504)
(the "Maintenance Reserve Account"), any deposits due and payable on such date.
(g) From and after the date of the First Advance, Agent shall, after
making the withdrawals specified in subpart (f) above, withdraw from the Project
Control Account on each Term Loan Repayment Date, and apply in accordance with
the terms of this Agreement and in the following order, the Debt Service due and
payable on such date, and, in the following order, any deposits to the
Additional Collateral Account and the Debt Protection Account due and payable on
such date; provided, however, that if any Letters of Credit issued pursuant to
Section 2.13 hereof are outstanding on such Term Loan Repayment Date, the Agent
shall provide for a retainage in the Project Control Account on such Term Loan
Repayment Date of an amount determined by the Agent to be equal to the LOC Fees
accrued as of such date on the borrowing supported by such Letters of Credit.
(h) On the date of the First Advance and on each Term Loan Repayment Date
thereafter, Agent shall, after making the withdrawals in the order specified
above and allocating a working capital balance of at least Seven Hundred Fifty
Thousand dollars ($750,000) or such other amount as mutually agreed by Borrower
and the Term Lenders, transfer as Borrower shall direct all monies in excess of
such allocated amount remaining in the Project Control Account on such date.
(i) From and after the date of the First Advance, Agent shall withdraw
from the Project Control Account on any Interest Payment Date which is not a
Term Loan Repayment Date, and apply in accordance with the terms of this
Agreement, the Debt Service due and payable on such date, and on any other
appropriate date as required, the amount described in Section 2.13(f)(iii).
(j) Borrower shall draw checks against the Special Operating Account only
for payment of Operating Costs in accordance with the Operating Budget and for
payment of Operator payments; provided, however, that Borrower shall be
permitted to increase the amount set out in the Operating Budget for such
Operating Costs by up to fifteen percent (15%) of the Operating Budget, less any
portion of such fifteen percent (15%) amount previously added, plus the amount
of any non-discretionary payments, without the prior written approval of the
Agent and Independent Engineer. All monies at any time in the Special Operating
Account are hereby irrevocably pledged by Borrower for the benefit of the Term
Lenders as additional security to secure the prompt payment to the Term Lenders
of
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all the Borrower's liabilities to the Term Lenders, and to secure the
performance by Borrower of its obligations to them hereunder and under the other
Loan Instruments. Borrower hereby irrevocably constitutes and appoints Agent as
Borrower's attorney-in-fact, in Borrower's name or in Agent's name, to make
withdrawals from the Special Operating Account upon the occurrence of an Event
of Default in accordance with the provisions of this Agreement. Prior to an
Event of Default, Borrower shall have the right to exercise all its rights
with respect to the Special Operating Account, provided that Borrower shall not
take any action or suffer to be done any act which would impair the security
constituted by this assignment and pledge. Borrower hereby agrees to provide
Agent with the authorization necessary to obtain monthly and other periodic
advises of debits and credits to the Special Operating Account.
(k) At any time when an Event of Default shall have occurred and is
continuing, and the applicable grace period, if any, shall have expired, Agent
may apply any monies in the Project Control Account and any monies in the
Special Operating Account to the payment of Borrower's obligations to the Term
Lenders and Agent in such order of application as the Agent may determine in its
sole discretion. Borrower shall provide Agent with the authorization necessary
to effectuate such transactions. Prompt notification shall be provided by Agent
to Borrower of the exercise of any such rights.
4.2 Debt Service Coverage Ratio.
(a) Borrower shall deliver to Agent on each Calculation Date the Debt
Service Coverage Ratio calculated for the six (6) month period terminating on
the last day of the third month immediately preceding such Calculation Date (the
"Calculation Period"); provided, however, that for purposes of the first
Calculation Date, the Calculation Period shall be the period commencing on the
date hereof and terminating on the last day of the third month immediately
preceding such first Calculation Date; and provided further, that Borrower shall
deliver to Agent all information upon which each such calculation is based five
(5) Banking Days prior to such Calculation Date.
(b) If the Debt Service Coverage Ratio calculated on any Calculation
Date is less than one and one-fifth (1.20), then on such Calculation Date a
percentage of the Discretionary Cash Flow for the three month period ending on
such Calculation Date (the "Deposit Amount") shall be withdrawn from the Project
Control Account and deposited by the Agent, in accordance with Section 4.1
hereof, into the Additional Collateral Account maintained by Borrower at the
Agent (Account No. 19960505). Monies in the Additional Collateral Account may be
invested in
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Permitted Investments. So long as no Event of Default has occurred and is
continuing, if the Debt Service Coverage Ratio calculated on the next succeeding
Calculation Date is one and one-fifth (1.20) or greater, then (i) all funds in
the Additional Collateral Account shall be released to Borrower, or to such
other person as the Agent shall be legally required to make such delivery and
(ii) the full amount of Borrower's Discretionary Cash Flow shall be released to
Borrower or as otherwise provided elsewhere in this Agreement, until such time
as a calculation required hereunder yields a Debt Service Coverage Ratio of less
than one and one-fifth (1.20), in which event the mandatory allocation
provisions of this Section 4.2 shall apply. For purposes of this Section 4.2,
the Deposit Amount shall be determined in accordance with the formula set forth
in Exhibit L hereof.
(c) If each Debt Service Coverage Ratio calculated on any two consecutive
Calculation Dates is less than one and one- fifth (1.20), then all funds in the
Additional Collateral Account shall be retained and the required Deposit Amount
shall continue to be deposited by Agent into such account until: (i) such time
as the Debt Service Coverage Ratio, calculated taking into account the amounts
deposited in the Additional Collateral Account, on any three consecutive
Calculation Dates is one and one-fifth (1.20) or greater, at which time all
amounts in excess of those required to meet the one and one-fifth Debt Service
Coverage Ratio shall be released to Borrower or as may be otherwise provided
elsewhere in this Agreement; or (ii) upon the direction of Borrower, applied pro
rata against remaining principal payments to minimize, to the extent reasonably
practicable, any increased costs to the Agent as described in Section 2.7
hereof.
So long as no Event of Default has occurred and is continuing, if the
Debt Service Coverage Ratio, calculated excluding the amounts deposited in the
Additional Collateral Account, on any three consecutive Calculation Dates is one
and one-fifth (1.20) or greater, all amounts in such account shall be released
to Borrower on the third such date. For purposes of this Section 4.2(c), the
amount of the outstanding balance of the Additional Collateral Account on a
Calculation Date shall be divided by the number of remaining Term Loan Repayment
Dates; the resulting dollar amount shall be credited against the Scheduled
Payment plus interest and/or LOC Fees due and payable on the Term Loan Repayment
Dates commencing six months prior to such Calculation Date in order to determine
the Debt Service which shall be the denominator for the calculation of the Debt
Service Coverage Ratio.
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(d) All monies while in the Additional Collateral Account are hereby
irrevocably pledged by Borrower to Agent for the benefit of the Term Lenders.
Borrower hereby irrevocably authorizes Agent, in Borrower's name or in Agent's
name, to make withdrawals from the Additional Collateral Account pursuant to the
terms of this Agreement.
(e) At any time when an Event of Default shall have occurred and is
continuing, and the applicable grace period, if any shall have expired, Agent
may apply any monies in the Additional Collateral Account to the payment of
Borrower's obligations to the Term Lenders and Agent in such order of
application as the Agent may determine in its sole discretion. Borrower shall
provided Agent with the authorization necessary to effectuate such transactions.
Prompt notification shall be provided by Agent to Borrower of the exercise of
any such rights.
4.3 Debt Protection Account.
(a) Prior to the date hereof, Borrower shall open, and shall thereafter
maintain in accordance with the provisions hereof, an account with KOP, 575
Fifth Avenue, New York, New York 10017 (Account No. 52805230) (the "Debt
Protection Account"). Monies in the Debt Protection Account may be invested in
Permitted Investments by Borrower. On or before the date hereof, Borrower shall
deposit into the Debt Protection Account an amount equal to One Million dollars
($1,000,000).
(b) On or prior to the day which is five (5) Banking Days prior to each
Term Loan Repayment Date, Agent shall advise Borrower of the Projected Debt
Service for the three (3) month period commencing on such Term Loan Repayment
Date; such amount, for each such period, is referred to herein as the "Debt
Protection Amount".
(c) If the Debt Protection Account does not contain the Debt Protection
Amount, Agent shall withdraw from the Project Control Account and deposit into
the Debt Protection Account on each Term Loan Repayment Date, in accordance with
Section 4.1 hereof, up to fifty percent (50%) of the Discretionary Cash Flow of
the quarter ending on such Term Loan Repayment Date, until the Debt Protection
Account contains the Debt Protection Amount; provided, however, that if Agent
withdraws any money from the Debt Protection Account to pay Debt Service,
Operating Costs or any other reasonable expense in connection with the Property
or the Facility, Borrower shall thereafter deposit into the Debt Protection
Account, on each Term Loan Repayment Date, eighty percent (80%) of the
Discretionary Cash Flow of the quarter ending on such Term Loan
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Repayment Date, until an amount has been deposited in the Debt Protection
Account which, together with interest earned on the amount remaining in the Debt
Protection Account, is equal to the withdrawn monies; and thereafter deposit
into the Debt Protection Account on each Term Loan Repayment Date up to fifty
percent (50%) of the Discretionary Cash Flow of the quarter ending on such Term
Loan Repayment Date until the Debt Protection Account contains the full Debt
Protection Amount; provided further, that if any calculation of the Debt Service
Coverage Ratio, as calculated pursuant to Section 4.2 hereof, is below one and
one-fifth (1.20), Borrower's Discretionary Cash Flow shall be utilized as
provided in such Section 4.2 prior to making the withdrawals and transfers
required hereunder.
(d) The monies constituting the Debt Protection Account shall be held by
the Agent until applied by Agent to the payment of Borrower's obligations to
Agent and the Term Lenders under this Agreement. Borrower hereby irrevocably
authorizes Agent, in Borrower's name or in Agent's name, to make withdrawals
from the Debt Protection Account pursuant to the terms of this Agreement. If
Agent determines that the Project Control Account does not contain sufficient
funds to make the payments required hereunder, Agent shall withdraw funds from
the Debt Protection Account to cover such shortfall.
(e) Borrower hereby pledges to Agent and the Term Lenders and grants to
them a security interest in all monies at any time constituting the Debt
Protection Account (including the interest paid on such amount) for the purpose
of securing all of Borrower's obligations to them under this Agreement and under
the other Loan Instruments.
(f) At any time when an Event of Default shall have occurred and is
continuing, and the applicable grace period, if any shall have expired, Agent
may apply any monies in the Debt Protection Account to the payment of Borrower's
obligations to the Term Lenders and Agent in such order of application as the
Agent may determine in its sole discretion. Borrower shall provided by Agent
with the authorization necessary to effectuate such transactions. Prompt
notification shall be provided by Agent to Borrower of the exercise of any such
rights.
(g) If on any Term Loan Repayment Date the Debt Protection Account
(including accrued interest) contains more than the then required Debt
Protection Amount, the Agent shall transfer such excess to the Project Control
Account. Upon payment in full of all obligations of Borrower to Agent and the
Term Lenders under this Agreement and the other Loan Instruments, the monies
constituting the Debt Protection Account, together with the interest paid
thereon, if any, will
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be released to Borrower, or to such other person as the Agent shall be legally
required to make such delivery.
(h) So long as no Event of Default (or event that with the passage of
time, the giving of notice or both, would constitute an Event of Default) has
occurred and is continuing, Agent shall, within five (5) Banking Days after the
written request of Borrower, transfer all or a requested portion of the funds in
the Debt Protection Account to any account requested by Borrower if all of the
following conditions are met:
(i) Agent is provided with a letter of credit (the "L/C") from a
financial institution acceptable to Agent naming Agent and Term Lenders as
beneficiaries and a party other than Borrower as account party;
(ii) The amount of the L/C shall be in the full amount of the funds
requested to be transferred from the Debt Protection Account; and
(iii) The L/C is in a form and substance acceptable to Agent.
Agent may draw upon the L/C (i) at any time Agent determines in its sole
discretion that funds should be applied from the Debt Protection Account (and
there is no balance in such account), (ii) upon the occurrence of an Event of
Default (if a payment Event of Default, Agent shall draw upon the L/C) or (iii)
the day prior to the date upon which the L/C will expire. Funds drawn under
the L/C shall be transferred to the Debt Protection Account; provided, however,
that if funds are drawn under the L/C pursuant to (ii) above, then Agent may
apply such funds as Agent would have applied funds from the Debt Protection
Account. Under no circumstances shall Borrower be obligated for any
reimbursement obligation with respect to the L/C, whether to the financial
institution issuing the L/C, the account party under the L/C or otherwise.
(i) So long as no Event of Default (or event that with the passage
of time, the giving of notice or both, would constitute an Event of Default) has
occurred and is continuing, Agent may, in its sole and absolute discretion,
transfer, within ten (10) days after the written request of Borrower, all or a
requested portion of the funds in the Debt Protection Account to any account
requested by Borrower if (i) Agent is provided with an irrevocable,
unconditional guaranty executed by FSOC (the "FSOC Guaranty") in form and
substance acceptable to Agent guaranteeing the availability of the monies which
would have otherwise been available in the Debt Protection Account, and (ii) the
amount of the FSOC Guaranty is in the full amount of the funds transferred from
the Debt Protection Account.
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The Agent may draw upon the FSOC Guaranty (i) at any time Agent
determines in its sole discretion that funds should be applied from the Debt
Protection Account, or (ii) upon the occurrence of an Event of Default. Funds
paid to Agent pursuant to the FSOC Guaranty shall be transferred to the Debt
Protection Account; provided, however, that if funds are drawn on the FSOC
Guaranty pursuant to (ii) above, then Agent shall apply such funds as Agent
would have applied any funds from the Debt Protection Account. Under no
circumstances shall the Borrower be obligated for any reimbursement obligation
to FSOC or any other party with respect to the FSOC Guaranty.
4.4 Maintenance Reserve Account.
(a) Prior to the date hereof, Borrower shall open, and shall thereafter
maintain in accordance with the provisions hereof, an account with the Agent for
the purposes of providing for periodic overhaul, repairs and spare parts, in
accordance with the provisions of the Operating Budget governing long-term
maintenance of the Facility (the "Maintenance Reserve Account"). Monies in the
Maintenance Reserve Account may be invested in Permitted Investments by
Borrower.
(b) The Agent shall deposit and apply funds in the Maintenance Reserve
Account in accordance with this provision. When requested by Borrower, amounts
may be withdrawn from the Maintenance Reserve Account for budgeted and
non-discretionary payments and deposited in the Special Operating Account. So
long as the Maintenance Reserve Account does not contain the "Required
Maintenance Amount" set forth on the schedule for such deposits attached hereto
as Exhibit M, as the same may be amended from time to time by the Borrower with
the consent of the Agent and the Independent Engineer, the Agent shall withdraw
from the Project Control Account and deposit into the Maintenance Reserve
Account on each Term Loan Repayment Date, in accordance with Section 4.1 hereof,
the amount set forth on such schedule for each deposit to such account, until
the Maintenance Reserve Account contains the Required Maintenance Amount;
provided, however, that if Agent withdraws any money from the Maintenance
Reserve Account to pay Operating Costs or any other reasonable expense in
connection with the Property or the Facility, Agent shall thereafter deposit
into the Maintenance Reserve Account, on each Term Loan Repayment Date, amounts
in accordance with the schedule until an amount equal to the Required
Maintenance Amount is on deposit in the Maintenance Reserve Account.
(c) Borrower hereby irrevocably authorizes Agent, in Borrower's name or
in Agent's name, to make withdrawals from the Maintenance Reserve Account
pursuant to the terms of this Agreement. If Agent determines that the Project
Control
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Account does not contain sufficient funds to make the payments required
hereunder, Agent may withdraw funds from the Maintenance Reserve Account to
cover such shortfall.
(d) Borrower hereby pledges to Agent and the Term Lenders and grants to
them a security interest in all monies at any time constituting the Maintenance
Reserve Account (including the interest paid on such amount) for the purpose of
securing all of Borrower's obligations to them under this Agreement and under
the- other Loan Instruments.
(e) At any time when an Event of Default shall have occurred and is
continuing, and the applicable grace period, if any shall have expired, Agent
may apply any monies in the Maintenance Reserve Account to the payment of
Borrower's obligations to the Term Lenders and Agent in such order of
application as the Agent may determine in its sole discretion. Borrower shall
provided Agent with the authorization necessary to effectuate such transactions.
Prompt notification shall be provided by Agent to Borrower of the exercise of
any such rights.
(f) Upon payment in full of all obligations of Borrower to Agent and the
Term Lenders under this Agreement and the other Loan Instruments, the monies
constituting the Maintenance Reserve Account, together with the interest paid
thereon, if any, will be released to Borrower, or to such other person as the
Agent shall be legally required to make such delivery.
4.5 Replacement of Components.
Borrower, at its sole cost and expense, shall, with reasonable
promptness, replace all necessary and advisable components of the Facility that
may from time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use for any
reason whatsoever, to the extent that replacement of such components is not the
responsibility of Contractor or Operator under the Turnkey Contract or O&M
Contract, respectively (such replacements by Borrower being referred to herein
as "Replacement Components"). Except as otherwise permitted herein, all
Replacement Components shall be free and clear of all liens and rights of others
and shall be in as good operating condition as, and shall have a productive
capacity, value, utility and remaining useful life at least equal to, the
components replaced and shall be in the condition and repair required to be
maintained by the terms hereof.
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4.6 Required Alterations.
Borrower, at its sole cost and expense, shall make such alterations to
the Facility and the Property as may be required from time to time, subject to
the reasonable review and approval of Agent or Independent Engineer, to meet the
requirements of any Governmental Requirements ("Required Alterations"). Borrower
shall install any Required Alterations promptly; provided, however, that
Borrower may at its sole cost and expense contest the applicability of any
Governmental Requirements as may entail the installation of any Required
Alterations, if and so long as adequate reserves are maintained in accordance
with applicable accounting principles with respect to such Required Alterations,
and if in Agent's and Independent Engineer's reasonable opinion failure to make
such Required Alteration does not impair the productive capacity, value, utility
or remaining useful life of the Facility. Subject to the foregoing, all such
alterations shall comply with all Governmental Requirements, unless such
non-compliance would not impair (i) the ability of the Borrower to meet its
obligations under this Agreement or (ii) any of the security interests granted
to the Term Lenders under any of the Security Documents.
4.7 Operating Logs.
Borrower shall, at its sole cost and expense, (i) maintain at the
Property daily operating logs showing, among other things, the electrical and
useful steam output of the Facility, (ii) keep maintenance and repair reports in
sufficient detail to indicate the nature and date of all work done, (iii)
maintain a current operating manual and a complete set of plans, accounting
records, and specifications reflecting all alterations and (iv) maintain all
other records, logs, and other materials required by the O&M Contract or any
Governmental Requirements.
4.8 Resist Regulatory Change.
If any Governmental Authority shall issue any order, judgment, regulation
or decision the effect of which is to rescind, terminate, repeal, invalidate,
suspend, enjoin, amend or modify the TUEC Agreement, the Steam Agreement or any
part thereof, then Borrower shall so notify Agent and if, as a result of such
regulatory change, there shall exist in the opinion of Agent a reasonable
possibility that such regulatory change will have a material and adverse effect
on any of the Loan Instruments, Project Documents or the operations or economics
of the Facility, Agent shall give Borrower notice thereof and Borrower shall
diligently and in a timely fashion (i) make all filings, (ii) pursue all
remedies and appeals, and
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(iii) take such other lawful action, in each case as shall be necessary or, in
the reasonable opinion of Agent after such notice, desirable to prevent such
regulatory change from becoming final and nonappealable or otherwise
irrevocable, to postpone the effectiveness of such regulatory change and to
cause such regulatory change to be revoked or amended or modified so as to
eliminate the reasonable possibility of such material adverse effect.
4.9 Information.
Borrower will deliver to Agent the following information:
(a) as soon as available after a best efforts attempt by Borrower to
obtain such information, a balance sheet of Borrower, TUEC, Fina, Operator and
FSGC, as of the end of such fiscal year, the related statements of income,
equity and changes in financial position for such fiscal year and related
consolidated statements, if any, setting forth in each case in comparative form
the figures for the previous fiscal year, the foregoing financial statements to
be consolidated, if such party has subsidiaries, to be prepared in accordance
with generally accepted accounting principles in the country of such party's
principal place of business, consistently applied, and to be audited by, and to
carry the unqualified report (or qualified report reasonably acceptable to the
Agent) of independent public accountants of nationally recognized standing;
(b) as soon as available after a best efforts attempt by Borrower to
obtain such information, a balance sheet of Borrower, TUEC, Fina, Operator and
FSGC, consolidated, if such party has subsidiaries, as of the end of the first
three quarters of each fiscal year of each such party, the related statements of
income and changes in financial position for such quarter and for the portion of
such party's fiscal year ended at the end of such quarter and the related
consolidated statements, if any, setting forth in each case in comparative form
the figures for the corresponding portion of such party's previous fiscal year,
all certified (subject to normal year-end adjustments) as to fairness of
presentation, generally accepted accounting principles in the country of such
party's principal place of business and consistency by the chief financial
officer, treasurer or chief accounting officer of such party;
(c) simultaneously with the delivery of each set of financial statements
of Borrower referred to in paragraphs (a) and (b) above, a certificate of the
chief financial officer, treasurer or chief accounting officer of Borrower
stating that, to the best of such officer's knowledge, no Default or Event of
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Default exists on the date of such certificate, or if any Default or Event of
Default has occurred, setting forth the details thereof and the action which
Borrower is taking or proposes to take with respect thereto;
(d) forthwith upon the occurrence of any Default or Event of Default
reasonably known to Borrower, a certificate of the chief financial officer,
treasurer or chief accounting officer of Borrower setting forth the details
thereof and the action which Borrower is taking or proposes to take with respect
thereto;
(e) promptly, upon notice from TUEC, Fina, FSGC or Operator, as the case
may be, of any development in such party's affairs, financial or otherwise,
which may, in the reasonable judgment of such party, have a material adverse
effect on the business, properties, condition (financial or otherwise) or
operations, present or prospective, of such party, a copy of such notice (or if
oral, a written summary thereof) for delivery to the Agent on the same or on the
next Banking Day;
(f) forthwith upon the filing by Borrower, and/or promptly upon receipt
by Borrower of knowledge of the filing by TUEC, Fina or FSOC of any information
or report with any Governmental Authority regarding the Facility, the Property,
any of the Loan Instruments or Project Documents, or any of such party's
obligations thereunder or regarding any material adverse change in the condition
("financial or otherwise) of such party, a copy of such information or report as
may be reasonably obtainable by Borrower;
(g) not less than forty-five (45) days prior to the commencement of each
Operating Year, as defined in the O&M Contract, the Operating Budget proposed by
Borrower for such Operating Year with a copy to the Independent Engineer; and
(h) within a reasonable time after request therefor, such additional
information regarding the business, properties, condition (financial or
otherwise) and operations, present or prospective, of Borrower, TUEC, Fina, FSGC
or Operator, as Agent may reasonably request and as may be reasonably obtainable
by Borrower.
4.10 Liens.
Other than as provided in this Agreement and in the Project Documents and
other Loan Instruments, Borrower shall not create, assume or suffer to exist any
lien on any asset now owned or hereafter acquired by it except (i) liens which,
when aggregated with all Debt incurred in accordance with Section
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4.17 and all voluntarily-incurred contingent liabilities not incurred in the
ordinary course of business (and excluding all contractual obligations incurred
in accordance with Section 4.18), do not exceed Five Hundred Thousand dollars
($500,000) in the aggregate at any one time outstanding, (ii) liens approved in
advance by the Agent, such approval not to be unreasonably withheld or (iii) the
following liens (collectively, the "Permitted Liens"):
(a) liens for current taxes, assessments and governmental charges which
are not delinquent and remain payable without penalty or are being contested in
good faith by appropriate proceedings and for which adequate reserves, bonds or
other security reasonably satisfactory to Agent has been provided;
(b) purchase money security interests in real or personal property when
the obligation secured is incurred for the purchase of such property and does
not exceed one hundred percent (100%) of the lesser of cost or fair market value
thereof at the time of acquisition, and the security interest does not extend
beyond the property involved;
(c) mechanics', materialmen's and similar liens which do not individually
or in the aggregate materially interfere with the conduct of Borrower's business
or which are contested in good faith by Borrower in appropriate proceedings and
for which adequate reserves, bonds or security reasonably satisfactory to Agent
has been provided; and
(d) deposits or pledges to secure statutory obligations, or appeals;
release of attachment, 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 its business.
4.11 Maintenance of Records; Inspection.
(a) At all times Borrower shall maintain financial records in accordance
with generally accepted United States accounting principles consistently applied
(except as disclosed therein) with those reflected in the Financial Statements
referred to in Section 4.9 hereof and, at all reasonable times during normal
business hours and as often as the Independent Engineer or Agent may reasonably
request, permit any authorized representative designated by the Independent
Engineer or Agent to visit and inspect the Property and the Facility, including
Borrower's books, and to make extracts from such books and to discuss Borrower's
affairs, finances and accounts with its officers and, upon reasonable notice and
in the presence of an
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officer of other authorized representative of the Borrower, its independent
certified public accountants or other parties preparing statements for or on
behalf of Borrower.
(b) At Agent's request, Borrower shall permit the Independent Engineer to
conduct an annual audit and review of the operation and maintenance of the
Facility. Borrower agrees that the audit and review shall include all fuel
requirements and gas supply arrangements relating to the Facility. Borrower
agrees to pay all reasonable costs of Agent and Independent Engineer incurred as
a result of such annual audits and reviews.
4.12 Consolidations, Mergers, Sales of Assets; Permitted Activities.
(a) Borrower shall not dissolve, consolidate or merge with or into any
other person, materially amend its charter or bylaws, sell, lease or otherwise
transfer all or substantially all of its assets to any other person or form any
subsidiary without the prior consent of the Agent. Borrower shall permit the
transfer (by assignment, sale or otherwise) of any shares only upon prior notice
to the Agent and upon prior approval by the Agent of all transferees (such
approval not to be unreasonably withheld); provided, however, that Borrower
shall not permit any such transfer if such transfer would violate any Law
concerning the transfer of securities; provided further, that prior to such
transfer Borrower shall deliver to Agent an opinion of counsel satisfactory to
Agent to the effect that such shares are exempt from registration under all Laws
applicable to such transfer or that such shares have been registered in
compliance with such Laws; and provided further, that FSOC shall agree to
indemnify the Term Lenders from any loss or liability incurred by Borrower or
Term Lenders in connection with any violation of such Laws caused by such
transfer. FSOC shall retain majority ownership of and controlling interest in
the Borrower. Borrower shall not issue any new shares or warrants unless the
Agent has provided its approval of the purchaser or other holder (which approval
shall not be unreasonably withheld) and FSOC retains majority ownership of and a
controlling interest in the Borrower.
(b) Borrower shall not change its chief executive office nor adopt or
change any trade name or fictitious business name without ninety (90) days'
written notice to Agent. Borrower shall execute and deliver to Agent any
additional documents or certificates necessary or advisable to reflect any
permitted adoption of or change in principal place of business, trade name or
fictitious business name.
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4.13 Insurance.
(a) Borrower shall maintain or cause to be maintained the required
Insurance Policies. At Agent's request, Borrower shall cause Agent to be named
as an additional insured or, if applicable, a lenders' loss payable (provided,
however, that Agent shall be named as beneficiary of the worker's compensation
policy), for the account of the Term Lenders, as their interest may appear,
under said policies. Such insurance policies shall provide for at least thirty
(30) days' written notice to Agent of cancellation, reduction in amount or
material change in coverage. Evidence of payment of premiums for such policies
shall be delivered to Agent at least thirty (30) days prior to the expiration
thereof.
(b) In the event of a casualty loss affecting the Facility or a
condemnation of the Facility or the Property, if the restoration of the Facility
or Property is feasible, in the reasonable opinion of the Independent Engineer,
after deducting from any such insurance or condemnation proceeds (the
"Proceeds") the reasonable expenses incurred by Agent in collecting and
disbursing such Proceeds or otherwise in connection therewith, the Proceeds
shall be released to Borrower from time to time in installments sufficient to
pay for restoration as it progresses upon the following conditions:
i. All payments required to be made hereunder in connection
with the Term Loan continue to be made by Borrower in a timely manner.
ii. Agent, prior to the initial release of Proceeds, receives
evidence satisfactory to it that:
a. The Proceeds are sufficient to complete the restoration of
the Facility or the Property to the condition that existed
immediately prior to the casualty, or Borrower deposits with
Agent the amount of any deficiency or otherwise insures, in
a manner reasonably acceptable to Agent, that such
deficiency will be deposited in a timely manner;
b. The value of the Property or the Facility after restoration
will not be materially less than the value of the Property
immediately prior to the casualty; and
c. A restoration budget and work plan satisfactory in the
reasonable judgment of the Agent has been prepared for the
complete restoration of the Facility and/or the Property.
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iii. Agent for all releases of Proceeds in addition to those
required by sections (ii) and (iv) of this Section 4.13 receives:
a. A certificate (the "Certificate") of Borrower approved by
Agent dated not more than ten days prior to the application
for such release, certifying that:
1. The sum then requested to be released either has been
paid by Borrower and/or is justly due to contractors,
subcontractors, materialmen, engineers, architects, or
other persons (whose names and addresses shall be
stated) who have rendered services or furnished
materials in connection with the approved restoration
budget and work plan, and stating the progress of the
work up to the date of the Certificate;
2. The sum then requested to be released, plus all sums
previously withdrawn, does not exceed the cost of the
work insofar as actually accomplished up to the date of
the Certificate, and that the remainder of the funds
then held by Agent will be sufficient to pay in full
for the completion of the work or Borrower deposits
with Agent the amount of such deficiency or otherwise
insures the availability of the deficient amount as
aforesaid;
3. No part of the cost of the services and materials
described in subsection 1 of this subsection has been
or is being made the basis for the release of any part
of the funds in any previous or then pending
application; and
4. All materials and all property described in the
Certificate are free and clear of all mortgages, liens,
charges, or encumbrances, except those securing
indebtedness due to persons (whose names and addresses
and the several amounts due them shall be stated)
specified in such certificate, which encumbrances will
be discharged upon payment of such indebtedness,
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except for the liens and security interest created in
the Security Documents or except for mechanic's liens
reserved or bonded;
5. There is no outstanding indebtedness known, after due
inquiry, which is then due and payable for work, labor,
services or materials in connection with the work which
if unpaid, might become the basis of a vendors,
mechanic's, laborer's, or materialman's statutory or
other similar lien upon the Facility, the Property or
any part thereof unless such indebtedness is reserved
for;
b. Borrower fulfills such additional conditions as Agent may
reasonably impose to provide assurance that the Proceeds
will be used to restore the Facility or the Property to the
same condition as existed prior to the damage, including,
without limitation, Agent's prior approval of plans and
specifications for restoration, construction contracts for
such restoration and Agent's requirements concerning
periodic inspections of such restoration work as it
progresses.
C. If Agent receives an application by the fifth (5th) day of
the month, the release of Proceeds shall be made on the last
day of such month.
iv. Agent receives, prior to the final release (in addition to
that which is required by section iii of this Section 4.13):
a. Evidence satisfactory to Agent that the restoration has been
completed and the Facility and the Property conform to all
applicable Governmental Requirements, unless such non-
conformity would not impair the ability of the Borrower to
meet its obligations under this Agreement or any of the
security interests granted to the Term Lenders under any of
the Security Documents; and
b. A certification by the Independent Engineer that the
restoration is complete to its reasonable satisfaction.
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V. If the amount of Proceeds exceeds the amount necessary to
effect restoration and reimburse Agent for its expenses, then such excess
shall be paid over to Borrower after such restoration is completed as
follows:
a. Upon compliance with the foregoing provisions, Agent shall
at Borrower's request, pay out of the funds held by it, to
the persons named in the Certificate, the amounts stated in
such Certificate to be due to them and/or shall pay to
Borrower the amount stated in said Certificate to have been
paid by Borrower.
b. All business interruption insurance proceeds, to the extent
paid, shall be jointly payable to Borrower and Agent and
shall be deposited in the Project Control Account.
4.14 Taxes.
Borrower shall pay and discharge all taxes, assessments and governmental
charges upon it, its income and its properties prior to the date on which
penalties are attached thereto, unless and to the extent only that (i) such
taxes, assessments and governmental charges shall be contested in good faith and
by appropriate proceedings by Borrower and (ii) adequate reserves are maintained
by Borrower with respect, thereto.
4.15 Compliance with Laws.
Borrower shall ensure that the Facility is operated and administered in
accordance with all applicable Governmental Requirements, including without
limitation all regulations and statutes governing environmental matters, unless
such non-compliance would not impair (i) the ability of the Borrower to meet its
obligations under this Agreement or (ii) any of the security interests granted
to the Term Lenders under any of the Security Documents, and shall ensure that
the FERC Qualifying Facility Certificate is maintained for the Facility.
Borrower shall timely comply with all applicable Governmental Requirements
unless such non-compliance would not impair (i) the ability of the Borrower to
meet its obligations under this Agreement or (ii) any of the security interests
granted to the Term Lenders under any of the Security Documents, and if
available, deliver to Agent evidence thereof, and if not available, certify to
Agent that Borrower is in such compliance. Borrower assumes full responsibility
for the
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compliance of the Plans and the Facility with all applicable Governmental
Requirements and with sound and reasonable engineering practices and,
notwithstanding any approvals by Term Lenders, they shall have no obligation or
responsibility whatsoever for the Plans or any other matter incident to the
Property or the design construction, testing, start-up or operation of the
Facility.
4.16 Compliance with ERISA.
Borrower shall not permit, with respect to any employee pension benefit
plan which is covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Internal Revenue Code of 1986, as amended
(the "Code") and which is maintained by Borrower for the benefit of employees of
Borrower: (i) any prohibited transaction or prohibited transactions under ERISA
or the Code resulting in liability of Borrower exceeding in the aggregate Fifty
Thousand Dollars ($50,000), (ii) any reportable event under ERISA, if upon
termination of the plan or plans with respect to which one or more such
reportable events shall have occurred there is or would be any liability of
Borrower to the Pension Benefit Guaranty Corporation.
4.17 Other Debt.
Borrower shall not incur any Debt, other than the Debt contemplated in
this Agreement or in the O&M Contract, which, when aggregated with liens
permitted pursuant to Section 4.10(i) and voluntarily-incurred contingent
liabilities not incurred in the ordinary course of business (and excluding all
contractual obligations incurred in accordance with Section 4.18), exceeds Five
Hundred Thousand dollars ($500,000) in the aggregate at any one time
outstanding, without the prior written consent of Agent; provided, that no such
debt may be incurred unless such debt is fully subordinated to all of Borrower's
obligations under this Agreement and the other Loan Instruments; and provided
further, additional subordinated indebtedness shall be approved by the Agent if
such indebtedness would be incurred on terms and conditions approved by the
Agent, such approval not to be unreasonably withheld or delayed, and such
indebtedness, when aggregated with all other such subordinated indebtedness of
Borrower, would not, in the reasonable opinion of Agent, impair the ability of
the Borrower to perform its obligations under this Agreement, the other Loan
Instruments and the Project Documents.
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4.18 Other Contracts.
(a) Borrower shall become party to no contract or capital lease other
than the Project Documents for the performance of any work on the Property or
for the supplying of any labor, materials, equipment or services for the design,
construction, testing, start-up or operation of the Facility except upon such
terms and with such parties as shall be approved in writing by the Independent
Engineer and Agent which consent shall not be unreasonably withheld or delayed;
provided, however, that such approval shall not be required for contracts in
connection with which all other parties to such contracts execute written
consents in form and substance acceptable to Agent consenting to the assignment
of such contracts to Agent as security and which:
(i) are included in the Annual Budget and are to be performed
within one year; or
(ii) if not capable of performance within one year, involve payment
by Borrower of less than Two Hundred Fifty Thousand dollars ($250,000) or
which, when aggregated with all such contracts, involve payments of less
than Seven Hundred Fifty Thousand dollars ($750,000).
(b) Borrower will not suffer or permit any breach or default to occur in
any of the obligations of Borrower under the Project Documents nor suffer or
permit the termination, cancellation, modification (other than, in the case of
gas supply arrangements only, any modification that does not or would not have
an adverse impact on the commitment, deliverability, maturity, or pricing or
other financial or economic terms of such arrangements) or, in the case of
Insurance Policies, non-renewal of any of such documents by reason of any
failure of Borrower to meet any requirement or, in the case of Insurance
Policies, exercise any renewal option. Borrower will promptly notify Agent of
any default by Borrower or by any other party to any of the Project Documents,
upon reasonable knowledge of such default. Borrower will comply with all
conditions of the Project Documents and will execute all documents necessary for
the consummation of the transactions contemplated thereby.
4.19 Costs and Expenses.
Borrower shall pay to Agent for the account of Term Lenders when due the
Agency Fee and the LOC Fronting Fee, all costs and expenses in connection with
the advance, the negotiation, preparation, execution and closing of this
Agreement and related documents, the issuance of the Term
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Notes, the exercise of any right, power or remedy, the enforcement of payment
and other terms, including, without limitation, (a) all fees for filing or
recording the Loan Instruments, (b) all reasonable fees and expenses of counsel
to Co-Managers and to Agent, (c) all title insurance and title examination
charges, including premiums for the Title Insurance, (d) all survey costs and
expenses, (e) all premiums for the Insurance Policies, (f) all reasonable fees
and expenses of the Independent Engineer, and (g) all other reasonable costs and
expenses payable to third parties incurred by the Co-Managers, the Letter of
Credit Bank and/or Agent and necessary in connection with the consummation of
the transactions contemplated by this Agreement, including, without limitation,
all renewals, extensions or modifications thereof.
4.20 Additional Documents.
Borrower shall execute and deliver to Agent, from time to time as requested
by Term Lenders, such other documents as shall reasonably be necessary to
provide the rights and remedies to Term Lenders granted or provided for by the
Loan Instruments or the Project Documents and to consummate the transactions
contemplated therein.
4.21 No Liability of Term Lenders or Agent.
Term Lenders, the Letter of Credit Bank and Agent shall have no liability,
obligation or responsibility whatsoever, jointly or severally, with respect to
the Property or the design, construction testing, startup or operation of the
Facility except to advance and maintain the Term Loan pursuant to this Agreement
and to issue and maintain Letters of Credit. Except as provided in the
immediately preceding sentence, Term Lenders and Agent shall not be obligated to
inspect the Property or the construction of the Facility, nor be liable for the
performance or default of Borrower, FSOC, Fina, TUEC, Contractor, Operator or
any other party, or for any failure to construct, complete, protect or insure
the Property, the Facility or any other property of any other person, or for the
payment of costs of labor, materials or services supplied for the design,
construction, testing, start-up and operation of the Facility, or for the
performance of any obligation of Borrower or of any other party to any of the
Project Documents. Nothing, including without limitation the advancing and
maintenance of the Term Loan or acceptance of any document or instrument, shall
be construed as a representation or warranty, express or implied, to any party
by Agent, the Letter of Credit Bank or by Term Lenders.
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4.22 No Conditional Sale Contract, Etc.
Except as otherwise provided in this Agreement, no materials, equipment or
fixtures shall be supplied or purchased for the operation of the Facility
pursuant to security agreements, conditional sale contracts, lease agreements or
other arrangements or understandings whereby a security interest or title is
retained by any party or the right is reserved or accrues to any party to remove
or repossess any materials, equipment or fixtures intended to be utilized in the
construction or operation of the Facility.
4.23 Defense of Actions.
Upon the occurrence of an Event of Default, or upon the reasonable
determination of Agent that an Event of Default is imminent, or with Borrower's
prior approval, Agent may (but shall not be obligated to) commence, appear in or
defend any action or proceeding purporting to affect the Term Loan, the Letters
of Credit, the Property, the Facility or the respective rights and obligations
of Term Lenders, Agent and any other person pursuant to this Agreement, any of
the other Loan Instruments or any of the Project Documents. Term Lenders and/or
Agent may (but shall not be obligated to) pay all necessary expenses, including
reasonable attorneys' fees and expenses, incurred in connection with such
proceedings or actions, which expenses Borrower hereby agrees to repay to Agent
and Term Lenders promptly upon demand.
4.24 Assignment of Project Documents.
As additional security for the payment of the Term Loan, Borrower hereby
transfers and assigns to Agent for the account of Term Lenders all of Borrower's
rights and interest, but not its obligations, in, under and to the Project
Documents upon the following terms and conditions:
(a) Neither this assignment nor any action by Agent or Term Lenders shall
constitute an assumption by Agent or Term Lenders of any obligations under the
Project Documents, and Borrower shall continue to be liable for all obligations
of Borrower thereunder. Borrower hereby agrees to perform all of its obligations
under the Project Documents and to indemnify and hold harmless Agent and Term
Lenders against and from any loss, cost, liability or expense (including, but
not limited to, reasonable attorneys' fees and expenses) resulting from any
failure of Borrower to so perform.
(b) Agent, upon the occurrence and continuation of an Event of Default, and
expiration of the applicable grace period, if any, or upon the occurence of an
event which with
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the passage of time, the giving of notice or both would constitute an Event of
Default, shall have the right at any time, but shall not be obligated, to take
in its name or in the name of Borrower such reasonable action as Agent may
determine to be necessary or advisable to cure any default under any Project
Document or to protect the rights of Borrower or Term Lenders thereunder. Term
Lenders and Agent shall incur no liability if any such reasonable action so
taken by Agent or on its or their behalf shall prove to be inadequate or
invalid, and Borrower agrees to hold harmless Agent and Term Lenders, should
such action prove to be inadequate or invalid, against and from any loss, cost,
liability or expense (including, but not limited to, reasonable attorneys' fees
and expenses) incurred in connection with any such action.
(c) Borrower hereby irrevocably constitutes and appoints Agent, upon an
Event of Default, and the expiration of the applicable grace period, if any,
with full power of substitution, as Borrower's attorney-in-fact, in Borrower's
name or in Agent's name, to enforce all rights of Borrower under the Project
Documents; provided, however, that Borrower shall not cancel or amend any
Project Document or do or suffer to be done any act which would impair the
security constituted by this assignment without the prior written consent of
Agent.
(d) This assignment shall inure to the benefit of Agent, Term Lenders,
their respective successors and assigns, including any purchaser upon
foreclosure of the Mortgage or other collateral, any receiver in possession of
the Property or other collateral, and any corporation formed by or on behalf of
Agent or Term Lenders which assumes Agent's and/or Term Lenders' rights and
obligations under this Agreement.
4.25 Prohibition on Assignment of Borrower's Interest.
Borrower shall not assign or encumber any interest of Borrower hereunder,
under any other Loan Instrument, any of the Project Documents, the Facility or
the Property, without the prior written consent of Agent.
4.26 Payment of Expenses
Borrower shall promptly pay or cause to be paid when due all costs and
expenses (except for such costs and expenses as are challenged by Borrower in
good faith, the nonpayment of which, is the reasonable judgment of Agent and
Independent Engineer, would not have a materially adverse effect on the
Property, the Facility or on the operation thereof) incurred in connection with
the Property and the Facility, including, without limitation, the reasonable
fees and expenses of the Independent Engineer, and Borrower shall keep the
Property, the
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Facility and any funds due to Borrower free and clear of any liens, charges or
claims other than the liens of the Mortgage and of the other Security Documents,
the "Permitted Liens," as defined in Section 4.10, and other liens approved in
writing by Agent, except for such liens, charges and claims as are contested by
Borrower in good faith in appropriate proceedings and for which adequate
reserves, bonds or other security reasonably satisfactory to Agent has been
provided.
4.27 Restrictions and Annexation.
Neither Borrower nor Fina shall impose any restrictive covenants or
encumbrances upon the Property or execute or file any plat adversely affecting
the Property.
4.28 Advertising by Agent, Term Lenders and Borrower.
Borrower and Agent agree that none of Agent, Term Lenders nor Borrower
shall refer to the financing of the Facility by Term Lenders, in any of Agent's,
Term Lenders' or Borrower's advertising, without the consent of the other
parties hereto.
4.29 Loan Participations.
Borrower acknowledges and agrees that Term Lenders may, from time to time,
sell or offer to sell on a pro rata basis interests in the Term Loan, the
Letters of Credit and the Loan Instruments to one or more participants
acceptable to Borrower (each a "Participant"); provided, however, that Borrower
shall not unreasonably withhold such approval. Borrower hereby expressly
approves as a Participant hereunder any participant under the Original
Agreement; provided that any such participant which does not waive its right to
receive a prepayment penalty as provided in Section 2.10 of the Original
Agreement is hereby disapproved. Borrower authorizes Agent and Term Lenders,
subject to the confidentiality obligations set forth in Section 7.16 hereof, to
disseminate to any such Participant or prospective Participant any information
Term Lenders or Agent possess pertaining to the Property, the Facility, the Loan
Instruments and the Project Documents, including, without limitation, complete
and current credit information on Borrower and on any of the other parties to
any Loan Instrument or Project Document, without the consent of or notice to the
Borrower. Borrower agrees that each Participant shall have all the rights
granted to the Term Lenders hereunder, including, without limitation, those
granted in Section 2.7 hereof. Borrower agrees to supply certain reasonably
requested information, and to execute and deliver all such instruments and take
all such further action as the Agent or Term Lenders may from time to time
reasonably request
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in connection with such participation arrangements. Agent shall notify Borrower
of the name and address for notice of each new Participant, and of such
Participant's proportionate interest in the Term Loan Commitment.
4.30 Notice of Litigation, Claims and Financial Change.
Borrower shall timely respond to and inform Agent promptly, but no later
than within five (5) Banking Days of receipt, of: (i) any litigation against
Borrower or affecting the Property or Facility, or any such litigation known to
Borrower involving any other party to any of the Loan Instruments or Project
Documents which could have a material adverse effect upon the condition of
Borrower or upon the Property or Facility or affect the ability of any other
party to any of the Loan Instruments or Project Documents to perform its
obligations thereunder or could cause an Event of Default; (ii) any claim or
controversy which could become the subject of such litigation; (iii) any
official notice or claim by any Governmental Authority received by Borrower or
known to Borrower pertaining to the Property, the Facility, any of the Project
Documents or any of the Loan Instruments having a material or substantial effect
on any of the foregoing; (iv) any fire or other casualty or any notice of taking
or eminent domain action or similar proceeding affecting the Property or
Facility; and (v) any material adverse change in the financial condition of
Borrower or, as soon as known by Borrower, of any other party to any of the Loan
Instruments or Project Documents.
4.31 Indemnification.
Borrower hereby indemnifies and holds harmless each Term Lender, the Letter
of Credit Bank and Agent (each an "Indemnified Party") from and against any and
all claims, damages, losses, liabilities, costs or expenses whatsoever which any
Indemnified Party may incur (or which may be claimed against any Indemnified
Party by any person or entity whatsoever) by reason of, in connection with or in
any way relating to this Agreement, any other Loan Instrument or any of the
Project Documents, except for costs or expenses arising from commercially
unreasonable, illegal or grossly negligent actions by such Indemnified Party.
Borrower further agrees that, upon demand by any Indemnified Party, it will pay
to such Indemnified Party any and all reasonable expenses incurred by such
Indemnified Party in enforcing any rights under this Agreement, any other Loan
Instrument or any of the Project Documents, including reasonable fees of
counsel. Any Indemnified Party shall, as soon as possible after the receipt by
it of notice of the actual or threatened commencement of any action in respect
to which indemnity may be sought from
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Borrower on account of the indemnity agreement contained herein, notify Borrower
thereof, and Borrower shall have the right (but not the obligation) to
participate in the defense of such action. Each Indemnified Party shall use its
best efforts to cooperate as reasonably requested by Borrower in the defense of
any such action. No Indemnified Party shall compromise or settle any action for
which indemnification is or may be sought hereunder without the prior consent of
Borrower, which consent shall not be unreasonably withheld. Nothing in this
Section is intended to limit the Borrower's other obligations contained in this
Agreement, the other Loan Instruments and the Project Documents. The provisions
of this Section shall survive the payment in full of the Term Loan, the
termination of all Letters of Credit, the release of the Mortgage and of all
other collateral under the other Security Documents.
4.32 Right of Set-off, Liens.
Upon the occurrence and upon the expiration of the applicable grace period,
if any, and during the continuance of any Event of Default, Borrower hereby
authorizes Agent and each Term Lender at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by Agent or such Term Lender to or for the
credit or the account of Borrower against any and all of the obligations of
Borrower under any Loan Instrument irrespective of whether or not Agent or such
Term Lender shall have made any demand hereunder and although such obligations
may be contingent or unmatured. In the event that any Term Lender shall at any
time receive any monies through exercise of its set-off rights as provided
herein, such Term Lender shall be deemed to have received such payment as agent
for and on behalf of all the Term Lenders and shall immediately advise Agent of
the receipt of such funds and promptly transmit the full amount thereof to the
Agent for prompt distribution to all the Term Lenders in accordance with their
respective interests, as provided in this Agreement; provided, however, that
such Term Lender shall be deemed not to have received, and Borrower shall be
deemed not to have made to such Term Lender, any payment transmitted to Agent by
such Term Lender pursuant to this Section. Prompt notification shall be provided
to Borrower of the exercise of any rights under this Section 4.32.
4.33 Operating Budget.
As of the time submitted, all future Operating Budgets submitted by
Borrower shall contain complete, fair and accurate projections of the Projected
Gross Revenues and Projected Operating Costs for each month of such Operating
Budget.
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4.34 Tax Benefits.
Borrower shall remain at all times the beneficial owner of the Facility for
purposes of the Code and applicable state and local tax Laws, and, as such,
Borrower, either directly or through a subsidiary formed with the prior approval
of Agent, shall retain all Borrower's Tax Benefits. Without limiting the
foregoing, Borrower, as the beneficial owner of the Facility, will be entitled
to the following deductions and credits provided by the Code to an owner of
property: (i) deductions for cost recovery with respect to the Facility computed
in accordance with Section 168(b) of the Code with the Facility having a basis
at least equal to (A) the sum of the Borrower's cost with respect to the
Facility, and such expenses incurred by the Borrower with respect to the
transaction which are properly includible in the basis of the Facility, reduced
by (B) the percentage set forth in Section 48(q) of the Code, (ii) deductions
for interest paid or accrued with respect to the Term Loan as authorized by
Section 163 of the Code, and (iii) deductions for such expenses of the
transaction with respect to the Facility incurred by the Borrower which are
deductible currently or amortized.
Borrower agrees that neither it, nor any entity directly or indirectly
controlled by, in control of, or under common control with Borrower, nor any
officer, employee or agent of any of the above, will at any time take any action
or file any returns, certificates or other documents inconsistent with
Borrower's being treated as the beneficial owner of the Facility, and that each
of such entities or persons will file such returns, take such actions and
execute such documents as may be reasonable and necessary to facilitate
accomplishment of the intent of this Agreement. Within thirty (30) days of the
filing of each tax return of Borrower, Borrower shall deliver to Agent a
certificate as to its compliance with the terms of this provision.
4.35 Fixed Rate Arrangement.
As soon as is reasonably practicable, but in no event later than one (1)
year from the date of this Agreement, Borrower shall select a Fixed Rate
Interest arrangement for either (i) a portion of the Term Loan then outstanding
equal to the greater of One Hundred Ten Million dollars ($110,000,000) or the
amount of the First Advance; or (ii) exercise it rights pursuant to Section 2.14
to enter into an Interest Rate Hedge Agreement with respect to such amount.
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4.36 Gas Supply Contracts.
All gas supply arrangements entered into by Borrower in accordance with
Section 2.3(l) of this Agreement, shall satisfy the Base Requirement set forth
therein throughout the term hereof.
4.37 Use of Proceeds.
The Borrower shall not, and shall not permit any subsidiary to, use the
proceeds of any Advance (a) for any purpose which violates the provisions of
Regulation G, U or X or (b) in connection with any acquisition of the common
stock of any company (or securities convertible into or any options, warrants or
other rights to acquire such common stock) constituting over five percent of
such common stock or $15,000,000 in value, whichever is less, unless the board
of directors of such company has approved such acquisition or has disclosed that
it expresses no opinion and is remaining neutral toward such acquisition.
4.38 Tax Payments.
Borrower shall not pay, and Agent shall not be required to release from the
Accounts, any amounts for payment of income, franchise or similar taxes imposed
by any federal, state or local taxing jurisdiction to any taxing authority or
any affiliate of Borrower in excess of the amount of such taxes Borrower would
be required to pay to the applicable taxing authority if such taxes were
determined as if the Borrower were a company which did not join in the filing of
a consolidated, combined or similar return with any affiliate of Borrower.
4.39 Environmental Issues.
(a) For the purposes of this Section 4.39, all terms used in this Section
4.39 which are not otherwise defined in this Section are used as defined in that
certain Amended and Restated Deed of Trust, Security Agreement and Assignment of
Rents dated as of December 29, 1988 by Borrower in favor of Agent for the
benefit of the Term Lenders. Unless the context otherwise specifies or requires,
the following terms shall have the meaning herein specified:
(i) "Hazardous Materials" shall mean (a) any "hazardous waste" as
defined by the Resource Conservation and Recovery Act of 1976 (42 U.S.C.
Section 6901 et seq.), as amended from time to time, and regulations
promulgated thereunder; (b) any "hazardous substance" as defined by the
Comprehensive Environmental Response,
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Compensation and Liability Act of 1980 (42 U.S.C. Section 9601 et
seq.) ("CERCLA"), as amended from time to time, and regulations promulgated
thereunder; (c) asbestos; (d) polychlorinated biphenyls; (e) any substance
the presence of which on the Land is prohibited by any Legal Requirements;
(f) any petroleum-based products; (q) underground storage tanks for storing
any material in subparagraphs (a) - (f); and (g) any other substance which
by any Legal Requirements requires special handling of any federal, state
or local governmental entity in its collection, storage, treatment, or
disposal.
(ii) "Hazardous Materials Contamination" shall mean the contamination
(whether presently existing or hereafter occurring) of the Improvements,
facilities, soil, groundwater, air or other elements on or of the Land by
Hazardous Materials, or the contamination of the buildings, facilities,
soil, groundwater, air or other elements on or of any other property as a
result of Hazardous Materials at any time (whether before or after the date
of this Agreement) emanating from the Land.
(iii) "Unauthorized" shall mean not in compliance with all Legal
Requirements.
(b) Grantor agrees to (i) give notice to Beneficiary immediately upon
Grantor's acquiring knowledge of the presence of any Unauthorized Hazardous
Materials on the Land or of any Hazardous Materials Contamination with a full
description thereof; (ii) promptly comply with any Legal Requirements requiring
the removal, treatment or disposal of such Hazardous Materials or Hazardous
Materials Contamination and provide Beneficiary with satisfactory evidence of
such compliance; and (iii) provide Beneficiary, within thirty (30) days after
demand by Beneficiary, with a bond, letter of credit or other reasonable
financial assurance evidencing to Beneficiary's satisfaction that sufficient
funds are available to pay the reasonably estimated cost of removing, treating
and disposing of such Hazardous Materials or Hazardous Materials Contamination
required by Legal Requirements and discharging any assessments which may be
established on the Land as a result thereof.
(c) If Beneficiary shall ever have reason to believe that there are
Unauthorized Hazardous Materials or Hazardous Contamination affecting any of the
Land, Beneficiary (by its officers, employees and agents) at any time and from
time to
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time, either prior to or after the occurrence of an Event of Default, may
contract for the services of persons (the "Site Reviewers") to perform
environmental site assessments ("Site Assessments") on the Land for the purpose
of determining whether there exists on the Land any environmental condition
which could result in any liability, cost or expense to the owner, occupier or
operator of such Land or any facility thereon arising under any state, federal
or local law, rule or regulation relating to Hazardous Materials. The Site
Assessments may be performed, at any time or times, upon reasonable notice, and
under reasonable conditions established by Grantor which do not impede the
performance of the Site Assessments. The Site Reviewers are hereby authorized to
enter upon the Property for such purposes. The Site Reviewers are further
authorized to perform both above and below the ground testing for environmental
damage or the presence of Hazardous Materials on the Land and such other tests
on the Property as may be necessary to conduct the Site Assessments in the
reasonable opinion of the Site Reviewers. Grantor will supply to the Site
Reviewers such historical and operational information in its possession
regarding the Property as may be reasonably requested by the Site Reviewers to
facilitate the Site Assessments and will make available for meetings with the
Site Reviewers appropriate personnel having knowledge of such matters. On
request, Beneficiary shall make the results of such Site Assessments fully
available to Grantor, which (prior to an Event of Default) may at its election
participate under reasonable procedures in the direction of such Site
Assessments and the description of tasks of the Site Reviewers. The cost of
performing such Site Assessments to the extent such costs are commercially
reasonable or necessary in order to comply with Legal Requirements, shall be
paid by Grantor upon demand of Beneficiary and any such obligations shall be
secured by the Security Documents.
(d) Regardless of whether any Site Assessments are conducted hereunder, if
any Event of Default shall have occurred and be continuing or any remedies in
respect of the Property are exercised by Beneficiary, Grantor shall defend,
indemnify and hold harmless Beneficiary from any and all liabilities (including
strict liability), actions, demands, penalties, losses, costs or expenses
(including, without limitation, consultants fees, investigation and laboratory
fees, reasonable attorneys' fees, expenses and remedial costs), suits, costs of
any settlement or judgment and claims of any and every kind whatsoever which may
now or in the future be paid, incurred or suffered by or asserted against
Beneficiary by any person or entity or governmental agency for, with respect to,
or as a direct or indirect result of, the presence on or under, or the escape,
seepage, leakage, spillage, discharge, emission or release from the Property of
any
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Hazardous Materials or any Hazardous Materials Contamination or arise out of or
result from the environmental condition of the Land or the applicability of any
Legal Requirements relating to Hazardous Materials (including, without
limitation, CERCLA or any so-called federal, state or local "Superfund" or
"Superlien" laws, statute, law, ordinance, code, rule, regulation, order or
decree), except for costs and expenses to the extent caused by illegal or
grossly negligent actions by Beneficiary, its officers, employees, and agents.
(e) Beneficiary shall have the right but not the obligation, without in any
way limiting Beneficiary's other rights and remedies, to enter onto the Land or
to take such other actions as it deems necessary or advisable to clean up,
remove, resolve or minimize the impact of, or otherwise deal with, any Hazardous
Materials or Hazardous Materials Contamination on the Land following receipt of
any notice from any person or entity asserting the existence of any Hazardous
Materials or Hazardous Materials Contamination pertaining to the Land or any
part thereof which, if true, could result in an order, notice, suit, imposition
of a lien on the Land or other action and/or which, in Beneficiary's sole
opinion, could jeopardize Beneficiary's security under the Mortgage, provided,
however, that Beneficiary shall not take any action pursuant to this Section
4.39 unless Beneficiary shall have first given Grantor the opportunity to take
such action and Beneficiary has determined in its reasonable discretion that
Grantor is not diligently and prudently proceeding to take such actions. All
reasonable costs and expenses paid or incurred by Beneficiary in the exercise of
any such rights shall be secured by the Security Documents and shall be payable
by Grantor upon demand.
ARTICLE 5 - RIGHTS AND REMEDIES OF TERM LENDERS
5.1 Events of Default,
Each of the following events and occurrences shall constitute an Event of
Default under this Agreement:
(a) Any indebtedness of Borrower evidenced by any of the Loan Instruments
or any reimbursement obligation related to a Letter of Credit is not paid when
due, whether by acceleration or otherwise; provided, however, that if such
payment is made within five (5) Banking Days of the date when due, the failure
to make such payment shall not constitute an event of default.
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(b) Any covenant by Borrower in this Agreement, any of the other Loan
Instruments or any of the Project Documents (other than Project Documents (xvi)
and (xvii)) is not fully and timely performed, and such failure or violation
shall not be remediable or, if remediable, shall continue unremedied for a
period terminating on the thirtieth (30th) day or such longer period as shall be
determined by Agent in its sole discretion after Borrower knows or reasonably
ought to know of the occurrence thereof or shall continue unremedied for a
period terminating on the twenty-fifth (25th) day after notice of such event of
default by Agent to Borrower, whichever is earlier to occur.
(c) Any statement, representation or warranty by Borrower in this
Agreement, any of the other Loan Instruments, any of the Project Documents, any
Financial Statement or any other writing delivered to Term Lenders or Agent in
connection with the Term Loan is materially false, misleading or erroneous as of
the time made or deemed to be made;
(d) Any event of default, as defined in any other Loan Instrument or in any
of the Project Documents, shall occur, any period permitted therein for the
remedy of such default shall expire, and (i) any such default is not cured or
waived by the other party or parties to such document (provided, that Borrower,
prior to waiving any such default, shall have obtained the consent of Agent,
which consent shall not be unreasonably withheld) and (ii) Borrower shall not
contest such claimed event of default in good faith in appropriate proceedings
with adequate reserves, bonds or other security reasonably satisfactory to Agent
(provided, however, that an event of default under Project Document (iv) shall
not constitute an event of default hereunder unless an event of default also
exists under Project Document a (v)).
(e) The cessation of the operation of the Facility or of related activity
on the Property for more than fifteen (15) consecutive days, or the operation of
the Facility at less than fifty per cent (50%) of Firm Capacity, as defined in
the Turnkey Contract, for more than three hundred (300) days, except for
scheduled maintenance periods, without the written consent of Agent or the
Independent Engineer, such consent not to be unreasonably withheld, other than
due to Uncontrollable Force, as defined in the TUEC Agreement and in the O&M
Contract, for the period provided in each such contract.
(f) Failure of the Facility, Property or Borrower to comply with the Plans,
any applicable Governmental Requirements (unless such nonconformity would not
impair (i) the ability of the Borrower to meet its obligations under this
Agreement or (ii) any of the security interests granted to the Term Lenders
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under any of the Security Documents) or any Insurance Policy requirements; an
Event of Default under this subsection (f), or under the TUEC Agreement or the
Steam Agreement shall be waived if it is waived by the other parties to such
agreements or such event of default, if remediable, shall tie remedied on or
prior to the thirtieth (30th) day after the Borrower knows or reasonably ought
to know of occurrence thereof, twenty-five (25) days after Agent gives notice of
such event of default, whichever is earlier to occur; or any modification (not
previously approved by the Agent) of any such agreements or requirements which,
in the reasonable judgment of the Agent or the Independent Engineer, has a
material adverse effect on the ability of the Borrower to meet its obligations
under this Agreement or on the compliance by the Facility, the Property, the
Borrower or any other party to any of the Project Documents with such
requirements.
(g) Failure of Borrower to maintain all authorizations, consents,
approvals, registrations, exemptions, permits and licenses with or from
Governmental Authorities which are then necessary for the operation of the
Facility and, if such failure is remediable, remains unremedied beyond the time
period allowed by such Governmental Authority to remedy such failure, or to
maintain the FERC Qualifying Facility Certificate.
(h) The Borrower or any other party to any of the Project Documents (other
than Project Documents (xvi) and (xvii)
(1) does not generally pay its debts as they become due or admits in
writing its inability to pay its debts or makes a general
assignment for the benefit of creditors; or
(2) commences any case, proceeding or other action seeking
reorganization, arrangement, adjustment, liquidation, dissolution
or composition of it or its debts under any Debtor Relief Laws;
or
(3) in any involuntary case, proceeding or other action commenced
against it which seeks to have an order for relief entered
against it, as debtor, or seeks reorganization, arrangement,
adjustment, liquidation, dissolution or composition of it or its
debts under any Debtor Relief Law, (i) fails to obtain a
dismissal of such case, proceeding or other action within sixty
(60)
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days of its commencement, or (ii) converts the case from one
chapter of the Federal Bankruptcy Code to another chapter, or
(iii) is the subject of an order for relief; or
(4) conceals, removes or permits to be concealed or removed, any part
of its property, with intent to hinder, delay or defraud its
creditors or any of them, or makes or suffers a transfer of a
substantial portion of its property which would be fraudulent
under any bankruptcy, fraudulent conveyance or similar law; or
makes any transfer of its property to or for the benefit of a
creditor at a time when other creditors similarly situated have
not been paid; or suffers or permits while insolvent, any
creditor to obtain a lien upon any of its property through legal
proceedings which is not vacated within sixty (60) days from the
date thereof; or
(5) has a trustee, receiver, custodian or other similar official
appointed for or take possession of all or any part of its
property or has any court take jurisdiction of any of its
property, which action remains undismissed for a period of sixty
(60) days (except where a shorter period is specified in the
immediately following subparagraph (6)); or
(6) fails to pay or to have stayed any final money judgment rendered
against such person, in an amount which would impair Borrower's
ability to meet its obligations under this Agreement, within
fifteen (15) days of entry of such judgment; or
(7) fails to have discharged within a period of ten (10) days any
attachment, sequestration or similar writ on Borrower (or, if on
any other party, any attachment, sequestration or similar writ in
an amount which would impair Borrower's ability to meet its
obligations under this Agreement) levied upon any property of
such person.
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Provided, however, that in connection with any party other than
Borrower to any of the Project Documents, the Event of Default
shall be waived if:
(i) such party has fully and continues to fully comply with all
its obligations under such Project Document or provides for
the assumption of its obligations under such Project
Document by a party reasonably acceptable to the Agent
within thirty (30) days of such Event of Default and in
connection with such assumption provides adequate assurance
of future performance of such obligations to Agent or
(ii) Borrower, within thirty (30) days of such event of default,
executes, with a party reasonably acceptable to Agent, a
replacement Project Document, in form and substance
acceptable to Agent.
(i) Title to all or any part of the Property or the Facility (other than
obsolete or worn personal property replaced by adequate substitutes of equal or
greater value than the replaced items when new) shall become vested in any party
other than the party named as owner thereof in the applicable Security Document,
whether by operation of Law or otherwise, unless permitted in this Agreement.
(j) Without the prior written consent of Agent, the Borrower or the owner
of the Property hereafter grants any easement or dedication, files any plat,
declaration or restriction or enters into any lease or sub-lease concerning the
Property for the purposes set forth in the Lease Agreement, which may materially
impair the use of the Property, and such grant, filing, declaration or lease is
not capable of being declared void ab initio, or is not so declared (or remedied
in a manner that is reasonably satisfactory to Agent), within thirty (30) days
from the date Agent gives notice to Borrower to do so.
(k) Abandonment of the Property or the Facility by Borrower.
(1) Failure of the Borrower, Operator, TUEC or Fina, as the case may be, to
maintain the required Insurance Policies; provided that such event of default
shall be waived so long as such Insurance Policy is unavailable through no fault
of Borrower and the coverage afforded under the relevant
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Insurance Policies is the maximum amount reasonably commercially obtainable
in the insurance market at such time.
(m) Any person obligated to pay any part of the indebtedness evidenced by
any of the Loan Instruments, any party to any of the Project Documents, or the
holder of any lien, security interest or assignment relating to the Property,
the Facility or any other asset of Borrower, institutes foreclosure or other
proceedings for the enforcement of its remedies thereunder and (i) such
proceedings are not dismissed within fifteen (15) days of institution or (ii)
Borrower does not contest such proceedings in good faith through appropriate
procedures and, in the event of (i) or (ii), adequate reserves, bonds or other
security reasonably satisfactory to Agent is not provided.
(n) The priority and effectiveness of the lien and/or the security
interests created by the Security Documents is in any way impaired or
invalidated or any person commences any action to have any Security Document, or
any portion thereof, declared void or voidable, or commences any similar action,
and (i) such action is not dismissed within sixty (60) days or (ii) Borrower
does not contest such proceedings in good faith through appropriate procedures
and, in the event of (i) or (ii), adequate reserves, bonds or other security
reasonably satisfactory to Agent is not provided.
(o) The liquidation, termination, merger or dissolution of Borrower or of
any other party to any of the Project Documents (other than Project Documents
(xvi) and (xvii)), unless, for any such event involving an entity other than
Borrower, Agent is reasonably satisfied within thirty (30) days that such event
will not have a material adverse effect on the Property, Facility or ability of
such party to perform its obligations when due under such agreement.
(p) The termination before maturity, cancellation, modification (excluding
immaterial modifications to ancillary work papers and similar items) or, in the
case of Insurance Policies, non-renewal of any of the Project Documents without
the Agent's prior written consent.
(q) Failure of Borrower to maintain an agent for service of process in the
County of New York, State of New York for more than five (5) days.
5.2 Consequences of Event of Default.
(a) If an Event of Default occurs and has not been remedied during the
applicable grace period, if any, Agent, for the account of the Term Lenders, may
in its sole discretion
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take all actions necessary to cure such Event of Default, and/or declare, by
giving notice to Borrower, the entire amount of Borrower's obligations to Term
Lenders under this Agreement and the other Loan Instruments to be immediately
due and payable, irrespective of any other provision of such agreements. If an
event of failure or violation constitutes an Event of Default under more than
one of the provisions of Sections 5.1, Agent and Term Lenders may take all
actions and remedies provided in this Section 5.2 upon expiration of the
shortest grace period, if any, provided herein; provided, however, that Agent
and Term Lenders shall exercise their rights under this Section 5.2 in a
commercially reasonable manner, considering, inter alia, the material adverse
consequences of such Event of Default to the Borrower, the Property, the
Facility and the rights of the Agent and Term Lenders hereunder and under the
other Loan Instruments.
(b) In the event that Borrower's obligations shall become due and payable
by acceleration as provided in paragraph (a) above, all sums payable shall, upon
the giving of such notice to Borrower by Agent, become immediately due and
payable without presentment, demand, protest or notice of any kind other than
the notice specifically required by this Section, all other notice being
expressly waived by Borrower, and Term Lenders shall have the right to take all
funds in the Accounts and to otherwise enforce their security interests as
provided herein and in the Security Documents. Borrower shall furthermore
indemnify Agent, the Letter of Credit Bank and Term Lenders for all costs,
expenses and losses resulting from any Event of Default and for all costs,
expenses and losses incurred by them in curing such Event of Default and/or in
proceeding to enforce their lien on and security interest in the collateral
under the Security Documents.
(c) Borrower hereby appoints Agent as the attorney-in-fact of Borrower,
upon the occurrence of an Event of Default and the expiration of the applicable
grace period, if any, with full power of substitution, and in the name of
Borrower, if Agent elects to do so, to: (i) execute all applications and
certificates in the name of Borrower which may be required for operation of the
Facility, (ii) endorse the name of Borrower on any checks or drafts,
representing proceeds of the Insurance Policies, or other checks or instruments
payable to Borrower with respect to the Property or Facility, (iii) do every act
with respect to the operation of the Facility which Borrower may do, and (iv)
prosecute or defend any action or proceeding incident to the Property or
Facility. The power-of-attorney granted hereby is a power coupled with an
interest and irrevocable. Agent and Term Lenders shall have no obligation to
undertake any of the foregoing actions, and if
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they take any such action they shall have no liability to Borrower for the
sufficiency or adequacy thereof.
(d) Any funds of Term Lenders used for any purpose referred to in this
Article 5 shall constitute a part of the Term Loan secured by the Term Loan
Instruments and shall bear interest at the highest then-applicable Default
Interest Rate.
ARTICLE 6 - AGENT
6.1 Appointment.
Each of the Term Lenders hereby appoints Agent to act as its agent under
this Agreement and to act as collateral agent under the Security Documents as
provided therein, and irrevocably authorizes Agent to take such action on such
Term Lender's behalf under the provisions of this Agreement, the Security
Documents and any other agreements and instruments referred to herein and to
exercise such powers hereunder and thereunder as are specifically delegated to
Agent and such powers as are reasonably incidental thereto. Agent shall exercise
the same care hereunder as it exercises in connection with similar transactions
for its own account in which no other lender participates. In performing its
function and duties hereunder and under the Security Documents Agent shall act
solely as the agent of the Term Lenders and does not assume and shall not be
deemed to have assumed any obligation towards or relationship of agency or trust
with or for the Borrower or any other party to any of the Project Documents.
6.2 Majority Lenders.
Agent will to the extent practicable under the circumstances consult with
the Term Lenders prior to taking action on their behalf under this Agreement and
in acting as their Agent under the Security Documents. Agent will not take any
action contrary to the written direction of the Majority Lenders and will take
any lawful action in accordance with the provisions of this Agreement prescribed
in a written direction of the Majority Lenders. Agent may decline to take any
action except upon the written direction of the Majority Lenders and Agent may
obtain a ratification by the Majority Lenders of any action taken by it under
this Agreement. In each case Agent shall have no liability to Borrower (other
than for gross negligence or willful misconduct) or any of the Term Lenders for
any action taken by it upon the direction of the Majority Lenders or if ratified
by the Majority Lenders, nor shall Agent have any liability for any failure to
act unless Agent has been instructed to act by the Majority Lenders. The action
of the
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Majority Lenders shall bind all the Term Lenders hereunder, except in respect of
matters specifically requiring consent of or action by all the Term Lenders.
Notwithstanding anything herein to the contrary, Agent need not take any action
on behalf of the Term Lenders unless and until it is indemnified to its
satisfaction for any and all consequences of such action.
6.3 Liability and Credit Appraisal.
Neither Agent, in its capacity as Agent, nor any of its officers,
directors, employees or agents shall be liable for any action taken or omitted
by it or them hereunder, or in connection herewith, except for its or their
gross negligence or willful misconduct. The Agent shall not be responsible for
any recitals, statements, representations or warranties herein or for the
execution, effectiveness, genuineness, validity or enforceability of this
Agreement, the Term Notes, the other Loan Instruments, the Project Documents or
any other document executed in connection herewith, or be required to make any
inquiry concerning the performance or observance by the Borrower of any of the
terms, provisions or conditions of this Agreement, the Term Notes, the other
Loan Instruments or the Project Documents. Each Term Lender represents and
warrants to Agent that it has independently without reliance on the Agent made
its own credit investigation and appraisal of Borrower on the basis of such
documents and information as it has deemed appropriate and that it has entered
into this Agreement on the basis of such independent appraisal, and each Term
Lender represents that it will continue to make its own credit appraisal. The
Term Lenders agree to indemnify and hold Agent harmless from and against any and
all liabilities, damages, penalties, judgments, suits, expenses and other costs
of any kind or nature whatsoever imposed on, incurred by or asserted against
Agent in respect of its obligations hereunder, except for its gross negligence
or willful misconduct.
6.4 Reliance by Agent.
Agent shall be entitled to rely upon any communication or document believed
by it to be genuine and correct and to have been signed, sent or made by the
proper person or persons and to act upon the advice of legal counsel and other
experts selected by it concerning all matters pertaining to this Agreement and
its duties hereunder and shall not be liable to any of the other parties hereto
for any of the consequences of such reliance. Agent may rely for the purposes of
the giving of notice or the disbursement of funds on the name and address of
each Term Lender in Section 7.1 or as notified to Agent pursuant to Section 7.1
hereof.
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6.5 Other Banking.
Agent, in its capacity as a Term Lender, shall have the same rights, powers
and obligations hereunder as any other Term Lender, specifically including the
right to give or deny consent to any action requiring consent or direction of
the Majority Lenders. Agent and its affiliates may, without liability to account
to any Term Lender, engage in any kind of banking, trust or other business with
Borrower as if it were not such Agent or affiliate. In addition, Agent shall be
entitled to receive from the Borrower its portion of any fee in connection with
this transaction without any liability to account therefor to any of the other
Term Lenders except as Agent may have expressly agreed.
6.6 Payments, Notices and Determinations by Agent.
(a) Agent shall promptly distribute to each of the Term Lenders in like
funds upon receipt each Term Lender's pro rata share of all amounts of principal
and interest, and each Term Lender's pro rata or other agreed share of all fees
and all other amounts received by Agent from Borrower hereunder, or from any
party under the Security Documents, on behalf of the Term Lenders. If at any
time Agent makes available to any Term Lender amounts due from Borrower
hereunder which Borrower fails to make available to Agent, such Term Lender
shall on request forthwith refund such amounts to Agent together with interest
thereon at the rate which is equal to the cost of funds to Agent for such
period.
(b) In the event that any Term Lender shall at any time receive any non pro
rata payment from any source in respect of the Term Loans in violation of the
requirement of this Agreement that Borrower make such payment to Agent, such
Term Lender shall be deemed to have received such payment as agent for and on
behalf of all the Term Lenders and shall immediately advise Agent of the receipt
of such funds and promptly transmit the full amount thereof to Agent for prompt
distribution among all the Term Lenders in accordance with their respective
interests as provided in this Agreement; provided, however, that such Term
Lender shall be deemed not to have received, and Borrower shall be deemed not to
have made to such Term Lender, any payment transmitted to Agent by such Term
Lender pursuant to this Section.
(c) Agent shall promptly notify the Term Lenders by telex of each Interest
Period chosen by Borrower, the Term Loan Interest Rate for each Interest Period
(and the relevant LIBOR, Short Term Rate, Fixed Offered Rate or Federal Funds
Rate), the date of any expected payment and all other notices transmitted by
Borrower. Determinations of interest rates and amounts of
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interest, Default Interest and other sums due hereunder and under the Term Loan
based upon the provisions of this Agreement and contained in notices from Agent
shall be conclusive and binding on Borrower and the Term Lenders, absent
manifest error in computation or transmission.
(d) Agent will maintain all records as to amount, type and value of
collateral pledged and assigned under the Security Documents. Upon request of
any Term Lender, Agent will give a statement to such Term Lender with respect to
the types and amounts of collateral held pursuant to the Security Documents, and
Agent will give prompt notice of any Event of Default under the Security
Documents of which it obtains knowledge.
(e) It is understood that Agent may not have resort to more than its pro
rata share of the collateral without the consent in writing of all of the Term
Lenders and, in any case, may have no resort to the collateral except as
provided in the Security Documents.
6.7 Successor Agent.
Subject to the appointment and acceptance of a successor Agent as provided
below, Agent may resign at any time either under this Agreement or under the
Security Documents by giving written notice thereof to the Term Lenders and
Borrower, and Agent may be removed at any time with or without cause by the
Majority Lenders. Upon any such resignation or removal, the Majority Lenders
shall have the right to appoint a successor Agent acceptable to Borrower. If no
successor Agent shall have been so appointed by the Majority Lenders and shall
have accepted such appointment within thirty (30) days after the retiring
Agent's notice of resignation or the Majority Lenders' removal of the retiring
Agent, then the retiring Agent may, on behalf of the Term Lenders, appoint one
of the other Term Lenders as successor Agent. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations hereunder. After any retiring Agent's
resignation or removal hereunder as Agent, the provision of this Article 6 shall
continue in effect for such Agent's benefit in respect of any actions taken or
omitted by it while it was acting as Agent hereunder.
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ARTICLE 7 - GENERAL TERMS AND CONDITIONS
7.1 Notices.
All notices, demands, requests, and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been given
(i) when presented personally, (ii) when transmitted by telex to the number
specified below and the proper answerback is received, or (iii) three (3)
Banking Days after being deposited in a regularly maintained receptacle for the
United States Postal Service, postage prepaid, registered or certified, return
receipt requested, addressed to the respective party, as the case may be, at the
following addresses, or such other address as any party may from time to time
designate by written notice to the others as herein required. The telecopy
(facsimile) numbers provided below are for the convenience of the parties only.
Transmission by telecopy shall constitute provision of notice under this
Agreement only if receipt thereof is acknowledged by the recipient.
If to Borrower: Power Resources, Inc.
Five Post Oak Boulevard
Suite 1400
Houston, Texas 77027
Attention: President
Telex:
Telecopy:
If to KOP: Kansallis-0sake-Pankki
575 Fifth Avenue, 36th floor
New York, New York 10017
Attention:
Telex: 424843
Telecopy: (212) 972-4557
If to CS: Credit Suisse
100 Wall St., 14th floor
New York, New York 10005
Attention: Specialty Finance
Telex: 23249
Telecopy: (212) 943-1598
If to Term Lenders: To KOP and to CS
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If to Agent: Credit Suisse
100 Wall St., 14th floor
New York, New York 10005
Attention: Specialty Finance
Telex: 23249
Telecopy: (212) 943-1598
7.2 Amendments and Waivers.
No amendment or waiver of any provision of this Agreement nor consent by
Term Lenders or Agent to any departure by Borrower therefrom shall in any event
be effective unless the same shall be in writing and signed by Agent and the
Majority Lenders. Any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No failure on
the part of Agent and/or the Term Lenders to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof (except as
provided above) nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
7.3 Election of Remedies.
Agent, acting on behalf of all the Term Lenders, shall have all of the
rights and remedies granted in the Loan Instruments and available at law or in
equity, and these same rights and remedies may be pursued separately,
successively or concurrently against Borrower, or any collateral under the Loan
Instruments, at the sole discretion of Agent.
7.4 Severability.
Any provision of this Agreement which is prohibited, unenforceable or not
authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition, unenforceability or non-authorization, without
invalidating the remaining provisions hereof or affecting the validity,
enforceability or legality of such provision in any other jurisdiction.
7.5 Form and Substance.
All documents, certificates insurance policies and other items required
under this Agreement to be executed and/or delivered to Agent or Term Lenders
shall be in form and substance reasonably satisfactory to such party or parties.
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7.6 Limitation on interest.
All agreements between Borrower and Term Lenders, whether now existing or
hereafter arising and whether written or oral, are hereby limited so that in no
contingency, whether by reason of acceleration of the maturity of any
indebtedness governed hereby or otherwise, shall the interest contracted for,
charged or received by Term Lenders exceed the maximum amount permissible under
applicable law. if, from any circumstance whatsoever, interest would otherwise
be payable to Term Lenders in excess of the maximum lawful amount, the interest
payable to Term Lenders shall be reduced to the maximum amount permitted under
applicable law. If from any circumstance the Term Lenders shall ever receive
anything of value deemed interest by applicable law in excess of the maximum
lawful amount, an amount equal to any excessive interest shall be applied to the
reduction of the principal of the Term Loan and not to the payment of interest,
or if such excessive interest exceeds the unpaid balance of principal of the
Term Loan such excess shall be refunded to Borrower. All interest paid or agreed
to be paid to Term Lenders shall, to the extent permitted by applicable law, be
amortized, prorated allocated and spread throughout the full period until
payment in full of the principal of the Term Loan (including the period of any
renewal or extension thereof) so that interest thereon for such full period
shall not exceed the maximum amount permitted by applicable law. This paragraph
shall control all agreements between the Borrower and Term Lenders.
7.7 No Third Party Beneficiary.
This Agreement is for the sole benefit of Agent, Term Lenders and Borrower
and is not for the benefit of any third party.
7.8 Borrower In Control.
In no event shall Agent's or Term Lenders' rights and interests under the
Loan Instruments be construed to give Agent or Term Lenders the right to, or be
deemed to indicate that Agent or Term Lenders are in control of the business,
management or properties of Borrower or have power over the daily management
functions and operating decisions made by Borrower.
7.9 Number and Gender.
Whenever used herein, the singular number shall include the plural and the
plural the singular, and the use of any gender shall be applicable to all
genders.
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7.10 Captions.
The captions, headings, table of contents and arrangements used in this
Agreement are for convenience only and do not and shall not be deemed to affect,
limit, amplify or modify the terms and provisions hereof.
7.11 Applicable Law and Jurisdiction.
(a) This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of New York.
(b) (i) Borrower hereby expressly and irrevocably agrees and consents that
any legal suit, action or proceeding arising out of or relating to this
Agreement and the transactions contemplated herein may be instituted by Term
Lenders in any State or Federal court sitting in the County of New York, State
of New York, United States of America and, by the execution and delivery of this
Agreement, Borrower expressly waives any objection which it may have now or
hereafter to the laying of the venue or to the jurisdiction of any such suit,
action or proceeding, and irrevocably submits generally and unconditionally to
the jurisdiction of any such court in any such suit, action or proceeding.
(ii) In the case of the courts of the State of New York or of the United
States sitting in the County of New York, New York, Borrower hereby irrevocably
designates, appoints and empowers, The Prentice Hall Corporation System, Inc.
(the "Process Agent", which has consented thereto) with offices on the date
hereof at 1 Gulf & Western Plaza, New York, New York 10023-7773, or successor
acceptable to the Term Lenders, as agent to receive for and on behalf of
Borrower service of process in the County of New York. Borrower further agrees
that such service of process may be made on Process Agent by personal service of
a copy of the summons and complaint or other legal process in any such legal
suit, action or proceeding on Process Agent, or by any other method of service
provided for under the applicable laws in effect in the County of New York, and
Process Agent is hereby authorized to accept such service for and on behalf of
Borrower, and to admit service with respect thereto.
(iii) Upon service of process being made on Process Agent as aforesaid, a
copy of the summons and complaint or other legal process served shall be mailed
by the Process Agent to Borrower by registered mail, return receipt requested,
at its address referred to in this Article 7, or to such other address as
Borrower may notify Process Agent in writing. Service upon Process Agent as
aforesaid shall be deemed to be
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personal service on Borrower and shall be legal and binding upon Borrower
for all purposes, notwithstanding any failure of Process Agent to mail
copies of such legal process thereto, or any failure on the part of Borrower
to receive the same.
(iv) Borrower agrees that it will at all times continuously maintain an
agent to receive service of process in the County of New York on its behalf with
respect to this Agreement. In the event that for any reason Process Agent or any
successor thereto shall no longer serve as agent for Borrower to receive service
of process in the County of New York on its behalf or shall have changed its
address without notification thereof to Agent or Term Lenders, Borrower will
immediately after having knowledge thereof, irrevocably designate and appoint a
substitute agent and advise Agent and Term Lenders thereof.
(c) Nothing contained in subsection (b) hereof shall preclude Agent,
for the account of Term Lenders, from bringing any legal suit, action or
proceeding arising out of or relating to this Agreement in the courts of any
place where Borrower or any of its property or assets may be found or located.
To the extent permitted by the applicable laws of any such jurisdiction,
Borrower hereby irrevocably submits to the jurisdiction of any such court and
expressly waives, in respect of any such suit, action or proceeding, the
jurisdiction of any court or courts which now or hereafter, by reason of its
present or future domicile, or otherwise, may be available to it.
7.12 Continuing Liability.
Borrower agrees to operate the Facility pursuant to the Plans and in
compliance with all Governmental Requirements, unless such noncompliance would
not impair (i) the ability of the Borrower to meet its obligations under this
Agreement or (ii) any of the security interests granted to the Term Lenders
under any of the Security Documents. If Borrower does not cause the Facility to
be so operated or if the operation thereof is not in such compliance, Term
Lenders shall have the option to operate the Facility so as to remedy such
failure. If Term Lenders elect to operate the Facility or take such other action
as may be necessary to remedy such failure, Borrower promises to pay to Term
Lenders, in addition to any other amounts which may be owing under any of the
Loan Instruments, all sums expended by Term Lenders to operate the Facility in
such manner, and such amounts owing to Term Lenders shall be payable on demand
and shall bear interest at the then-applicable Term Loan Interest Rate. In
addition, if Term Lenders shall advance any funds on behalf of Borrower to any
Governmental Authority to assure such operation of the
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Facility, Borrower shall pay to Term Lenders all amounts advanced by Term
Lenders for such purpose together with interest on such amount at the
Default Interest Rate, when requested by Term Lenders.
7.13 Certain Calculations.
All calculations of the amount required in the Debt Protection Account,
of the amount required in the Maintenance Reserve Account, of Debt Service
Coverage Ratio, of Discretionary Cash Flow, of Gross Revenues, of Net Revenues,
of Operating Costs, of Projected Gross Revenues, of Projected Net Revenues and
of Projected Operating Costs shall be made by Borrower, in accordance with the
terms of this Agreement, in form and substance satisfactory to Agent. In the
event any such calculation is reasonably rejected by Agent, the Independent
Engineer shall make such calculation in accordance with the provisions of this
Agreement and the relevant definition, for the relevant period. The calculation,
and the assumptions used in making such calculation, of the Independent Engineer
shall be final absent manifest error.
7.14 Continuing Lien.
(a) The liens and security interests granted in the Loan Instruments
secure all indebtedness and all obligations of Borrower owed to Agent and Term
Lenders in connection with the Property, the Facility, the Loan Instruments and
the transactions contemplated herein and therein, of whatever kind or character,
whether now owing, hereafter arising or hereafter to be performed (collectively,
the "Loan Obligations").
(b) The liens and security interest granted in the Loan Instruments
also secure all indebtedness and all obligations of Borrower, Agent and/or Term
Lenders arising under any agreements among or between Borrower, Agent and/or
Term Lenders and any third-party, or any Governmental Authority having
jurisdiction over the Property or the Facility, in connection with the Property,
the Facility, the Loan Instruments and the transactions contemplated herein and
therein, of whatever kind or character, whether now owing, hereafter arising or
hereafter to be performed (collectively, the "Assurance Obligations").
(c) Notwithstanding anything to the contrary in any of the Loan
Instruments, if at the time the principal balance of the Term Loan is fully paid
and no Letters of Credit are outstanding (the "Pay-off Date") any of the Loan
Obligations or Assurance Obligations remains to be paid or performed, Agent and
Term Lenders, subject to paragraph (d) below, shall not be obligated to release
any collateral remaining subject to the
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Security Documents, and such collateral shall continue to secure the payment
and performance of the Loan Obligations and Assurance Obligations remaining
as of the Pay-off Date.
(d) Agent shall provide to Borrower, within thirty (30) Banking Days of
the Pay-off Date, a list of the Loan Obligations and Assurance Obligations
remaining as of such date, and of the collateral that Agent intends to retain as
security for the payment and performance of such obligations. Borrower may, at
any time thereafter, request release of such collateral and the substitution
thereof with other collateral (the "Other Collateral"). Agent shall timely
accept such substitution provided the Other Collateral is acceptable, in value
and quality, in the reasonable judgment of Agent.
7.15 Consent.
Unless otherwise specified as being within the sole discretion of
Agent, Term Lenders or Borrower, whenever the consent or approval of Agent, Term
Lenders or Borrower is required herein, such consent or approval shall not be
unreasonably withheld or delayed.
7.16 Confidentiality of Information.
(a) Agent and each Term Lender agrees to preserve the confidentiality
of and shall not, without the prior written consent of Borrower, make any
unauthorized use of any written information made available to any of them in
connection with this Agreement, which is marked "Confidential" or "Proprietary"
or is otherwise clearly identified as not to be made public. Agent and each Term
Lender agrees to use its best efforts to preserve the confidentiality of any
other written information made available to it in connection with this Agreement
which is identified as of a proprietary nature. For purposes of this Section
7.16, proprietary information includes but is not limited to (i) the terms of
the Project Documents and Loan Instruments, (ii) all documents, data, drawings,
studies, projections, plans and other information which relates to economic
benefits to Borrower or any party to the Project Documents or costs of design,
construction or operation of the Facility, including, without limitation, the
cost and quantities of fuel and information of the type described in Section 4.9
or 4.11, and (iii) all plans, drawings, documents, studies and other information
relating to design, construction and operation of the Facility.
(b) Borrower acknowledges and agrees that Agent and/or Term Lenders may
disclose such proprietary information to participants or prospective
participants in the Term Loan Commitment. Agent and Term Lenders acknowledge and
agree that
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such disclosure shall be made only to parties that have executed an
agreement to be bound by the confidentiality obligations set forth herein.
(c) The confidentiality obligations set forth in this Section shall not
apply to any proprietary information that (i) was already known to the receiving
party at the time of its disclosure by the disclosing party, as provable by
prior written records; (ii) is now or may hereafter become part of the public
domain, other than through the failure of the receiving party to fulfill its
obligation hereunder; or (iii) is disclosed to the receiving party by a third
party having no direct or indirect secrecy obligation to the disclosing party
with respect to the disclosed confidential information. Agent and Term Lenders
shall also be free to disclose any such information or data to the extent and
only to the extent (x) required by applicable Law, and (y) during the course of
or in connection with any litigation, governmental investigation, arbitration or
other proceedings based upon or in connection with the subject matter of this
Agreement, including without limitation, the failure of the transactions
contemplated hereby to be consummated.
(d) The obligations of Agent and each Term Lender under this Section
7.16 with respect to confidential information of Borrower, shall expire three
(3) years after the final Term Loan Repayment Date and, with respect to
confidential information of entities other than Borrower, shall expire upon the
expiration of Borrower's confidentiality obligations with respect to such
information.
7.17 Counterparts.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
BORROWER:
POWER RESOURCES, INC.
By: /s/ J. Donald Dacey
------------------------------
Name: J. Donald Dacey
Title: Chief Financial Officer
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TERM LENDERS:
KANSALLIS-OSAKE-PANKKI
By: /s/ Martha P. Toll-Reed
---------------------------------
Name: Martha P. Toll-Reed
Title: Assistant Vice President
CREDIT SUISSE
By: /s/ Tony K. Muoser
---------------------------------
Name Tony K. Muoser
Title: Assistant Vice President
By: /s/ Marcus K. Cozihus
---------------------------------
Name: Marcus K. Cozihus
Title: Assistant Vice President
AGENT:
CREDIT SUISSE
By: /s/ Tony K. Muoser
-----------------------------------
Name: Tony K. Muoser
Title: Assistant Vice President
By: /s/ Marcus K. Cozihus
---------------------------------
Name: Marcus K. Cozihus
Title: Assistant Vice President
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Amendment No. 1
Amended and Restated Term Loan Agreement
This Amendment No. 1 ("Amendment No. 1"), entered into as of March 1,
1989, to the Amended and Restated Term Loan Agreement dated December 30, 1988
(the "Amended Term Loan Agreement") among Credit Suisse and Kansallis-Osake-
Pankki as Lenders, Power Resources, Inc. as Borrower, and Credit Suisse as
Agent.
W I T N E S S E T H :
WHEREAS, Agent, Lenders and Borrower have entered into the Amended Term
Loan Agreement; and
WHEREAS, the parties wish to amend certain provisions of the Amended
Term Loan Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the Amended Term Loan Agreement is hereby amended as follows:
1. Section 4.13 is amended to add subsections (c), (d) and (e)
following subsection (b), to read in their entirety as follows:
"(c) Upon the occurrence of a casualty loss affecting the Facility
or a condemnation of the Facility or the Property, the Agent shall
establish a special escrow account in the name of the Borrower, in
trust for the Agent (for the benefit of the Lenders), TUEC and the
Borrower (the "Proceeds Account"). All Proceeds shall be deposited
in the Proceeds Account, and all monies at any time in the Proceeds
Account are hereby irrevocably pledged by Borrower to Agent (for the
benefit of the Lenders) and TUEC. Upon the establishment of the
Proceeds Account, the Borrower shall execute any agreements or
documents reasonably requested by the Agent to grant and perfect a
first-priority security interest in favor of the Agent (for the
benefit of the Lenders) in the monies in the Proceeds Account to
secure all obligations of the Borrower hereunder and under the other
Loan Instruments. Borrower hereby authorizes Agent to make
withdrawals from the Proceeds Account pursuant to
<PAGE>
the terms of this Section 4.13. The Agent agrees to provide the
Borrower and TUEC copies of all account statements in regard to the
Proceeds Account. If the Independent Engineer reasonably determines
that a restoration of the Facility or Property is feasible pursuant
to Section 4.13(b) but for a deficiency in the amount of the
Proceeds and the Agent reasonably determines that with additional
funds in the amount of such deficiency the restoration could be
completed in accordance with the provisions of Section 4.13(b), and
if such deficiency is not deposited by the Borrower, then the Agent
shall give TUEC notice of such deficiency, and TUEC shall have the
right within twenty-five (25) days of such notice to offer to
deposit funds into the Proceeds Account to cover such deficiency or
to otherwise insure, in a manner reasonably acceptable to the Agent,
that the amount of such deficiency will be deposited in a timely
manner. If the Agent agrees in its reasonable discretion to accept
such funds, TUEC shall deposit such funds into the Proceeds Account
within thirty (30) days of the notice of deficiency or in the timely
manner referred to above, and upon their deposit such funds shall be
disbursed as Proceeds in accordance with Section 4.13(b) above.
"(d) If Proceeds are not disbursed for the restoration of the
Facility or the Property pursuant to Section 4.13(b) above, the
Agent agrees that, upon payment in full of all amounts owed to the
Agent and the Lenders pursuant to this Agreement and the other Loan
Instruments, the Agent shall disburse to TUEC from any monies
remaining in the Proceeds Account any amounts owed to TUEC pursuant
to the terms of the TUEC Agreement and shall then disburse any
remaining monies to the Borrower.
"(e) All payments to be made to Borrower pursuant to
Section 4.13(b)(v) above shall be made by the Agent after it
disburses to TUEC any amounts owed to TUEC pursuant to the terms of
the TUEC Agreement."
2. Section 7.16 is amended to reletter subsection (d) to become
subsection (e) and to add a new subsection (d), to read in its
entirety as follows:
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"(d) Notwithstanding anything to the contrary herein, with respect
to the TUEC Agreement the parties hereto agree to comply with the
confidentiality provisions set forth in Sections 16.01, 16.02 and
16.03 of the TUEC Agreement; provided, however, that the parties
hereto shall be permitted to disclose the TUEC Agreement during
the course of or in connection with any litigation, governmental
investigation, arbitration or other proceedings based upon or in
connection with the subject matter of this Agreement, except that in
any such disclosure the parties hereto shall comply with the
requirement under Section 16.03(b) of the TUEC Agreement to use
reasonable efforts to restrict public access to the information
disclosed by way of protective order or otherwise."
Except as specifically provided in this Amendment No. 1, no other
amendments, revisions or changes to the Amended Term Loan Agreement are made or
permitted hereby. All other terms and conditions of the Amended Term Loan
Agreement remain in full force and effect and apply fully to this Amendment
No. 1.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers hereunto duly
authorized as of the date first above written.
BORROWER:
POWER RESOURCES, INC.
By: /s/ J. Donald Dacey
--------------------------------
Name: J. Donald Dacey
Title: CFO
TERM LENDERS:
KANSALLIS-OSAKE-PANKKI
By: /s/ Martha P. Toll-Reed
--------------------------------
Name: Martha P. Toll-Reed
Title: Assistant Vice President
3
<PAGE>
CREDIT SUISSE
By: /s/ Markus K. Christen
--------------------------------
Name: Markus K. Christen
Title: DVP
By:
--------------------------------
Name:
Title:
AGENT:
CREDIT SUISSE
By: /s/ Markus K. Christen
--------------------------------
Name: Markus K. Christen
Title: DVP
By:
--------------------------------
Name:
Title:
NY:7450P
<PAGE>
Amendment No. 2
Amended and Restated Term Loan Agreement
This Amendment No. 2 ("Amendment No. 2") to the Amended and Restated
Term Loan Agreement dated as of December 30, 1988, as amended by Amendment No.
1 dated as of March 1, 1989 (the "Amended Term Loan Agreement"), among Credit
Suisse and Kansallis-Osake-Pankki as Term Lenders, Power Resources, Inc. as
Borrower, and Credit Suisse as Agent, is entered into as of April 28 1989.
WITNESSETH:
WHEREAS, Term Lenders, Borrower and Agent have entered into the Amended
Term Loan Agreement; and
WHEREAS, the parties wish to amend certain provisions of the Amended
Term Loan Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the Amended Term Loan Agreement is hereby amended as follows:
1. The definition of the term "Insurance Policies" set out in Article 1
is deleted and replaced with the following definition:
"The term 'Insurance Policies' means the insurance policies
specified in Exhibit N to this Agreement, the insurance policies
specified in Article XIV of the TUEC Agreement, the insurance
policies specified in Article XIII of the Steam Agreement and such
other insurance policies as Agent may reasonably require and are
reasonably commercially available for risks and/or contingencies
that are not covered to the reasonable satisfaction of Agent by
existing policies and are customary for comparable projects of
similar nature and size. All Insurance Policies shall (1) conform to
the relevant provisions of Exhibit N, the TUEC Agreement and/or the
Steam Agreement; (2) be issued by companies and in form and
substance reasonably satisfactory to Agent; (3) have Agent, for the
account of the Term Lenders, named as an additional insured or, if
applicable, a lenders' loss payable (provided, however, that Agent
and
<PAGE>
Term Lenders shall be named as beneficiaries of the worker's
compensation policy); and (4) have a provision giving Agent thirty (30)
days' prior notice of cancellation or of material change in the
coverage."
2. The definition of the term "LIBOR" set out in Article 1 is deleted and
replaced with the following definition:
"The term 'LIBOR' means, for each Advance (or where the context so
requires, the aggregate of the Advances then outstanding), for Interest
Periods of one (1), three (3), six (6) and twelve (12) months, as
selected by Borrower, or such other period as requested by Borrower and
approved by Agent, for the principal amount of the Term Loan then
outstanding, the per annum rate of interest at which dollar deposits in
the amount of such outstanding principal amount are, or would be,
offered for such Interest Period in the London interbank market at 11
a.m. London time two (2) Banking Days prior to the commencement of such
Interest Period, as reported in the Reuter's Monitor for such date
under the page code "LIBOR," and in case of variations in rates, the
arithmetic average thereof rounded upward if necessary expressed as a
percentage rounded to five (5) decimal places, calculated by Agent;
provided, however, that if such reported rate is unavailable, "LIBOR"
shall mean, for each Interest Period, for each Advance (or, where the
context so requires, the aggregate of Advances then outstanding), the
per annum rate of interest at which dollar deposits in the amount of
such Advance are, or would be, offered by KOP and CS to prime banks in
the London interbank market at 11 a.m. London time two (2) Banking Days
prior to the commencement of such Interest Period, and in the case of
variations in rates, the weighted average thereof rounded upward if
necessary expressed as a percentage rounded to five (5) decimal places,
calculated by Agent.
3. The definition of the term "O&M Contract" set out in Article 1 is
amended by deleting the date "December 30, 1988" from such definition
and replacing such date with the date "as of September 30, 1988".
2
<PAGE>
4. The definition of the term "Required Maintenance Amount" set out in
Article 1 is deleted in its entirety.
5. Section 2.3(l) is deleted in its entirety and is hereby replaced with
the following provision:
"(1) Borrower shall have contracted, in the aggregate, for either (i)
a minimum of 12,800,000 MM BTUs for each remaining year of this
Agreement or (ii) such amount of natural gas as may from time to time be
reasonably deemed necessary by the Co-Managers, after consultation with
Borrower, or as Borrower may reasonably recommend, subject to the
reasonable approval of the Co-Managers in consultation with the
Independent Engineer, to meet in a timely manner all of its obligations
under the TUEC Agreement and this Agreement (the "Base Requirement").
The Base Requirement may be provided from one or more of the following
sources:
"(i) Natural Gas Clearinghouse Inc., pursuant to that certain
contract, dated as of December 11, 1986, by and between Natural Gas
Clearinghouse Inc. and FSOC, as the same has been assigned and may be
amended from time to time (the "Natural Gas Clearinghouse Contract");
"(ii) Certain Qualified gas reserves currently owned or controlled by
FSGC or FSOC and more fully described on Exhibit G hereto, which, if
owned, shall be pledged or, if controlled, shall be dedicated to the
Facility until such time and to the extent necessary to fulfill the
Base Requirement. For purposes of this Section 2.3(l), the term
"Qualified" shall mean such natural gas reserves or natural gas supply
arrangements as are reasonably approved by the Independent Engineer and
the Agent; and
"(iii) Qualified natural gas reserves or natural gas supply
arrangements as and when the same are acquired and/or entered into by
FSGC, a wholly owned subsidiary thereof or an affiliate thereof,
including, without limitation, that certain Purchase and Sale Agreement,
dated November 21, 1986, by and between Borrower and Fina.
"At Borrower's request and expense, the Agent shall promptly release
from dedication any
3
<PAGE>
and all of the gas reserves in excess of the Base Requirement ("Excess
Reserves"); provided, however, that all of the gas reserves which
remain subject to dedication will contain sufficient unproduced natural
gas to meet the Base Requirement (as reasonably determined by the
Independent Engineer) after release of the Excess Reserves. Borrower
also shall have the right to substitute from time to time other
leases, agreements and properties, including gas purchase contracts or
other supply arrangements with third parties, for those subject to
dedication, and Agent shall promptly execute a release from dedication
in recordable form of all natural gas produced from or attributable to
such substituted gas reserves; provided, however, that such new gas
reserves shall be Qualified gas reserves; and provided further, that
all of the gas reserves which are subject to dedication will contain
sufficient unproduced natural gas to meet the Base Requirement (as
reasonably determined by the Independent Engineer) after such
substitution is effected. Any interests, leases, agreements and
properties that Borrower proposes for substitution hereunder are
subject to the approval of Independent Engineer and Agent in accordance
with this provision. Such substitution shall occur either by (i)
amendment of currently recorded dedication agreements to reflect such
substitution or (ii) execution of new dedication agreements (in form
and substance reasonably acceptable to Agent and the other parties
thereto) dedicating such new interests, leases, agreements and
properties and filing of such amendment or new dedication agreements in
the counties where the new interests, leases, agreements and properties
are located and filing a release of dedication with respect to the
released gas reserves. Any releases required herein from Agent shall
not be unreasonably delayed.
"All arrangements for the supply of natural gas to the Facility shall
(i) be on terms and conditions reasonably satisfactory to the
Co-Managers, (ii) be sufficient to supply the Facility's Base
Requirement; (iii) include the execution and delivery of transportation
agreements as deemed necessary and reasonably approved by Agent and
Independent Engineer; and (iv) during any given year, provide for
the sale
4
<PAGE>
of natural gas at a price not in excess of the annual weighted average
price set forth opposite such year as provided on Exhibit H hereto.
"Anything in this Section 2.3(l) to the contrary notwithstanding, in
the event that the Independent Engineer reasonably determines that (i)
the arrangements then in place for the supply of natural gas to the
Facility are insufficient to meet the Base Requirement or the
requirements of Section 4.36 or (ii) adjustments of the Base
Requirement pursuant to this Section 2.3(l) or a change in the criteria
for establishing the Base Requirement has rendered the then-existing
arrangements for the supply of gas insufficient to meet the Base
Requirement, Borrower shall within six (6) months from the date of
notice of such determination make any additional arrangements for the
supply of gas as are necessary to meet the Base Requirement or the
requirements of Section 4.36. Such six (6) month grace period will be
available only if the Borrower is able to establish to the Independent
Engineer's reasonable satisfaction that Borrower has made arrangements
assuring the delivery of natural gas to the Facility for a 365-day
period in an amount not less than the amount determined for such period
in calculating the Base Requirement at a price not in excess of that
specified on Exhibit H; and"
6. Section 2.3(n) is hereby renumbered as Section 2.3(m).
7. Section 4.4(b) is deleted in its entirety and is hereby replaced with
the following provision:
"(b) The Agent shall deposit and apply funds in the Maintenance
Reserve Account in accordance with this provision. When requested by
the Borrower, amounts may be withdrawn from the Maintenance Reserve
Account for budgeted and non-discretionary Operating Costs, or any
other reasonable expense in connection with the Property or the
Facility, and deposited in the Special Operating Account. On each Term
Loan Repayment Date, the Agent shall withdraw from the Project Control
Account and deposit into the Maintenance Reserve Account, in accordance
with Section 4.1 hereof, an amount equal to one-fourth (1/4) of the
amount set forth on Exhibit M to this
5
<PAGE>
Agreement, as the same may be amended from time to time by the Borrower
with the consent of the Agent and the Independent Engineer, for the
calendar year in which such Term Loan Repayment Date occurs, plus any
amounts previously payable into the Maintenance Reserve Account pursuant
to this provision which were not so deposited, plus any amounts
withdrawn or disbursed from the Maintenance Reserve Account for
non-budgeted Operating Costs."
8. Section 4.9(g) is amended by deleting the word "and" at the end of such
provision, and Section 4.9(h) is renumbered as Section 4.9(i). A new
paragraph is added immediately following Section 4.9(g) reading as
follows:
"(h) not less than forty-five (45) days prior to the commencement of
each Operating Year (as defined in the O&M Contract) beginning with
Operating Year 1996, a dedicated reserve report containing the
following information:
"(1) An itemized list of all properties currently pledged or dedicated
to the satisfaction of the Base Requirement;
"(2) With respect to each property so itemized, the name(s) of the
record-title owner(s) thereof. If such record-title owner is FSOC
or FSGC, then the recording information reflecting such ownership;
if such owner is someone other than FSGC, then a description of
the contractual relationship between such owner and FSGC which
gives rise to the control by FSGC of any gas produced from such
property;
"(3) With respect to each such property, the quantity of proven
reserves (subdivided into proved developed producing, proved
behind pipe, and proved undeveloped categories) assigned thereto
by FSGC's internal or outside reserve engineers; and
"(4) With respect to each property for which proved behind pipe or
proved undeveloped reserves are assigned, a description of FSGC's
development plans for such reserves; and"
6
<PAGE>
9. Section 4.15 is deleted in its entirety and is hereby replaced with the
following provision:
"4.15 Compliance with Laws.
"Borrower shall ensure that the Facility is operated and
administered in accordance with all applicable Governmental
Requirements, including without limitation all regulations and statutes
governing environmental matters, unless such non-compliance would not
impair (i) the ability of the Borrower to meet its obligations under
this Agreement, (ii) any of the security interests granted to the Term
Lenders under any of the Security Documents or (iii) the operation of
the Facility in accordance with the performance standards under Article
VIII of the O&M Agreement and in accordance with the TUEC Agreement,
and shall ensure that the FERC Qualifying Facility Certificate is
maintained for the Facility. Borrower shall timely comply with all
applicable Governmental Requirements, unless such non-compliance would
not impair (i) the ability of the Borrower to meet its obligations
under this Agreement, (ii) any of the security interests granted to the
Term Lenders under any of the Security Documents or (iii) the operation
of the Facility in accordance with the performance standards under
Article VIII of the O&M Agreement and in accordance with the TUEC
Agreement, and if available, deliver to Agent evidence thereof, and if
not available, certify to Agent that Borrower is in such compliance.
Borrower assumes full responsibility for the compliance of the Plans
and the Facility with all applicable Governmental Requirements and with
sound and reasonable engineering practices and, notwithstanding any
approvals by Term Lenders, they shall have no obligation or
responsibility whatsoever for the Plans or any other matter incident to
the Property or the design construction, testing, start-up or operation
of the Facility."
10. Section 4.36 is deleted in its entirety and is hereby replaced with the
following provision:
"4.36 Gas Supply Arrangements.
"Borrower shall at all times during the term hereof maintain gas
supply arrangements
7
<PAGE>
which are, to the reasonable satisfaction of Term Lenders,
sufficient in form and substance to satisfy the Base Requirement.
Without limiting the foregoing, Borrower acknowledges and agrees that
at any time after the date which is one (1) year prior to the date of
expiration of the Natural Gas Clearinghouse Inc. Contract, or at any
time during which such contract is not in full force and effect, upon
the reasonable recommendation of the Independent Engineer taking into
account any term remaining under the Natural Gas Clearinghouse Contract
and any other existing Qualified gas supply arrangements pursuant to
Section 2.3(l)(iii) above, Term Lenders may require that any portion,
or all, of the gas reserves which are to be utilized under Section
2.3(l)(ii) necessary to supply the gas required by the Facility for a
period of up to two (2) years as determined in calculating the Base
Requirement, at a price not in excess of that specified on Exhibit H,
must be categorized by the Independent Engineer as proved developed
producing reserves."
11. Exhibit D to the Amended Term Loan Agreement is deleted in its entirety
and is replaced with the document attached to this Amendment No. 2
labeled as Exhibit D.
12. The document attached to this Amendment No. 2 labeled as Exhibit N is
incorporated in the Amended Term Loan Agreement as Exhibit N thereto.
Except as specifically provided in this Amendment No. 2, no other
amendments, revisions or changes to the Amended Term Loan Agreement are made or
permitted hereby. All other terms and conditions of the Amended Term Loan
Agreement remain in full force and effect and apply fully to this
Amendment No. 2.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their respective officers hereunto duly
authorized as of the date first above written.
BORROWER
POWER RESOURCES, INC.
By: /s/ illegible
----------------------------
Name:
Title: CFO
8
<PAGE>
TERM LENDERS
KANSALLIS-OSAKE-PANKKI
By: /s/ William S. Bennett
------------------------------
Name: William S. Bennett
Title: Assistant Treasurer
By: /s/ Michael R. Chalian
-----------------------------
Name: Michael R. Calian
Title: First Vice President
CREDIT SUISSE
By: /s/ illegible
------------------------------
Name
Title:
By:
------------------------------
Name
Title:
AGENT
CREDIT SUISSE
By: /s/ illegible
---------------------------------
Name
Title:
By:
-----------------------------------
Name:
Title:
NY:7862P
9
<PAGE>
EXHIBIT "D"
SAMPLE CALCULATION OF DEBT SERVICE COVERAGE RATIO
A. Net Revenues
1. Gross Revenues:
-- TUEC Payments
-- Interest
-- Other
Total:
2. Less Operating Costs:
-- O&M Costs
-- Fuel Costs
-- Insurance
-- Taxes
-- Contributions to Maintenance Reserve Account
in accordance with Exhibit M and amounts in payment
of contributions previously payable in accordance
with Exhibit M which were not so deposited
-- Other
Total:
TOTAL NET REVENUES:
B. Debt Service
-- Principal
-- Interest
TOTAL DEBT SERVICE:
FORMULA
A
Debt Service Coverage Ratio = ----
B
<PAGE>
EXHIBIT "N"
INSURANCE COVERAGE
(a) Owner shall provide and maintain the following insurance coverages
provided that the required limits may be satisfied by any combination of
primary or excess insurance in Owner's sole discretion:
(i) insurance for so-called "all risk" property damage or
destruction in an amount not less than the cost of replacement of
the Facility;
(ii) boiler and machinery breakdown coverage;
(iii) Comprehensive General Liability Insurance or equivalent form
as offered, including premises-operations, independent contractors,
products-completed operations, broad form property damage including
completed operations, blanket broad form contractual liability, and
blanket explosion, collapse and underground damage (XCU) coverage.
The policy shall contain limits of at least $1,000,000 combined
single limit each occurrence and in the aggregate where applicable;
(iv) Comprehensive Automobile Liability Insurance for all owned,
non-owned and hired automobiles with limits of liability of at
least $1,000,000 combined single limit;
(v) Excess liability insurance or equivalent form as offered
following the terms of the primary insurance set forth in
subsection (a)(iii) and (iv) above, with a combined single limit of
$20,000,000 per occurrence and in the aggregate where applicable;
and
(vi) Worker's Compensation Insurance in accordance with statutory
requirements.
(b) Owner shall provide and maintain the following insurance coverages
covering the operations of the Operator provided that the required limits
may be satisfied by any combination of primary or excess insurance in
Owner's sole discretion:
<PAGE>
(i) Comprehensive General Liability Insurance or equivalent form
as offered, including premises-operations, independent
contractors, products-completed operations, broad form property
damage including completed operations, blanket broad form
contractual liability, and blanket explosion, collapse and
underground damage (XCU) coverage. The policy shall contain limits
of at least $1,000,000 combined single limit each occurrence and
in the aggregate where applicable;
(ii) Comprehensive Automobile Liability Insurance for all owned,
non-owned and hired automobiles with limits of liability of at
least $1,000,000 combined single limit;
(iii) Excess liability insurance or equivalent form as offered
following the terms of the primary insurance set forth in
subsections (a)(i) and (ii) above, with a combined single limit of
$20,000,000 per occurrence and in the aggregate where applicable;
and
(iv) Worker's Compensation Insurance in accordance with statutory
requirements.
<PAGE>
AMENDMENT NO. 3
Amended and Restated Term Loan Agreement
This Amendment No. 3 ("Amendment No. 3") to the Amended and
Restated Term Loan Agreement dated as of December 30, 1988, as amended by
Amendment No. 1 dated as of March 1, 1989 and Amendment No. 2 dated as of April
28, 1989 (the "Amended Term Loan Agreement"), among Credit Suisse and
Kansallis-Osake-Pankki as Term Lenders, Power Resources Inc. as Borrower, and
Credit Suisse as Agent, is entered into as of June 1, 1990.
WITNESSETH:
WHEREAS, Term Lenders, Borrower and Agent have entered into the
Amended Term Loan Agreement; and
WHEREAS, the parties wish to amend certain provisions of the Amended
Term Loan Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the Amended Term Loan Agreement is hereby amended as follows:
1. The definition of the term "L/C" set forth in Article 1 is
amended by replacing the words "Section 4.3(g)" with the words "Section
4.3(h)".
2. Section 2.13 is deleted in its entirety and is replaced with the
following:
"2.13 Letters of Credit.
"Notwithstanding any provision of this Agreement to the contrary,
neither the Agent, the Term Lenders nor the Letter of Credit Bank
shall have any obligation under this Agreement to issue or to fund
a Letter of Credit for the benefit of the Borrower. All references
in this Agreement to the terms 'Letter of Credit,' 'Letter of
Credit Bank,' 'LOC Fee,' 'LOC Fronting Fee' and 'LOC Reimbursement
Obligation' (other than those references in this Section 2.13)
shall be deemed to be deleted from this Agreement in their
entirety."
<PAGE>
Except as specifically provided in this Amendment No. 3, no other
amendments, revisions or changes to the Amended Term Loan Agreement are made or
permitted hereby. All other terms and conditions of the Amended Term Loan
Agreement remain in full force and effect and apply fully to this Amendment No.
3.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers hereunto duly
authorized as of the date first above written.
BORROWER
POWER RESOURCES, INC.
By: /s/ J. Donald Dacey
-------------------------------
Name: J. Donald Dacey
Title: Senior Vice President
TERM LENDERS
KANSALLIS-OSAKE-PANKKI
By: /s/ Michael Hudson
-------------------------------
Name: Michael Hudson
Title: Vice President
By: /s/ Pekka Salo
--------------------------------
Name: Pekka Salo
Title: Assistant Vice President
CREDIT SUISSE
By: /s/ Bruce R. Brown
--------------------------------
Name: Bruce R. Brown
Title Deputy Vice President
By: /s/ Bruce W. Hurd
----------------------------------
Name: Bruce W. Hurd
Title: Assistant Treasurer
<PAGE>
AGENT
CREDIT SUISSE
By: /s/ Bruce R. Brown
--------------------------------
Name: Bruce R. Brown
Title: Deputy Vice President
By: /s/ Bruce W. Hurd
--------------------------------
Name: Bruce W. Hurd
Title: Assistant Treasurer
<PAGE>
AMENDMENT NO. 4
Amended and Restated Term Loan Agreement
This Amendment No. 4 ("Amendment No. 4") to the Amended and Restated
Term Loan Agreement dated as of December 30, 1988, as amended by Amendment No.
1 dated as of March 1, 1989, Amendment No. 2 dated as of April 28, 1989 and
Amendment No. 3 dated as of June 1, 1990 (the "Amended Term Loan Agreement"),
among Credit Suisse and Kansallis-Osake-Pankki as Term Lenders, Power
Resources, Inc. as Borrower, and Credit Suisse as Agent, is entered into as of
April 15, 1991.
W I T N E S S E T H :
WHEREAS, Term Lenders, Borrower and Agent have entered into the
Amended Term Loan Agreement; and
WHEREAS, the parties wish to amend certain provisions of the Amended
Term Loan Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the Amended Term Loan Agreement is hereby amended as follows:
1. Article 1 as amended to add the following:
"Standby Facility Commitment Letter.
The term "Standby Facility Commitment Letter" means that certain
Standby Facility Commitment Letter, dated April 15, 1991, between Borrower and
FSOC."
2. Section 4.3(c) is deleted in its entirety and replaced with the
following:
"(c) If the Debt Protection Account does not contain the Debt
Protection Amount, Agent shall withdraw from the Project Control Account and
deposit into the Debt Protection Account on each Term Loan Repayment Date, in
accordance with Section 4.1 hereof, up to sixty-six percent (66%) or, if the
most recently reported Debt Service Coverage Ratio, as calculated pursuant to
Section 4.2 hereof, is below one and one-fifth (1.20), up to one hundred
percent (100%), of the Discretionary Cash Flow of the quarter ending on such
Term Loan Repayment Date, until the Debt Protection Account contains the Debt
Protection Amount; provided, however, that
<PAGE>
if Agent withdraws any money from the Debt Protection Account to pay
Debt Service, Operating Costs or any other reasonable expense in
connection with the Property or the Facility, Borrower shall thereafter
deposit into the Debt Protection Account, on each Term Loan Repayment
Date, eighty percent (80%) of the Discretionary Cash Flow of the quarter
ending on such Term Loan Repayment Date, until an amount has been
deposited in the Debt Protection Account which, together with interest
earned on the amount remaining in the Debt Protection Account, is equal
to the withdrawn monies; and thereafter deposit into the Debt
Protection Account on each Term Loan Repayment Date up to sixty-six
percent (66%) or, if the most recently reported Debt Service Coverage
Ratio, as calculated pursuant to Section 4.2 hereof, is below one and
one-fifth (1.20), up to one hundred percent (100%), of the Discretionary
Cash Flow of the quarter ending on such Term Loan Repayment Date until
the Debt Protection Account contains the full Debt Protection Amount;
provided further, that if any calculation of the Debt Service Coverage
Ratio, as calculated pursuant to Section 4.2 hereof, is below one and
one-fifth (1.20), Borrower's Discretionary Cash Flow shall be utilized
as provided in such Section 4.2 prior to making the withdrawals and
transfers required hereunder."
3. Section 4.4(b) is amended by adding the following sentence after
the second sentence thereof:
"When requested by Borrower, amounts shall be withdrawn from the
Maintenance Reserve Account and paid to FSOC in repayment of amounts owing to
FSOC under the Standby Facility Commitment Letter in accordance with the terms
of such Standby Facility Commitment Letter."
4. Section 4.4. is amended to add subsection (g), to read in its
entirety as follows:
"(g) Amounts may be drawn by Borrower pursuant to the Standby
Facility Commitment Letter and may be applied during the term
thereof only for the purpose of providing funds for and to the extent
of any cost overruns incurred in connection with the performance of the
Maintenance Program (as defined on the Standby Facility Commitment
Letter) or to the payment of Borrower's Debt Service obligations,
provided that Agent shall have first applied to the payment of such
Debt Service obligations all funds on deposit in the Debt Protection
Account available for the payment thereof."
2
<PAGE>
5. Section 4.17 is deleted in its entirety and replaced with the
following:
"4.17 Other Debt.
Borrower shall not incur any Debt, other than the Debt contemplated
in this Agreement or in the O&M Contract or incurred pursuant to the Standby
Facility Commitment Letter, which, when aggregated with any Debt outstanding
under the Standby Facility Commitment Letter, liens permitted pursuant to
Section 4.10(i) and voluntarily-incurred contingent liabilities not incurred
in the ordinary course of business (and excluding all contractual
obligations incurred in accordance with Section 4.18), exceeds Five Hundred
Thousand dollars ($500,000) in the aggregate at any one time outstanding,
without the prior written consent of Agent; provided, that no such debt may
be incurred unless such debt is fully subordinated to all of Borrower's
obligations under this Agreement and the other Loan Instruments; and
provided further, additional subordinated indebtedness shall be approved by
the Agent if such indebtedness would be incurred on terms and conditions
approved by the Agent, such approval not to be unreasonably withheld or
delayed, and such indebtedness, when aggregated with all other such
subordinated indebtedness of Borrower, would not, in the reasonable opinion
of Agent, impair the ability of the Borrower to perform its obligations
under this Agreement, the other Loan Instruments and the Project
Documents."
Except as specifically provided in this Amendment No. 4, no other
amendments, revisions or changes to the Amended Term Loan Agreement are made
or permitted hereby. All other terms and conditions of the Amended Term Loan
3
<PAGE>
Agreement remain in full force and effect and apply fully to this
Amendment No. 4.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their respective officers hereunto duly
authorized as of the date first above written.
BORROWER
POWER RESOURCES, INC.
By: /s/ ILLEGIBLE
------------------------------
Name: ILLEGIBLE
Title: EVP-CEO
TERM LENDERS
KANSALLIS-OSAKE-PANKKI
By: /s/ Martha P. Toll-Reed
------------------------------
Name: Martha P. Toll-Reed
Tit1e: Assistant Vice President
By: /s/ Nicholas A. Matacchieri
------------------------------
Name: Nicholas A. Matacchieri
Title: Assistant Treasurer
CREDIT SUISSE
By: /s/ Tony K. Muoser
------------------------------
Name: Tony K. Muoser
Title: Associate
By: /s/ Bruce W. Hurd
------------------------------
Name: Bruce W. Hurd
Title: Associate
4
<PAGE>
AGENT
CREDIT SUISSE
By: /s/ Tony K. Muoser
------------------------------
Name: Tony K. Muoser
Title: Associate
By: /s/ Bruce W. Hurd
------------------------------
Name: Bruce W. Hurd
Title: Associate
5
<PAGE>
AMENDMENT NO. 5 TO AMENDED
AND RESTATED TERM LOAN AGREEMENT
This Amendment No. 5 (this "Amendment") to the Amended and Restated
Term Loan Agreement, dated as of December 30, 1988, as amended by Amendment
No.1, dated as of March 1, 1989, as further amended by Amendment No. 2,
dated as of April 28, 1989, as further amended by Amendment No. 3, dated as
of June 1, 1990 and as further amended by Amendment No. 4, dated as of April
15, 1991 (as so amended, the "Amended Term Loan Agreement"), among Credit
Suisse and Merita Bank Ltd, Grand Cayman Branch (formerly Kansallis-Osake-
Pankki) as Term Lenders, the other Term Lenders named therein, Power
Resources, Inc., as Borrower, and Credit Suisse, as Agent, is entered into
as of June 29, 1995.
RECITALS
WHEREAS, Term Lenders, Borrower and Agent have entered into the
Amended Term Loan Agreement;
WHEREAS, the parties wish to amend certain provisions of the Amended
Term Loan Agreement as set forth herein; and
WHEREAS, capitalized terms used but not defined herein shall have the
meanings given to such terms in the Amended Term Loan Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the Amended Term Loan Agreement is hereby amended as follows:
1. Amendment of Certain Definitions. The following definitions
contained in Article I of the Amended Term Loan Agreement are hereby amended
as follows:
a. The definition of "Accounts" is amended so that the existing
definition is deleted in its entirety and replaced with the following:
The term "Accounts" means the Additional Collateral Account, the
Debt Protection Account, the Maintenance Reserve Account, the
Project Control Account, the Special Operating Account and the
Subordinated Fuel Component Account.
b. The definition of "Operating Costs" is amended (i) by adding the
words "(other than the Subordinated Fuel Component)" immediately after the
words "fuel costs" in the sixth line of such definition, and (ii) by adding
the words "or the Subordinated Fuel Component" prior to the period at the
end of the last sentence of such definition.
c. The definition of "Project Documents" is amended so that the
existing subsection (viii) thereof is deleted in its entirety and replaced
with the following:
(viii) Gas Sale and Purchase Agreement, dated June 29, 1995, between
Dreyfus and Borrower (the "Dreyfus Agreement");
<PAGE>
Security Agreement dated June 29, 1995 between FSGC and Borrower;
Consent and Agreement dated June 29, 1995, among Dreyfus, Borrower and
Agent; the consent by Westar Transmission Company (formerly Cabot Gas
Supply Corporation), a Delaware corporation, or any successor thereto,
to the assignment and collateral assignment of any gas transportation
arrangements by FSGC and Borrower, respectively; and all other gas
supply arrangements and pledges or dedications of Qualified gas
reserves and substitutes therefor.
d. The definition of "Projected Operating Costs" is amended by
adding the words "(other than the Subordinated Fuel Component)" immediately
after the words "fuel costs" in the sixth line of such definition, and
(ii) by adding the words "or the Subordinated Fuel Component" immediately
prior to the period at the end of the last sentence of such definition.
2. Certain Additional Definitions. The following definitions are
hereby added to Article I of the Amended Term Loan Agreement in appropriate
alphabetical order:
a. Dreyfus. The term "Dreyfus" means Louis Dreyfus Natural Gas
Corp., an Oklahoma corporation.
b. Extraordinary Capital Expenditure. The term "Extraordinary
Capital Expenditure" means (i) any unforeseen, necessary capital expenditure
in connection with the operation and maintenance of the Facility not
anticipated in the Operating Budget and not capable of being funded from
funds available in the Maintenance Reserve Account or, if Borrower shall so
direct, any expenditure which, if an appropriate amount were then on deposit
in the Maintenance Reserve Account, could be paid in accordance with
Section 4.4(b) hereof and, (ii) any amounts due and payable to Dreyfus under
the Dreyfus Agreement which result from any period of suspended gas delivery
pursuant to Section 13.2(b) of the Dreyfus Agreement.
c. Subordinated Fuel Component. The term "Subordinated Fuel
Component" means the amount described as the "Subordinated Fuel Component" in
the Gas Supply Agreement, dated December 30, 1988 between FSGC and Borrower, as
amended by Amendment No. 1, dated March 1, 1989, Amendment No. 2, dated May 19,
1989, and Amendment No. 3, dated June 29, 1995.
d. Subordinated Fuel Component Account. The term "Subordinated Fuel
Component Account" means the interest bearing account established by Borrower
with the Agent in accordance with the terms of Section 4.4A of this Agreement.
3. Payment of Subordinated Fuel Component. Section 4.1(f) of the
Amended Term Loan Agreement shall be replaced in its entirety with the
following:
(f) From and after the date of the First Advance, Agent shall, on the
last day of each month, after making the withdrawals specified in
subpart (e) above, withdraw from the
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Project Control Account, and transfer, in accordance with the terms of
this Agreement and in the following order, (1) into a Maintenance
Reserve Account maintained by Borrower with the Agent (Account No.
19960504) (the "Maintenance Reserve Account"), any deposits due and
payable on such date, (2) into the Debt Protection Account, any amounts
due and payable on such date, and (3) into the Subordinated Fuel
Component Account, an amount equal to the Subordinated Fuel Component
then due and not yet paid to FSGC.
4. Amendment to Project Control Account. Section 4.1(g) of the Amended
Term Loan Agreement shall be replaced in its entirety with the following:
(g) From and after the date of the First Advance, Agent shall, after
making withdrawals specified in subpart (f) above, withdraw from the
Project Control Account on each Term Loan Repayment Date, and apply in
accordance with the terms of this Agreement and in the following order,
the Debt Service due and payable on such date, and, any deposits to the
Additional Collateral Account due and payable on such date; provided,
however, that if any Letters of Credit issued pursuant to Section 2.13
hereof are outstanding on such Term Loan Repayment Date, the Agent
shall provide for a retainage in the Project Control Account on such
Term Loan Repayment Date of an amount determined by the Agent to be
equal to the LOC Fees accrued as of such date on the borrowing
supported by such Letters of Credit.
5. Subordinated Fuel Component Account. The following new Section 4.4A
is hereby added to the Amended Term Loan Agreement:
4.4A Subordinated Fuel Component Account.
(a) On or prior to the date hereof, Borrower shall open, and shall
thereafter maintain in accordance with the provisions hereof, an
account with the Agent (Account No. 19960507) for the purpose of
providing for Extraordinary Capital Expenditures in connection with the
operation and maintenance of the Facility, for the purpose of providing
for the payment of Debt Service, and for the purpose of the
replenishment of the Debt Protection Account, in the event Borrower has
insufficient funds available to satisfy any such Extraordinary Capital
Expenditure and Debt Service requirements (the "Subordinated Fuel
Component Account"). Monies in the Subordinated Fuel Component Account
may be invested in Permitted Investments by Borrower.
(b) If, at any time and from time to time, after making the deposits
and withdrawals in the order specified in Section 4.1, the Agent
determines that (A) the Project Control Account does not contain
sufficient funds to make the Debt Service payments required under
Section 4.1(g) and, in accordance with the terms of Section 4.3(b)
hereof, withdraws money from the Debt Protection Account to pay Debt
Service in such amount, determined by Agent, as is necessary to cover
such Debt Service shortfall, or (B) the Debt Protection Account has on
deposit therein an amount which is less than the then applicable Debt
Protection Amount, then, in either such case, to the extent funds are
then on deposit in the Subordinated Fuel Component Account, the Agent
shall withdraw from the Subordinated Fuel Component Account for deposit
into the Debt Protection Account such amount as is necessary to fully
replenish the Debt Protection Account up to the then applicable Debt
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<PAGE>
Protection Amount. If, at any time and from time to time, after making
all applications required pursuant to the preceding sentence and/or as
may otherwise be required to be made pursuant to Section 4.1 hereof,
funds remain on deposit in the Subordinated Fuel Component Account and
the Agent determines that the Project Control Account and the
Maintenance Reserve Account do not contain sufficient funds to satisfy
Extraordinary Capital Expenditure requirements in connection with the
operation and maintenance of the Facility, then, to the extent funds
are then remaining on deposit in the Subordinated Fuel Component
Account, the Agent shall withdraw from the Subordinated Fuel Component
Account such amount, determined by Agent, as is necessary to cover such
Extraordinary Capital Expenditure shortfall and apply such amount to
(or provide such amount to the Borrower for application to) the payment
of such Extraordinary Capital Expenditure shortfall.
(c) So long as no Event of Default (or event that with the passage of
time, the giving of notice or both, would constitute an Event of
Default) has occurred and is continuing, then on the second Term Loan
Repayment Date following October 1, 1995 and on each Term Loan
Repayment Date thereafter, subject to the proviso below in this
paragraph (c), fifty percent (50%) of all funds then on deposit in the
Subordinated Fuel Component Account shall be released to FSGC, or to
such other person as the Agent shall be legally required to make such
delivery, so long as (i) the Debt Service due and payable on the
applicable Term Loan Repayment Date has been paid in full, (ii) the
amount on deposit in the Debt Protection Account is equal to or exceeds
the then applicable Debt Protection Amount, and (iii) all Extraordinary
Capital Expenditure requirements in connection with the operation and
maintenance of the Facility, whether then payable or then identified,
have been satisfied or provided for in full; provided, however, any
such release to FSGC or such other person shall be made only if, and
then only to the extent that, after giving effect to such release, an
amount equal to the aggregate of the Subordinated Fuel Component
otherwise due to FSGC for the immediately preceding three (3) month
period remains on deposit in the Subordinated Fuel Component Account.
(d) Borrower hereby irrevocably authorizes Agent, in Borrower's name
or in Agent's name, to make withdrawals from the Subordinated Fuel
Component Account pursuant to the terms of this Agreement.
(e) Borrower hereby pledges to Agent and the Term Lenders and grants
to them a security interest in the Subordinated Fuel Component Account
and all monies on deposit therein (including the interest paid on such
amount) for the purpose of securing all of Borrower's obligations to
them under this Agreement and under the other Loan Instruments.
(f) At any time when an Event of Default shall have occurred and is
continuing, and the applicable grace period, if any, shall have
expired, Agent may apply any monies in the Subordinated Fuel Component
Account to the payment of Borrower's obligations to the Term Lenders
and Agent in such order of application as the Agent may determine in
its sole discretion. Borrower shall provide Agent with the
authorization necessary to effectuate such transactions. Prompt
notification shall be provided by Agent to Borrower of the exercise of
any such rights.
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<PAGE>
(g) Upon payment in full of all obligations of Borrower to Agent and
the Term Lenders under this Agreement and the other Loan Instruments,
the monies on deposit in the Subordinated Fuel Component Account,
together with the interest paid thereon, if any, will be released to
Borrower, or to such other person as the Agent shall be legally
required to make such delivery.
6. Governing Law. This Amendment shall be governed by and construed
and interpreted in accordance with the laws of the State of New York,
without reference to principles of conflicts of laws (other than Section
5-1401 of the New York General Obligations Law).
7. No Other Amendments. Except as specifically provided in this
Amendment, no other amendments, revisions or changes to the Amended Term
Loan Agreement are made or permitted hereby. All other terms and conditions
of the Amended Term Loan Agreement remain in full force and effect and apply
fully to this Amendment.
8. Paragraph Headings. Paragraph headings have been inserted in this
Amendment as a matter of convenience for reference only and it is agreed
that such paragraph headings are not a part of this Amendment and shall not
be used in the interpretation of any provision of this Amendment.
9. Counterparts. This Amendment 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.
10. Amended Term Loan Agreement. From and after the date hereof,
whenever referred to in any Project Document, "Amended Term Loan Agreement"
shall mean the Amended Term Loan Agreement as amended by this Amendment.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their respective officers hereunto duly
authorized as of the date first written above.
BORROWER:
Power Resources, Inc.,
a Texas corporation
By: /s/ Mario H. Young, Jr.
------------------------------------
Name: Mario H. Young, Jr.
Title: Senior Vice President
TERM LENDERS:
Credit Suisse
By: /s/ Guy R. Cirincione
------------------------------------
Name: Guy R. Cirincione
Title: Member of Senior Management
By: /s/ Suzanne Leon
------------------------------------
Name: Suzanne Leon
Title: Associate
Merita Bank Ltd, Grand Cayman Branch
By: /s/ Gerald Chelius
------------------------------------
Name: Gerald Chelius
Title: Senior Vice President
By: /s/ Nicholas A. Matacchieri
------------------------------------
Name: Nicholas A. Matacchieri
Title: Vice President
6
<PAGE>
Bank Austria Aktiengesellschaft
By: /s/ J.A. Scay
------------------------------------
Name: J.A. Scay
Title: Vice President
By: /s/ Mark Nolan
------------------------------------
Name: Mark Nolan
Title: Assistant Vice President
Union Bank of Bavaria (Bayerische Vereinsbank)
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
Fuji Bank, Limited
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
7
<PAGE>
Z-Laenderbank Austria
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
Union Bank of Bavaria (Bayerische Vereinsbank)
By: /s/ Marianne Weinzinger
------------------------------------
Name: Marianne Weinzinger
Title: Vice President
By: /s/ James A. Lagergren
------------------------------------
Name: James A. Lagergren
Title: Assistant Vice President
Fuji Bank, Limited
By: /s/ Thomas Boylan
------------------------------------
Name: Thomas Boylan
Title: Vice President
By:
------------------------------------
Name:
Title:
7
<PAGE>
Gentra Limited
By: /s/ P.R. Marsh
------------------------------------
Name: P.R. Marsh
Title: Director
By: /s/ M.A. Ferguson
------------------------------------
Name: M.A. Ferguson
Title: Director - Credit Management
Agent:
Credit Suisse
By: /s/ Guy R. Cirincione
------------------------------------
Name: Guy R. Cirincione
Title: Member of Senior Management
By: /s/ Suzanne Leon
------------------------------------
Name: Suzanne Leon
Title: Associate
8
<PAGE>
AMENDED AND RESTATED POWER SALES AGREEMENT
This Amended and Restated Power Sales Agreement ("Power Agreement") is
made effective as of this lst day of November, 1998 ("Effective Date"), by and
between CalEnergy Minerals LLC ("Buyer"), having an office at 302 South 36th
Street, Suite 400-L, Omaha, Nebraska 68131, and Salton Sea Power L.L.C.
("Seller"), having an office at 302 South 36th Street, Suite 400-K, Omaha,
Nebraska 68131.
INTRODUCTION
1. Seller proposes to construct and operate Seller's Plant and Buyer
proposes to construct and operate Buyer's Plant.
2. Buyer requires electrical energy in order to operate Buyer's Plant.
Buyer desires to purchase electrical energy from Seller, and Seller is willing
to sell electrical energy to Buyer, subject to the terms and conditions of this
Power Agreement.
3. For and in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, including
payment of ten dollars from Buyer to Seller, the receipt and sufficiency of
which is hereby acknowledged, Buyer and Seller agree as follows:
SECTION 1.0
GENERAL
1.1 Amendment. From and after the date hereof, the terms of that
certain Power Sales Agreement dated as of October 13, 1998 by and among Buyer
and Seller (the "Original Agreement") shall be amended and restated in their
entirety to read as set forth in this Power Agreement and the terms of this
Power Agreement shall govern and control the rights and obligations of the
parties, notwithstanding any conflict between the terms of this Power Agreement
and the Original Agreement.
1.2 Definitions. Capitalized terms used herein and not defined herein
shall have the meanings set forth in Exhibit A hereto, which Exhibit A is hereby
incorporated by reference, and shall include the plural as well as the singular.
1.3 Certain References. Unless otherwise specified, all references in
this Power Agreement to Sections, Exhibits and other subdivisions are references
to the Sections, Exhibits and other subdivisions of this Power Agreement. Unless
otherwise specified, all references in this Power Agreement to "herein",
"hereunder", "hereof", or words of similar import are references to this Power
Agreement as a whole and not to any particular Section, Exhibit or other
subdivision.
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SECTION 2.0
SALE AND PURCHASE OF ELECTRICITY
2.1 Sale and Purchase of Electricity. Subject to all the terms and
conditions of this Power Agreement, Seller shall sell and deliver to Buyer, and
Buyer shall purchase from Seller for the consideration provided herein, at the
Power Delivery Points, the full requirements for electrical energy of Buyer's
Plant. Buyer shall have no obligation to design, construct, operate or maintain
Buyer's Plant so as to use any particular quantity of electricity.
2.2 Initial Conditions Precedent. Seller's obligations to sell and
deliver, and Buyer's obligations to purchase and pay for, electrical energy
hereunder shall be subject to satisfaction of the following conditions
precedent:
(i) Buyer shall desire electricity for testing or operation
of all or a portion of Buyer's Plant; and
(ii) Seller's Plant shall be ready to commence commercial
operation.
2.3 Quantity. Notwithstanding any provision herein to the contrary, (i)
Seller shall not sell more than its Power Production Capacity over any sixty
minute period, and (ii) Seller shall have no obligation to deliver or make
available power at any time in excess of the Peak Demand and Seller's obligation
to make available or deliver power shall be limited to delivering such power up
to the Peak Demand that Buyer calls upon for the operation of Buyer's Plant at
the Power Delivery Points.
2.4 Electrical Energy Specifications.
2.4.1 The electrical energy delivered by Seller to Buyer
hereunder shall be in the form of three-phase alternating current at a frequency
of approximately 60 Hertz.
2.4.2 The voltage of the power delivered by Seller to Buyer
shall be the Applicable Voltage unless otherwise agreed by the Parties in
writing.
2.5 Interruptions by Seller. Subject to Section 2.2, Seller may
interrupt deliveries of power and associated energy hereunder for a Forced
Outage, a Scheduled Outage or Force Majeure as provided under Section 9.0.
Seller shall use its best efforts to minimize Forced Outages or Force Majeure
outages and Seller shall submit notice to Buyer in writing of any impending
shutdown as soon as is reasonably practicable, and at least seven (7) days in
advance of any Scheduled Outage.
2.6 Backup, Makeup and Emergency Power. Buyer shall make such
arrangements as it deems appropriate for Backup Power, Emergency Power and
Makeup Power all at Buyer's own expense. Such arrangements shall not
unreasonably interfere with the performance by either Party
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<PAGE>
hereunder. Seller shall have no obligation to provide Backup Power, Emergency
Power and Makeup Power.
SECTION 3.0
TERM AND TERMINATION
3.1 Term. This Power Agreement shall commence on the Effective Date
and, unless terminated earlier in accordance with the terms hereof, shall
continue in effect for a period until thirty-three (33) years from the date of
initial deliveries hereunder, and thereafter shall continue in effect unless and
until terminated by a Party by written notice to the other Party given at least
120 days prior to the date such termination is to become effective.
SECTION 4.0
PRICE AND PAYMENTS
4.1 Energy Payment. The price for electrical energy purchased and
received by Buyer hereunder shall be the Applicable Price. Buyer shall pay to
Seller a monthly energy payment based upon (i) the electrical energy purchased
and received by Buyer hereunder in each hour of such month and (ii) the
Applicable Price; provided, however, such monthly payment shall be reduced by
the Transmission Cost Adjustment Factor. If any of the elements used to
calculate the Applicable Price or Transmission Cost Adjustment Factor ceases to
exist, becomes unavailable or is changed so that the energy payment does not
reasonably reflect the net price available to Seller for short term sales of
electricity by Seller to the California Power Exchange at Mirage, less
transmission costs and line losses to deliver such electricity to Mirage
("Available Price"), the Parties shall negotiate in good faith in an effort
agree on other elements in order to establish a mechanism for calculating a
price that is comparable to the Available Price or Transmission Cost Adjustment
Factor.
4.2 Invoicing and Payment.
4.2.1 Seller shall render to Buyer, after the end of each
Billing Month, one or more invoices setting forth the charges as specified in
this Section 4.0 for such Billing Month and for charges, if any, for any prior
Billing Month that have not been previously invoiced. Buyer shall pay all
amounts owing within thirty (30) days following receipt of Seller's invoices for
such amounts.
4.2.2 If Buyer in good faith disputes the amount of any
invoice delivered by Seller, or any part of it, Buyer shall promptly notify
Seller in writing of the amount in dispute and the reasons therefor.
4.2.3 Should Buyer fail to make the full amount of any payment
when due (including any amount disputed in good faith), interest at the Interest
Rate shall accrue on the unpaid portion from the date the payment was due until
payment is made. If any amount paid by Buyer to Seller is subsequently
determined to be an overcharge by Seller, then Seller shall repay
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<PAGE>
such amount overcharged plus interest at the Interest Rate on such overcharge
from the date the payment was received by Seller until repayment is made.
4.2.4 If Buyer fails to pay (not including the withholding of
payment disputed in accordance with Section 4.2.2) the full amount of any
payment within thirty (30) days after the payment is due, Seller, upon ten (10)
days' prior written notice and in addition to any other remedies Seller may
have, may suspend service hereunder until the amount due (inclusive of interest)
has been paid in full.
SECTION 5.0
METERING
5.1 Location. Subject to Section 5.4.1, Seller shall meter power and
associated energy at the Power Delivery Points.
5.2 Tests. Not less frequently than once each year, Seller shall make
tests and inspections of meters it installs. At the request of Buyer, Seller
shall make additional tests or inspections. Buyer shall pay all costs resulting
from additional tests requested by Buyer if such tests show the meters to be
accurate within two percent (2%).
5.3 Conclusive Measurement. Invoices based on readings of metering
instruments found to be in error by not more than two percent (2%) shall not be
corrected. Invoices based on readings of metering instruments found to be in
error by more than two percent (2%), either fast or slow, shall be corrected and
credits or debits shall be made to Buyer's account on the assumption that such
error commenced at the midpoint of the period from the last previous inspection
and test to the current inspection and test. All such measurements (with any
corrections required hereunder) shall be deemed conclusive as to the amount of
power delivered hereunder.
5.4 Other Meters.
5.4.1 Seller may use meters installed by IID or another
utility to measure power delivered hereunder in lieu of installing meters
itself. In such case, at the election of Seller, meter readings, inspections and
tests, adjustments shall be made in accordance with the procedures of IID or
such utility, as applicable. At the request of Seller, Buyer shall use best
efforts to cause IID to (i) measure any power delivered hereunder that is
delivered through the facilities of IID and (ii) to provide to Buyer a monthly
statement of such deliveries, which statement Buyer shall promptly provide to
Seller.
5.4.2 Buyer may install and use such additional meters as it
may desire at its own expense, provided that such meters do not interfere with
Seller's equipment or the ability of Seller to perform its obligations
hereunder. Such meters shall not be the basis for billing unless the meters used
by Seller shall fail entirely. Buyer shall allow Seller access to any such
meters and the recorded readings therefrom.
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SECTION 6.0
INTERCONNECTION
6.1 Installation. Seller shall be responsible, at its sole cost, for
constructing, and installing, or causing to be constructed or installed, all
necessary transformers, switches, protective devices and other electrical
equipment at Seller's Plant necessary to deliver power sold hereunder at the
Power Delivery Point(s) in accordance with good industry practices. Buyer shall
be responsible, at its sole cost, for constructing, and installing, or causing
to be constructed or installed, all necessary transformers, switches, protective
devices and other electrical equipment at Buyer's Plant necessary to receive
power sold hereunder at the Power Delivery Point(s) in accordance with good
industry practices. Notwithstanding the foregoing, Seller shall remain
responsible for its obligations under the Construction Agreement. Buyer and
Seller will consult with each other regarding the design, construction and
operation of such equipment.
6.2 Maintenance. Seller shall be responsible, at its sole cost, for
operating and maintaining the electrical equipment at Seller's Plant. Buyer
shall be responsible, at its sole cost, for operating and maintaining the
electrical equipment at Buyer's Plant.
SECTION 7.0
DISTURBANCES AND CORRECTIVE EQUIPMENT
7.1 Equipment. Buyer shall not utilize, or allow to be utilized, any
equipment, appliance, or device that tends to unreasonably adversely affect
Seller's equipment or its interconnection to IID. Buyer shall maintain a
reasonable electrical balance between the phases at the Power Delivery Points.
7.2 Protective Devices. Buyer shall also install and maintain other
suitable Protective Apparatus in order to afford reasonably adequate protection
to Seller's equipment and IID against adverse conditions or disturbances
originating at Buyer's Plant and to protect Buyer's Plant from any disturbances
originating at Seller's Plant or IID. Such Protective Apparatus shall comply
with the applicable industry standards relating to such equipment.
7.3 Power Factor Correction. Unless otherwise agreed by the Parties,
Buyer shall maintain a minimum power factor of .85 at Buyer's Plant, and shall
install such power factor correction equipment as may be required for such
purpose. Seller shall be responsible for providing reactive power as may be
required to compensate for Buyer's reactive power consumption to the extent
Buyer operates above such minimum power factor level.
SECTION 8.0
SCHEDULING
8.1 Scheduling.
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8.1.1 Buyer shall provide Seller with a good faith estimate of
the quantity of electricity Buyer expects to take hereunder during each hour of
a calendar day, which estimate shall be provided to Seller no later than two
hours prior to the deadline for Seller to submit to the California Power
Exchange Seller's proposed deliveries of electricity in the California Power
Exchange day-ahead market for such calendar day; provided, however, if Buyer
fails to submit such an estimate for any calendar day, Buyer's good faith
estimate for such day shall be deemed to be the estimate applicable, or deemed
to be applicable, for the prior calendar day. The actual quantities taken by
Buyer hereunder may be either higher or lower than the applicable foregoing
estimate; provided, however, for each hour on any calendar day that the actual
quantities of electricity taken by Buyer hereunder are greater than Buyer's
foregoing good faith estimate for such hour by more than one (1) megawatt hour,
Buyer shall pay to Seller the Applicable Unscheduled Demand Amount, if any.
Seller shall not supply more than its Power Production Capacity during any 60
minute period, as a result of the foregoing or any other provision of this
Agreement, and thus Buyer shall be solely responsible for arrangements for
Makeup Power. Seller shall make a reasonable effort to minimize the Applicable
Unscheduled Demand Amount when practicable, including revisions to schedules
when it has advance notice of unscheduled demand. If Buyer's demand is less than
the good faith estimate under Section 8.8.1, Seller shall have the option to
either resell such amount for its own account or reduce generation, but shall
not recover any loss resulting therefrom.
8.1.2. In addition to the foregoing estimate, Buyer shall
provide Seller, as Seller may reasonably request from time to time, good faith
estimates of the quantities of electricity Buyer expects to take hereunder. The
Parties may agree to such other scheduling procedures as may be appropriate from
time to time.
8.2 Ramp Up and Down. Buyer shall use reasonable efforts to schedule
and implement each ramp up of power demand and ramp down of power demand at a
rate consistent with prudent operation and maintenance of Seller's Generation
Equipment. Buyer shall give reasonable advance notice of significant changes in
demand to assist Seller in operating its Generation Equipment.
8.3 Maintenance. Seller will be entitled to schedule Scheduled Outages,
and during such periods, will not be required to supply power from its
Generation Equipment or otherwise. Seller will use reasonable efforts to
schedule Scheduled Outages on a schedule which will result in a minimum
interruption of Buyer's operations. By the last day of each year, Seller and
Buyer shall each provide the other Party with a forecast of its expected
maintenance schedule for the next year and shall cooperate in coordinating such
maintenance schedules so that they coincide to the extent practicable.
SECTION 9.0
FORCE MAJEURE
9.1 Force Majeure.
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9.1.1 If either Party because of Force Majeure is unable to
perform its obligations under this Power Agreement, that Party shall be excused
from whatever performance is affected by the Force Majeure to the extent so
affected, except as to obligations to pay money, provided that:
(i) the non-performing Party, within ten (10) days after
discovering the Force Majeure, gives the other Party
notice describing the particulars of the occurrence;
(ii) the suspension of performance is of no greater scope and
of no longer duration than is required by the Force
Majeure; and
(iii) the non-performing Party uses its due diligence to
remedy its inability to perform.
9.1.2 When the non-performing Party is able to resume
performance of its obligations under this Power Agreement, that Party shall give
the other Party written notice to that effect.
9.1.3 Nothing in this Power Agreement shall require (as a
condition to claiming Force Majeure or otherwise) the settlement of any strike,
walkout, lockout, or other labor dispute on terms which, in the sole judgment of
the Party involved in the dispute, are contrary to its interest. It is
understood and agreed that the settlement of strikes, walkouts, lockouts, or
other labor disputes shall be at the sole discretion of the Party having the
difficulty.
9.1.4 In the event a Party is unable to perform due to action
by a Governmental Authority, this Power Agreement shall be amended to comply
with the legal change which caused the non-performance, but only if this Power
Agreement may be amended without creating a material adverse effect for either
Party.
9.2 Notice of Labor Disputes. Whenever there exists an actual or
potential labor dispute which is reasonably likely to delay or prevent a Party's
timely performance hereunder, such Party shall give notice thereof to the other
Party as promptly as practicable.
SECTION 10.0
COMPLIANCE WITH LAWS
10.1 Compliance with Laws. Each Party shall each comply with all
applicable laws, regulations, orders, permits and other rules of
duly-constituted Governmental Authority to the extent applicable to such Party's
performance hereunder.
SECTION 11.0
DEFAULT AND REMEDIES
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11.1 General. Subject to Section 11.4 hereof, the remedies reserved to
Buyer or Seller herein shall be cumulative and in addition to all other or
further remedies provided by law.
11.2 Non-Waiver. Failure of either Party at any time to require
performance by the other Party of any provision of this Power Agreement shall
not be deemed a continuing waiver of that provision or a waiver of any other
provision of this Power Agreement.
11.3 Event of Default.
11.3.1 An "Event of Default" under this Power Agreement shall
be deemed to exist upon the occurrence of any one or more of the following
events:
(i) Failure by either Party to make payment of any amounts
due to the other Party under this Power Agreement and
that failure continues for a period of thirty (30) days
after written notice of nonpayment; or
(ii) Failure by either Party to perform fully any other
material provision of this Power Agreement and (A) such
failure continues for a period of thirty (30) days after
written notice of nonperformance from the other Party or
(B) if within thirty (30) days the non-performing Party
commences and proceeds with due diligence to cure the
failure and the failure is not cured within ninety (90)
days or the period of time agreed to by the Parties in
writing as being necessary for the Party to cure the
failure with all due diligence; or
(iii) If by order of a court of competent jurisdiction, a
receiver or liquidator or trustee of either Party or of
any of the property of either Party shall be appointed
and such receiver or liquidator or trustee shall not
have been discharged within a period of sixty (60) days;
or if by decree of such a court, either Party shall be
adjudicated bankrupt or insolvent or any substantial
part of the property of such Party shall have been
sequestered or such decree shall have continued
undischarged and unstayed for a period of sixty (60)
days after the entry thereof; or if a petition to
declare bankruptcy or to reorganize either Party
pursuant to any of the provisions of the Federal
Bankruptcy Code, as it now exists or as it may hereafter
be amended or pursuant to any other similar state
statute applicable to such Party, as now or hereafter in
effect, shall be filed against such Party and shall not
be dismissed within sixty (60) days after such filing;
or
(iv) If either Party shall file a voluntary petition in
bankruptcy law or shall consent to the filing of any
bankruptcy or reorganization petition against it under
any similar law; or without limitation of the generality
of the foregoing, if either Party shall file a petition
or answer or consent seeking relief or assisting in
seeking relief in a proceeding under any of the
provisions of the Federal Bankruptcy Code, as it now
exists or as it may hereafter be amended or pursuant to
any other similar state statute applicable
8
<PAGE>
to such Party, as now or hereafter in effect, or an
answer admitting the material allegations of a petition
filed against it in such a proceeding; or if either
Party shall make a general assignment for the benefit of
its creditors; or if either Party shall admit in writing
its inability to pay its debts generally as they become
due; or if either Party shall consent to the appointment
of a receiver(s), trustee(s) or liquidator(s) of it or
of all or of any part of its property.
11.3.2 During any Event of Default, the Party other than the
Party in default shall have the rights:
(i) To terminate this Power Agreement; and
(ii) Subject to Section 11.4 hereof, to pursue any other
remedy provided under this Power Agreement or now or
hereafter existing at law or in equity or otherwise.
11.4 Consequential Damages. Notwithstanding any other provision of this
Power Agreement, neither Party shall be liable to the other Party for any
special, consequential or punitive damages hereunder.
SECTION 12.0
DISPUTE RESOLUTION
12.1 Matters to Be Arbitrated. Any dispute, controversy or claim
arising under or in connection with this Power Agreement shall be settled by
arbitration in accordance with this Section 12.0.
12.2 Procedure for Arbitration.
12.2.1 Matters subject to arbitration shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, as amended, on the date of this Power Agreement, which
Rules are deemed to be incorporated by reference into this clause. If there is a
conflict between the provisions of this Power Agreement and the provisions of
the Commercial Arbitration Rules of the American Arbitration Association, the
provisions of this Power Agreement shall prevail. The place of arbitration shall
be Omaha, Nebraska, or such other location as may be agreed upon by the Parties.
The arbitration shall be the sole and exclusive forum for resolution of the
dispute or controversy and the award shall be final and binding. Judgment
thereon may be entered by any court having jurisdiction.
12.2.2 A Party may demand arbitration by delivering a written
notice thereof to the other Party setting forth a complete, concise statement of
the issue(s) in dispute, the amount involved and the remedy requested.
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12.2.3 The number of arbitrators shall be three (3), each of
whom shall be disinterested in the dispute and shall have no connection with any
Party. Unless the three (3) arbitrators have been appointed by agreement of the
Parties within thirty (30) days after the date on which any Party requests the
settlement of any dispute by arbitration pursuant to this Section 12, the
American Arbitration Association shall appoint the three (3) arbitrators
referred to above. The appointing authority may appoint from among nationals of
any country, whether or not a Party is a national of that country.
SECTION 13.0
ASSIGNMENT
13.1 Assignments with Consent. Subject to Section 13.2, neither Party
shall voluntarily assign its rights nor delegate its duties under this Power
Agreement without the written consent of the other Party, except in connection
with the sale or transfer of substantially all of its properties. Consent for
assignment shall not be withheld unreasonably.
13.2 Assignments without Consent.
13.2.1 Each Party shall have the right, without the consent of
the other Party, but upon prior written notice to the other Party, to assign all
of its rights and interests (but not its obligations) under this Power Agreement
to one of its Affiliates.
13.2.2 Each Party shall have the right, without the consent of
the other Party, but upon prior notice to the other Party, to assign all of its
rights and interests (but not its obligations) under this Power Agreement as
collateral security for loans or other indebtedness. Each Party shall execute
such additional documents, including a consent to assignment or similar
document, as may be reasonably requested by the other Party in connection with
such a financing transaction.
SECTION 14.0
OTHER PROVISIONS
14.1 Notices. All notices and other communications required or
authorized under this Power Agreement shall be given in writing either by
personal delivery, registered mail, or overnight or other courier or delivery
service, addressed to the respective Party at the addresses indicated below:
To Seller: Salton Sea Power L.L.C.
302 South 36th Street
Suite 400-K
Omaha, NE 68131
Attn: General Counsel
To Buyer: CalEnergy Minerals LLC
302 South 36th Street
Suite 400-L
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<PAGE>
Omaha, NE 68131
Attn: General Counsel
Notice or communication shall be deemed effective upon receipt. Either Party may
change its address from time to time by giving written notice of such change to
the other Party.
14.2 Choice of Law This Power Agreement shall be governed by and
construed in accordance with the internal law, but not the conflicts of law
rules, of California.
14.3. Severability If any provision of this Power Agreement is held
invalid, such provision shall be deemed deleted and this Power Agreement
construed to give effect to the remaining provisions hereof. In the event any
provision of this Power Agreement is declared invalid or unenforceable, the
Parties shall promptly negotiate in good faith a new provision(s) to eliminate
the invalidity or unenforceable provision and to restore this Power Agreement as
near as possible to its original intent and effect.
14.4 Modifications. No modification, amendment, extension, renewal,
rescission, termination or waiver of any of the provisions contained herein, or
any future representation, promise or condition in connection with the subject
matter hereof, shall be binding upon either Party unless in writing and signed
by an officer on its behalf.
14.5 Headings. Headings used in this Power Agreement are included for
purposes of convenience only and shall not affect the construction or
interpretation of any of its provisions.
14.6 Entire Agreement. This Power Agreement contains the entire
agreement between the Parties with respect to the subject matter hereof, and all
prior agreements in connection with the subject matter hereof that are not
incorporated herein are not binding upon either of the Parties.
14.7 Counterparts. This Power Agreement may be executed in any number
of counterparts, and each counterpart shall have the same force and effect as
the original instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Parties hereto have executed this Power
Agreement as of the date first written above.
SALTON SEA POWER L.L.C.,
a Delaware limited liability company
By: CE Salton Sea Inc.,
a Delaware corporation, its manager
By: /s/ Douglas L. Anderson
------------------------------------
Name: Douglas L. Anderson
----------------------------------
Title: Assistant Secretary
---------------------------------
CALENERGY MINERALS LLC,
a Delaware limited liability company
By: Salton Sea Minerals Corp.,
a Delaware corporation, its manager
By: /s/ Douglas L. Anderson
------------------------------------
Name: Douglas L. Anderson
----------------------------------
Title: Assistant Secretary
---------------------------------
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EXHIBIT A
TO POWER AGREEMENT
DEFINITIONS
For the purposes of this Power Agreement, the following terms shall have the
following meanings assigned to them:
"Affiliate" means, with respect to a Party, any person, partnership, joint
venture, corporation, or other form of enterprise which directly or indirectly
controls, is controlled by, or is under common control with, such Party. For
purposes of the preceding sentence, "control" means possession, directly or
indirectly, of the power to direct or cause direction of management and policies
through ownership of voting securities, contract, voting trust, or otherwise. It
is understood and agreed that control of a company can be exercised by another
company or companies if such latter company or companies owns shares carrying
more than 50% of the votes exercisable at a general meeting (or its equivalent)
of the first mentioned company, and a particular company is deemed to be
indirectly controlled by a company or companies (the parent company or
companies) if a series of companies can be identified beginning with the parent
company or companies and ending with the particular company so related that each
company of the series except the parent company or companies is directly
controlled by one or more of the companies in the series.
"Applicable Unscheduled Demand Amount" means, for any hour during which Buyer
takes more than the applicable good faith estimate under Section 8.1.1, the net
loss incurred by Seller, if any, as a result of such unscheduled demand, not to
exceed any applicable imbalance charges incurred by Seller due to its failure to
deliver quantities it had scheduled in reliance on the good faith estimate. The
net loss to Seller shall equal its actual out of pocket costs due to a failure
to deliver scheduled amounts (not to exceed applicable imbalance charges) minus
the Applicable Price for such unscheduled demand.
"Applicable Price" means (i) the product of the PX Price for the applicable time
period, the applicable Generator Meter Multiplier, and the Loss Factor, minus
(ii) the applicable Usage Charges.
"Applicable Voltage" means, in the case of the Power Delivery Point identified
in clause (i) of the definition thereof, approximately 92,000 volts, and, (ii)
in the case of the Power Delivery Point identified in clause (ii) of the
definition thereof, approximately 13,800 volts.
"Backup Power" means power to operate a facility supplied when the principal
source of power is, or is reasonably expected to be, interrupted or curtailed
due to a Forced Outage, Scheduled Outage, Force Majeure or otherwise.
"Buyer's Plant" means (i) Buyer's proposed ion exchange, solvent extraction,
electrowinning, casting, and related facilities used in connection with the
extraction and production of zinc from geothermal brine, to be located in the
SSKGRA, (ii) subsequent additions to or expansions of the
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facilities referred to in clause (i), and (iii) all electrical equipment on
Buyer's side of the Power Delivery Points, including all protective equipment
Buyer is required to provide.
"Billing Month" means a period between successive meter readings.
"Construction Agreement" means the Construction Agreement between Seller and
IID, dated April 14, 1998, as amended from time to time.
"Emergency" means an actual or imminent condition or situation which jeopardizes
the integrity of Seller's Generation Equipment.
"Emergency Power" means the amount of power required to safely shut down and/or
maintain the facility in readiness for production which is supplied when the
principal source of power is, or is reasonably expected to be, interrupted or
curtailed due to Forced Outage, Scheduled Outage, Force Majeure or otherwise.
"Force Majeure" means any cause or condition, other than Forced Outages, beyond
the reasonable control of and without the fault or negligence of the Party
claiming Force Majeure which causes the Party to be unable to perform its
obligations, which by exercise of due foresight such Party could not reasonably
have been expected to avoid and which the Party is unable to overcome by the
exercise of due diligence. Such an occurrence may include, but is not limited
to: acts of God; labor disputes; sudden or abnormal actions of elements,
earthquake, fire; actions or inactions by Governmental Authorities; inability to
obtain on reasonably acceptable terms any public or private license, permit, or
other authorization that may be required to conduct operations; the necessity
for compliance with any applicable law, regulation, ordinance, or resolution or
order of any Governmental Authority; any restrictions upon, delays in receiving,
or failures to receive any permits, licenses, or approvals from any Governmental
Authority; explosion, breakage, or accident to facilities; partial or entire
failure of electricity or transmission under an electricity supply or
transmission agreement; inability after diligent effort to obtain workmen or
material; exhaustion of or change in the nature, properties, or composition of
the geothermal brine supply to the extent it is no longer economically feasible
to recover zinc; or any other similar cause.
"Forced Outage" means any outage of the Generation Equipment or any related
generation, transmission or distribution facilities resulting from an Emergency,
design defect, inadequate construction, operator error, interruption in fuel
supply, or a breakdown or unplanned shutdown of the mechanical, electrical or
other equipment, or of any electrical transmission or distribution facilities,
that fully or partially curtails the electrical output of Seller's Plant.
"Generation Equipment" means the turbines, generators, pipes, control equipment,
metering, protective equipment, switches, transmission or distribution lines
owned by Seller to serve Buyer's Plant, and any ancillary or related equipment
and facilities owned by Seller or others.
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<PAGE>
"Generator Meter Multiplier" means the generator meter multiplier used by the
ISO to determine net deliveries of power at Mirage, or any other factor used to
account for transmission losses for deliveries at Mirage.
"Governmental Authority" means any federal, state, or local governmental body
or any political sub-division, agency, sub-agency or instrumentality thereof,
including, without limitation, any legislature, the courts and any
quasi-adjudicative bodies with jurisdiction.
"IID" means Imperial Irrigation District, a political sub-division of the State
of California.
"Interest Rate" means, for any month, the sum of (i) the U.S. Prime Bank Lending
Rate, as published in The Wall Street Journal for the first business day of the
month for which interest is being calculated and (ii) two hundred (200) basis
points, but in no event greater than the maximum interest rate allowed by law.
"Loss Factor" means the percentage that results when (i) the percentage then in
effect for transmission losses used by IID for transmission service for Seller's
Plant to Mirage is subtracted from (ii) 100%.
"Makeup Power" means power which is used to supply demand of a facility in
excess of Peak Demand.
"Mirage" means the point of interconnection of the facilities of IID and the
facilities of Southern California Edison Company ("SCE") at SCE's Mirage
substation.
"Party" or "Parties" means Buyer and Seller, their successors or permitted
assigns.
"Peak Demand" means net generation capacity of Seller's Plant but not greater
than the lesser of 49,000 kilowatts measured on an instantaneous basis or the
Power Production Capacity.
"Power Delivery Point(s)" means (i) the point of interconnection between
Seller's Plant and the facilities of IID at Seller's Plant site, (ii) the point
of interconnection between the Seller's Plant and the portion of Buyer's Plant
commonly known as the Region I IX Plant. and (iii) such other point(s) as Seller
and Buyer may agree to in writing from time to time.
"Power Production Capacity" means the amount of power which is produced from
time-to-time using Seller's generator, net of auxiliary loads as defined by the
regulations under the Public Utility Regulatory Policy Act and interpretations
thereof.
"Protective Apparatus" means all relays, meters, power circuit breakers,
synchronizers, and other control devices as shall be agreed to by the Parties in
accordance with the requirements of Buyer as necessary for proper and safe
operation of the Generation Equipment as it interfaces with Buyer's Plant.
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<PAGE>
"PX Price" means, for any month, the day-ahead price for the hour in which a
sale occurs as applicable to sales of electricity on the California Power
Exchange at Mirage.
"Scheduled Outage" means an outage of Generation Equipment for inspection,
testing, repair, overhaul, modification, construction or maintenance of a
facility or for other pre-planned reasons.
"Seller's Plant" means all of Seller's 49 MW (net) geothermal power generation
plant and related facilities proposed to be located in Imperial County,
California, and all electrical equipment on Seller's side of the Power Delivery
Point, including protective equipment Seller is required to supply.
"SSKGRA" means the Salton Sea Known Geothermal Resource Area.
"Transmission Cost Adjustment Factor" means, for any month, an amount per kWh
electrical energy purchased and received by Buyer hereunder equal to (i) the
then applicable Transmission Service Charge under Seller's transmission service
agreement with IID for transmission service for Seller's Plant, expressed in
dollars per kilowatt - month divided by (ii) 730.
"Usage Charges" means charges imposed for delivery of power at Mirage during
periods of congestion under the ISO Tariff or any replacement tariff, which
charges shall be allocated per kWh purchased and received by Buyer.
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<PAGE>
CONFIDENTIAL MATTER
AMENDMENT NO. 2 TO
POWER PURCHASE AGREEMENT
BETWEEN
NEW YORK STATE ELECTRIC & GAS CORPORATION
AND
SARANAC POWER PARTNERS. L.P.,
THIS AMENDMENT made this 24th day of February 1994, by and between New
York State Electric & Gas Corporation, a New York corporation having an office
for the transaction of business in Binghamton, N.Y. ("Buyer"), and Saranac Power
Partners, L.P., a Delaware limited partnership having an office for the
transaction of business in Houston, Texas ("Seller"), amends that power purchase
agreement between Buyer and Seller dated April 27, 1990 and amended August 29,
1991 (the "Agreement").
WITNESSETH:
WHEREAS, Buyer submitted to Seller a proposal for the amendment of the
Agreement to provide for, among other things, Buyer's ability to schedule the
operation of Seller's cogeneration facility to be located in Plattsburgh, New
York (The "Plant"); and
WHEREAS, it is the objective of Buyer to obtain among other ratepayer
benefits, increased operating flexibility associated with the ability to
schedule the Plant; and
<PAGE>
WHEREAS, Buyer and Seller, pursuant to a letter of intent dated March
1, 1993, as amended, have met to negotiate the terms of such an amendment to the
Agreement; and
WHEREAS, as a result of those successful negotiations, Buyer and Seller
desire to amend hereby the Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration given by one party to the other, the sufficiency of which
each party acknowledges, Buyer and Seller agree as follows:
1. A new article, designated as Article XXI, is added to the Agreement
and shall read as follows:
Article XXI - Scheduling of Plant
(1) Scheduling. Beginning with the latter of (a) the effective date of
Amendment No. 2 to this Agreement or (b) the Commercial Operation Date,
through the remaining term of this Agreement, and notwithstanding
anything in this Agreement to the contrary, Buyer shall have the right
to schedule the operation of the Plant in accordance with the
scheduling instructions and operating procedures contained in Exhibit I
to this Agreement; provided, however, that in no event shall Seller be
required to operate the Plant in a manner inconsistent with (i)
maintaining the Plant's status as a qualifying facility, as required by
Section 1.1(b) of Article I hereof, and (ii) operating the Plant in
conformity with all laws and governmental rules, regulations and
permits applicable to the Plant and Seller during the Term of this
Agreement; provided further, however, that if Seller's operation of the
Plant consistent with constraints (i) and (ii) above, or Seller's
failure to comply with the scheduling directions given by Buyer
pursuant to this Article XXI, results in Seller failing to reduce the
electric generation of the Plant in any Gas Supply Year for less than
the number of megawatt hours scheduled by Buyer for that Gas Supply
Year in accordance with the terms hereof (The "Requested Scheduling"),
then Seller shall credit Buyer with the difference between the
Requested Scheduling and the number of megawatt hours of electric
generation reduction provided by Seller for that Gas Supply Year, which
credit shall be applied toward the following
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Gas Supply Year, and Buyer shall be permitted to schedule the
generation of the Plant in the following Gas Supply Year for 200,000
megawatt hours plus the number of megawatt hours credited from the
prior Gas Supply Year. In The event that the number of megawatt hours
available for scheduling by Buyer in any Gas Supply Year exceeds
240,000 megawatt hours, Buyer shall provide written notice of said
exceedance on or before that date which is sixty (60) days after the
commencement of a Gas Supply Year. Upon Seller's receipt of said
written notice, Seller and Buyer shall engage in good faith
negotiations for a period of sixty (60) days in order to finalize an
amendment to this Agreement restoring to Buyer scheduling and other
rights commensurate with those embodied in Amendment No. 2 to this
Agreement. If Seller and Buyer fail to so finalize such an amendment
within such sixty (60) day period, then Buyer shall have the option, in
addition to other remedies and rights under this Agreement, to rescind
Amendment No. 2 to this Agreement and, upon such rescission, Buyer's
right to curtail the electric generation of the Plant shall be
reinstated to the extent said right was waived under Amendment No. 2 to
this Agreement; provided, however, that such option shall only apply if
Buyer notifies Seller within sixty (60) days of the expiration of the
sixty (60) day period for finalizing an amendment of its intent to
rescind Amendment No. 2; provided, further, that any notice to rescind
Amendment No. 2 pursuant to this Article XXI shall be in writing and
any such notice shall state that the rescission of Amendment No. 2
shall be effective as of the last day of the first month that ends at
least ten (10) business days after Seller receives such written notice.
(2) Waiver of Curtailment Rights. Buyer shall not curtail Seller
during the term of this Agreement pursuant to Article X hereof, or
otherwise, due to the existence of conditions satisfying the
requirements of section 292.304(f) of the PURPA regulations or pursuant
To any order issued by the Commission in Cases 92-E-0814 and 88-E-081
that (i) interprets said section 292.304(f) and (ii) permits
(utility-specific) curtailment. Neither Buyer nor Seller shall commence
or join any judicial or regulatory proceeding seeking to overturn
Amendment No. 2 to this Agreement.
2. A new exhibit is added to the Agreement, and is attached hereto as
Appendix A. This exhibit shall be entitled "Exhibit I - Operating Procedures,"
and shall be incorporated into and made a part of the Agreement.
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<PAGE>
3. The first full paragraph of Article III of the Agreement is deleted
in its entirety and is replaced with the following text:
Seller agrees to deliver and make available to Buyer, and Buyer agrees
to purchase from Seller, except as otherwise provided in this
Agreement, all of the electric energy and capacity produced or made
available by the Plant at the delivery point during the term of this
Agreement, including any extension or renewal thereof, at the following
rates:
(a) the purchase price for "Actual Generation" (as defined in
Exhibit J) shall be the applicable rate set forth in Exhibit B
to this Agreement.
(b) the purchase price for "Available Generation" (as defined in
Exhibit J) shall be the applicable rate set forth in Exhibit J
to this Agreement.
(c) to the extent that Seller delivers to the delivery point an
amount of energy associated with more than 240 MW of capacity,
as averaged over a five (5) minute period ("Excess Energy"),
then Buyer shall pay for said Excess Energy at a rate equal to
the lower of (i) ninety-five percent (95%) of Seller's
Variable Cost at the time said energy was delivered, or (ii)
eighty percent (80%) of Buyer's avoided energy cost as
designated in Buyer's Service Classification No. 10 tariff, as
the same may be amended or superseded ("SC-10"), which avoided
energy cost shall not include the minimum rate referenced in
Section 66-c of the New York Public Service Law. Buyer's
avoided energy cost shall be calculated at a Transmission
level (115 kV) and shall be time-differentiated (namely,
separated into on-peak and off-peak rates). Seller shall not
receive, and Seller hereby waives, any capacity payment for
said Excess Energy and any energy payment for said Excess
Energy greater than that rate provided under this subparagraph
(c); provided, however, that if Buyer requests that Seller
deliver Excess Energy to the delivery point, then Buyer shall
pay a rate for such Excess Energy equal to the greater of (i)
one hundred and five percent (105%) of Seller's Variable Cost
at the time said energy is delivered, and (ii) eighty percent
(80%) of Buyer's avoided energy cost as designated in SC-10.
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4. The first paragraph of Article IV of the Agreement is revised to
read as follows,
Buyer shall pay Seller via wire transfer, or such other agreed upon
payment method, for the electric energy and capacity delivered or made
available during the preceding calendar month, applying the price terms
set forth in Article III. Buyer shall make said payment to Seller's
account at such bank as Seller may from time to time designate in
writing on or before the twenty-fifth (25th) day of each month. Buyer
shall make said payment provided that Seller shall notify Buyer in
writing, at least thirty (30) days in advance of a required payment
hereunder, of any change in the account to which such payment is to be
directed, and that, during any period that the Lenders (as defined in
Exhibit B) hold a security interest in the Plant, such notice shall not
be effective unless accompanied by a written authorization signed by a
representative of the Lenders. Along with this payment, Buyer shall
enclose a statement explaining how the payment amount was calculated.
5. The text of the Article V entitled "Price for Electricity Sold to
Buyer" is deleted in its entirety and replaced by "Reserved."
6. The third paragraph of Article XI of the Agreement is deleted in its
entirety.
7. A new exhibit is added to the Agreement, and is attached hereto as
Appendix B. This exhibit shall be entitled "Exhibit J - Payment for Available
Generation," and shall be incorporated into and made a part of the Agreement.
8. A new exhibit is added to the Agreement, and is attached hereto as
Appendix C. This exhibit shall be entitled "Exhibit K - Payment for Start-Up
Costs," and shall be incorporated into and made a part of the Agreement.
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<PAGE>
A new article, designated Article XXII, is added to the Agreement and
shall read as follows:
Article XXII - Reactive Power Support
Seller shall provide to Buyer, upon Buyer's request, up to 40,000 MVAR
- hours of reactive power support during each Gas Supply Year during
the term of this Agreement. Buyer understands that, while the Plant's
VAR capability varies with ambient temperature, in no event shall
Seller be able to provide reactive power support from each of Seller's
three (3) generators in excess of a power factor of 0.85 in the lag
(namely, providing reactive power support to Buyer's system) and unity
in the lead; provided, however, that in no case shall Seller be
required to provide to Buyer MVAR in excess of the maximum level the
Plant can generate without reducing The Plant's ability to generate
240 MW net output as measured at the delivery point, as said maximum
level is designated in the D-curve provided by Seller hereunder. As
part of the monthly statement provided by Buyer to Seller pursuant to
Article IV of this Agreement, Buyer shall provide a written report of
the amount of reactive power support provided by Seller during the
prior month. Seller shall provide to Buyer, no later than thirty (30)
days prior to the Date of Commercial Operation, the D-curve for each
of the Plant's generators, which D-curves shall be updated by Seller
and provided to Buyer on or before each January 1 during the term of
this Agreement. Seller shall provide said reactive power support (a)
upon Buyer's telephonic request to the Plant control room, followed by
a confirming facsimile notice, the form of which facsimile notice
shall be finalized by Seller and Buyer within ten (10) days following
the execution by Seller and Buyer of Amendment No. 2 to this
Agreement, and (b) without compensation from Buyer. Buyer's requests
for reactive power support shall specify the magnitude of the VAR
support to be provided by Seller. Unless Seller determines that, for
Plant security reasons, the Plant must operate at some other power
factor, Seller shall operate the Plant at the power factor capability
requested by Buyer until otherwise notified by Buyer.
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<PAGE>
10. A new article, designated Article XXIII, is added to the Agreement
and shall read as follows;
Article XXIII - Coordination of Maintenance
Notwithstanding any other provision of this Agreement to the contrary,
Seller shall provide to Buyer, on or before September 1st of each year
during the term of this Agreement, a five-year schedule of maintenance
outages for the Plant, which schedule shall provide (a) the duration of
each outage and (b) the extent to which said maintenance outage(s) for
the first year of said schedule may be rescheduled by Buyer, either
earlier or later. Should the extent to which said maintenance outage
can be rescheduled, either earlier or later, be equal to or less than
one and one-half (1/1/2) months, Seller shall provide all
documentation and information reasonably requested by Buyer supporting
Seller's inability to reschedule the maintenance outage more than one
and one-half (1/1/2) months. Seller shall schedule and coordinate these
planned outages with Buyer and shall use reasonable efforts to conduct
all deferable maintenance during Buyer's off-peak periods, which shall
be defined as (a) those periods other than 7:00 am to 10:00 pm, Monday
through Friday, and (b) the following holidays: New Year's Day,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
Subject to the limitations in rescheduling as specified by Seller in
accordance with the above paragraph, Buyer shall have the right to
modify the first-year of the five-year schedule of maintenance outages
submitted by Seller, without compensation to Seller, by providing
written notice to Seller no later than sixty (60) days prior to the
earlier of (a) the date the outage is being rescheduled by Buyer to
commence, and (b) the date the outage was scheduled by Seller To
commence. If Buyer provides less than sixty (60) days' written notice
to Seller of its intent to modify Seller's maintenance schedule, Buyer
shall compensate Seller for any incremental charges reasonably incurred
by Seller under its fuel supply agreements and for Seller's other
reasonably incurred incremental costs; provided, however, that Seller
shall provide to Buyer, by facsimile transmission, a statement
detailing these incremental charges within two (2) business days of
Seller's receipt of Buyer's written notice. Seller's failure to provide
this statement timely shall be deemed as an acceptance by Seller of
Buyer's direction to modify the maintenance schedule without
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compensation from Buyer. Buyer shall have the right to rescind the
notice to Seller within two (2) business days of Buyer's receipt of
Seller's statement of incremental charges. In no event shall Seller be
required to take any action to implement a revision to the maintenance
schedule until Buyer's right to rescind has expired,
Seller may modify its schedule of planned outages at any time subject
to Buyer's consent, which consent shall not be unreasonably withheld.
Seller shall provide to Buyer in writing the expected duration of a
forced outage within forty-eight (48) hours after the start of the
outage.
11. A new article, designated as Article XXIV, is added to the
Agreement and shall read as follows:
Article XXIV - Right of First Refusal
Buyer shall have a right of first refusal with respect to the sale by
Seller of any additional capacity, and associated energy, produced by
the Plant above 240 MW (the "Additional Capacity"). Seller shall notify
Buyer in writing of its receipt of any acceptable, bona fide offer from
a third party for the purchase of all or part of the Additional
Capacity. Within thirty (30) days from the date of its receipt of said
notice from Seller, Buyer may provide written notice to Seller that it
will purchase the Additional Capacity pursuant to the terms of said
third party offer. If Buyer provides said notice to Seller, Buyer and
Seller shall immediately commence negotiations for a power purchase
agreement to memorialize the terms of said third party offer, If Buyer
does not provide said notice to Seller, Seller may accept said third
party offer and Buyer shall be deemed to have provided any written
approval of such sale of power to a third party that might otherwise be
required under Articles XII and XIII of this Agreement. Seller shall
not sell any Additional Capacity to a third party unless Buyer has
failed to exercise its right of first refusal hereunder,
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<PAGE>
12. A new article, designated Article XXV, is added to the Agreement
and shall read as follows:
Article XXV - Fuel Remarketing Obligations
Seller hereby acknowledges and agrees that, to the extent that Seller's
fuel supplies exceed that amount of fuel that is needed (a) to operate
the Plant consistent with maintaining its status as a qualifying
facility, as required by Section 1.1(b) of Article 1 hereof, (b) to
operate the Plant in compliance with its various governmental permits
and authorizations (as in effect from time to time) and good utility
and engineering practices, and (c) to operate the Plant so as to comply
with Seller's obligations to supply steam to Seller's steam host,
either party may undertake the exploration of various means for
utilizing such excess fuel supplies for purposes other than consumption
at the Plant for the mutual benefit of Seller and Buyer. Buyer hereby
acknowledges and agrees that any means of utilizing Seller's fuel
supplies that would require Seller to become a gas corporation under
the New York State Public Service Law or would subject Seller to
regulation by the New York State Public Service Commission or other
federal or state governmental agency, or result in a reduction of net
revenue to Seller, would not be to the mutual benefit of the Seller and
Buyer and will not be undertaken under this Article XXV. Both parties
agree to cooperate in good faith in exploring such mutually beneficial
endeavors, which cooperation shall include (a) subject to any
confidentiality restrictions or provisions, Seller providing to Buyer
all information and documents pertaining to Seller's existing fuel
supply and transportation arrangements reasonably required by Buyer and
(b) the negotiation and execution of all necessary documents and
agreements as reasonably requested by either party in connection with
the exploration of such alternatives. Seller and Buyer agree that the
expenses either party incurs to consummate the ultimate transaction(s)
contemplated hereunder, along with the benefits of the transaction(s)
hereunder, shall be subject to negotiation by the parties as to their
allocation. The parties hereto acknowledge and agree that the
consummation of any transaction that may be contemplated by this
Article XXV, and the obligation of the parties with regard thereto, is
subject to and specifically conditioned upon (aa) The negotiation and
execution of acceptable agreements in form and content acceptable To
each party, in their respective reasonable discretion, (bb) the receipt
of any required
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governmental approval(s), and (cc) the receipt of necessary consents,
in form and content acceptable to Seller and its counsel, of Seller's
constituent partners, Seller's Lenders, Seller's fuel suppliers
(currently Shell Canada Limited) and, if required, the consent of
Seller's gas transporter and steam host. Nothing in this Article XXV
shall be construed so as to require Seller to violate the
confidentiality provisions of its fuel supply and transportation
arrangements with third parties.
13. A new article, designated XXVI, is added to the Agreement and shall
read as follows:
Article XXVI - No Partnership or Agency Relationship
This Agreement shall not be interpreted or construed to create an
association, joint venture or partnership between the parties hereto or
to impose any partnership obligations or liability upon either party.
Further, neither party (nor such party's employees, representatives,
agents and subcontractors) shall have any right, power or authority to
enter into any agreement or undertaking for or on behalf of, to act as
or be an agent or representative of, or to otherwise bind the other
party. It is covenanted and agreed that neither party shall act or make
any representation to any person or persons whomsoever to the effect
that such party, its agents, representatives, or subcontractors is the
agent or agents of the other party.
14. The second to last sentence of the second paragraph of Exhibit B -
Performance Guarantee, which appears on page B-25 of the Agreement, shall be
revised to read as follows:
The capacity factor calculation will exclude curtailments made in
accordance with Article X by subtracting the curtailed MWHRS from the
maximum possible MWHRS, and will be performed using Potential
Generation (as defined in Exhibit J) as the numerator in the
appropriate formula(s). To the extent that the unavailability of the
Plant would, absent this provision, result in (a) the Plant failing a
capacity factor test under this Exhibit B - Performance Guarantee, with
the attendant reduction in the rate paid by Buyer for electricity and
(b) The Seller not receiving payment for Available Generation, then
Buyer may be compensated for such
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unavailability in an amount equal to the greater of either (a) the
payments withheld to Seller pursuant to Article XXI due to said
unavailable generation for such unavailability or (b) the reduction in
the rate payable by Buyer for electricity pursuant to Exhibit B
Performance Guarantee, but not both. Upon performing the capacity
factor tests pursuant to Exhibit B - Performance Guarantee of the
Agreement, Buyer shall compare any resulting reduction in rates that
Buyer is permitted to initiate as a result of Seller's failure, if any,
to satisfy said capacity factor test against the amount of payments
withheld from Seller during the period over which the capacity factor
test was performed. If the capacity factor test rate reduction is
greater than the amount of withheld payments, then Buyer may initiate
a reduction in the rates payable to Seller for electricity for that
period of time necessary to recover the positive difference between the
reduction allowed under Exhibit B and the withheld payments for
unavailable generation. If the capacity factor test reduction is less
than the amount of withheld payments, then Buyer shall not be permitted
to initiate any reduction in rates payable to Seller for electricity.
15. The third through seventh paragraphs of Exhibit B - Pricing
Description are revised to read as provided in Appendix D hereto.
16. The third paragraph of Exhibit B - security language - 8. Security
for Front-Load is revised by inserting the parenthetical "(assuming the Plant's
power was sold under a must-run contract)" after "such payments", where it
appears in the second sentence.
17. This Amendment, and each of the new articles and exhibits added to
the Agreement, shall become effective when executed by Buyer and Seller, subject
to a condition subsequent of Seller's constituent limited partners ("Limited
Partners") and Lenders' consents. In the event that the Limited Partners' and
Lenders' consents are not obtained within ninety (90) days after the effective
date of this Amendment, or the Limited Partners or Lenders insist on any
material modification to
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this Amendment as a condition to its consent, Buyer may Terminate this Amendment
upon written notice to Seller without any liability by Buyer to Seller. Seller
shall submit this Amendment to the Limited Partners and Lenders promptly after
the Amendment is fully executed and Seller shall use its reasonable efforts (a)
to obtain the Limited Partners' and Lenders' consents and (b) to keep Buyer
apprised of Seller's discussions with such entities regarding requests for such
consents.
The Limited Partners and Lenders may consent to all or part of this
Agreement, and this Amendment shall survive to the extent to which the Limited
Partners' and Lenders grant their consents, provided, however, that the Limited
Partners and Lenders must consent, to (a) the entirety of proposed Article XXI
of the Agreement, and related provisions, as proposed in paragraphs 1, 2, 4, 5,
6, 7, 8 and 9 of this Amendment, and (b) identical terms.
18. Notwithstanding Article XIX of the Agreement, Buyer and Seller
hereby agree that the effectiveness of this Amendment is not contingent upon, or
otherwise subject to, the approval of the New York State Public Service
Commission.
19. Except as otherwise modified by this Amendment, the terms of the
Agreement remain unchanged and in full force and effect.
20. Seller and Buyer agree that this Agreement constitutes Confidential
Matter as defined in the Confidentiality Agreement between Seller and Buyer, and
Seller agrees to support any request for trade secret protection for this
Amendment made by Buyer to the New York Public Service Commission.
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IN WITNESS WHEREOF, Buyer and Seller have caused this Amendment to be
executed as of the day and year first above written.
NEW YORK STATE ELECTRIC & GAS
CORPORATION
/s/ Jack H. Roskoz
-------------------------------------
Jack H. Roskoz
Senior Vice President -
Electric Business Unit
SARANAC POWER PARTNERS, L.P.
By: Saranac Energy Company, Inc.
Its General Partner
By /s/ Martin H. Young
---------------------------------
Name: Martin H. Young
Title: Senior Vice President and
Chief Financial officer
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APPENDIX A
<PAGE>
EXHIBIT I - OPERATING PROCEDURES
A. Information To be Supplied by Seller to Buyer
a. At least thirty (30) days prior to the Commercial Operation Date,
and on or before each January 15 thereafter during the term of this Agreement,
Seller shall provide to Buyer in writing an estimate of the Variable Cost for
that calendar year. Following the Commercial Operation Date, on or before the
fifteenth (15th) day of each month during the term of this Agreement, Seller
shall provide to Buyer in writing an updated estimate of the Variable Cost for
the upcoming month. Seller shall furnish to Buyer, with the estimates provided
to Buyer hereunder, those documents and data used by Seller to calculate the
estimate of the yearly or monthly Variable Cost.
b. Within ninety (90) days after the effective date of this Amendment,
Seller shall provide to Buyer a heat rate curve designating the Plant's heat
rate for the following load levels based on the average monthly ambient
temperatures expected at the Plant site: operation at 100% of the maximum net
output that can safely and reliably be achieved under expected operating
conditions (but in no event greater than 240 MW), 75% of such level, 100% of
the maximum net output that can safely and reliably be achieved under expected
operating conditions with one of the Plant's gas-fired turbines shut down, and
75% of such level (such outputs correspond to the
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following nominal outputs: 240, 187, 115 and 90 MW based on the average ambient
temperatures expected at the Plant site). The set of heat rate curves shall
identify a heat rate curve applicable to each month of the calendar year taking
into account the expected average ambient temperature for each month. On or
before each January 15 after the Commercial Operation Date and before the
expiration of the term of this Agreement, Seller shall provide updated versions
of said heat rate curves based on testing of the Plant's heat rate during the
prior calendar year and, as appropriate, revised estimates of expected average
monthly ambient temperatures. The Plant's heat rate shall be tested during
normal Plant operating conditions. Buyer shall be afforded the opportunity to
have a representative present at any heat rate test of the Plant. Seller shall
provide to Buyer a two (2) week written notice of any heat rate test of the
Plant. Buyer shall have the right to review the data used by Seller to create
the heat rate curves provided To Buyer hereunder.
B. Buyer's Scheduling instructions
a. Commencing on the date that Seller receives the consent of its
Lenders and Limited Partners to this Amendment, by no later than the Scheduling
Deadline (as defined herein) for each Gas Day (as defined herein), Buyer shall
notify Seller of the expected schedule for the Plant for such Gas Day (the
"Schedule"). For the purposes of this Agreement: (1) a Gas Day shall be the
Twenty-four (24) hour period beginning at the time specified for the
commencement of a "day" by the tariff issued
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by Seller's gas transporter (for gas delivered to the United States' border with
Canada at a point near Napierville, Quebec, Canada and applicable to Seller's
gas supply) and ending at the same time on the following day; (2) the Scheduling
Deadline for any particular Gas Day shall be 11:00 A.M. Eastern Time of the
business day prior to the Gas Nomination Deadline for such Gas Day, adjusted
forward or back in concert with any changes in the Gas Nomination Deadline;
provided, however, that adjustments related to a change in the Gas Nomination
Deadline shall not increase the time span between the Gas Nomination Deadline
and the start of the associated Gas Day by more than six (6) hours; and (3) the
Gas Nomination Deadline for any particular Gas Day shall be the deadline for
notifying Seller's gas transporter of the amount of gas to be transported during
such Gas Day, as such deadline is established in the tariff issued by Seller's
gas transporter for gas delivered to the United States border with Canada at a
point near Napierville, Quebec, Canada and applicable to Seller's gas supply.
Currently, Seller's gas transporter is TransCanada PipeLines Limited; a Gas Day
commences each day at 8 A.M. Eastern Standard Time and ends at 8 A.M. the
following day; and the Gas Nomination Deadline is 11 A.M. Mountain Time of the
day prior to the day on which a Gas Day commences. Seller agrees to promptly
notify Buyer in the event that Seller's gas transporter amends its tariff in a
manner that affects the Scheduling Deadline or the period covered by a Gas Day.
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<PAGE>
b. The Schedule shall be transmitted by Buyer to Seller by facsimile,
and receipt of which shall be confirmed by telephonic message from Seller to
Buyer. The Schedule shall be transmitted to Seller on a form to be finalized by
Seller and Buyer within ten (10) days following the execution of Amendment No.
2 to the Agreement by Seller and Buyer. The Schedule shall include the
operating levels for the applicable period (Gas Day), which shall be either 100%
of the maximum net output that can safely and reliably be achieved under actual
operating conditions (but in no event greater than 240 MW), 75% of such level,
100% of the maximum net output that can safely and reliably be achieved under
actual operating conditions with one of the Plant's gas-fired turbines shut
down, and 75% of such level (such output levels correspond to the following
nominal outputs: 240, 187, 115 and 90 MW, based on the average ambient
temperatures expected at the Plant site). The Schedule shall be consistent with
the provisions of this Exhibit I. Should Buyer fail to provide a Schedule to
Seller, Seller shall operate the Plant at its discretion (not to exceed 240 MW)
until such period (Gas Day) as Seller receives a timely Schedule from Buyer. On
the twentieth (20th) day of each month during the term of this Agreement, Buyer
shall provide to Seller in writing a preliminary schedule for operation of the
Plant for the upcoming month. Buyer shall have the right to modify this
preliminary monthly schedule pursuant to this section b.
c. Buyer shall have the right to request a modification of the
previously scheduled operating level of the Plant for any particular period (Gas
Day), or remaining
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part thereof, by providing telephonic notice to Seller no later than five and
one-quarter (5 1/4) hours prior to the commencement of the hour for which the
change in the Schedule is being requested by Buyer, provided that said
scheduling directive is consistent with the provisions of this Exhibit I. Buyer
may make its request in the form of a direction to Seller to implement the
modification to the schedule for said Gas Day provided that the incremental
costs to be incurred by Seller are equal to or less than an amount specified by
Buyer.
d. In the event Buyer requests a modification to a scheduled operating
level of the Plant pursuant to subparagraph c above, Seller shall promptly use
reasonable efforts to obtain the approval of its non-affiliated gas suppliers
and transporters (currently, Shell Canada Limited and TransCanada PipeLines
Limited, respectively) and determine its costs of complying with such a request.
If Seller succeeds in obtaining the consent of its non-affiliated gas suppliers
and transporters and Seller reasonably determines that its cost of complying
with such request would not exceed the upper bound on costs, if any, previously
specified by Buyer, then Seller shall modify the Plant's operation to match
Buyer's request and promptly notify Buyer of the same. Buyer shall reimburse
Seller for all incremental costs reasonably incurred by Seller as a result of
such change, but in no, event shall those costs exceed the ceiling on
incremental costs, if any, specified by Buyer and furnished to Seller in writing
in advance of such modification as provided for by subparagraph c above. If
Seller is unable to obtain The consent of its non-affiliated gas suppliers and
transporters or
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<PAGE>
Seller reasonably determines that its cost of complying with such request would
exceed the upper bounds on costs, if any, previously specified by Buyer, then
(i) Seller shall promptly so notify Buyer, (ii) Seller shall not be required to
modify its operation to match Buyer's request. and (iii) any megawatt-hours
included in any such request shall not be used in determining Requested
Scheduling and the number of megawatt-hours Buyer requested for the purposes of
Article XXI(1), except to the extent that such MWHs were scheduled by Buyer
prior to such request.
e. Upon one (1) hours' telephonic notice to Seller, Buyer may request a
modification in the scheduled operating level of the Plant from 240 MW to 187
MW, or from 187 MW to 240 MW, for a particular hour in a Gas Day provided said
scheduling change(s) do not result in a modification of the volume of gas
nominated for Seller for said Gas Day, and Seller shall comply with that request
without requiring reimbursement from Buyer for incremental costs, and provided
further that said rescheduling does not eliminate the required eight (8)
consecutive hour operating period of the Plant at 240 MW.
f. Buyer's scheduling directions to Seller shall be subject to the
following parameters:
i. Buyer may schedule the Plant to operate at any of the
following levels: 100% of the maximum net output that can safely and reliably be
achieved under actual operating conditions (but in no event greater than 240
MW), 75% of such level, 100% of the maximum net output that can safely and
reliably be achieved
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<PAGE>
under actual operating conditions with one of the Plant's gas-fired turbines
shut down, and 75% of such level (such output levels correspond to the following
nominal outputs: 240 MW, 187 MW, 115 MW, and 90 MW based on average ambient
temperatures expected at the Plant site); provided, however, that during any Gas
Day, Buyer may schedule the Plant to operate at either 240 or 187 MW for each
hour of that Gas Day provided The Plant operates at 240 MW during said Gas Day
for a period of at least eight (8) consecutive hours;
ii. the start-up time for a gas turbine shall be two (2) hours
if a cold start (which is defined as after a shutdown of four (4) hours or more)
is scheduled, and one (1) hour if a hot start (which is defined as after a
shutdown of less than four (4) hours) is scheduled;
iii. in the event that (1) Seller's gas transporter's
tariff(s) covering the transportation of Seller's fuel is amended, revised or
otherwise changed, and (2) Seller notifies Buyer in writing of such amendment,
revision or change, Buyer thereafter shall not schedule the Plant in a manner
that would cause Seller to violate or breach any nomination requirement(s)
contained in the tariff of Seller's transporter, as in effect from time to time;
provided, however, that if said amendment, revision or change to the tariff of
Seller's fuel transporter has a material and adverse impact on Buyer's ability
to schedule the operation of the Plant, Buyer and Seller shall commence good
faith negotiations, upon Seller's receipt of written notice from Buyer
requesting same, and continue same for a period of sixty (60) days for an
amendment to this
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<PAGE>
Agreement restoring to Buyer scheduling and other rights commensurate with those
embodied in Amendment No. 2 to this Agreement. If Seller and Buyer fail to so
finalize such an amendment Within said sixty (60) day period, Then Buyer shall
have the option to, in addition to other remedies and rights under this
Agreement, to rescind Amendment No. 2 to this Agreement, and upon such
rescission Buyer's right to curtail the electric generation of the Plant shall
be reinstated to the extent said right was waived under Amendment No. 2 to this
Agreement; provided, however, that such option shall only apply if Buyer
notifies Seller within sixty (60) days of the expiration of the sixty (60) day
period for finalizing an amendment of its intent to rescind Amendment No. 2;
provided, further, that any notice to rescind Amendment No. 2 pursuant to this
Exhibit I shall be in writing and any such notice shall state that the
rescission of Amendment No. 2 shall be effective as of the last day of the first
month that ends at least ten (10) business days after Seller receives such
written notice;
iv. the minimum scheduled downtime for a gas turbine shall be
eight (8) hours, and the minimum run time between gas turbine start and stop
shall be eight (8) hours;
v. Seller shall endeavor to transition between operating
states as quickly as is reasonably feasible, based on equipment specifications,
operating conditions, project contracts and other relevant limiting factors. The
expected average minimum ramp rate shall be 1,000 KW per minute (up or down)
except that for transitions between generating states that do not require a gas
turbine start, the
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expected ramp rate will be up to 5,000 KW per minute (up or down), as requested
by Buyer;
vi. provided that Seller's auxiliary boiler has not been
unavailable for more than ten (10) days in the Gas Supply Year in which Buyer
schedules the Plant hereunder, which unavailability shall be verified by Buyer
through its inspection of Seller's documents relating to the outages of its
auxiliary boiler, Buyer shall not schedule the Plant so as to require Seller to
take a turbine off-line during periods in which Seller's auxiliary boiler is
temporarily unavailable for operation, whether due to maintenance or otherwise
for reasons beyond Seller's reasonable control;
vii. the maximum number of gas turbine starts during any
calendar year shall be 50; provided, however, that a start Of a gas turbine
following a forced outage or scheduled outage shall not constitute a start for
purposes of this section vii; and
viii. except as provided in Article XXI(1) of this Agreement,
the maximum reduction in the Plant's electric output that can be scheduled by
Buyer during any gas supply year ("Gas Supply Year") is 200,000 megawatt hours.
For the purposes of this Agreement, a Gas Supply Year shall mean (1) in the case
of the first Gas Supply Year, the period commencing at 12:00:01 a.m. on the
Commercial Operation Date and concluding with the last day of the calendar month
that encompasses a period of at least twelve (12) full, consecutive calendar
months but less than thirteen (13) full, consecutive calendar months, and (2)
thereafter, the period
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<PAGE>
commencing at 12:00:01 a.m. on the first day immediately following the last day
of the prior Gas Supply Year and continuing for twelve (12) full, consecutive
calendar months.
The amount of reduction in electric output scheduled by Buyer shall be
calculated by determining the difference, in each hour that the Plant is
available for scheduling, between 240 megawatts (or such lower maximum operating
state that the Plant could have achieved during said hour if the Plant had not
been scheduled by Buyer) and The output scheduled by Buyer for that hour;
provided that Plant's scheduled output shall never be deemed to exceed 240
megawatts and that, in any hour That the Plant was available for scheduling but
was not scheduled by Buyer, the scheduled output shall be deemed to have been
240 megawatt hours. The sum of all such calculations for each hour since The
start of the current Gas Supply Year shall represent The total amount of
reduction to which the 200,000 megawatt hour (or such higher number as provided
in Article XXI(1) upper limit applies.
g. (i) If Buyer schedules the Plant at a level below 240 MW (the
"Initial Level"), and then schedules the Plant to achieve a higher generating
level (the "Requested Level") and the Plant (aa) cannot comply with this
subsequent direction, the Plant will be deemed to have been unavailable at an
operating level above the Initial Level for the time period from the hour the
Plant was scheduled to commence operating at the Requested Level to the hour the
Requested Level is achieved and no compensation shall be paid by Buyer for
Available Generation above the Initial Level of operation
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during that deemed period of unavailability, or (bb) is able to return only to
an operating level less than the Requested Level but more than the Initial Level
(the "Interim Level"), the Plant will be deemed to have been unavailable at an
operating level above the Interim Level for the time period from the hour the
Plant was scheduled to commence operating at the Requested Level to the hour the
Requested Level is achieved and no compensation shall be paid by Buyer for
Available Generation above the Interim Level during that deemed period of
unavailability.
(ii) If Seller is unable To comply with Buyer's scheduling directions
involving a Requested Level of 240 MW and an Initial Level of 187 MW, as such
inability is described in subparagraphs (aa) and (bb) of paragraph (i), more
than twenty percent (20%) of the time such directions have been given in the
twelve (12) month period preceding a failure to follow such a direction, then
the period of unavailability for such failure shall be deemed to have commenced
at the hour that the Plant was scheduled To operate at the Initial Level of 187
MW.
(iii) If Seller is unable to comply with Buyer's scheduling directions
involving an Initial Level less than 187 MW (namely, involving the complete
shut-down of one of the Plant's gas-fired generators), as such inability is
described in subparagraphs (aa) and (bb) of paragraph (i), more than twenty
percent (20%) of the time such, directions have been given in the twelve (12)
month period preceding a failure to follow such a direction or, if less than ten
(10) such directions have been given in said twelve (12) month period, more than
twenty percent (20%) of the last ten (10) such directions
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given to Seller, then the period of unavailability for such failure shall be
deemed to have commenced at the hour that the Plant was scheduled to operate at
the Initial Level.
h. Seller shall immediately notify Buyer if (i) Seller elects to
perform maintenance that would interfere with Buyer's ability to schedule the
Plant within the bounds of this Agreement, or (ii) the Plant is otherwise
unavailable, during any period that Buyer has directed the Plant to operate at a
level other than 240 MW If the Plant is derated by Seller for any reason, Seller
shall notify Buyer immediately via facsimile transmission to Buyer's chief
system dispatcher or such person's designee of the commencement and cessation
hour for such derating period. To the extent that such derating is not the
result of force majeure, or otherwise excused under the terms of this Agreement,
and such derating conflicts with Buyer's ability to schedule the Plant as
otherwise provided for by this Agreement, the Potential Generation (as defined
in Exhibit J) of the Plant during this period shall be adjusted by Buyer
accordingly,
i. Notwithstanding any other provision of this Amendment, Seller shall
not be required to comply with any Schedule supplied by Buyer to the extent that
such Schedule would interfere with: (a) EPC performance testing for establishing
project completion during the first six (6) months following the Commercial
Operation Date; (b) DMNC testing, as required by this Agreement, as amended; and
(c) testing in accordance with industry practices following major Plant
overhauls and repairs;
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provided however, that (aa) with respect to subparagraph (a) above, Seller shall
provide prompt telephonic and written notice to Buyer upon the completion of
such EPC performance testing, and (bb) with respect to subparagraph (c) above,
Seller shall (aaa) provide prompt telephonic and written notice to Buyer upon
the commencement and completion of all such major Plant overhauls and repairs,
(bbb) limit such testing to no more than three (3) months, and (ccc) provide
prompt telephonic and written notice to Buyer upon the completion of such
testing.
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APPENDIX B
<PAGE>
EXHIBIT J - PAYMENT FOR AVAILABLE GENERATION
Provided that Buyer scheduled the operation of the Plant for said
monthly billing pursuant to Article XXI of this Agreement, Buyer shall make a
monthly payment to Seller for Available Generation equal to the monthly
summation of the following formula calculated for each hour during the said
billing period:
Payment for Available Generation = AVG x (CR - (.95 x VC)) where
AVG = Available Generation, shall be equal to PG - AG.
PG = Potential Generation, is the number of KWH the Plant could
have produced for said hour had the Plant been available and
operated at the Potential Capacity (as defined on page J-2).
AG = Actual Generation, shall be the number of KWH that are both
scheduled for delivery by Buyer (based on the output state
chosen by Buyer) and actually produced by the Plant and
delivered to the delivery point for said hour, which amount
shall not exceed 240 MW net when averaged over a five (5)
minute period.
CR = Contract Rate, shall be the rate specified in Exhibit B of
this Agreement.
<PAGE>
APPENDIX C
<PAGE>
EXHIBIT K
PAYMENT FOR START-UP COSTS
In addition to payments for Actual Generation and Available Generation,
Buyer shall pay Seller an amount for each start-up of a gas turbine requested by
Buyer pursuant to Article XXI of this Agreement equal to five thousand dollars
($5,000.00) for calendar year 1994, which amount shall escalate at a compounded
rate of four (4) percent each calendar year as set forth below:
Calendar Year Start-Up Cost
------------- -------------
1994 $ 5,000.00
1995 5,200.00
1996 5,408.00
1997 5,624.32
1998 5,849.29
1999 6,083.26
2000 6,326.60
2001 6,579.66
2002 6,842.85
2003 7,116.56
2004 7,401.22
2005 7,697.27
2006 8,005.16
2007 8,325.37
2008 8,658.38
2009 9,004.72
2010 9,364.91
2011 9,739.50
<PAGE>
APPENDIX D
<PAGE>
With regard to Period A, all electricity delivered by Seller to Buyer
during peak hours shall constitute Class I electricity. In addition, all
electricity delivered by Seller to Buyer during off-peak hours shall constitute
Class I electricity up to a maximum number of off-peak KWh such that the ratio
of peak to off-peak hours in the then current billing period shall equal the
ratio of Potential Peak Generation to Class I off-peak KWh delivered during The
same period. (Kilowatt hours of Potential Peak Generation shall be calculated by
summing the Potential Generation (as defined in Exhibit J) in each peak hour of
the relevant billing period). Except as otherwise as provided below, any
electricity delivered during off-peak in excess of that maximum number of
off-peak KWh shall be considered Class II electricity and shall be paid for at a
rate equal to Buyer's off-peak short-run avoided cost as defined in Exhibit H.
If the number of KWh delivered during the off-peak hours in any billing
period is less than the maximum off-peak permitted for Class I, the difference
between such maximum permitted amount and the amount actually delivered shall be
tracked in a notional account. In The event that in later billing periods, there
is an excess of off-peak KWh hours in comparison to the maximum Class I off-peak
KWh permitted, such additional off-peak KWh shall also be paid for at the Class
I rate up to any amount then in the notional account and the notional account
will be reduced by the additional KWh paid for at the Class I rate,
With regard to the offset to be applied during Period A, no offset
shall be applied through the end of 1994 (the period during which LRAC is less
than 6 cents/KWh under the Commission's current estimate). Instead, the period
between commencement of commercial operation to the end of 1994 shall be used to
establish
<PAGE>
the Plant's base output. Specifically, a second notional account shall be used
to track (1) the total number of Class I KWh purchases by Buyer through the end
of 1994 plus the total amount of Available Generation (as defined in Exhibit J)
paid for based on a Contract Rate (as defined in Exhibit J) equal to the Class I
electricity rate through the same period less Variable Cost (as defined in
Exhibit J), and (2) the total number of hours from the time of commercial
operation through the end of 1994. The first number will then be divided by the
second to compute the Plant's Base Output.
Commencing in January 1995 and for each monthly billing period
thereafter through the end of Period A, the sum of the Potential Generation of
the Plant for each hour of the current monthly billing period and the preceding
eleven monthly billing periods shall be divided by the total number of hours in
the same twelve monthly billing periods less any hours of Force Majeure outages
in the same period; the resulting number shall be referred to as the Plant's
"Current Output."
If the Plant's Current Output is less than the Plant's Base Output,
then an offset in the amount of that difference times twelve times the
difference between Buyer's short-run avoided cost as defined in Exhibit H and
six cents/KWh times the number of hours in the then current billing period shall
be applied to the amount due from Buyer during that billing period; provided,
however, that if six cents/KWh exceeds Buyer's short-run avoided cost as
defined in Exhibit H, then no offset shall be applied. In any monthly billing
period that an offset is applied, the Plant's total Potential Generation for the
corresponding period shall be deemed to equal the Plant's Base Output times the
number of hours in that period for the purpose of all future calculations of
offsets.
<PAGE>
AGREEMENT
THIS AGREEMENT dated July 30, 1986, by and between FALCON SEABOARD OIL
COMPANY, a Texas corporation with offices in Houston, Harris County, Texas,
hereinafter called "Cogenerator" and TEXAS UTILITIES ELECTRIC COMPANY, a
Texas corporation with offices in Dallas, Dallas County, Texas, hereinafter
called "Company," acting herein through its Texas Utilities Generating
Company division;
In consideration of the promises herein made, Cogenerator agrees to
produce, deliver and sell to Company, and Company agrees to take and
purchase from Cogenerator, all electrical capacity and energy generated by
Cogenerator at its hereinafter-described Plant, net of that required for
operation of the Plant, subject to the terms and conditions contained
herein, as follows:
ARTICLE I - DEFINITIONS
1.01 Parties. As used herein, the term "parties" means Cogenerator and
Company and, subject to Section 11.03, their successors and assigns.
1.02 Other Definitions. Other terms defined herein and the section
containing such definition are listed below:
Annual Capacity Factor 7.06(a)
Backdowns 5.13
Billing Capacity 7.05
Cogenerator Interconnection
Facilities 3.02
Cogenerator Substation 3.01
Commercial Operation 2.04
Commercial Paper Rate 7.03
Construction Power and Energy 4.01
Early Payments 10.08
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Emergency 5.06
Firm Capacity 5.10
Host 2.02
Initial Firm Capacity 5.10
Interconnection Facilities 3.02
Maintenance Power and Energy 4.02
Partial Commercial Operation 2.04
Peak Days 7.06(d)
Peak Hour Capacity Factor 7.06(c)
Peak Hours 7.06(d)
Peak Month Capacity Factor 7.06(b)
Peak Months 7.06(d)
Peak Hour Months 7.06(d)
Plant 2.01
Qualifying Cogeneration Facility 2.02
Spinning Reserve 5.04(a)
Tested Capacity 5.12
Trial Energy 4.03
Uncontrollable Forces 12.03
WACOG Hours 7.08(b)
Weighted Average Cost of Fuel 4.03
Weighted Average Cost of Gas 7.08(b)
ARTICLE II - CONSTRUCTION OF THE PLANT
2.01 Cogenerator to Construct. Cogenerator will, at its sole cost and
expense, design, construct and complete, on land near Big Spring, Howard
County, Texas, a cogeneration facility consisting of two gas-combustion
turbines and one steam turbine with a net electrical generating capacity of
approximately 106 megawatts (MW) together with all necessary and desirable
buildings, equipment and facilities, hereinafter referred to as the "Plant".
The Plant will be designed and constructed in compliance with legal and
regulatory, including environmental,
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requirements. Cogenerator will, at its expense, obtain all necessary permits
and licenses for construction and operation of the Plant and make all
arrangements for fuel, cooling water and other supplies used in the Plant
and for disposition of waste materials from the Plant. The Plant will have
an alternate fuel supply and the capability of start up without a supply of
electric power and energy.
2.02 Qualifying Cogeneration Facility. The Plant will be designed,
constructed, completed and thereafter operated so that it will, at all
times, be a "Qualifying Cogeneration Facility" as that term is defined in
Section 3(18) of the Federal Power Act, as amended [16 USCA 796(18)] and
regulations thereunder. Neither the Plant nor its operation shall be altered
or modified so that it ceases to be a Qualifying Cogeneration Facility. The
host facility will be a refinery owned by Fina Oil and Chemical Company
("Host").
2.03 Company Comments and Approval. (a) Plans for the initial design
and construction of the Plant, the Cogenerator Substation, and the
Cogenerator Interconnection Facilities, including Cogenerator's facilities
interconnecting the Plant and the Cogenerator Substation, shall be submitted
to Company for its comments at least thirty (30) days prior to letting of
bids for construction. Plans submitted to Company will be schematics or
single-line drawings and not detailed construction drawings, unless more
detail is requested by Company. Company may inform Cogenerator of its
opinion of said plans, but Company's comments or failure to comment shall
not waive any of Company's rights or Cogenerator's obligations under this
agreement or applicable law. Company shall be deemed to have waived its
right to comment on such plans if it fails to comment thereon within thirty
(30) days after receipt of the last member of a complete set of plans for
the construction of the Plant, Cogenerator Substation and Cogenerator
Interconnection Facilities or a discrete portion thereof. Cogenerator will
advise Company when a set of plans is complete.
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<PAGE>
(b) Design and construction of the portions of the Plant, the
Cogenerator Substation, and Cogenerator Interconnection Facilities,
including Cogenerator's facilities interconnecting the Plant with the
Cogenerator Substation, and of any modification or alteration thereof as
well as Cogenerator's methods of operating the same, described in Exhibit
2.03, are subject to the prior approval of Company. Such approval is limited
to that which provides the Company with reasonable assurance that the Plant
and Cogenerator Substation will operate reliably, in synchronism with
Company's system, without material disturbance to or material adverse effect
on Company's system, and in accordance with the provisions of Article V.
2.04 Commercial Operation.
(a) It is anticipated that the Plant will begin Commercial Operation
on or before June 1, 1988, and Partial Commercial Operation on or before
June 1, 1987. As used herein, "Commercial Operation" means that construction
of the Plant has been substantially completed, trial operations of the Plant
have been completed, the twenty-four (24) hour test required in Section 5.10
has been completed, and the Plant is available for normal and continuous
operation. "Partial Commercial Operation" as used herein means that
construction of the gas turbines and necessary related facilities has been
substantially completed, trial operations thereof have been completed, the
twenty-four hour test required in Section 5.10 has been completed and the
gas turbines are available for normal and continuous operation. The dates of
Commercial Operation and Partial Commercial Operation shall be determined by
Cogenerator but the Partial Commercial Operation date shall not, unless
otherwise agreed, be later than six (6) months after the first trial
operation. The first trial operation shall be on the date that power and
energy is first generated by the Plant.
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<PAGE>
(b) Failure by Cogenerator to begin Commercial Operation on or before
December 31, 1988 shall constitute an act of default under this Agreement,
and, in addition to other remedies at law or provided in this Agreement,
Company shall have the option to immediately terminate, upon written
notice, this Agreement upon such failure. If the date of Commercial
Operation shall occur later than June 1, 1988, then the monthly capacity
payments otherwise payable to Cogenerator under Article VII shall be reduced
by fifty percent (50%) of the daily capacity payment for each day that the
Commercial Operation date is later than June 1, 1988; such reduction shall
be only on The difference between Firm Capacity at Commercial Operation and
Firm Capacity at Partial Commercial Operation. Reductions for any such delay
will be applied to the first capacity payment or payments coming due after
the date of Commercial Operation.
(c) If the date of Partial Commercial Operation shall occur later than
July 1, 1987, then the monthly Capacity Payments otherwise payable to
Cogenerator under Article VII shall be reduced by twenty-five percent (25%)
of the daily capacity payment for each day that the Partial Commercial
Operation date is later than July 1, 1987. Reductions for any such delays
will be applied to the first capacity payment or payments coming due
hereunder. No such reduction shall be made in Capacity Payments if the delay
in Partial Commercial Operation is the result of an intervention in
proceedings filed by Cogenerator seeking a construction permit for the Plant
from the Texas Air Control Board or a PSD permit from the Environmental
Protection Agency, and:
(i) Cogenerator has timely filed such application and thereafter
prosecuted same in good faith and with due diligence; and
(ii) The Intervenor is not associated with or assisted by
Cogenerator.
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<PAGE>
ARTICLE III - ELECTRIC SUBSTATION AND TRANSMISSION FACILITIES
3.01 Cogenerator Substation. Cogenerator will, at its expense,
construct or modify an electric substation near the Plant as depicted in
Exhibit 3.01 attached hereto and made a part hereof for all purposes,
including all transformers, switches, breakers, meters and other facilities
and equipment (the "Cogenerator Substation").
3.02 Interconnection Facilities. Company will, if necessary, and at
Cogenerator's expense, also modify its existing switching station and
transmission facilities and construct new transmission and/or distribution
facilities as depicted in Exhibit 3.01 attached hereto and made a part
hereof for all purposes so as to connect the Cogenerator Interconnection
Facilities with Company's 138kv transmission system. Such modifications to
the existing switching station or transmission facilities and the new
transmission and/or distribution facilities are hereinafter referred to as
"Interconnection Facilities". Cogenerator will, at its expense, construct
the Cogenerator Interconnection Facilities, being the facilities
interconnecting the Cogenerator Substation with the Interconnection
Facilities.
3.03 Communication and Telemetry. The Cogenerator Substation,
Cogenerator Interconnection Facilities and the Interconnection Facilities
will include, and Company shall design, install and control, the
telemetering, communications and data acquisition equipment and automatic
switching control facilities necessary for effective integration of the
Plant, Cogenerator Substation and Interconnection Facilities with Company's
System. Such equipment shall include communication and data transmission
(telemetering) facilities and control equipment operable from the Texas
Utilities System Operating Center ("TUSOC"), and/or any alternate location
designated by Company, including but not limited to:
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(a) One full period voice circuit (an off-premise extension for
TUSOC's PBX);
(b) One telemetering circuit to Company to record Plant net
generation at TUSOC;
(c) One remote terminal unit (RTU) on a separate communication
circuit to the TUSOC computer with instantaneous MW and megavolt-
ampere reactive (MVAR) load and hourly megawatt-hour (MWH) readings,
bus voltage and switchyard and generator breaker positions.
(d) One RTU on a separate communication circuit to TUSOC or other
Company control center for control of and status indication for the
transmission line breaker(s) in the Interconnection Facilities.
Construction or modification of the Cogenerator Substation, Cogenerator
Interconnection Facilities and Interconnection Facilities will include,
as appropriate, installation of communication, telemetering and control
equipment from the Cogenerator Substation to the Plant.
3.04 Cogenerator Approval. Company's design of and construction
standards for the Interconnection Facilities are subject to review and
approval of Cogenerator; such approval is limited to that which provides
Cogenerator with reasonable assurance that the Interconnection Facilities
are in accordance with Exhibit 3.01 and will operate reliably without
adverse effect on the Plant. Cogenerator will be deemed to have waived its
right to approve such design and construction standards unless it otherwise
advises Company within thirty (30) days after receipt of plans therefor or
for a discrete portion thereof.
3.05 Completion. Company and Cogenerator will coordinate construction
of the Interconnection Facilities with construction of the Cogenerator
Substation, Cogenerator Interconnection Facilities and Plant so that such
facilities will be available by April 13, 1987 for testing and trial
operations of the Plant. Such completion may be advanced, as agreed by
Cogenerator and
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<PAGE>
Company, if necessary to provide power and energy for construction of the
Plant.
3.06 Easements. Cogenerator will, at its own expense, cause Host to
execute and deliver easements or other instruments satisfactory to both
parties, conveying land or rights in land to Company (or to Cogenerator with
the right to assign to Company) as required for the Interconnection
Facilities, including communications, telemetering and control facilities.
3.07 Construction Costs. Cogenerator will reimburse Company for the
construction costs incurred in the modification and/or construction of the
Interconnection Facilities and installation of the communications and
telemetry equipment described in Section 3.03 in accordance with Section
3.12(a). Company's construction costs shall be determined in accordance
with (i) - (vi) of Subsection 3.12(d). Attached hereto as Exhibit 3.07 is
Company's estimate of said construction costs. Cogenerator acknowledges that
the actual construction costs may be higher or lower than the estimate.
3.08 Maintenance. Unless otherwise provided by separate agreement,
Company will patrol, maintain and repair the Interconnection Facilities, and
Company's metering, telemetering, communication, data acquisition equipment,
and automatic switching control facilities, from and after completion of
construction thereof, and Cogenerator will reimburse Company for its costs
thereof in accordance with Section 3.12(b), (c) and (d). Cogenerator will
also pay the costs of replacing any of said equipment which, in the
reasonable opinion of Cogenerator and Company, becomes obsolete or
inadequate for then current utility operations and practices.
3.09 Billing. Except as otherwise provided in Section 3.12, bills for
sums due under this Article III may be rendered monthly or upon occurrence,
as in the case of equipment replacement. All bills shall be due and payable
within twenty (20) days after the date thereof. Cogenerator may question or
contest any
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<PAGE>
such billings, including Company's costs so billed. No such question or
contest will extend the due date for any payment.
3.10 Ownership. (a) The Cogenerator Substation, the Cogenerator
Interconnection Facilities and the Interconnection Facilities, except for
those facilities described in Exhibit 3.10, shall be the property of
Cogenerator. Company shall install, own and maintain the metering,
telemetering, communications lines and facilities, data acquisition
equipment, and automatic switching control facilities in and on the
Cogenerator Substation, Cogenerator Interconnection Facilities, and
Interconnection Facilities. Company will also own the facilities described
in Exhibit 3.10.
(b) Company shall have the exclusive right to operate and control the
Interconnection Facilities. In addition, Company may utilize the
Interconnection Facilities in the conduct of its business, including
use to provide service to other customers and, for such purposes, may
construct, at its own expense, alter or enlarge the same and add taps
and interconnections thereto.
(c) The Cogenerator Substation and Cogenerator Interconnection
Facilities, by reason of their interconnection with Company's
transmission system, will necessarily be involved with providing
service to Company's other customers. Company may, at its own expense,
install, maintain and operate transformers, switches, lines and other
facilities and equipment in the Cogenerator Substation to provide
service to its other customers.
(d) Cogenerator shall not be responsible for any costs incurred by
Company in reconstructing, altering, modifying or enlarging the
Cogenerator Substation and Interconnection Facilities for the purpose
of providing service to other customers nor any increased costs of
inspection, maintenance and repair resulting therefrom.
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(e) At the termination of this Agreement, Cogenerator shall, at. its
own expense, remove the Interconnection Facilities and restore the
premises to its condition as it existed prior to installation of said
Interconnection Facilities; provided, however, that if termination
occurs by reason of the default of Cogenerator, then the
Interconnection Facilities are subject to purchase or lease by Company
under Article XV and shall not be removed by Cogenerator until the
time for exercise of the option provided in Section 15.01 has passed.
3.11 Facilities Between Plant and Cogenerator Substation. Cogenerator
shall, at its expense, install, maintain and operate facilities necessary to
transmit power and energy generated at the Plant to the Cogenerator
Substation and to receive Maintenance and Construction Power and Energy
furnished by Company at the Cogenerator Substation and transmit same to the
Plant.
3.12 Payment. (a) To reimburse Company for modifying and constructing
the Interconnection Facilities and all telemetering, metering, communication
and data acquisition equipment and automatic switching control facilities,
Cogenerator will pay to Company, before the beginning of construction,
Company's estimated construction costs described in Section 3.07, to be
adjusted to actual costs after completion of construction. Sums due Company
under this section may be paid in periodic installments if, before the
beginning of construction, the parties reach agreement as to such
installment payments and Cogenerator furnishes security satisfactory to
Company.
(b) To reimburse Company for routine inspection of the
Interconnection Facilities, and Company's telemetering, metering,
communications and data acquisition equipment and automatic switching
control facilities, Cogenerator will pay to Company monthly, beginning May
1, 1987, the sum of Nine Hundred dollars ($900.00), as adjusted pursuant to
subsection (c)
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below. Company will periodically provide justification of the amount of such
expense, if requested by Cogenerator. Exhibit 3.12 attached hereto
delineates which services are included in routine inspections and which are
not.
(c) At June 1st of each year during the term of this Agreement, the
monthly amount specified in subsection (b) above shall be adjusted as set
forth in this subsection to reflect increases in the Bureau of Labor
Statistics of the United States Department of Labor Transportation and
Public Utilities Electric Services average hourly earnings using May, 1986
as the base period. The average hourly earnings numbers referred to in
sub-subsection (i) below will be taken from this SIC Code 491, except as set
forth in sub-subsection (ii) below:
(i) The adjustments in the monthly amount shall be determined by
multiplying the dollar amount specified by a fraction, the numerator
of which is the average hourly earnings number for December of the
last calendar year prior to the adjustment and the denominator of
which is the average hourly earnings number for the month of May,
1986.
(ii) If SIC Code 491 is discontinued during the term of this
Agreement, the remaining adjustments called for in this subsection
shall be made using the formula set forth in sub-subsection (i)
above, but substituting in the average hourly earnings number for the
Electric, Gas and Sanitary Services ("SIC Code 49") for the average
hourly earnings numbers of the SIC Code 491. If both SIC Code 491 and
SIC Code 49 are discontinued during the term of this Agreement, the
remaining adjustments called for in this subsection shall be made
using the statistics of the Bureau of Labor Statistics of the United
States Department of Labor that are most nearly comparable to SIC
Code 491 and as agreed by the parties. If the
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Bureau of Labor Statistics of the United States Department of Labor
ceases to exist or ceases to publish statistics concerning the
purchasing power of the dollar during the term of this Agreement,
the remaining adjustments called for in this subsection shall be
made using the most nearly comparable statistics published by a
recognized financial authority selected by Company and Cogenerator.
(d) To reimburse Company for maintenance of the Interconnection
Facilities and the communication and other equipment described in Section
3.03, Cogenerator shall pay Company's Maintenance Costs, which shall be
actual costs incurred by Company plus a percentage equal to fifteen percent
(15%) of such costs. Actual costs shall include but are not necessarily
limited to the following:
(i) Material - Materials will be priced at Company store issue or
purchase order price in effect when materials are removed from stores
plus a material handling cost for supervision, labor and expenses
incurred in the operation and maintenance of Company's storerooms.
The material handling cost shall be the same as used by Company for
its own accounting purposes. The material handling cost is a
percentage recalculated periodically; therefore, percentages may vary
from time to time.
(ii) Payroll - Labor and services, including engineering and
technical support services, of Company personnel will be priced at
the then current rate of pay to the employees performing the work at
regular rates or overtime rates as applicable plus all labor-related
expenses such as retirement, insurance, vacation, taxes, etc. All
labor-related expenses shall be the same as used by Company for its
own accounting purposes. The labor-related expenses
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are recalculated periodically; therefore, percentages may vary from
time to time.
(iii) Transportation - Transportation will be priced at the cost
per mile and/or per hour dependent upon the type of equipment being
used in accordance with the rates Company charges for such use for
its own accounting purposes. The per mile and/or per hour rate is
recalculated periodically; therefore, charges may vary from time to
time.
(iv) Contractors' Expense - Contractors' expense will consist of
the costs billed Company by the contractors and can be on a unit cost
or a bid basis. Unit cost prices are renegotiated periodically, thus
cost per unit may vary from time to time. Contractor's Expense will
be approximately equal to then prevailing market rates for similar
work.
(v) Miscellaneous Expense - This will include actual expenditures
incurred which are not included in (i) through (iv) above. Examples
of this type cost are crew lodging and travel expense, laboratory
tests and equipment rental. In the event that Company furnishes its
own major tools or major equipment in the performance hereof, Company
will charge a rate for the use of same equal to the fair market
rental value of such major tools or major equipment at the time and
place same are so used.
(vi) General Engineering Overhead - General Engineering Overhead
is a percentage charge applied to the sum of (i) - (v) to recover
Company's costs of design, engineering, supervision, and other
applicable costs and overhead. The charge shall be the same as
applied by Company to determine its costs of its new construction and
is currently 13%. The
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charge is redetermined periodically in accordance with Company's
established accounting procedures using the uniform system of
accounts prescribed by the Federal Energy Regulatory Commission.
(e) Any leased communication facilities shall be obtained
and operated at Cogenerator's expense.
ARTICLE IV - CONSTRUCTION, MAINTENANCE AND TRIAL ENERGY
4.01 Construction Power. By separate agreement with either
Cogenerator or its contractor, Company, acting through its Texas Electric
Service Company division, will furnish electric power and energy required
for construction of the Plant ("Construction Power and Energy") upon its
standard terms and conditions and at its rates from time to time in effect.
Such separate agreement may require payment for installation of temporary
facilities if Construction Power and Energy is required in advance of
completion of the Cogenerator Substation and Interconnection Facilities.
4.02 Maintenance Power. From and after Commercial Operation, if
Cogenerator so elects, Company will furnish Cogenerator with Maintenance
Power and Energy at its applicable rates and riders and in accordance with
its Service Rules and Regulations from time to time in effect. As used
herein, "Maintenance Power and Energy" is the electric power and energy
required at the Plant for operation of auxiliary equipment, lighting,
maintenance and start-up when the Plant is not generating or is generating
insufficiently therefor.
4.03 Trial Energy. It is anticipated that power and energy will
be generated by the Plant prior to Partial Commercial Operation during tests
and trial operations; power and energy so generated is hereinafter called
"Trial Energy". Provided that the Cogenerator Substation, Cogenerator
Interconnection Facilities, and Interconnection Facilities are complete and
subject to establishment of a mutually satisfactory schedule therefor,
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Company will, at Cogenerator's request and upon receipt of advance notice,
purchase all Trial Energy net of that used for operation of the Plant.
Company will pay Cogenerator for the Trial Energy at a rate equal to
Company's Weighted Average Cost of Fuel, as defined in Exhibit 4.03, for all
kwh delivered to Company as metered on the Company side of the Cogenerator
Substation. Payments for Trial Energy will be made monthly unless
Cogenerator elects to defer receipt of such payments and so notifies
Company. There will be no capacity payments for Trial Energy.
4.04 Metering. Construction Power and Energy, Maintenance Power and
Energy, and Trial Energy shall be delivered and metered on the Company side
of the Cogenerator Substation, unless otherwise agreed.
ARTICLE V - OPERATION OF THE PLANT
5.01 Operator. Cogenerator will operate and maintain, at its sole
expense, the Plant, Cogenerator Substation, and Cogenerator Interconnection
Facilities.
5.02 Duties. All electric power and energy generated at the Plant and
delivered to Company shall have a nominal frequency of 60 Hz and shall have
the frequency, voltage and other properties and characteristics from time
to time established for operation of Company's electric system. Cogenerator
will maintain and operate the Plant, Cogenerator Substation, Cogenerator
Interconnection Facilities and facilities interconnecting the Plant to the
Cogenerator Substation (i) so as reasonably to prevent the likelihood of a
disturbance affecting or impairing Company's system, and; (ii) so as to
maintain, within the design capability of the Plant, power factor and
voltage as from time to time requested by Company, and (iii) in compliance
with all legal and regulatory requirements, including environmental
requirements. Cogenerator will also maintain an adequate inventory of spare
parts to minimize Plant unavailability due to repair or overhaul.
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5. 03 Tests. Prior to the dates of Commercial Operation and Partial
Commercial Operation, Cogenerator shall perform or allow Company to perform,
as specified, the following tests on the Plant after reasonable notice to
Company. Such tests will be at Cogenerator's expense, but Company will bear
expenses incurred in observing the performance of such tests. Company shall
subsequently have the right to require that each of these tests be performed
after any malfunction of the equipment which that test is designed to
evaluate and be performed at least annually thereafter. Each party has the
right to reasonable advance notice of, and to have personnel present during
tests performed by the other party. The party performing the test will
furnish to the other party written results of the tests. The tests are:
(a) A trip test by Cogenerator of the Plant's protective relay
schemes that trip the 138 kV circuit breakers connecting the Plant to
the Company's electric system.
(b) An operational test by Cogenerator of the Plant's protective
relaying for each generating unit and main step-up transformer.
(c) A test by Cogenerator of each generating unit's start-up
durations under each of the following conditions:
(1) After an overnight shutdown (8 hours in length).
(2) As soon as possible after a full unit trip.
Durations shall be measured from the time that notification to restart
was given for (1), or from the time that the unit trip occurred for
(2), until the unit is synchronized and when it reaches full load.
These starting durations shall be verified for both the combustion
turbines and the steam turbine. It is not intended that Cogenerator
guarantee those start-up durations. This information is needed only
for day-to-day system operational and planning purposes. If
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sufficient operational data is available to verify the above-described
starting durations, actual testing may be waived by Company.
(d) Verification by Cogenerator of the speed of each generating
unit's normal response rate for both load increase and decrease. Each
steam turbine shall be capable of load increase or decrease at the
rate of at least 5%/minute from minimum to maximum capacity. Combusion
turbines shall have a response rate of at least 200%/minute.
(e) Verification by Cogenerator of each generating unit's ability
to operate under leading and lagging power factor conditions with the
Automatic Voltage Regulator in service. For example, if a unit is
designed to operate at a 0.9 power factor it shall be verified that it
is capable of operation at either a leading or lagging 0.9 power
factor.
(f) Verification by Cogenerator of the ability of each generating
unit to respond to upsets in system frequency. Each unit's governor
should provide a 5% droop response outside a (+-) .03 Hz deadband to
frequency disturbances. The response is relevant to the period of time
from occurrence of the disturbance to reaching of reset frequency,
usually 7 to 10 seconds. Governors must begin responding within 0.5
seconds after frequency exceeds the (+-) .03 Hz deadband. A 5% droop
response will provide 3-1/3% of the unit's capability per 0.1 Hz
deviation in frequency. To be considered a successful response, the
unit must provide the increased or decreased output in response to
changes in frequency and maintain the new output in accordance with
the 5% droop curve until the frequency returns to normal within the
deadband. Data will be gathered for each disturbance experienced for
use in verification of each unit's response.
5.04 Operation Requirements. (a) The Plant will be operated in
synchronism with Company's system and subject to and
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in compliance with the then-current established guidelines of the Electric
Reliability Council of Texas (ERCOT) and subject to directions of TUSOC.
Compliance with such guidelines and directions, other than those
prescribing frequency and other standards for the Company's transmission
and generation system and other systems with which it is interconnected,
will not impair operation of the Plant (and delivery of power and energy
therefrom to Company's transmission system) at a level equal to Firm
Capacity except for emergencies or reliability matters involving Company's
system. Without limiting the foregoing, Cogenerator will comply with any
ERCOT-approved guideline for responsive reserves. The current ERCOT
guidelines state that Cogenerator shall operate the Plant in such a manner
as normally to provide for a spinning reserve of no less than 6% of the
nominal capacity rating of units on line (Released Capability). This
spinning reserve provides for the Automatic Governor Response to system
frequency disturbances as specified in section 5.03(f), or for manual
increase by the unit operator as requested by TUSOC. The Plant must be able
to maintain operation at this increased level of capability for a minimum
of eight (8) hours following each disturbance or request.
(b) Generators at the Plant shall not go off-line because of a
decline in system frequency until system frequency has declined to a
level below 58.5 Hz, and shall include equipment providing for
automatic trip at or below 58.0 Hertz with 1/2 second delay.
(c) The Plant shall be equipped with automatic controls for both
frequency and voltage response, and Cogenerator shall notify Company
at any time when such automatic controls malfunction or are out of
service.
(d) Cogenerator shall staff the control room of the Plant with a
qualified operator during all hours when the Plant and/or Cogenerator
Substation is in operation or is electrically connected to Company's
system.
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(e) Company shall promptly notify Cogenerator's operator of any
outage or malfunction of equipment and facilities on the Company
System that would prohibit or limit Company's receipt of power and
energy generated by the Plant or any other condition affecting
operation of the Plant. Cogenerator shall report performance of the
Plant to Company utilizing the then-current standard Generating
Availability Data System ("GADS") methodology of the North American
Electric Reliability Council ("NERC") and in a format and medium
acceptable to Company. All GADS data is to be reported on a monthly
basis and is to be delivered to Company no later than forty-five (45)
days after the end of the appropriate report month. Cogenerator hereby
authorizes Company to publish the GADS data. In addition, Cogenerator
shall supply to Company sufficient data in a format and medium
acceptable to Company to permit calculation of Peak Hour Capacity
Factor within fifteen (15) days after the end of the month.
(f) Cogenerator shall obtain prior approval of TUSOC for any
closing of main circuit breakers of the Plant, whether for testing or
for operations, and of any planned outage of, or limitation on,
generation by the Plant, which approval shall not be unreasonably
withheld.
(g) Cogenerator shall keep maintenance records of the generating
equipment and control and protective equipment at the Plant, which
records shall be available to Company for inspection at all reasonable
times.
(h) Cogenerator shall report to TUSOC, on a timely basis, those
items and/or conditions necessary for TUSOC's internal planning and
compliance with TUSOC's guidelines in effect from time to time. The
information supplied shall include, without limitation, the following:
1. status (on or off line) within 15 minutes;
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2. daily plan for the next day, including capability released
and available for operation;
3. overhaul or scheduled outage plans for the year (updated
weekly);
4. any scheduled or planned transmission or switchyard clearances
or maintenance plans for the next twelve (12) months (updated
weekly);
5. time and cause of outage of Cogenerator's generators or
circuit breakers included in the Plant;
6. monthly generation estimates by August 1 for the next calendar
year;
7. prompt updates of the monthly generation estimates when any
changes are anticipated; and
8. at least thirty days prior to each calendar quarter, an
order-of-magnitude generation estimate for the next twelve
(12) month period.
5.05 Required Disconnection. (a) Cogenerator shall immediately open
the electrical connection between the Plant and the Interconnection
Facilities when requested by the Company for any of the following reasons:
(i) To facilitate maintenance or repair of any of the Company's
facilities or system or Cogenerator's facilities being maintained by
Company which requires such open connection as determined solely by
Company in the exercise of its engineering judgment, provided that
Company diligently proceeds with said repairs or maintenance; or
(ii) An emergency exists on Company's or ERCOT's system which
requires such open connection as determined solely by the Company in
the exercise of its engineering judgment and Company diligently
proceeds to correct or remedy said emergency to the extent such is
reasonable; or
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(iii) Inspection of the Cogenerator generating and/or protective
equipment reveals a hazardous condition, or a lack of proper
maintenance which requires the immediate opening of the connection, as
reasonably determined solely by the Company in the exercise of its
engineering judgment; or
(iv) Cogenerator's facilities are operating, as determined solely
by the Company in the reasonable exercise of its judgment, in a
hazardous manner or operating such that they are interfering with the
Company's customers or the operation of the Company's system to the
extent that the immediate opening of the connection is required, as
determined solely by Company in the reasonable exercise of its
judgment; or
(v) Upon termination of the Agreement.
While reasonable effort will be made to provide prior notice, the Company
reserves the right to require opening of the electrical connection or open
the connection itself without prior notice for any of the aforesaid
reasons, provided, that after-the-fact Company must show, upon request of
Cogenerator, that it was reasonable to require or make such opening of the
connection without prior notice. Where prior notice is not given, the
Company will promptly notify Cogenerator of all openings of the electrical
connections. Company will reimburse Cogenerator for Capacity Payments not
otherwise paid because Company required opening of the connections between
the Plant and the Interconnection Facilities under (iii) or (iv) above in
violation of the provisions of this subsection; Company's compliance with
or breach of the provisions of this subsection shall be based upon
circumstances known to Company's dispatchers or other supervisory
operating personnel at the time an immediate disconnection was ordered.
Cogenerator shall likewise exercise reasonable effort to provide prior
notice to Company of all unscheduled openings of the connection and all
unscheduled complete or partial outages of
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the Plant and, where prior notice is not given, shall promptly notify the
Company of all such openings of the connection and all such partial or
complete outages of the Plant. Once the cause requiring the opening of the
electrical connection has been removed, then the parties will cooperate to
promptly close the electrical connection between the Plant and the
Interconnection Facilities.
(b) Cogenerator shall immediately open the electrical connection
between the Plant and the Interconnection Facilities upon request by
Company when inspection of the Plant has revealed a lack of the maintenance
records required by this agreement, Cogenerator has been notified of such
lack, and such lack has not been corrected within thirty (30) days after
such notice.
5.06 Plant Maintenance. As soon as practicable and not later than the
date of Commercial Operation of the Plant, Cogenerator will furnish Company
with its long-term preventive maintenance program for each major item of
equipment of the Plant reflecting planned outages for inspection, repair,
maintenance and overhaul. After Partial Commercial Operation, similar
programs will be provided by Cogenerator for equipment in service. Such
program will be based, at least in part, on manufacturer's recommendations
and may be altered from time to time by reason of later manufacturer's
releases pertaining to major items of equipment of the Plant and experience
of Cogenerator in operating the Plant; Cogenerator will promptly advise
Company of any such changes. The specific times for planned outages of the
Plant will be scheduled annually in advance by agreement of the parties so
as to coordinate planned outages of the Plant with planned outages of
Company's generating facilities, of generating facilities of others
interconnected with Company's system and of the Cogenerator Substation,
Interconnection Facilities, and Company's transmission facilities involved
in receipt of power and energy from the Plant. Each party will, if
requested, endeavor to reschedule planned outages
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of any such facilities to accommodate the needs of the other party.
Cogenerator may also request a transmission or substation clearance, but
any such clearance must be scheduled by Company, except in an emergency. As
used in this section, an emergency is a condition that is imminently likely
to endanger life or property.
5.07 Delivery of Power. All power and energy generated by the Plant,
net of that required for operation of the Plant, shall be delivered to and
taken by Company, subject to the following and to other provisions of this
Agreement. Power and Energy so delivered shall be metered at the
Cogenerator Substation on the Company side of the transformers. Cogenerator
will supply and sell and Company will take and pay for energy from the
Plant delivered by Cogenerator to Company and Firm Capacity subject to the
following:
(a) Cogenerator shall not be required to furnish energy in excess of
Firm Capacity.
(b) Company shall not be required to take or pay for Firm Capacity or
energy it is permitted to refuse under the terms hereof.
(c) Cogenerator shall not be entitled to payment for deliveries of
capacity in excess of Firm Capacity.
(d) Cogenerator shall at any time, upon Company's request, increase
deliveries of Energy up to a maximum rate of delivery equal to the Firm
Capacity (or up to 90% of Firm Capacity when Cogenerator is affected by
fuel supply limitations), except to the extent that output of the Plant is
unavailable because of uncontrollable force, forced outage or scheduled
maintenance.
(e) Cogenerator shall, during an emergency and if requested by
Company, supply such power as the Plant is able to generate and Company is
able to receive. If Cogenerator has previously scheduled an outage, and
such outage occurs or would occur coincident with an emergency, Cogenerator
shall make all
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good faith efforts to reschedule the outage or, if outage has occurred,
expedite the completion thereof.
(f) Company shall not be required to purchase energy at a capacity in
excess of Firm Capacity, but, if maintenance of Capacity Factors at the
levels set forth in Section 7.05 is in jeopardy, Company will credit
Capacity Factor calculations with energy in excess of Firm Capacity reduced
at Company's request.
5.08 No Other Interconnection; Intrastate Commerce Operations. (a) The
Plant, Cogenerator Substation, Cogenerator Interconnection Facilities and
facilities transmitting power and energy generated at the Plant to the
Cogenerator Substation shall not be interconnected with the facilities of
any entity, other than Company, which generates, transmits or distributes
electric power and energy until:
(i) Cogenerator shall have notified Company in writing
of the proposed interconnection including all pertinent
details including but not limited to those requested by
Company; and
(ii) Company shall have consented thereto in writing.
Company shall not unreasonably withhold such consent unless
such interconnection would cause a breach of subsection (b).
(b) Cogenerator represents and warrants:
(i) that Cogenerator will not directly or through
connections with other entities transmit, sell or deliver
electric energy generated at the Plant (other than power or
energy delivered to Company or its successors and assigns)
in interstate commerce; and
(ii) that Cogenerator will not directly or through
connections with other entities transmit, sell or deliver
Maintenance Power and Energy or Construction Power
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and Energy delivered by Company under this Agreement in
interstate commerce; and
(iii) that Cogenerator will open all electrical
connections controlled by it which are necessary to prevent
transmission of electric energy generated at the Plant (and
not delivered to Company) or Maintenance or Construction
Power and Energy delivered by Company under this Agreement
in interstate commerce.
(c) It is understood and agreed that if Cogenerator transmits,
sells, delivers, purchases or receives electric energy in interstate
commerce or maintains any interconnection therefor, Company shall, in
addition to any other remedies it may have, including the remedies
specified below, have the option to immediately terminate this
Agreement.
(d) Company may immediately suspend receipt of power and energy
from, or delivery of power and energy to, the Plant if this Section is
violated. It is further agreed that it will be impossible to measure
in terms of money the damages which may or will accrue to Company by
reason of any failure in the performance of the obligations of this
Section, and, for that reason, among others, the parties agree that,
in case of any such failure, Company will be irreparably damaged in
the event that this Agreement is not specifically enforceable and,
accordingly, the parties agree to specific performance of the
Agreement set forth in this Section in addition to any other remedies
which may exist. If Company shall institute proceedings to enforce the
provisions of this Section, Cogenerator hereby waives any claim or
defense that an adequate remedy at law exists.
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(e) Nothing contained in this section shall preclude the
utilization of connections for the transmission of electric energy in
interstate commerce (i) under bona fide emergencies pursuant to the
provisions of Section 202(d) of the Federal Power Act, or (ii)
pursuant to orders of the Federal Energy Regulatory Commission,
applicable to Company, under Sections 210, 211 and 212 of the Federal
Power Act requiring the establishment, maintenance, modification or
utilization of any such connection which may be involved.
5.09 No Alterations. The design of the major items of equipment of the
Plant and Cogenerator Substation will not be materially altered or modified
without prior written consent of Company. Company may inform Cogenerator
of its opinions of such alterations, but Company's comments on such
alterations shall not waive any of Company's rights under this Agreement or
applicable law. Company shall be deemed to have consented to any proposed
alterations or modifications if it fails to comment thereon within 30 days
after receipt from Cogenerator of a complete set of plans for such
alteration or modification or a discrete portion of such alteration or
modification.
5.10 Firm Capacity. At or prior to both Commercial Operation and
Partial Commercial Operation, Initial Firm Capacity of the Plant shall be
established by agreement in writing of the parties after a twenty-four
(24) hour performance test in accordance with Exhibit 5.10 attached hereto
conducted by Cogenerator with the participation and under the observation
of Company, the results of which shall be considered in establishing
Initial Firm Capacity. Determination of Initial Firm Capacity (or of Firm
Capacity in the event of subsequent tests in accordance with the procedures
of this Section) will consider the results of performance tests and
anticipated operating procedures and guidelines, with due regard for
avoiding a level of generation that might advance deterioration of the
Plant or result in increased maintenance and repair. The determination of
Initial Firm Capacity
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will be in accordance with Exhibit 5.10. Initial Firm Capacity shall be net
of auxiliary equipment and other electrical requirements of the Plant
which are supplied by the Plant. Based upon the design of the Plant, but
subject to performance tests and operating guidelines, it is estimated that
the Initial Firm Capacity at Commercial Operation will be approximately 106
MW and approximately 80 MW at Partial Commercial Operation.
References in this Agreement to "Firm Capacity" mean Initial Firm Capacity
as determined under this Section unless Cogenerator has exercised its
rights under Section 5.11 to change Firm Capacity, in which case "Firm
Capacity" means the amount so designated by Cogenerator.
5.11 Redetermination of Firm Capacity. At any one time after the date
of Commercial Operation, but not later than May 31, 1989, Cogenerator has
the unilateral right, upon six months' written notice to Company, to change
Firm Capacity to the then current Tested Capacity, but not to less than
Initial Firm Capacity nor greater than 110% of the Initial Firm Capacity
determined under Section 5.10; provided, that Cogenerator must, prior to
implementation of the new Firm Capacity, conduct another test in accordance
with the procedures of Section 5.10 to verify that the proposed change in
Firm Capacity is justified. The effect of any changes in Firm Capacity
under this Section will be prospective only.
5.12 Tested Capacity. Tested Capacity will be determined from time to
time by the parties in accordance with this Section.
(a) Company may, not more than once each month, conduct an
unscheduled four hour test of the capacity of the Plant, using
installed meters. Representatives of Company may be present at the
Plant when such test is conducted. if the results of such test, as
adjusted, indicate the Plant
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has failed to maintain generation of Firm Capacity, then Company may
request a test pursuant to subsection (b).
(b) Company, subject to subsection (a), or Cogenerator may, at
any time, request another twenty-four (24) hour performance test of
the Plant, but there shall be no more than one test per calendar
month. Determination of Tested Capacity shall be in accordance with
Section 5.10. A determination of Tested Capacity shall be effective as
of the first day of the calendar month in which the performance test
is completed. Company shall be given reasonable prior notice of any
performance test and shall have the right to have representatives
present during any performance test. If Company determines that the
performance test was conducted in a manner or under conditions that
make the results of the test unrepresentative or inaccurate, then,
upon a written notice to Cogenerator within ten (10) days after such
test results are provided to Company in the performance test final
report, in which Company specifies the defects in the test and
requests a retest, Cogenerator will rerun the test with the defects
corrected within a reasonable time after the notice. Results of any
such retest shall be retroactive to the date of the original test. If
the results of a performance test show that Tested Capacity is less
than Firm Capacity then, Billing Capacity (as defined at Section 7.05)
shall be reduced as set out in Section 7.05, and shall remain so
reduced until a subsequent performance test conducted in accordance
with the procedures of Section 5.10. establishes that Tested Capacity
equals or exceeds Firm Capacity.
5.13 Backdown. (a) Cogenerator will, upon request of Company, reduce
the level of generation of the Plant as requested by Company, which
reduction may be accomplished, at Cogenerator's option, either by taking a
unit or units off-line or by reducing
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the operating level of the unit or units on-line ("Backdowns"). Backdowns
pursuant to this subsection shall not reduce generation of the Plant below
38% of Firm Capacity after Commercial Operation or below 50% of Firm
Capacity prior to Commercial Operation. In any twelve (12) consecutive
months the aggregate amount of all such Backdowns shall not exceed that
number of megawatthours (MWH) equal to fifty percent (50%) of Firm Capacity
times 2000 hours.
(b) So long as there is no decrease in the amount per kwh due
Cogenerator (Capacity Payments plus Energy Payments for twelve consecutive
months divided by the amount, in kwh, of Energy sold by Cogenerator
hereunder during such months), Backdowns in any twelve month period may
exceed the amount set forth in (a) shown, but all Backdowns in excess of
such amount shall be deemed not to have occurred for the purpose of
computing Annual Capacity Factor, Peak Month Capacity Factor, and Peak Hour
Capacity Factor for purposes of the Capacity Payment; in addition,
appropriate adjustments will be made in determining the amount of WACOG kwh
under Section 7.08(b)(ii)because of Backdowns in excess of the amount
stipulated in (a) above.
(i) Backdowns, pursuant to this subsection (b) shall not be of
such magnitude as to jeopardize the Plant's continuing to be a
Qualifying Cogeneration Facility; Cogenerator will notify Company if
such qualification appears to be in jeopardy and will, if requested,
present evidence of such jeopardy.
(ii) Backdowns pursuant to this subsection (b) will be
coordinated so as not to unreasonably conflict with Cogenerator's
operating practices and Host's steam requirements.
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(c) The amount of each Backdown shall be measured based upon the
generation level at the time of the request. Company will promptly advise
Cogenerator when it may increase generation or resume normal generation.
ARTICLE VI - OTHER AGREEMENT FOR ELECTRIC SERVICE
6.01 Description. Company presently provides electric power and energy
to Host's refinery near Big Spring pursuant to agreement or agreements
between Host and Texas Electric Service Company, a division of Company.
6.02 No Effect. The agreements for electric service described in
Section 6.01 as heretofore and hereinafter amended, shall remain in full
force and effect and are not hereby amended or altered. Company's
obligations to deliver power and energy to Host pursuant to such agreements
are not contingent upon generation of power and energy at the Plant.
Cogenerator's obligations to generate power and energy at the Plant shall
not be suspended by reason of Company's interruption of electric service to
Host.
ARTICLE VII - PAYMENTS TO COGENERATOR
7.01 Monthly Payments. Beginning on the date of Partial Commercial
Operation, Company shall pay Cogenerator monthly for power and energy in
accordance with this Article and with Article X.
7.02 Billinq Determinants. The billing determinants for the payments
to Cogenerator shall be:
(a) total net energy (in kwh) generated by the Plant and
delivered to Company each month as metered on the Company side of
the Cogenerator Substation (billing kwh), except as otherwise
provided in Section 7.08 (b)(ii) with respect to WACOG kwh.
(b) Billing Capacity (billing kW).
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If there be a partial calendar month following the date of Partial
Commercial Operation, the billing kW shall be in the proportion that the
number of days in such month from and including the date of Partial
Commercial Operation bears to the total number of days in such month. A
similar proration shall be made for any partial calendar month at the
expiration or other termination of this Agreement.
7.03 Initial Capacity Factors.
(a) For a period beginning on the date of Partial Commercial
Operation and ending after the expiration of six (6) full
calendar months after the date of Partial Commercial Operation
for the purposes of Section 7.05 of this Agreement (but not for
any other Section) (i) Annual Capacity Factor shall be deemed to
be equal to 65.00%, (ii) Peak Month Capacity Factor shall be
deemed to be equal to 75.00%, and (iii) Peak Hour Capacity Factor
shall be deemed to be equal to 82.00%. These deemed Capacity
Factors have no effect whatsoever on the calculation of the
various Capacity Factors under Section 7.06 at any time and apply
to Section 7.05 only through the end of six (6) full calendar
months after Partial Commercial Operations.
(b) After the expiration of six (6) full calendar months after
the date of Partial Commercial Operation, if the Capacity Factors
have failed to be equal to, or to exceed, the deemed Capacity
Factors specified in Subsection (a) at any time during said
period, then an adjustment to the previous capacity payments
shall be made pursuant to Section 7.05 as if no Capacity Factors
had been deemed whatsoever. The adjustment shall equal the
difference between (i) the capacity payments actually made and
(ii) the capacity
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payments that would have been made if no Capacity Factors had
been deemed pursuant to Subsection (a). Such adjustment will be
calculated after the exclusion of any month or months so elected
by Cogenerator pursuant to Section 7.04. Any such adjustment
shall bear interest at the Commercial Paper Rate from the end of
the sixth full calendar month after the date of Partial
Commercial Operation and shall be repayable in twelve equal
monthly installments beginning on the last day of the seventh
full calendar month after the date of Partial Commercial
Operation. As used in this Agreement, "Commercial Paper Rate"
means the lesser of (i) the interest rate on 30-day high grade
unsecured notes sold through dealers by major corporations as
such rate is published in The Wall Street Journal or (ii) the
highest rate permitted by applicable law, in effect on the first
business day of each calendar month in which interest accrues
hereunder.
7.04 Exclusion of Months. Prior to the end of the seventh full
calendar month after the date of Partial Commercial Operation, Cogenerator
shall notify Company in writing which month or months (not to exceed two)
immediately following the date of Partial Commercial Operation that
Cogenerator chooses to exclude from the calculation of Annual Capacity
Factor, Peak Month Capacity Factor and Peak Hour Capacity Factor; provided,
that such excluded month or months, if any, must be the first full calendar
month or the first two full calendar months after the date of Partial
Commercial Operation. If Cogenerator makes no such notification, then no
calendar months will be so excluded.
7.05 Billing Capacity. The Billing Capacity shall be determined in
megawatts and rounded to two decimal points for each month after the date
of Partial Commercial Operation in
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accordance with this Section. Billing Capacity is equal to Firm Capacity
except as follows:
(a) If the Annual Capacity Factor, as determined at the end of
any month in accordance with Section 7.06, is less than 65.00%, then
the Billing Capacity for such month shall be equal to zero; or
(b) If the Peak Month Capacity Factor, as determined at the end
of any month in accordance with Section 7.06, is less than 75.00%,
then the Billing Capacity for such month shall be reduced
proportionally by five percent (5%) of Firm Capacity for each one
percent (1%) by which Peak Month Capacity Factor is less than 75%
(eg., if Peak Month Capacity Factor is 72.95%, Billing Capacity is
89.75% of Firm Capacity); or
(c) If the Peak Hour Capacity Factor, as determined at the end of
any month in accordance with Section 7.06, is less than 82.00%, then
the Billing Capacity for such month shall be reduced proportionally by
five percent (5%) of Firm Capacity for each one percent (1%) by which
Peak Hour Capacity Factor is less than 82.00%; or
(d) If, on request of Company made when Company's system or
generation facilities are operating under other than normal conditions
or when any of Company's gas fired generating units are using oil as
fuel, Cogenerator is unable to generate energy in any month at a rate
of not less than 90% of Firm Capacity (less capacity not available
because of forced outage, scheduled maintenance, or uncontrollable
force other than limitation of fuel supply), due to fuel supply
limitations, whether or not such fuel supply limitations are caused by
an uncontrollable force during the first 480 hours following Company's
request and thereafter unless such limitation is caused by
uncontrollable force, then the Billing Capacity will be reduced as
follows:
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(i) the first time that such limited generation occurs for
a total of two hours within any consecutive seventy-two hours,
Billing Capacity for the month will be reduced by five percent
(5%) of Firm Capacity;
(ii) once condition (i) above has occured, if such limited
generation occurs for an additional two hours, Billing Capacity
for the month will be reduced by an additional two and one half
percent (2 1/2%) of Firm Capacity;
(iii) for each additional hour of such limited generation in
the same month, Billing Capacity for the month will be reduced by
an additional one percent (1%) of Firm Capacity; and
(iv) if enough hours of such limited generation occur to
reduce Billing Capacity for the month to zero, then additional
hours of such limited generation during the month will operate to
reduce Billing Capacity for the following month or months at the
rate of one percent (1%) of Firm Capacity for each additional
hour of such limited generation.
(e) If Tested Capacity is less than Firm Capacity, then, Billing
Capacity shall be reduced proportionately by two percent (2%) of Firm
Capacity for each one percent (1%) of Firm Capacity by which Tested
Capacity is less than Firm Capacity, for the period of time during which
Tested Capacity is less than Firm Capacity.
(f) Any partial reductions of Billing Capacity pursuant to (b), or (c)
above are not additive, but only the largest reduction shall apply (e.g.,
if Peak Month Capacity Factor is 72.95% and Peak Hour Capacity Factor is
80.00%, then Billing Capacity equals 89.75% of Firm Capacity); however, a
reduction of Billing Capacity pursuant to (d) or
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(e) above is additive with reductions under (b) and (c) above (e.g.,
if Peak Month Capacity Factor is 72.95%, Peak Hour Capacity Factor is
80.00%, and Tested Capacity is 89.00 megawatts while Firm Capacity is 90.00
megawatts for fifteen (15) out of the thirty (30) days in the month, then
Billing Capacity equals 87.25% of Firm Capacity).
7.06 Definition of Capacity Factors.
(a) Annual Capacity Factor shall be determined by dividing the total
net energy (in mwh) delivered to Company during the current month and the
prior 11 months, by the product of the number of hours in such month and
the prior 11 months and the Firm Capacity (in mW) as determined at the end
of the prior month. If less than 12 full calendar months have occurred
since the date of Partial Commercial Operation or the end of any months
excluded by Cogenerator pursuant to Section 7.04, whichever is later, the
Annual Capacity Factor shall be determined using only such lesser number of
months.
(b) Peak Month Capacity Factor shall be determined by dividing the
total net energy (in mwh) delivered to Company during (i) the current
month, if it be a Peak Month, and the last six prior Peak Months, or (ii)
the last seven prior Peak Months if the current month is not a Peak Month,
by the product of the number of hours in such seven Peak months and Firm
Capacity for the immediately preceding month. If less than seven full
calendar Peak Months have occurred since the date of Partial Commercial
Operation or the end of any months excluded by Cogenerator pursuant to
Section 7.04, whichever is later, then Peak Month Capacity Factor will be
determined by using only said lesser number of months. If no calendar Peak
Months have occurred since the date of Partial Commercial Operation and any
months excluded by Cogenerator pursuant to Section 7.04, then Peak Month
Capacity Factor shall be deemed to be 75.00%.
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(c) Peak Hour Capacity Factor shall be determined by dividing the
total net energy (in mwh) delivered to Company during Peak Hours of Peak
Days in (i) the current month, if it be a Peak Hour Month, and the last six
prior Peak Hour Months, or (ii) the last seven prior Peak Hour Months if
the current month is not a Peak Hour Month, by the product of the number
of Peak Hours in Peak Days in such seven Peak Hour Months and Firm Capacity
for the immediately preceding month. If less than seven calendar Peak Hour
Months have occurred since the date of Partial Commercial Operation or at
the end of any months excluded by Cogenerator pursuant to Section 7.04,
whichever is later, then Peak Hour Capacity Factor will be determined by
using the Peak Hours in Peak Days in such lesser number of Peak Hour
Months. If no Peak Hour Months have occurred since the date of Partial
Commercial Operation and any months excluded by Cogenerator pursuant to
Section 7.04, then Peak Hour Capacity Factor shall be deemed to be 82.00%.
(d) "Peak Months," and "Peak Hour Months" as used in this Section, are
the months of January, February, June, July, August, September and
December. "Peak Days" means all weekdays in the months of January, June,
July, August, September, and all week days in the periods of December 16
through 31 and February 1 through 15; week days excludes Saturdays and
Sundays. "Peak Hours" means the hours of 8:00 a.m. through 10:00 p.m. of
Peak Days in the months of June, July, August and September and the hours
of 6:00 a.m. through 10:00 p.m. of Peak Days in the months of January,
February and December. Peak Months, Peak Hour Months, Peak Days and Peak
Hours in a calendar year may be changed by Company (but the number of Peak
Months, Peak Hour Months, Peak Days and Peak Hours may not be increased)
upon not less than three months' written notice to Cogenerator or as
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agreed by the parties; provided, that such change, for all purposes under
this Agreement, will be applied prospectively.
(e) Each of the above-described Capacity Factors shall be expressed as
a percentage and rounded to two decimal points.
(f) If months both before and after the date of Commercial Operation
are considered in computing Annual, Peak Month or Peak Hour Capacity
Factors, then the net energy delivered during all such months shall, in
lieu of contrary provisions of subsections (a) - (c) , be divided by the
sum of the products of:
(i) the number of hours in the applicable number of months and
partial months preceding the date of Commercial Operation multiplied
by Firm Capacity at the end of the last month preceding the date of
Commercial Operation; and
(ii) the number of hours in the applicable number of months and
partial months after the date of Commercial Operation, multiplied by
Firm Capacity at the end of the month immediately preceding the month
for which such determination is being made; if, however, Commercial
Operation has not occurred at the end of the prior month, then
substitute Firm Capacity at the end of the month for which such
determination is being made.
7.07 Adjustments to Capacity Factors.
(a) Computations of Annual, Peak Month and Peak Hour Capacity Factors
shall be made as provided in this Article based upon total net generation
of the Plant metered on the Company side of the Cogenerator Substation for
the applicable period even though actual generation of the Plant may have
been affected by uncontrollable forces (except as
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provided in (b) below) or by Cogenerator's or Company's suspension of
performance as authorized by Sections 5.05, 5.06, 5.08, 12.01 or 13.03 of this
Agreement or a reduction in generation made at Company's request pursuant to
Section 5.13. Provided, however, that computations of Peak Month Capacity Factor
and Peak Hour Capacity Factor will not be affected by any reductions of
generation made at Company's request pursuant to Section 5.13, i.e., said
Factors will be calculated as if the amount and level of reduction had not
occurred. Similarly, computations of Peak Month Capacity Factor, Peak Hour
Capacity Factor and Annual Capacity Factor will not be affected by (i) any
reductions of generation made at Company's request to construct or maintain
facilities pursuant to section 3.10(b) or (c) solely to serve other customers,
(ii) reductions in excess of 150 hours per year made at Company's request
pursuant to section 5.05(a)(i), (iii) backdowns made pursuant to Subsection
5.13(b), (iv) reductions in generation resulting from Company's opening of
electrical connections in violation of subsection 5.05(a)(iii) or 5.05(a)(iv),
(v) reductions in generation in excess of twenty-five (25) hours in any
consecutive twelve-month period made pursuant to subsection 5.05(a)(ii), or (vi)
reductions in generation pursuant to Section 5.07(f).
(b) if Uncontrollable Forces is applicable and is declared by Cogenerator,
the Capacity Factors applicable immediately before the occurrence of the
Uncontrollable Force shall remain unchanged for so long as such Uncontrollable
Force continues in accordance with the terms hereof. If Uncontrollable Force is
applicable and is declared by Cogenerator, Company shall not be required to make
any Capacity Payment for the months or any portions thereof during which the
Uncontrollable Force conditions existed.
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7.08 Prices Company's payments to Cogenerator shall be based on the
billing kwh and billing kW as set out above and the following:
(a) Capacity Payments will be made at the following rates:
Calendar Year $/kw/month
------------- ----------
1987 10.75
1988 11.13
1989 11.52
1990 11.92
1991 12.33
1992 12.77
1993 13.21
1994 13.68
1995 14.16
1996 14.65
1997 15.16
1998 15.69
1999 16.24
2000 16.81
2001 17.40
2002 18.00
2003 18.63
(b) Energy Payments.
(i) Energy payments shall be based on the following schedule:
Calendar Year cents/kwh
------------- ---------
1987 2.10
1988 2.17
1989 2.25
1990 2.33
1991 2.41
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1992 2.49
1993 2.58
1994 2.67
1995 2.77
1996 2.86
1997 2.96
1998 3.07
1999 3.17
2000 3.28
2001 3.40
2002 3.52
2003 3.64
(ii) Provided, however, that for any month after 1988 in which the Annual
Capacity Factor is 72.5% or greater, billing kwh in excess of 72.5% of the
product of the Firm Capacity for the current month and the number of hours
in the current month ("WACOG kwh") shall be paid for at 99% of the
Company's Weighted Average Cost of Gas rather than at the above rates in
accordance with Exhibit 7.08(b)(ii). "Weighted Average Cost of Gas" will be
determined on an after-the-fact basis using a heat rate of 10,300 btu/kwh
and the Company's average cost of gas for the month in which the energy was
delivered. The monthly energy constituting WACOG kwh, if any, shall be
determined by the applicable formula and be subject to the limitations set
forth below:
If B is greater than FC x 1000, then:
NG (FC x H x .725) - (B - (FC x 1000))
P = ------ - [ ----------------------------------- ]
M M
If B is less than FC x 1000, then:
NG FC x H x .725
P = ------ - [ ------------- ]
M M
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where:
P is the monthly energy constituting WACOG kwh.
NG is net generation of the Plant for the current month and the
prior eleven months or such lesser number of full calendar months as
have elapsed since the later of Commercial Operation or December 31,
1988.
B is the Backdown, in kwh, in the current and prior eleven
months or such lesser number of full calendar months as have elapsed
since Commercial Operation or December 31, 1988, whichever is later.
FC is Firm Capacity.
H is the number of hours in the current and prior eleven months
or such lesser number of full calendar months as have elapsed since
the later of Commercial Operation or December 31, 1988.
M is 12 or such lesser number equal to the number of full
calendar months including the current month which have elapsed since
the later of Commercial Operation or December 31, 1988.
Limitation: Notwithstanding the results of the foregoing, Company
shall have no obligation to pay for any more WACOG kwh than is
actually generated.
7.09 Payments Subject to PUC Action. The payments from the Company as
specified in Section 7.08 have been established by the parties based upon laws,
regulations and rules in effect during negotiation of this Agreement and
applicable to purchases of power and energy from a Qualifying Cogeneration
Facility. Such payments do not exceed estimates of Company's avoided costs in
PUC Docket No. 6065 over the term of this Agreement, computed by Company using
its best efforts in accordance with such laws, rules and regulations. It is the
intention of the parties that
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such payments, as herein established, shall be in effect and observed during the
term of this Agreement. Notwithstanding the foregoing, if at any time during the
term of this Agreement, the Public Utility Commission of Texas, other than in a
proceeding initiated by Company or Cogenerator for the purpose of requesting or
obtaining such alteration, alters the rate for the purchase of energy and
capacity which can be paid by Company to Cogenerator pursuant to this Agreement
or the amounts allowed to be recouped from Company's retepayers, then such
payments shall be adjusted to the rate allowed by the Commission. Prior to the
time that any such order becomes final, Company may, at its option, suspend any
affected portion(s) of payment obligations hereunder pending appeal, approval of
a superseding order, modified rules or tariff for Company, or other action that
would permit payments herein provided. Amounts so suspended shall be held in
escrow for payment to the appropriate party when the order becomes final. During
such suspension, Cogenerator may, at its option, do either one or both of the
following:
(i) sell the energy and capacity for which payment has been suspended
to Host or others so long as such sale does not violate any other
provision of this Agreement; or
(ii) sell all or part of the energy for which payment has been
suspended to Company. Payment for non-firm energy so sold to Company
shall be based on Company's avoided energy costs computed according to
the most recent methodology filed by Company with the Public Utility
Commission of Texas as required by its substantive Rule 23.66. Any such
payments are subject to regulatory action and recoupment in accordance
with this section and Section 7.10. If the regulatory authority
determines that amounts held in escrow should be paid to Cogenerator or
its ruling has that effect, then any amounts paid to Cogenerator for
non-firm energy during the period of suspension shall be subtracted
from escrow funds to be paid to Cogenerator.
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If the amount disallowed by the final order is more than nominal (the parties
agreeing that a reduction of 5% or more is more than nominal without prejudice
to the right of Cogenerator to assert that a lesser reduction is more than
nominal) Cogenerator may terminate this Agreement upon notice given within
thirty (30) days after the order becomes final. Nothing herein contained shall
obligate Company to wheel energy and capacity to any entity other than another
utility nor to any utility if such wheeling would subject Company to regulation
under the Federal Power Act. Any wheeling to another utility will be in
accordance with, and subject to Cogenerator's compliance with PUC Substantive
Rule 23.66.
7.10 Recoupment. Company's obligations to make payments to Cogenerator
pursuant to this Article are conditioned upon the Company's being permitted by
the Public Utility Commission of Texas to fully recoup from Company's ratepayers
through a Purchased Power Cost Recovery Factor Clause or other authorized rate
or charges all of the payments made to Cogenerator. Any sums recouped by
Company from its ratepayers and which are subsequently disallowed by the Public
Utility Commission and charged back to Company including any interest or other
sums added to the amount disallowed, other than in a proceeding initiated by
Company or Cogenerator for the purpose of requesting or obtaining such
disallowance, shall be paid by Cogenerator to Company or setoff or credited
against subsequent payments owed by Company to Cogenerator. Amounts payable by
Cogenerator to Company under this Section shall bear interest at the Commercial
Paper Rate from the date the sums disallowed are charged back to Company until
the date they are paid by Cogenerator or set off against Cogenerator's payment
obligations. At the request of Cogenerator, Company will consider arrangements
for payment of
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sums due in periodic installments; any such arrangement will be upon such terms
and at such rate of interest as may be agreed. Unless or until terminated under
section 7.09, future rates for capacity and energy will be adjusted to the
levels allowed by the Public Utility Commission to be charged to ratepayers for
purchases under this Agreement.
ARTICLE VIII - COGENERATOR NOT A UTILITY
8.01 Cogenerator Not a Utility. Cogenerator does not hereby dedicate the
Plant and related facilities nor the electrical output of the Plant to serving
the public and nothing herein contained shall be construed or interpreted as
constituting Cogenerator a public utility. Instead, Cogenerator intends to be a
private entity owning and operating the Plant as a Qualifying Cogeneration
Facility.
8.02 Company Is a Utility. Company does not hereby dedicate its system or
any part thereof to Cogenerator nor does it hereby alter its status as a public
utility providing service to its customers including those described in Section
6.01.
ARTICLE IX - PERMITS, REGULATIONS AND CONTINGENCIES
9.01 Subject to Regulation. This Agreement, including amounts to be
credited against billings to Cogenerator, may be subject to regulation by
applicable regulatory authorities having jurisdiction. Construction of the
Interconnection Facilities may be subject to prior approval of the Public
Utility Commission of Texas.
9.02 Application for Permits. Each party shall, promptly after execution
hereof, apply for any and all permits, licenses and regulatory approvals
required for its performance hereof.
9.03 Certificate of Convenience and Necessity Not Obtained. If Company is
unable to obtain, in form and substance satisfactory to it, a certificate of
convenience and necessity or
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an amendment to its existing certificate of convenience and necessity, if
required, for construction of the Interconnection Facilities, either party may
terminate this Agreement on written notice to the other.
9.04 Fuel Supply Not Obtained. If Cogenerator is unable to obtain written
contracts for a fuel supply (including back-up fuel) satisfactory to Company,
then Company may, at any time prior to September 15, 1986, terminate this
Agreement upon written notice to Cogenerator. To the extent that Cogenerator
elects to provide fuel from its own reserves, such reserves must be dedicated to
supplying the Plant so that such dedication will be binding upon Cogenerator's
successors and assigns. Company may terminate by the aforesaid date if the
amount or dedication of such reserves or arrangements (or contracts) for
transportation thereof are not satisfactory.
9.05 Third Party Contracts Unsatisfactory. If any of the contracts
described in Section 15.08 contain provisions unsatisfactory to Company,
(excluding provisions contained in a draft approved by Company) then Company
may, within thirty days after receipt of such contract, terminate this Agreement
upon written notice to Cogenerator unless such contract is amended to Company's
satisfaction.
9.06 Effect of Termination. Upon termination under this Article, neither
party shall have any further obligation to the other under the terms and
provisions hereof except that Cogenerator will pay Company for any costs
incurred by Company to the date of termination for design, construction and
removal of the Interconnection Facilities including the costs of cancelling any
orders for materials and the costs of any materials under any non-cancellable
orders other than materials which Company may readily use for other purposes.
9.07 Subject to Applicable Laws. This Agreement is also subject to
applicable federal, state and local laws, ordinances, rules and regulations.
Nothing herein contained shall be con-
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strued as a waiver of any right to question or contest any such law, ordinance,
rule or regulation or asserted regulatory jurisdiction.
9.08 Changes in Contracts. Fuel supply and transportation contracts and
third party contracts described in Sections 9.04 and 15.08, approved or deemed
approved by Company shall not be altered, amended or terminated without
Company's prior written consent.
9.09 Termination by Cogenerator.
(a) Cogenerator may terminate this Agreement by written notice to
Company if any of the following events have not occurred by the dates set
forth in (c) below:
(i) Execution by Cogenerator and Host of an enforceable Steam Sale
and Purchase Agreement, satisfactory to Company, whereby Host will be
obligated to purchase sufficient steam from Cogenerator for the Plant
to be a Qualified Cogeneration Facility;
(ii) Execution of an enforceable Construction Agreement,
satisfactory to Company, by Cogenerator and its equipment vendor for
construction of the Plant;
(iii) Cogenerator's obtaining a firm commitment from a lender to
finance construction of the Plant and containing such terms and
provisions as are acceptable to Cogenerator, in its discretion.
(b) Cogenerator may terminate this Agreement by written notice to
Company if, by October 15, 1986 or such later date as may be agreed in
writing by the Parties, Cogenerator has not entered into a loan agreement
with its lender pursuant to its firm commitment.
(c) The date specified in (a) above shall be the latest of September
15, 1986, such subsequent day as may be agreed in writing by the Parties or
30 days after Company's receipt of a final draft of the agreements
described in (i) and (ii) of (a) above.
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(d) Written notice of termination pursuant to this Section shall be
given not later than the date specified in (b) or (c), as applicable.
(e) Cogenerator shall make every reasonable effort to execute the
agreements and to obtain the commitment described above.
ARTICLE X - METERS, RECORDS AND BILLINGS
10.01 Metering by Company. Company will, at Cogenerator's expense, install
and maintain meters on the Company side of the Cogenerator Substation to
measure power and energy (i) delivered by Company to Cogenerator and (ii)
delivered by Cogenerator to Company. The Company shall have the right to
inspect, test and read its meters and measuring equipment at all times. The
Company shall, at Cogenerator's expense, inspect and test all meters and
measuring equipment upon their installation and on a scheduled basis at least
once every year thereafter. Meters will also be inspected at any other
reasonable time upon the request of Cogenerator; the cost of such inspections
will be borne by Cogenerator. If such meters and measuring equipment are found
to be not within the standards established by the American National Standards
Institute, Incorporated, such meters and measuring equipment will be
repaired or replaced at Cogenerator's expense. If a meter or other measuring
equipment fails to register or, upon test, is found to be not within the
accuracy standards established in the latest revision of Standard C12.1 of the
American National Standards Institute, Incorporated, an adjustment, estimated by
the Company, shall be made correcting a11 measurements made by such an
inaccurate meter or measuring equipment for:
(a) the actual period during which inaccurate measurements were made,
if such period can be determined or, if not,
(b) the period immediately preceding the test of the meter or measuring
equipment equal to one-half the time
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from the date of the last previous test of such meter or measuring
equipment, provided that the period covered by any such correction shall
not exceed six months.
Company shall give Cogenerator reasonable advance notice of any such tests, and
Cogenerator shall have the right to observe the test and to conduct its own
tests to verify the Company's procedures and results.
10.02 Metering by Cogenerator. Cogenerator will install and maintain meters
to measure all pertinent fuel and electrical parameters of the Plant as set
forth in Exhibit 10.02 attached hereto. Cogenerator shall, at its own expense,
inspect and test such meters at least once each year, or at any other reasonable
time at Company's request and at Company's expense. Cogenerator shall repair or
replace any meters found to be not within the accuracy standards of the American
National Standards Institute, Incorporated. Cogenerator shall give Company
reasonable advance notice of any such test, and Company shall have the right to
observe the test and to conduct its own tests to verify Cogenerator's procedures
and results.
10.03 Records. Company shall maintain meter records and other records
needed to reflect power and energy generated at the Plant and delivered to
Company. Company will also maintain complete records of its costs and expenses
chargeable to Cogenerator pursuant to Article III hereof. Cogenerator shall
maintain meter records and other records needed to reflect power and energy
generated at the Plant and records of all pertinent fuel and electrical
parameters of the Plant. Such records will be maintained in accordance with
generally accepted accounting procedures consistently applied and will be
subject to inspection and audit by the other party during normal business hours
upon reasonable advance notice.
10.04 Interest on Past Due Bills. Any bills rendered by Company hereunder
(specifically excluding any billings for construction or maintenance power and
energy) which are not paid
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when due and any payments due by Company to Cogenerator pursuant to Article VII
which are not paid when due shall bear interest, compounded monthly, from the
due date until paid, at the Commercial Paper Rate.
10.05 Corrections. Billings and payments shall be subject to correction
for a period of one (1) year from the date thereof.
10.06 Metering Expense. Cogenerator will pay to Company monthly, beginning
at the conclusion of the first month of trial operation of the Plant, the sum of
Three Hundred Sixty dollars ($360.00) for al1 associated meter reading,
processing and administrative cost. At June lst of each year during the term of
this Agreement, the monthly amount shall be adjusted as set forth in Section
3.12 (c)(i) and (ii) to reflect increases in the Bureau of Labor Statistics of
the United States Department of Labor Transportation and Public Utilities
Electric Services average hourly earnings using May 1986 as the base period.
The average hourly earnings numbers referred to in Section 3.12 (c)(i) will be
taken from this SIC Code 491, except as set forth in Section 3.12(c)(ii).
10.07 Billing. Within thirty (30) days after the end of a month, Company
shall render to Cogenerator a statement detailing all amounts due from Company
to Cogenerator and all amounts due from Cogenerator to Company for said calendar
month, based upon data from Company's telemetry equipment:
(a) The statement will contain payment by Company to Cogenerator of
the sum due, if any, from Company to Cogenerator.
(b) Company may offset sums due or to become due from Cogenerator
against sums payable by Company to Cogenerator after (i) the date of
termination pursuant to Section 7.09, (ii) the date Company gives
Cogenerator notice of default, (iii) the date Company gives Cogenerator
notice of termination pursuant to Section 13.03 or 18.03 or (iv) the date
Cogenerator makes an assignment for the benefit of
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creditors or becomes insolvent or the date a receiver is appointed to take
possession of the Plant. Sums so offset shall be paid to Cogenerator if
Cogenerator cures its default within thirty days after the date of
Company's notice of default or termination.
(c) If the statement shows a net amount due from Cogenerator to
Company, payment shall be due twenty (20) days after said statement is
sent.
(d) On a regular monthly basis, Company will read the meters and
correct the previous billing for any differences in the substation meters
and the telemetry equipment. At Cogenerator's request, Company wil1
substantiate any such differences. In the event of any such differences the
substation meters shall determine the correct billing.
10.08 Early Payments. In the event that this Agreement is terminated prior
to the end of its original term as specified in Section 11.01, then Early
Payments made by Company to Cogenerator will be refunded according to the
Schedule attached hereto as Exhibit 10.08. Said refund will be due thirty (30)
days after termination and, if not paid when due, will bear interest at the
Commercial Paper Rate. At the request of Cogenerator, Company will consider
arrangements for payment of sums due in periodic installments; any such
arrangement will be upon such terms and at such rate of interest as may be
agreed. The amount of "Early Payments" consists of all capacity payments made by
Company to Cogenerator in excess of the amount of such payments that would have
been made had such payments been scheduled to start in 1989 and escalate at a
7.07% annual rate. To secure the refund of such Early Payments, Cogenerator
shall furnish a surety bond, or other security, which may include pledge or
encumbrance of properties or fuel reserves, satisfactory to Company, on or
before the date of Partial Commercial Operation in an amount equal to the
maximum amount of Early Payments which could be made
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under this Agreement given the date of Partial Commercial Operation. Cogenerator
may from time to time reduce the amount of its bond or other security to an
amount equal to its then remaining potential liability for refund of Early
Payments as specified in Exhibit 10.08.
ARTICLE XI - TERM AND OTHER PROVISIONS
11.01 Term. This Agreement shall be effective from its date and shall
continue thereafter until the September 30th which occurs first after fifteen
(15) years after the date of Commercial Operation, at which time it shall
automatically terminate.
11.02 Amendment. This Agreement may be amended at any time, but only upon
written agreement of the parties.
11.03 Assignment.
(a) This Agreement shall not be assigned nor shall the Plant, Cogenerator
Substation, Cogenerator Interconnection Facilities or any major items of
equipment thereof or any of Cogenerator's fuel supply for the Plant be sold
or transferred, in whole or in part, by either party without the prior
written consent of the other (which consent will not be unreasonably
withheld but Company may require security satisfactory to Company for
transferee's performance of Cogenerator's obligations hereunder, including
without limitation, under Sections 3.12, 10.08 and 13.05).
(b) A party shall be deemed to have consented to a proposed assignment if
it does not otherwise advise the party requesting consent within thirty
days after receipt of such request;
(c) Consent of the other party shall not be required for:
(i) Assignment of this Agreement in whole or in part by Company to
Texas Utilities Company or any wholly owned subsidiary of Texas
Utilities Company;
(ii) Assignment of this Agreement by Cogenerator to any subsidiary,
parent or successor entity whose voting securities are at least
fifty-one percent owned by Cogenerator;
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(iii) Assignment of this Agreement by Cogenerator for collateral
security purposes to aid in providing financing for the Plant,
Cogenerator Substation, and Cogenerator Interconnection Facilities or
Cogenerator's obligations hereunder, provided that any such assignment
will require the lender to assume the obligations of this Agreement if
lender operates the Plant directly or to require assumption of this
Agreement by any lessee or purchaser of the Plant from the lender;
(iv) Sale by Cogenerator of any major item of equipment which has been
replaced. A "major item of equipment" is any equipment or facility
(excluding fuel supply reserves and contracts and fuel transportation
agreements) required for reliable operation of the Plant and delivery
of power and energy to Company;
(v) Transfer by Cogenerator of an undivided interest in the Plant,
Cogenerator Substation, Cogenerator Interconnection Facilities, major
item of equipment or Fuel Supply so long as Cogenerator retains an
undivided interest therein.
(vi) Transfer to Company pursuant to Article XV.
(d) No assignment of this Agreement without consent under Subsection (c)
shall release the assignor from liability hereunder;
(e) Subject to the foregoing provisions of this section, the provisions of
this Agreement shall be binding upon, and inure to the benefit of the
successors and assigns of the parties hereto.
11.04 Company Organization. References herein to a division of Company are
for convenience only and reflect the current organization of Company. Company
may designate other of its divisions to perform or receive a benefit hereunder
and may
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reorganize its divisions or discontinue its divisions entirely. All provisions
hereof imposing an obligation or conferring a benefit upon a division of Company
shall be binding upon or inure to the benefit of Company.
11.05 No Waiver. Failure of a party to insist, on any occasion, upon strict
performance of this Agreement shall not be a waiver of the right to insist upon
strict performance of any provision on any other occasion.
ARTICLE XII - OUTAGES AND UNCONTROLLABLE FORCE
12.01 Outages.
(a) The parties recognize that the Plant, Cogenerator Substation,
Cogenerator Interconnection Facilities, Interconnection Facilities and
Company's transmission system will be subject, from time to time, to
scheduled outages for construction, maintenance, repairs and inspection and
to unscheduled outages caused by breakage or malfunction of equipment,
machinery and facilities, or by storm or other casualty. Receipt of power
and energy generated at the Plant may be interrupted or curtailed by either
party because of such scheduled or unscheduled outages of the Plant,
Interconnection Facilities, Cogenerator Substation, Cogenerator
Interconnection Facilities and related transmission lines and facilities.
(b) Receipt of power and energy generated at the Plant may also be
interrupted or curtailed by Company or Cogenerator because of other outages
or conditions but only to prevent possible injury to persons and possible
damages to facilities and equipment, to prevent jeopardy to reliability of
its system, to maintain the security requirements of ERCOT, or as otherwise
authorized by this Agreement.
(c) Cogenerator and Company will promptly give notice to the other of
any unscheduled outage. Company and
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Cogenerator will, as far in advance as practical, schedule outages of the
Plant and of other facilities affecting receipt by Company of electric
power and energy generated at the Plant.
(d) Each party will, however, use due diligence so that delivery and
receipt of power and energy generated at the Plant may be resumed.
12.02 Liability. Neither party shall be liable to the other for
interruptions or curtailments; of the delivery or receipt of power and energy
generated at the Plant by reason of any of the causes set forth in Section 12.01
even though caused, in whole or in part, by the negligence of a party. Such
interruptions or curtailments may, however, affect calculation of capacity
factors or payments under Article VII, cause a party to be in default hereunder
or authorize termination of this agreement.
12.03 Uncontrollable Force. (a) Provided that notice is given as required
in subsection (b) below, a party shall not be considered to be in default with
respect to any obligation under this Agreement (other than an obligation to pay
sums due and other than as provided in (d) below) if it is prevented from
fulfilling such obligation by reason of an Uncontrollable Force for a period of
up to six (6) months in length. The term "Uncontrollable Forces" shall be deemed
for the purposes of this Agreement to mean storm, tornado, flood, lightning,
earthquake, fire, explosion, civil disturbance, acts of God, sabotage, war,
national emergency or restraint by a court or public authority, which such
party could not reasonably have been expected to avoid by exercise of due
diligence and foresight. Uncontrollable Forces shall also include delays in
receipt of generator rotor, generator stator, main power transformer or steam
turbine caused by damage or loss in shipping. The failure of a party's
facilities which is caused by an act or event other than storm, tornado, flood,
lightning, earthquake, fire, explosion, civil
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disturbance, acts of God, sabotage, or war, is not an "uncontrollable force".
The term "Uncontrollable Forces" does not include changes in market conditions,
including but not limited to changes that affect the cost or availability of
Cogenerator's supply of fuel or alternate supplies of fuel. A party shall
exercise due diligence to remove any disability to its performance caused by
Uncontrollable Forces with reasonable promptness. After a party's failure to
perform due to an Uncontrollable Force has continued for six (6) months, then
the Uncontrollable Force shall cease to excuse the failure to perform, and the
party failing to perform shall thereafter be in default of this Agreement.
(b) A party may not assert an Uncontrollable Force as an excuse for a
default unless the party suffering the Uncontrollable Force notifies the other
party in writing within fourteen (14) days after the commencement of the failure
or inability to perform which was caused by the Uncontrollable Force. The notice
shall specify the nature of the Uncontrollable Force and the date of its
commencement.
(c) If Cogenerator is prevented from performance by breakdown or
malfunction of equipment requiring replacement of a generator stator, generator
rotor, main power transformer or steam turbine, Cogenerator may so advise
Company within the time limits specified in Subsection (b). If Company agrees on
the need for such replacement so that Cogenerator may perform under this
Agreement, then the equipment breakdown or malfunction shall be deemed to have
been caused by Uncontrollable Force. If Company does not agree, the question of
the need for such replacement may be submitted to arbitration under Article XIX,
by request made within 45 days after date of notice given pursuant to Subsection
(b). If Cogenerator believes that replacement of the rotor, stator or
transformer cannot be completed within six (6) months, Cogenerator may so notify
Company in writing, and the parties will negotiate in good faith to extend the
six (6) month
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period set out in (a) above for the time necessary to make the replacement, but
not to exceed eighteen (18) months. If no agreement is reached within thirty
(30) days after the written notice, then either party may submit the issue of
the length of time necessary to make the replacement to binding arbitration
under Article XIX by request made within 45 days of the date of Cogenerator's
notice that replacement will require more than six months, but under no
circumstances shall the six (6) month period under (a) above be extended to
greater than eighteen (18) months.
(d) If Cogenerator shall violate Section 5.08(b), Company may exercise the
rights afforded in Section 5.08(c) and (d) even though Cogenerator's violation
is the result of Uncontrollable Force.
12.04 Cogenerator's Indemnification of Company. This Agreement is for the
benefit of the parties hereto and shall not be construed to confer any rights
or benefits on any third party.
(a) Without limiting the foregoing, Cogenerator further agrees to defend,
protect, indemnify, and save harmless Company, its agents, servants, officers,
directors, and employees, from and against all claims, expenses, demands,
judgments, and causes of action of every kind and character for personal injury
or death or damage to property of Cogenerator, Cogenerator's agents, servants,
and employees, as well as Cogenerator's contractors and the agents, servants,
and employees of Cogenerator's contractors, whether or not arising from the sole
or concurrent negligence or fault of Company, its agents, servants, officers,
directors, or employees or independent contractors directly responsible to
Company, arising out of or incident to this Agreement, including, but not
limited to, (i) any condition of Cogenerator's premises, (ii) separate
operations being conducted on Cogenerator's premises, or (iii) the imperfection,
whether latent or patent, of any material or equipment furnished by Company;
Cogenerator may purchase and install, to Company's specifications, such
material or equipment in lieu of Company's furnishing the same.
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(b) Cogenerator shall defend, protect, indemnify, and save harmless Company
and its officers, directors, agents, servants, and employees from and against
any and all claims, expenses, demands, judgments, causes of action of every kind
and character whatsoever arising in favor of any person or entity (other than
Cogenerator, Cogenerator's contractors a and the agents, servants, and employees
of Cogenerator or Cogenerator's contractors, as provided in the preceding
subsection), except that arising from the sole negligence or fault of Company,
its agents, servants, officers, directors, or employees or independent
contractors directly responsible to Company, including but not limited to
claims, demands, judgments, causes of action on account of personal injuries or
death, or damage to property arising out of or incident to this Agreement; it is
the clear and unequivocal intent of the parties hereto that Cogenerator's
obligation to defend, protect, and save harmless Company shall be full and
complete, with the only exception being that Company shall not be entitled to
indemnification under this Subsection (b) for claims, demands, expenses,
judgments, and causes of action resulting from Company's sole negligence.
(c) Cogenerator will also indemnify Company from any suits, claims,
demands, or damages of any such entity arising from Company's termination of
this Agreement according to its terms, or agreement with Cogenerator for
modification or termination hereof.
(d) Cogenerator will also indemnify Company from any of its costs and
expenses, including reasonable attorney's fees, arising from any claim, demand
or suit as to which Company is hereby indemnified.
12.05 No Consequential Damages. Neither party shall be liable to the other
for loss of earnings, revenues, or indirect or consequential damages or injury
which may occur, in whole or in part, as a result of the breach of any provision
hereof. Neither loss of sales price of power and energy or cost of
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replacement power and energy are indirect or consequential damages under this
Agreement.
ARTICLE XIII - DEFAULT
13.01 Default. As used in this Article XIII, "default" shall mean the
failure of a party to make any payment or perform any obligation in the time and
manner provided in this Agreement. No default shall exist where such failure to
discharge obligations (other than the payment of money) is the result of an
uncontrollable force as defined in Section 12.03 and for the period set forth
therein.
13.02 Notice of Default. Upon failure of a party hereto to make a payment
or to perform any obligation required hereunder, the other party shall give
written notice of such default to the party in default. The party in default
shall have thirty (30) days within which to cure a default involving payment of
money and, if cured within such time, the default specified in such notice
shall cease to exist. A party may make a payment "under protest" by so notifying
the other party in a written notice accompanying the payment. Any refund of an
amount paid "under protest" shall bear interest at the Commercial Paper Rate
from the date of payment until the date of refund. If a party in default of any
obligation other than the payment of money shall commence work or other efforts
to cure such default within thirty (30) days after receipt of such notice and
shall thereafter prosecute such curative work with reasonable diligence until
such curative work is completed, and if as a result thereof such default is
cured within ninety (90) days or such longer period as the party not in default
may agree, then the default specified in such notice shall cease to exist. Even
though cured, a defaulting party shall not be excused thereby for any damages
arising by or during such default.
13.03 Remedy for Default. If a default is not cured as provided in
Section 13.02, the party not in default may suspend
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performance hereof. The party in default may, after expiration of the period set
forth in Section 13.02, remedy such default and pay the party or parties not in
default its losses or damages, subject to the limitations of Section 12.05. Such
losses or damages may include the net cost of replacement power and energy,
incurred by Company, or the loss to Cogenerator caused by the failure of Company
to take power and energy, and related costs incurred by the non-defaulting party
in respect to such default plus interest at the Commercial Paper Rate in effect
on the first day of each month that interest accrues hereunder; thereupon such
default shall cease to exist. If such default is not cured within six (6) months
after the notice specified in Section 13.02, the party not in default may
terminate this Agreement by written notice to the other; such termination shall
not, however, impair or terminate the remaining provisions of this Article XIII.
The remedy provided by this Section is in addition to other remedies provided
elsewhere in this Agreement.
13.04 Good Faith Negotiations. If a default is not cured as provided in
Section 13.02, 13.03, or 18.03, then the parties will, on the request of either
Party and whether or not this Agreement has otherwise been terminated, meet and
negotiate in good faith for resolution of the breach and damages occurring or
to occur therefrom. If requested by either party, the parties wil1 negotiate
concerning the sale or lease of the Plant, Cogenerator Interconnection
Facilities and Cogenerator Substation to Company or the right of Company to
operate the same. If this Contract be terminated pursuant to Articles XIII or
XVIII, Company will, at Cogenerator's request, negotiate in good faith with
Cogenerator for Company's purchase of firm power and energy from the Plant if:
(i) such purchase can be made without material adverse effects, including
adverse economic effects, on Company;
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(ii) The Plant retains its status as a Qualifying Facility;
(iii) Cogenerator's facilities, including the Plant, Cogenerator
Substation, Cogenerator Interconnection Facilities and fuel supply meet the
requirements of this agreement; and
(iv) Company has been made whole for all damages it may have sustained by
reason of Cogenerator's default hereunder.
13.05 Liquidated Damages. The parties acknowledge that any damages for
replacement power and energy will be extremely difficult to calculate
accurately in the event this Agreement is terminated. Therefore,
Cogenerator's liability for replacement power and energy under this Agreement
shall equal ten percent (10%) of the payments for capacity and energy that
would have been made during the period between the termination of this Agreement
and the end of the remaining term of this Agreement if no termination had
occurred if the Plant operated at a sixty-five percent (65%) annual capacity
factor continuously for such period and without applying any of the adjustments
to Billing Capacity specified in subsections (a) through (f) of Section
7.05. Said amount shall be discounted to present value using a discount rate of
11.51% per annum and shall bear interest at the Commercial Paper Rate from the
date of termination. Said amount, both principal and accrued interest, shall be
due and payable ninety (90) days after the date of termination. At the request
of Cogenerator, Company will consider arrangements for payment of sums due in
periodic installments; any such arrangement will be upon such terms and at such
rate of interest as may be agreed. The amount payable hereunder is intended by
the parties to be liquidated damages and not a penalty. Exhibit 13.05 shows the
amount of such damages for a termination in each year of this Agreement.
13.06 Exclusion of Liability. Neither party, by review, comment, failure to
comment, or approval of any plans and specifications for construction, operation
or maintenance of, any
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facilities under this Agreement, assumes any responsibility or liability for
damages or physical injury to: (1) either party's real or personal property or
electrical equipment, (2) the real or personal property of third persons or
corporations not a party to this Agreement, including, but not limited to, Host,
(3) any persons who may come in contact with or upon either party's facilities,
and (4) any other persons or property, real or personal.
13.07 Bankruptcy or Insolvency. In the event of a party's bankruptcy or
insolvency, or in the event of the initiation of any proceedings, voluntary or
involuntary, against a party under the bankruptcy or insolvency laws, or in the
event of a party's inability to meet its debts in the ordinary course of
business, the other party may terminate this Agreement immediately upon written
notice; provided, however, there shall be no right to terminate hereunder if,
within ten (10) days from the receipt of such written notice to terminate, the
debtor in possession, trustee, receiver or custodian of the party in bankruptcy
or insolvency, whichever is obligee under this Agreement, in writing affirms
this Agreement and demonstrates to the other party's reasonable satisfaction the
ability to fulfill its or their obligations under this Agreement.
13.08 Inadvertent Operating Default.
(a) If Company shall give notice pursuant to Section 13.02 or 18.03 of
Cogenerator's default and such default is of the nature described in
subsection (h) below, Cogenerator may, within thirty (30) days after the
date of such notice or such longer period as may be agreed, present
evidence to the Company that:
(i) such default was not the result of the willful or reckless
act or willful or reckless omission of Cogenerator, it being
understood and agreed that an act or omission resulting from
Cogenerator's inadvertence, mistake or negligence shall in no event
be deemed willful or reckless;
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(ii) after completion of corrective work or efforts by
Cogenerator, the Plant and Cogenerator will be able to perform in
accordance with this Agreement; and
(ii) Cogenerator is ready and able to promptly begin and
thereafter diligently pursue corrective work or efforts to cure such
default.
(b) If such evidence is satisfactory to Company, Company's right to
terminate this Agreement for such default shall be suspended until the
first to occur of the following:
(i) completion of Cogenerator's corrective work or efforts (and
tests pursuant to Section 5.12, if applicable,) reveal that the Plant
and Cogenerator can perform in accordance with this Agreement;
(ii) expiration of the period when Cogenerator would have
completed corrective work or efforts by exercise of due diligence;
(iii) Failure of Cogenerator to pay sums due under subsection (d)
within thirty (30) days after billing therefor; or
(iv) expiration of the term hereof.
(c) During the period that Company's right to terminate is suspended, power
and energy to replace generation from the Plant will be provided by Company if
it can reasonably do so. To the extent that Company does not do so, Company will
(except for periods when Company elects not to provide or purchase replacement
power) attempt, in good faith, to purchase replacement power and energy from
third parties; provided, however, that Company has no obligation to make any
purchase which might subject it to regulation under the Federal Power Act.
(d) During the period of suspension, no sums will be paid Cogenerator
hereunder. Cogenerator will pay Company
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monthly, the amount, if any, by which the cost of replacement power and
energy exceeds sums that would have been paid Cogenerator for power and
energy hereunder.
(e) Costs of replacement power purchased from third parties shall be
the purchase price therefor, plus any costs of interconnection, wheeling,
and losses. The costs of replacement power and energy provided by Company
shall be calculated as follows:
(i) capacity cost per kW per year shall be equal to the
original cost per kW of Company's most recently added peaking unit
times the Company's weighted average cost of capital as determined in
its most recent rate case, grossed up for Federal income taxes; and
(ii) energy cost per kwh shall equal Company's incremental
energy cost as determined by Company's production costing study then
in effect.
(f) If the Plant and Cogenerator can perform in accordance with this
Agreement at expiration of the period that Company's riqht to terminate is
suspended and if Cogenerator has paid Company all sums due under this
section, then Cogenerator shall be deemed to have cured such default.
(g) If the Plant or Cogenerator cannot perform in accordance with
this Agreement at expiration of the period that Company's right to terminate
is suspended or Cogenerator has failed to pay sums due under (d) above, then
Company may immediately terminate this Agreement, without obligation under
Section 13.04. Upon such termination, Cogenerator shall be liable to Company
for sums due under Section 10.08 but shall have no liability under Section
13.05.
(h) Defaults to which this section applies are those involving
Cogenerator's failure to deliver power and
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energy, to maintain minimum Capacity Factors as required by Section
18.01 (j) or to comply with provisions of Section 5.02 or 5.04. Without
limiting the foregoing, defaults under Sections 5.05(a), 5.08, 9.08,
11.03, under Articles XIV, XV, XVII, and failure to correct an
Uncontrollable Force (other than an Uncontrollable Force affecting
operation or ability to operate the Plant) within the time prescribed
by Section 12.03, are not defaults to which this section applies.
(i) This section does not apply to termination by Company pursuant to
Sections 2.04, 5.08 or 9.05.
Article XIV - Insurance
14.01 Proof of Coverage. Cogenerator shall require that its insurance
carriers provide to Company proof of insurance as required by Section 14.05 in
the form of two (2) copies of an insurance certificate form acceptable to
Company. All policies shall be written with insurers acceptable to Company and
the certificates received not less than thirty (30) days prior to beginning
construction at the site of the Plant. Such certificates shall provide that
there will be sixty (60) days' written notice given to Company of any change in
or cancellation of any policy upon which a certificate is required of
Cogenerator by this Article hereof. All coverages required of Cogenerator shall
be in full force and effect during the term of this Agreement.
14.02 Policies. All policies shall be written on an occurrence basis,
unless an occurrence basis policy becomes unavailable, and shall include
Company, its directors, officers, agents, servants, employees and/or independent
contractors directly responsible to Company as additional insureds. All policies
shall contain an endorsement (if such terminology is not in the printed form)
that Cogenerator's policy shall be primary in all instances regardless of like
coverages, if any, carried by Company.
14.03 Certificates. All certificates shall be furnished to Company
and shall be subject to the approval and acceptance of Company.
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14.04 Limitation of Liability. Cogenerator's liability under this
Agreement is not limited to the amount of in coverage required herein.
14.05 Coveraqe and Limits of Liability. Cogenerator sole expense
shall maintain the following types of cover limits of liability, provided
that the required limits satisfied by any combination of primary or excess
insure Cogenerator's sole discretion. If general public liability coverage is
not commercially available in the amounts specified, Cogenerator will provide
such amount of coverage as is commercially available; Cogenerator will, at
Company's request, provide evidence of such unavailability.
Type of Coverage Limits of Liability
Insurance Policy
(a) Workers' Compensation
Insurance Statutory
(b) Employer's Liability
Insurance $20,000,000 per occ
(c) Comprehensive General
Public Liability
Insurance $20,000,000 per occ
Including:
Coverage for damage caused by
blasting, collapse, underground
damage or explosion; Independent
Contractors; Products, Completed
Operations; Personal Injury;
Contractual Public Liability
and Property Damage covering
liability assumed in the
Agreement; and Excess Employer's
Liability.
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(d) Comprehensive Automobile
Liability $20,000,000 per occurrence
Including:
Coverage for all owned,
hired or non-owned licensed
automotive equipment.
14.06 Insurance on Plant. Cogenerator agrees to obtain insurance
acceptable to Company against property damage or destruction in an amount not
less than the cost of replacement of the Plant. Company shall be named an
additional insured on all such insurance policies. Cogenerator shall promptly
notify Company of any loss or damage to the Plant. Company may make proof of
loss if Cogenerator fails to do so within fifteen (15) days of the casualty.
Proceeds from said casualty insurance policies shall be paid into a trust
account with Company and Cogenerator and any other named insureds as Trustees.
Disbursements from that trust account may be used for repairing or replacing the
insured property or in the event that Cogenerator decides that the insured
property cannot be economically repaired or replaced, the amount, including
accumulated interest, in the trust account shall be disbursed to the Trustees as
their interests appear.
14.07 Release and Waiver. Cogenerator agrees to release, and will
require its insurers (by policy endorsement) to waive their rights of
subrogation against Company, its directors, officers, agents, servants,
employees and/or independent contractors directly responsible to Company for
loss under the policies of insurance described herein, damages to Cogenerator's
properties and/or any other loss sustained by Cogenerator, whether insured or
not; save and except for damages for which Cogenerator does not indemnify
Company under Section 12.04 of this Agreement.
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Article XV - Option to Purchase and/or Lease
15.01 Option. If Company terminates this Agreement by reason of the
default of Cogenerator or shall suspend receipt of power and energy from the
Plant pursuant to Section 5.08 for a period of ninety (90) days or more, then
Company may, at its option, purchase (if Cogenerator owns the Plant) or lease
(if Cogenerator is lessee of the Plant) the Plant, Cogenerator Substation and
Cogenerator Interconnection Facilities as hereinafter provided.
(a) Company may exercise any option herein granted upon giving
written notice to Cogenerator not later than one hundred twenty (120)
days after the date of the notice to terminate this Agreement as
hereinabove provided or at any time when Company is suspending
receipt of power and energy pursuant to Section 5.08 and such
suspension has been in effect for ninety (90) days or more.
(b) If Cogenerator shall receive a bona fide offer for purchase
of the Plant during such option period and if it shall notify Company
of such offer, the aforesaid option period shall be reduced to 45
days from the date Company receives notice from Cogenerator of such
other offer.
(c) If Cogenerator shall have given notice pursuant to (b)
above and if Company shall not have received regulatory approval for
its purchase of the Plant within ninety days (or such longer period
as the parties may agree) after the date of Company's notice
exercising the option to purchase, then Cogenerator may conclude the
transaction described in its notice under Section 15.01(b), free of
any rights of Company to purchase under Article XV or Article XVII,
unless Company shall notify Cogenerator, prior to the expiration of
such ninety day or longer period, that Company will consummate the
transaction described in its exercise of such option whether or not
regulatory approval is obtained.
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15.02 Information. During any period when exercise of the foregoing
option is pending, Company may request information as to the Plant, its costs of
construction and operations including fuel costs, and other information
pertinent to exercise of any such option. Cogenerator will promptly furnish the
information so requested. If Cogenerator fails or refuses to furnish, within
thirty (30) days after a request, any information requested by Company in
writing within forty-five (45) days after commencement of the option period,
then the option period is extended so that it will expire no sooner than thirty
(30) days after receipt by Company of the requested information. If the option
period is shortened pursuant to Section 15.01(b), the option period will be
extended for a period of 15 days after Company's receipt of information
requested within 25 days of the commencement of the option period or the date of
the notice given under Section 15.01(b), whichever is later.
15.03 Manner of Exercise. Company may exercise any option granted in
this Article by written notice to Cogenerator given prior to the end of the
option period. If Company fails to give notice within such term, such option
will terminate.
15.04 Closing Date. If Company exercises the aforesaid option to
purchase or lease, then such purchase or lease will be closed within sixty (60)
days after the date of Company's notice exercising such option; provided,
however, Company may defer the closing for not to exceed ninety (90) additional
days or for such period as the parties may agree, in order that Company may
obtain regulatory approval of such purchase or lease. If final regulatory
approval is not obtained by the date for closing, as extended, or if such
approval is not satisfactory to Company, it may withdraw its exercise of such
option without penalty or other liability unless Company has waived regulatory
approval under Section 15.01(c).
15.05 Closing. At such closing, Cogenerator will transfer its rights
in and to the Plant, Cogenerator facilities intercon-
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necting the Plant and the Cogenerator Substation, the Cogenerator Substation,
Cogenerator Interconnection Facilities and the necessary land and land rights
then being utilized by Cogenerator to Company by appropriate transfer documents,
including instruments of assignment of leaseholds and easements or general
warranty of fee interest, and will assign to Company (and Company will assume)
such contracts and contract rights relating to operation of the Plant, including
but not limited to fuel supply contracts and gas transportation contracts, and
gas reserves dedicated to this agreement as Company may elect in its exercise of
such option. Necessary land and land rights shall include, to the extent that
Cogenerator then has rights in same:
(a) the Plant site and sufficient adjoining land for operation
and maintenance of the Plant including fuel handling and storage,
together with easements for ingress and egress, rail transportation,
electric transmission and distribution facilities, communication
lines and other utility services, if the Plant is to be transferred;
and
(b) easements for the Cogenerator Substation including the
right of ingress and egress, if the Cogenerator Substation is to be
transferred.
15.06 Payment. Unless otherwise agreed, the purchase price to be paid
in cash or by assumption of either Cogenerator's liability on indebtedness
secured by a lien or security interest in the property being purchased or
Cogenerator's lease obligations on property being leased, will be fair market
value, as determined by an appraisal. The minimum purchase price will be equal
to Cogenerator's liability on indebtedness, both principal and interest, secured
by a lien on or security interest in the property being purchased. Market value
will be determined in accordance with industry standards for similar facilities;
current use and the value of Plant license and permits may be considered. No
value will be attributed by reason of this agreement other than to consider the
operating capability of the
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Plant. Market value of the property being sold will be determined by an
appraiser or appraisers qualified to appraise such facilities. If a party, in
good faith, disagrees with the market value determined by the appraiser, the
question of market value may be submitted to arbitration under Article XIX by
request made within 45 days after receipt of the appraisal. The time for actions
required by this Article XV shall be suspended during arbitration proceedings,
beginning with the notice of arbitration. Upon closing, Company shall no longer
be entitled to liquidated damages under Section 13.O5 for any and all defaults
of Cogenerator, but Company shall be entitled to actual damages from date of
default to date of closing as determined pursuant to the principles set forth
in Section 13.08(c), (d) and (e).
15.07 Assignment of Option. Provided that Company shall remain
obligated to pay the purchase price or rental for the Plant, Cogenerator
Interconnection Facilities and Cogenerator Substation, Company may assign such
option, before or after its exercise, to any wholly-owned subsidiary of Texas
Utilities Company or to any such subsidiary and one or more third parties or to
a partnership, corporation or other entity owned by any such subsidiary and one
or more third parties.
15.08 Third Party Contracts. Cogenerator will include, in al1 of its
contractual agreements concerning ownership, financing, or leasing of the Plant,
Cogenerator Substation, Cogenerator Interconnection Facilities and facilities
interconnecting the Plant and Cogenerator Substation, the necessary land and
land rights as defined in Section 15.05 and contracts relating to operation of
the Plant, including but not limited to fuel-supply contracts and gas
transportation contracts, provisions satisfactory to Company which will allow
Company the option either to purchase the subject property and assume any
indebtedness or to assume any lease or lease-purchase or other contracts. In
addition, all such contractual agreements will be expressly made
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subject to this Agreement and to Company's rights under this Agreement.
Cogenerator will promptly submit drafts of all such contracts to Company as they
are received or produced by Cogenerator. A draft will be deemed satisfactory to
Company if it fails to otherwise advise Cogenerator within thirty (30) days
after receipt of such draft. Final, signed copies of all such contracts will be
furnished by Cogenerator to Company. Cogenerator will also advise Company when
all such contracts have been furnished Company.
15.09 Post-Option Operations. After exercising its option, Company
may operate the Plant in any manner it sees fit, including but not limited to
operating the Plant as a peaking unit. Further, Company shall never be obligated
to furnish any steam to Host or to any other person or entity, but Company will
endeavor to comply with Cogenerator's contractual obligations to supply steam to
Host, to operate and maintain the Plant, to purchase fuel for the Plant, and for
Plant services, if and to the extent such compliance can be accomplished under
applicable laws and regulations, without material adverse effects including
economic effects on Company.
Article XVI - Confidentiality
16.01 Scope. Each party agrees, for itself, its subsidiaries and
affiliated corporations, and their directors, officers, employees and
representatives, including, without limitation, attorneys, accountants and
consultants, to keep confidential (i) this Agreement, (ii) all negotiations
concerning this Agreement, and (iii) all documents, data, drawings, studies,
projections, plans and other information, whether written or oral, which relate
to economic benefits to or amounts payable by either party pursuant to this
Agreement or costs of design, construction, operations of the Plant, including,
without limitation, cost and quantities of fuel. In addition, Company will keep
confidential all plans, drawings, documents, studies and other information
relating to design, construction and operation of the Plant.
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16.02 Confidential. "Confidential", as used herein, means that
information or a document, including the content, substance or effect of such
information or document shall not be disclosed, discovered or distributed to any
other person, firm, organization or entity except pursuant to the valid order of
an administrative or judicial officer having jurisdiction, which order will be
opposed unless opposition with respect thereto is waived by the undersigned and
except as hereinafter provided. No party shall be required to oppose any order
requiring disclosure by appeal, separate legal proceeding or extraordinary
measures in any judicial or administrative proceeding unless the other party,
after notice agrees to pay the costs of such opposition.
16.03 Exceptions. Either party may, without violating this Article,
disclose matters which are made confidential by this Agreement:
(a) to actual or prospective co-owners, lenders, underwriters
and others involved in financing transactions and arrangements for a
party, or its subsidiaries, affiliates or parent, or to actual or
prospective fuel suppliers, provided, that the party making the
disclosure obtains, as a condition precedent to the disclosure, a
confidentiality agreement with the person or entity to whom the
disclosure is being made with terms substantially the same as this
Article.
(b) to governmental officials and parties involved in any
proceeding whereby either party is seeking a permit, certificate or
other regulatory approval or order necessary or appropriate to carry
out this Agreement; provided, that the party making the disclosure
will exercise reasonable efforts to restrict public access to the
information disclosed by way of protective order or otherwise.
(c) to governmental officials or the public as required by any
law, regulation or order, including, without limitation, laws or
regulations requiring disclosure of
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financial information, information material to financial matters and
filing of financial reports; provided, that the party making the
disclosure will exercise reasonable efforts to restrict public access
to the information disclosed by way of protective order or otherwise.
Company may also disclose amounts paid or credited Cogenerator hereunder as
necessary to state and recover its costs in regulatory proceedings. Any
disclosure permitted by this Section will be only to the extent necessary or
required.
16.04 Warranty. Each party warrants and represents that as of the
date of this Agreement it has made no disclosures, to the best of its
knowledge, which would violate that Confidentiality Agreement between the
parties dated October 7, 1985.
Article XVII - First Refusal
17.01 Notice of Sale or Lease. During the term of this Agreement and
for one (1) year after termination of this Agreement, Cogenerator shall not
sell, lease or dispose of the Plant or Substation to any person, firm,
corporation or other entity unless it shall first give written notice to Company
and thereafter comply with the following provisions of this Article.
17.02 Contents of Notice. Any notice given pursuant to Section 17.01
shall specify or include the following, as applicable:
(a) identity of the proposed transferee and its relation, if
any, to Cogenerator;
(b) description of the proposed transfer as including or not
the Plant, the Cogenerator Substation, or Cogenerator Interconnection
Facilities or;
(c) purchase price or other considerations for such transfer;
(d) contracts or agreements to be assumed on any transfer
including, without limitation, contracts for fuel and contracts with
respect to credits to
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Cogenerator or its successors for power and energy delivered under
this Agreement.
17.03 Option to Purchase. Company shall have the option to purchase
or lease the Plant, Cogenerator Interconnection Facilities and/or the
Cogenerator Substation as specified in the notice from Cogenerator, exercisable
by giving Cogenerator written notice within forty-five days after receipt of the
notice given by Cogenerator. Company will endeavor, to the extent practicable,
to expedite its exercise or non-exercise of such option. Provided that Company
shall remain obligated to pay the purchase price or lease rental, Company may
assign such option, before or after its exercise, to any wholly-owned subsidiary
of Texas Utilities Company or to any such subsidiary and one or more third
parties or to a partnership, corporation or other entity owned by any such
subsidiary and one or more third parties.
17.04 Closing. If final regulatory approval for acquisition by
Company is not obtained by the date for closing, as extended, or if such
approval is not satisfactory to Company, it may withdraw its exercise of such
option without penalty or other liability. If regulatory approval is not
received within ninety (90) days (or such longer period as may be agreed) after
Company's notice of exercise of such option, Cogenerator may consummate the
transaction described in its Notice given pursuant to Sections 17.01 and 17.02,
free of Company's rights to purchase under this Article XVII, unless Company
shall notify Cogenerator, prior to the expiration of such ninety (90) day or
longer period, that Company will consummate purchase of the Plant whether or not
regulatory approval is obtained. After Company has exercised its option and
after its obligation to purchase is no longer subject to obtaining regulatory
approval, Company shall have an additional 90 days to close the sale and
transfer. At closing, the Plant and/or the Cogenerator Substation and necessary
land and land rights will be transferred by deed, assignment of leasehold,
assignment or grant of rights of way, as appropriate, and other
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appropriate instruments of transfer with general warranty. Necessary land and
land rights shall include:
(a) the Plant site and sufficient adjoining land for operation
and maintenance of the Plant including fuel handling and storage,
together with easements for ingress and egress, rail transportation,
electric transmission and distribution facilities, communication
lines and other utility services, if the Plant is to be transferred,
and
b) easements for the Cogenerator Substation and Cogenerator
Interconnection Facilities including the right of ingress and
egress, if is to be transferred.
Unless otherwise agreed, the purchase price will be payable in cash at closing.
All contracts to be assigned to and assumed by the proposed transferee, as set
forth in the notice to Company of the proposed sale, shall be assigned to
Company and Cogenerator's obligations which arise thereunder after closing
shall be assumed by Company.
17.05 Price. If Company exercises the foregoing option, the purchase
price for the Plant, Cogenerator Interconnection Facilities and/or the
Cogenerator Substation shall be:
(a) the amount specified in the notice given pursuant to
Section 17.02 if payable in cash, whether in one or more
installments; or
(b) the market value of any securities described in such notice
if the purchase price is not payable in cash or in securities having
a readily ascertainable market value; or
(c) the fair market value of the consideration described in
such notice, if not payable in cash or in securities having a readily
ascertainable market value. If the parties disagree on the fair
market value of the consideration, the issue of fair market value may
be submitted to arbitration under Article
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XIX by request made within forty-five days of Company's notice of
exercise of the option. The times for actions required by this
Article XVII shall be suspended during arbitration proceedings,
beginning with the notice of arbitration.
17.06 Partial Sales. Company's right of first refusal as set forth in
this Article shall also apply to any sale of an undivided interest in the Plant
and Substation.
17.07 Option Not Exercised. If Company does not exercise the option
to purchase within the time herein specified then Cogenerator may sell the
Plant, Cogenerator Interconnection Facilities and Cogenerator Substation to the
proposed transferee provided that such transfer is closed within six months
after Company's refusal or deemed refusal to purchase and provided that consent
to assignment of this Agreement shall be required pursuant to Section 11.03. If
such consent is given, then Cogenerator shall have no liability hereunder for
events occurring after the assignment and the provisions of this Article XVII
shall apply to any subsequent act or transfer of the Plant and Substation by
Cogenerator's transferee, its successors and assigns. If Company does not
exercise the option here granted and Cogenerator does not transfer the Plant,
Cogenerator Interconnection Facilities and Substation to the transferee named
in its notice, the provisions of this Article will apply to any subsequent
transfer or lease by Cogenerator.
Article XVIII - Representations and Warranties of the Parties
18.01 Cogenerator's Representations and Warranties. In addition to
the other representations, obligations, and warranties of Cogenerator provided
herein, Cogenerator hereby represents and warrants unconditionally to Company
that:
(a) Cogenerator is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas.
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(b) Cogenerator has full corporate power and lawful authority
to accomplish, execute and fulfill all of its obligations and duties
hereunder.
(c) The making and performance by Cogenerator of this Agreement
have been duly authorized by all necessary corporate action and will
not: (i) violate any provision of any law, rule, regulation, order,
writ, judgment, decree, determination or award presently in effect
having applicability to Cogenerator; (ii) violate any provision of
the Articles of Incorporation or Bylaws of Cogenerator, or (iii)
result in a breach of or constitute a default under any mortgage,
indenture or bank loan or credit agreement or any other material
agreement or instrument to which Cogenerator is a party or by which
it or its property is presently bound or affected.
(d) All authorizations, permits, consents, approvals, licenses
or exemptions of, and filings or registrations with, any court or
governmental agency or other authority, domestic or foreign,
necessary to permit Cogenerator to execute and deliver, and to
perform its obligations under this Agreement, will have been obtained
or made at Cogenerator's sole expense on or before the commencement
of trial operation of the Plant (except an operating permit from the
Texas Air Control Board which will be applied for as soon as
practicable, but not later than sixty (60) days after operation of
the Plant commences and such application shall be diligently pursued)
and Cogenerator is not, and will not be, in violation or default in
any respect of or under any law, rule, regulation, order, writ,
judgment, decree, determination or award, and is not, and will not be
in violation of or default under any mortgage, indenture, agreement
or instrument.
(e) Cogenerator possesses or will before the commencement of
trial operations, possess the necessary expertise, technology,
manpower, equipment, financial resources
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and experience to fulfill all of Cogenerator's obligations hererunder.
(f) The Plant is a Qualifying Facility, as that term is used
and defined in 18 CFR (Code of Federal Regulations) 292 as of the
date of the signing of this Agreement, and Cogenerator will provide
certification by the FERC of such qualifying status pursuant to 18
CFR 292.207(b) prior to both Partial Commercial Operation and
Commercial Operation. Within thirty days after the date hereof,
Cogenerator will furnish Company with a legal opinion of its counsel
that the Plant is self qualified as a Qualifying Facility.
Cogenerator covenants that it will exert its best efforts to maintain
said Plant as a Qualifying Facility.
(g) Cogenerator will comply in a timely manner with all of the
terms, provisions and conditions of this Agreement throughout the
term hereof.
(h) Cogenerator shall maintain throughout the term hereof a
reliable fuel supply for the Plant sufficient for such facility to
meet the energy and capacity requirements provided herein.
(i) Cogenerator shall maintain an alternate fuel supply
sufficient to operate the Plant at full load for at least five days.
(j) Beginning with the date of Commercial Operation,
Cogenerator will deliver energy to Company at a rate such that its
Annual Capacity Factor will be equal, as a minimum, to fifty percent
(50.00%) and that its Peak Month Capacity Factor will be equal, as a
minimum, to fifty percent (50.00%), and that its Peak Hour Capacity
Factor will be equal, as a minimum, to fifty percent (50%).
18.02 Company's Representations and Warranties. Company hereby
represents and warrants unconditionally to Cogenerator that:
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(a) Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas.
(b) The making and performance by Company of this Agreement
have been duly authorized by all necessary corporate action and will
not: (i) violate any provision of any law, rule, regulation, order,
writ, judgment, decree, determination or award presently in effect
having applicability to Company, (ii) violate any provision of the
Articles of Incorporation or Bylaws of Company; or (iii) result in a
breach of or constitute a default under any indenture or bank loan or
credit agreement or any other material agreement or instrument to
which Company is a party or by which it or its property is presently
bound or affected.
(c) All authorizations, permits, consents, approvals, licenses
or exemptions of, and filings or registrations with, any court or
governmental agency or other authority, domestic or foreign,
necessary to permit Company to execute and deliver, and to perform
its obligations under, this Agreement will have been obtained or made
on or before the commencement of trial operation of the Plant, and
Company is not in violation or default in any material respect of or
under any law, rule, regulation, order, writ, judgment, decree,
determination or award and is not in violation of or default under
any mortgage, indenture, agreement or instrument to which Company is
a party or by which it or its property is presently bound or
affected.
(d) Company possesses the necessary expertise, technology,
manpower, equipment, financial resources and experience to fulfill
all of Company's obligations hereunder.
(e) Company will comply in a timely manner with all of the
terms, provisions and conditions of this Agreement throughout the
term hereof.
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18.03 Misrepresentation; Breach of Warranty; Fulfillment of
Obligations. In the event either party hereto materially breaches any warranty
provided in this article, or fails to fulfill any material obligation provided
in this article, or if any material representation given in this article is
discovered to have not been accurate when made, then the party to whom such
representation or warranty was made, or to whom such obligation was due, may
invoke the procedures set forth in Article XIII for default. If Cogenerator
shall fail to meet the requirements of Section 18.01(j), Company may, in
addition to any other remedies which may be available at law or in equity or
under this Agreement, terminate this Agreement upon thirty (30) days' written
notice to Cogenerator (such thirty (30) days commencing with the date of
Cogenerator's receipt of such notice), if, by the end of said thirty (30) day
period, Cogenerator has not cured such default.
Article XIX - Arbitration
19.01 Scope. As concluded by the parties hereto upon the advice of
counsel, and as evidenced by the signatures of the parties hereto, it is agreed
that questions as to rights and obligations arising under the terms of Section
12.03(c) and valuation issues arising under Sections 15.06 and 17.05 of this
Agreement are subject to arbitration, and such arbitration shall be governed by
the provisions of the Texas General Arbitration Act, Articles 224 through 238-6
of the Texas Revised Civil Statutes.
19.02 Demand. If a dispute should arise under this Agreement, either
party may make a demand for arbitration by filing a demand in writing with the
other within the time limits prescribed in such sections.
19.03 Selection of Arbitrator. The parties hereto may agree upon one
arbitrator, but in the event that they cannot so agree, there shall be three
arbitrators, one named in writing by each of
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the parties within ten (10) days after demand for arbitration is made, and a
third to be chosen by the two so named within thirty (30) days after demand for
arbitration is made. Should either party refuse or neglect to join in the
appointment of the arbitrators, they shall be appointed in accordance with the
provisions of Article 226 of the Texas Revised Civil Statutes.
19.04 Hearings. All arbitration hearings conducted hereunder, and all
judicial proceedings to enforce any of the provisions hereof, shall take place
in Dallas County, Texas, and shall commence within thirty (30) days after the
arbitrator or arbitrators have all been selected. The hearing before the
arbitrators of the matter to be arbitrated shall be at the time and place within
said County as is selected by the arbitrators. Notice shall be given and the
hearing conducted in accordance with the provisions of Articles 228, 229 and 320
of the Texas Revised Civil Statutes. At the hearing any relevant evidence may be
presented by either party, and the formal rules of evidence applicable to
judicial proceedings shall not govern. The arbitrator or arbitrators shall have
the power to determine the question or questions as set forth in Sections
12.03(c), 15.06 and 17.05. The arbitrator or arbitrators shall have no power to
amend or alter provisions of this Agreement. The arbitrators shall hear and
determine the matter and shall execute and acknowledge their award in writing
and deliver a copy thereof to each of the parties by registered or certified
mail.
19.05 Decision Binding. If there is only one arbitrator, his or her
decision shall be binding and conclusive on the parties. If there are three
arbitrators, the decision of any two shall be binding and conclusive. The
submission of a dispute to the arbitrators and the rendering of their decision
shall be a condition precedent to any right of legal action on the dispute. A
judgment confirming the award of the arbitrators may be rendered by any court
having jurisdiction; or such court may vacate, modify, or correct the award in
accordance with the provisions of the Texas General Arbitration Act.
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19.06 Failure to Make Timely Decision. If the arbitrators selected
pursuant to Section 19.03 hereof shall fail to reach an agreement within thirty
(30) days after conclusion of the hearing, they shall be discharged, and three
new arbitrators shall be appointed and shall proceed in the same manner, and
the process shall be repeated until a decision is finally reached by two of the
three arbitrators selected.
19.07 Costs. The costs and expenses of arbitration, including the
fees of the arbitrators, shall be borne by the losing party or in such
proportions as the arbitrators shall determine.
Article XX - Miscellaneous
20.01 Notices. Any notice required or authorized by this Agreement
shall be in writing and personally delivered or sent by certified mail, return
receipt requested, postage prepaid, to:
If to Company: Mr. Michael D. Spence, President
Texas Utilities Generating Company
Skyway Tower
400 North Olive St., L.B. 81
Dallas, TX 75201
If to Cogenerator: Mr. David H. Dewhurst, President
Falcon Seaboard Oil Company
2200 Post Oak Blvd., Suite 509
Houston, Texas 77056
The person to receive notices or the address for such notices may be changed by
written notice of one party to the other. Such written notice is effective upon
the earlier of (i) actual receipt, or (ii) three (3) days after mailing. Routine
operational notices and communications and notices during an emergency or other
unforeseen event may be made in person or by telephone.
20.02 No Rights of Third Parties. This Agreement is intended for the
benefit of the parties. Nothing in this Agree-
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ment shall be construed to create any duty to, any standard of care with
reference to, or any liability to, any person not a party to this Agreement,
including specifically, but not limited to, Host Corporation.
20.03 No Partnership. 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 in any
agreement or undertaking for, or act on behalf of, or to act as or be an agent
or representative of, or to otherwise bind, the other party.
20.04 Captions. The captions of the various articles and sections of
this Agreement are for convenience and reference only and shall not limit or
define any of the terms and provisions hereof.
20.05 Complete Agreement. This Agreement embodies the complete
agreement between the parties hereto and supersedes all other oral or written
understandings and agreements. Each party acknowledges that no representations,
inducements, promises, or agreements, oral or otherwise, have been relied upon
or made by any party, or anyone on behalf of a party, which are not embodied
herein, and that no other agreement, statement, or promise not contained in this
Agreement shall be valid or binding.
20.06 Choice of Laws. This Agreement shall be interpreted and
enforced in accordance with the laws of the State of Texas.
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20.07 Venue. Venue for any disputes arising under this Agreement shall
lie exclusively in Dallas County, Texas. Cogenerator's payment obligations to
Company under this Agreement are payable in Dallas County, Texas.
20.08 Severability. If any term or provision of this Agreement, or the
application thereof to any person or circumstance, shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application
of such term or provision to persons or circumstances other than those as to
which it is held invalid or unenforceable, shall not be affected thereby, and
each term and provision of this Agreement shall be valid and enforced to the
fullest extent permitted by law.
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EXECUTED on the date first above written.
FALCON SEABOARD OIL COMPANY
By /s/ David H. Dewhurst
--------------------------------
Title President
TEXAS UTILITIES GENERATING
COMPANY, a Division of Texas
Utilities Electric Company
By /s/ Michael D. Spence
--------------------------------
Title President
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FIRST AMENDMENT TO AGREEMENT
THIS AGREEMENT, dated December 23, 1986, by and between FALCON SEABOARD
OIL COMPANY hereinafter called "Cogenerator" and TEXAS UTILITIES ELECTRIC
COMPANY, hereinafter called "Company", acting through its Texas Utilities
Generating Company division:
W I T N E S S E T H:
The parties have heretofore entered into an Agreement dated July 30,
1986, hereinafter called the "Agreement" for the sale by Cogenerator and the
purchase by Company of electric power and energy. Cogenerator desires to
increase the electric generating capacity of the Plant and Company is agreeable
thereto. Therefore, in consideration of the premises and of the promises herein
made, the parties hereby agree as follows:
1
Section 2.01 of the Agreement is hereby amended to strike "106" and to
substitute therefor as the approximate net electrical generating capacity of the
Plant, "190".
2
The following exhibits attached hereto, to-wit:
2.03 (Revised)
3.01 (Revised)
3.07 (Revised)
3.10 (Revised)
3.12 (Revised)
10.08 (Revised), and
13.05 (Revised)
<PAGE>
are hereby substituted for Exhibits 2.03, 3.01, 3,07, 3.10, 3.12, 10.08, and
13.05, respectively, attached to the Agreement. All references in the Agreement
to Exhibits 2.03, 3.01, 3.07, 3.10, 3.12, 10.08, and 13.05 are hereby changed to
refer to the respective Exhibits attached hereto.
3
Section 2-04 of the Agreement is amended to add thereto a subsection
(d) as follows:
"(d) If Company shall fail to substantially complete the
second phase of the Interconnection Facilities as described in Section
3.02(c) so that the same are in operation on or before March 1, 1988,
then the dates December 31, 1988 and June 1, 1988 set forth in (b)
above shall each be extended by the same number of days as elapse
between March 1, 1988 and the date the second phase of the
Interconnection Facilities are in operation."
4
Section 3.02 of the Agreement is amended to read as follows;
3.02 Interconnection-Facilities.
"(a) COMPANY, will, at Cogenerator's expense, also modify its
existing switching station and transmission facilities and construct
new transmission and/or distribution facilities as depicted in Exhibit
3.01 (Revised) attached hereto and made a part hereof for all purposes
so as to connect the Cogenerator Interconnection Facilities with
Company's transmission
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system. Such modifications to the existing switching station and
transmission facilities and the new transmission and/or distribution
facilities are hereinafter referred to as "Interconnection Facilities.
"(b) The Interconnection Facilities will consist of and be
constructed in two phases. The first phase will include those
facilities shown in Exhibit 3.01 (Revised) appropriate to interconnect
Cogenerator's Interconnection Facilities with Company's 138 kv
transmission system. The first phase of the Interconnection Facilities
will have a capacity of approximately 140 MW.
"(c) The second phase will consist of a 345 kv substation,
transmission line, and related facilities required to receive the
estimated electrical capacity of the Plant at Commercial Operation and
for tests and trial operations of the Plant, including the steam
turbine, prior to the date of Commercial operation.
"(d) Company will apply for and obtain a Certificate of
Convenience and Necessity from the Public Utility Commission of Texas
and thereafter obtain necessary easements and rights-of-way for the
second phase. Company has preliminarily determined upon three possible
routes for the transmission line which is a part of the second phase.
At the time of execution hereof, Company intends to apply for a
Certificate for
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the most favorable route; the estimated construction costs in Exhibit
3.07 (Revised) are for that route, Company may select a different
route, either before or after filing an application for the required
Certificate, if its initial application is denied or if, in Company's
judgment, a Certificate for one of the other routes is more likely to
be granted, is more likely to engender a prompt decision by the
Commission, is more likely to avoid costs, expenses or delays in
obtaining rights-of-way, or will avoid construction problems which will
make the more favored route more expensive than the estimated costs in
Exhibit 3.07 (Revised). Congenerator hereby consents to Company's
selection of an alternate route, realizing that an alternate route may
increase the costs of Interconnection Facilities
"(e) Cogenerator will, at its expense, construct the
Cogenerator Interconnection Facilities, being the facilities
interconnecting the Cogenerator Substation with the Interconnection
Facilities."
5
Section 3.05 of the Agreement is amended to read as follows:
"3.05 Completion. Company and Cogenerator will coordinate
construction of the first phase of the Interconnection Facilities with
construction of the Cogenerator Substation, Cogenerator Interconnection
Facilities and
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Plant so that such facilities will be available by May 15, 1997 for
testing and trial operations of the Plant. Such completion may be
advanced, as agreed by Cogenerator and Company, if necessary to
provide power and energy for construction of the Plant. Company will
endeavor to complete the second phase of the Interconnection Facilities
by March 1, 1988, but will not be in default if completion occurs after
such date."
6
Section 3.12(b) is amended to read as follows:
"(b) To reimburse Company for routine inspection of the
Interconnection Facilities, and Company's telemetering, metering,
communications and data acquisition equipment and automatic switching
control facilities, Cogenerator will pay to Company monthly, beginning
May 1, 1987, the sum of One Thousand Two Hundred Dollars ($1,200.00);
such payment will increase to One Thousand Five Hundred Dollars
($1,500.00) per month beginning on the first day of the first month
following the date that the second phase of the Interconnection
Facilities are completed and in operation. Such monthly payments will
be adjusted pursuant to subsection (c) below. Company will
periodically provide justification of the amount of such expense, if
requested by Cogenerator. Exhibit 3.12 attached hereto delineates which
services are included in routine inspections and which are not."
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7
Section 5.07(f) of the Agreement is amended to read as follows:
"(f) Prior to the time that the second phase of the
Interconnection Facilities is completed and ready for operation,
Cogenerator will not generate and deliver power and energy to Company
in excess of the maximum safe capacity of the first phase
Interconnection Facilities, estimated to be 140 MW. Notwithstanding any
contrary provisions, Company shall have no obligation to receive or pay
for power and energy generated at the Plant in excess of the maximum
safe capacity of the first phase Interconnection Facilities until the
second phase of such Interconnection Facilities is complete and ready
for operation."
8
The first sentence of Section 5.03 of the Agreement is amended to read
as follows:
"Prior to the dates of Commercial Operation and Partial Commercial
Operation and again subsequent to placing of the second phase of the
Interconnection Facilities in service (if the second phase is
completed after Commercial Operation), Cogenerator shall perform or
allow Company to perform, as specified, the following tests on the
Plant after reasonable notice to Company. If the second phase is
completed after Commercial operation, Company shall grant Cogenerator a
credit on applicable Capacity Factors for the time period Cogenerator
must cease generating energy and capacity to perform the following
tests."
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9
Subsection (a) of Section 5.03 of the Agreement is amended to read as
follows:
"(a) A trip test by Cogenerator of the Plant's protective
relay schemes that trip the 138 kv or 345 kv circuit breakers
connecting the Plant to the Company's electric system."
10
Section 5.10 of the Agreement is amended to substitute "190" for "106"
as the estimated Initial Firm Capacity at Commercial Operation and to substitute
"133" for "80" as the estimated Initial Firm Capacity at Partial Commercial
Operation.
11
The second sentence of Section 5.13 (a) of the Agreement is amended to
read as follows;
"Backdowns pursuant to this subsection will not reduce generation of
the Plant below 80% of the capacity of one gas turbine, as determined
during Firm Capacity tests, plus generation of the steam turbine with
one gas turbine operating at 80% of Firm Capacity without supplemental
firing; the estimated generation at such level is 79 MW."
12
The Agreement is amended by adding thereto a new Section 5.14 as
follows:
"5.14 Excess Energy. Cogenerator may generate and deliver energy in
excess of Firm Capacity in any hour (Excess Energy) and Company will
accept and purchase same, subject to the following:
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"(a) Company may refuse to accept Excess Energy when it
interrupts or curtails receipts of energy under other provisions
hereof, including Sections 5.05, 5.06, 5.07, 5.08, 5.13, 12.01 and
13.03.
"(b) In addition to the provisions of (a) above, Company may
refuse to accept Excess Energy, in hours other than Peak Hours, for up
to 3000 hours in any twelve (12) consecutive months. The parties agree
to make a good faith effort to determine a reasonable notice period for
Company to refuse to accept Excess Energy, but, in no event, shall such
notice period be Less than six hours."
13
That portion of Section 7.02 of the Agreement, preceding the last two
sentences of such Section, is amended to read as follows:
"7.02 Billing Determinants. The billing determinants for the
payments to Cogenerator shall be:
"(a) total net energy (in kwh) generated by the Plant
and delivered to Company each month, less Excess Energy
generated by the Plant and delivered to the Company each
month, as metered on the Company side of the Cogenerator
Substation (billing kwh), except as otherwise provided in
Section 7.08 (b)(ii) with respect to WACOG kwh.
"(b) Billing Capacity (billing kw).
"(c) total Excess Energy (in kwh) generated by the
Plant and delivered to Company during each hour and totalled
for each month (Excess Energy kwh)
-8-
<PAGE>
14
Section 7.07 of the Agreement is amended to read as follows:
"7.07 Adjustments to Capacity Factors.
"(a) Computations of Annual, Peak Month and Peak Hour Capacity
Factors shall be made as provided in this Article based upon total net
generation of the Plant metered on the Company side of the Cogenerator
Substation for the applicable period even though actual generation of
the Plant may have been affected by uncontrollable forces (except as
provided in (b) below) or by Cogenerator's or Company's suspension of
performance as authorized by Sections 5.05, 5.06, 5.08, 12.01 or 13.03
of this Agreement or a reduction in generation made at Company's
request pursuant to Section 5.13. Provided, however, that computations
of Peak Month Capacity Factor and Peak Hour Capacity Factor will not be
affected by any reductions of generation made at Company's request
pursuant to Section 5.13, i.e., said Factors will be calculated as if
the amount and level of reduction had not occurred. Similarly,
computations of Peak Month Capacity Factor, Peak Hour Capacity Factor
and Annual Capacity Factor will not be affected by (i) any reductions
of generation made at Company's request to construct or maintain
facilities pursuant to Section 3.10(b) or (c) solely to
-9-
<PAGE>
serve other customers, (ii) reductions in excess of 150 hours per year
made at Company's request pursuant to section 5.05(a)(i), (iii)
backdowns made pursuant to Subsection 5.13(b), (iv) reductions in
generation resulting from Company's opening of electrical connections
in violation of subsection 5.05(a)(iii) or 5.05 (a) (iv), or (v)
reductions in generation in excess of twentv-five(25) hours in any
consecutive twelve-month period made pursuant to subsection 5.05 (a)
(ii).
"(b) If Uncontrollable Forces declared by Cogenerator causes
cessation or curtailment of generation of power and energy by the
Plant, then, except as provided in (c) below, the Capacity Factors
applicable Immediately before the occurrence of the Uncontrollable
Force shall remain unchanged for so long as such Uncontrollable Force
continues in accordance with the terms hereof, and (ii) Company shall
not be required to make any Capacity Payment for the months or any
portions thereof during which the Uncontrollable Force conditions
existed.
"(c) During any period of Uncontrollable Forces, declared by
Cogenerator, which reduces the Plant's net generating capability by
more than twenty-five percent (25%) of Firm Capacity for fourteen
consecutive days or longer, Cogenerator may elect, by written notice
to Company, to have Annual, Peak Month and Peak Hour
-10-
<PAGE>
Capacity Factors determined as provided in this Agreement but with the
following modifications:
"(i) only periods of time (hours, months, and partial months)
and generation of energy occurring after Cogenerator's election will be
considered; calculations will be made from the date of such election as
if it occurred immediately following Partial Commercial Operation
except that Sections 7.03 and 7.04 shall not be applicable;
"(ii) Firm Capacity shall be reduced by the same percentage as
the percentage reduction in net generating capability of the Plant
caused by Uncontrollable Forces.
At the request of either party, the net generating capability of the
Plant during a period when such capacity is reduced by Uncontrollable Forces may
be determined by the test for determining Firm Capacity in Section 5.10.
During any calendar month which includes any part of the period when
Capacity Factors are calculated pursuant to this subsection: (i) "WACOG kwh" as
defined in Section 7.07(b)(ii) shall be deemed to be zero, if Company believes,
in its sole discretion, that generating capability of the Plant materially
exceeds the stated reduced capability during the period of Uncontrollable
Forces, and (ii) Capacity Payments will be
-11-
<PAGE>
at eighty percent (80%) of the otherwise applicable rate."
15
That portion of Section 7-08 of the Agreement preceding (a) is amended
to read as follows:
"7.08 Prices. Except as provided in Section 7.08A, Company's
payments to Cogenerator shall be based on the billing kwh, billing kw,
and Excess Energy kwh as set out above and the following:
16
That portion of subsection 7.08 (b) (i) of the Agreement preceding
the schedule is amended to read as follows:
"(i) Energy payments for billing kwh shall be based on the
following schedule:
17
Subsection 7.08(b) of the Agreement is amended to add a new subdivision
(iii) as follows:
"(iii) Payments for Excess Energy kwh shall be at the lesser
of WACOF or Company's avoided energy costs. Company's avoided energy
costs are determined by calculating by time period, using Company's
economic dispatch model, or comparable methodology, the difference
between the costs of the total energy furnished by both Company and
Cogenerator, computed as though the energy furnished by Cogenerator had
been furnished by Company, and the actual cost of energy furnished
by Company"
-12-
<PAGE>
18
The Agreement is amended to add a new section 7.08A as follows:
"7.08A. Alternate Prices.
"(a) During the period commencing on the later of
(i) the date that the steam turbine at the Plant is ready for
trial operation or (ii) March 1, 1988, and ending on the date
that the second phase of the Interconnection Facilities is
complete and ready for operations, Company's payments to
Cogenerator shall be based on billing kwh, billing kw, and
Excess Energy kwh as set out above and the following, in lieu
of the provisions of Section 7.03:
"(b) Capacity payments will be made at the following
rates:
Calendar Year $/kw/month
------------- ----------
1988 12.68
1989 13.12
1990 13.58
1991 14.06
1992 14.55
1993 15.06
1994 15.58
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<PAGE>
"(c) Energy Payments
"(i) Energy Payments for billing kwh shall
be based on the following schedule:
Calendar Year cents/kwh
------------- ---------
1988 2.36
1989 2.45
1990 2.53
1991 2.62
1992 2.71
1993 2.31
1994 2.91
"(ii) For months after 1988, the provisions
of Section 7.08(b)(ii) with respect to WACOG kwh
shall also apply to determine sums payable to
Cogenerator.
"(iii} Payments for Excess Energy kwh shall
be in accordance with Section 7.08(b)(iii).
"(d) During the period, if any, that this Section is
applicable, Company will also compute the monthly payments
that would have been made to Cogenerator if the amount of the
payments had been determined under Section 7.08. The excess of
payments made under this section over the amount of payments
computed under Section 7.08 together with interest shall be
repaid to
-14-
<PAGE>
Company by Cogenerator over a period of months equal to the
number of months that this Section is applicable. The excess
amounts will bear interest from the date paid by Company
until repaid by Cogenerator at a variable rate each month
equal to the lesser of (i) the prime rate of RepublicBank
Dallas, N.A. on the first business day of each month or (ii)
the maximum lawful rate. Notwithstanding the provisions of
Section 10.07(b), Company may deduct sums due it under this
Section from payments due Cogenerator."
19
The parties acknowledge that Company has not breached Section 9.02,
Section 16.02(c) or other provisions of the Agreement by not heretofore applying
for a Certificate of Convenience and Necessity for the Interconnection
Facilities. Company will make such application promptly after execution hereof.
20
Section 9.03 of the Agreement is hereby deleted and cancelled.
21
Section 11.01 of the Agreement is amended to read as follows:
"11.01 Term.
"(a) This Agreement shall be effective from its date
and shall continue thereafter until the September 30th which
occurs first after fifteen (15) years after the date of
Commercial Operation.
-15-
<PAGE>
"(b) Company may, at its option and subject to (c)
and (d) below, extend the term of this Agreement beyond the
expiration date set forth in (a) for such period as Company
may elect but not to exceed a period equal to the total of all
periods of Uncontrollable Forces of fourteen (14) consecutive
days or longer duration declared by Cogenerator. For purposes
of such extension, a period of Uncontrollable Forces causing
only a partial curtailment of operation of the Plant shall be
equal to the product of the period of such Uncontrollable
Force and the percentage reduction in generation.
"(c) Company may exercise the option to extend by
written notice to Cogenerator, specifying the period of such
extension. Such notice shall be given two (2) years prior to
expiration of the term set forth in (a) above or, if later,
within thirty (30) days after the end of a period of
Uncontrollable Force. Company may extend the term for events
of Uncontrollable Forces occurring during the last two (2)
years of the term set forth in (a) even though it did not
elect to extend for periods of Uncontrollable Forces occurring
prior to such last two (2) years. Likewise, if Company gives
notice to extend two (2) years or more prior to the expiration
of the term set forth in (a), it may elect, within the time
limits set forth herein, to further
-16-
<PAGE>
extend the term for periods of Uncontrollable Forces
thereafter occurring.
"(d) Company's election to extend the term of this
agreement may be cancelled and rescinded if Cogenerator will
be subject to regulation as a public utility during such
extension. If sale of steam from the Plant is required to
avoid such regulation, then Cogenerator will, promptly after
receipt of Company's notice of extension, use all reasonable
efforts to reach agreement for sale of steam during the
extension. If no such agreement is reached and if such
extension would subject Cogenerator to regulation, then either
Party may cancel the proposed extension of the term hereof by
written notice to the other given within six (6) months after
Company's notice of extension but not later than sixty (60)
days prior to expiration of the term set forth in (a) above;
if Company gives notice under (c) in the last ninety (90) days
of the term, notice of cancellation may be given within thirty
(30) days after the date of Company's notice.
"(e) This Agreement shall automatically terminate at
expiration of the term or any extension thereof."
22
Subsections (a) and (c) of Section 12.03 of the Agreement are amended
to read as follows:
-17-
<PAGE>
"12-03 Uncontrollable Force.
"(a) Provided that notice is given as required in subsection
(b) below, a party shall not be considered to be in default with
respect to any obligation under this Agreement (other than an
obligation to pay sums due and other than as provided in (d) below) if
it is prevented from fulfilling such obligation by reason of an
Uncontrollable Force for a period of up to six (6) months in Length,
unless such period is extended as hereinafter provided. A party will
not, in its sole judgment, unreasonably refuse an extension if failure
to perform extends beyond six months even though due diligence is used.
The term "Uncontrollable Forces" shall be deemed for the purposes of
this Agreement to mean storm, tornado, flood, lighting earthquake,
fire, explosion, civil disturbance, acts of God, sabotage, war,
national emergency, restraint by a court or public authority, nuclear
explosion or radioactive contamination, which such party could not
reasonably have been expected to avoid by exercise of due diligence and
foresight. Uncontrollable Forces shall also include delays in receipt
of generator rotor, generator stator, main power transformer or steam
turbine caused by damage or loss in shipping. The failure of a party's
facilities Which is caused by an act or event
-18-
<PAGE>
other than storm, tornado, flood, lightning, earthquake, fire,
explosion, civil disturbance, acts of God, sabotage, war, national
emergency, restraint by a court or public authority, nuclear explosion
or radioactive contamination, is not an Uncontrollable Force. The term
"Uncontrollable Forces" does not include changes in market conditions,
including but, not limited to changes that affect the cost or
availability of Cogenerator's supply of fuel or alternate supplies of
fuel. A party shall exercise due diligence to remove any disability
to its performance caused by Uncontrollable Forces with reasonable
promptness. After a party's failure to perform due to an Uncontrollable
Force has continued for six (6) months, or such longer period as the
party whose performance is not affected by Uncontrollable Forces may
agree in writing, then the Uncontrollable Force shall cease to excuse
the failure to perform, and the party failing to perform shall
thereafter be in default of this Agreement."
"(c) If Cogenerator is prevented from performance by breakdown
or malfunction of equipment requiring replacement or major repair of a
generator stator, generator rotor, main power transformer or steam
turbine, Cogenerator may so advise Company within the time limits
specified in Subsection (b). As used in this
-19-
<PAGE>
section, "major repair" shall be a repair having a cost of not less
than twenty-five percent (25%) of the inflation-adjusted original cost
of the specific item of equipment to be repaired. If Company agrees on
the need for such replacement or repairs and that such repairs are a
major repair so that Cogenerator may perform under this Agreement, then
the equipment breakdown or malfunction shall be deemed to have been
caused by Uncontrollable Force. If Company does not agree, the
question of the need for such replacement or repairs or whether repairs
are a major repair may be submitted to arbitration under Article XIX,
by request made within 45 days after date of notice given pursuant to
Subsection (b). If Cogenerator believes that replacement or major
repair of the rotor, stator or transformer cannot be completed within
six (6) months, Cogenerator may so notify Company in writing, and the
parties will negotiate in good faith to extend the six (6), month
period set out in (a) above for the time necessary to make the
replacement, but, not to exceed eighteen (18) months. If no agreement
is reached within thirty (30) days after the written notice, then
either party may submit the issue of the length of time necessary to
make the replacement or major repair to binding arbitration under
Article XIX by request made
-20-
<PAGE>
within 45 days of the date of Cogenerator's notice that
replacement or major repair will require more than six
months, but under no circumstances shall the six (6) month
period under (a) above be extended to greater than eighteen
(18) months."
23
This Agreement is amended to add a new Section 12.06 as follows:
"12.06 Waiver. Both Parties waive all rights and remedies
which would otherwise be available to them pursuant to the Texas
Deceptive Trade Practices-Consumer Protection Act, Texas Business and
Commerce Code Section 17.41, et seq., except for Section 17.55A. This
waiver shall not otherwise alter or affect any of a Party's rights or
remedies at law. For the purpose of this Section, each party represents
that (i) it is a business consumer with assets of five million or more,
(ii) it has experience and knowledge in financial and business matters
that enable it to evaluate the merits and risks of this Agreement, and
(iii) it is not in a significantly disparate bargaining position with
respect to this Agreement."
24
The Agreement is amended to add thereto a new Article XVA as follows:
-21-
<PAGE>
"Article XVA - Additional Option to Purchase
"15A.01 Option. In addition to the option granted in Article
XV, at the expiration of the term of this Agreement, Company may, at
its option, purchase the Plant as hereinafter provided. Company may
exercise any option herein granted upon giving written notice to
Cogenerator not later than one hundred eighty (180) days prior to the
expiration of the term of this Agreement.
"15A.02 Information. During the period beginning one (1) year
prior to expiration of the term hereof and ending five (5) months
later, Company may request information as to the Plant, its costs of
construction and operations including fuel costs, and other information
pertinent to exercise of this option. Cogenerator will promptly furnish
the information so requested. If Cogenerator fails or refuses to
furnish, within thirty (30) days after a request, any information
requested by Company in writing within the aforesaid period, then the
time for exercise of the option is extended so that it will expire no
sooner than thirty (30) days after receipt by Company of the requested
information.
"15A.03 Manner of Exercise. Company may exercise the option
granted in this Article by written notice to Cogenerator given on or
prior to the date specified in Section 15A.01 as extended by Section
15A.02. If Company fails to give notice on or before such date, such
option will terminate.
-22-
<PAGE>
"15A.04 Closing Date.
"(a) If Company exercises the aforesaid option to purchase
under Section 15A.01, then such purchase will be closed on the later
of (i) the first business day following expiration of this Agreement or
(ii) fifteen days after determination of market value under Section
15A.06.
"(b) If final regulatory approval is not obtained by the date
for closing, as extended, or if such approval is not satisfactory to
Company, it may withdraw its exercise of such option without penalty or
other liability.
If the closing date is extended beyond expiration of the term hereof, then this
agreement shall continue, at Cogenerator's sole option, in full force and effect
according to its terms until the closing date or withdrawal by Company of its
exercise of such option, whichever first occurs. During such extension or any
part thereof when sale of electric power and energy from the Plant would subject
Cogenerator to regulation as a public utility, Cogenerator shall have no
obligation to generate and sell power and energy from the Plant nor Company to
receive or pay for same.
"15A.05 Closing. At such closing, Cogenerator will convey the Plant,
Cogenerator facilities interconnecting the Plant and the Cogenerator Substation,
the Cogenerator
-23-
<PAGE>
itself and the necessary land and land rights, as Section 15.05, to Company by
instruments of easements or general warranty of fee interest. will also assign
to Company (and Company will assume) such contracts and contract rights relating
to operation of the Plant, fuel supply contracts and gas transportation
contracts, as Company and Cogenerator may agree after Company's exercise of the
option.
"15A.06 Payment. If Company elects to exercise its purchase option
under Section 15A.01 the purchase price for such conveyance shall be the market
value of the property being purchased as defined in Section 15.06. If the
parties have not agreed upon market value by ninety (90) days prior to
expiration of this Agreement, then either Company or Cogenerator may, within
thirty (30) days thereafter, give written notice to the other requesting
determination of such amount or value by appraisal, in accordance with Section
15.06 and Article XIX.
"15A.07 Miscellaneous.
"(a) The option in this Article may be assigned in accordance
with Section 15.07.
"(b) Provisions with respect to the option granted in this
Article shall be included in Cogenerator's agreements in accordance
with Section 15.8.9
"(c) Section 15.09 shall be applicable if Company exercises
the option in this Article granted.
-24-
<PAGE>
15A.08 Negotiations. If Company does not exercise the option
provided in this Article XVA, then at Cogenerator's written request
given within thirty (30) days after expiration of the period for
Company's exercise of such option, Company will use reasonable efforts
to negotiate with Cogenerator to purchase power and energy from the
Plant."
25
Section 18.01(f) of the Agreement is amended to read as follows:
"(f) The Plant (with the increased capacity as provided in
the First Amendment) is a Qualifying Facility, as that term is used and
defined in 18 CFR (Code of Federal Regulations) 292 as of the date of
the signing of this Agreement, and Cogenerator will provide
certification by the PBRC of such qualifying status pursuant to 18 CFR
292.207(b) prior to both Partial Commercial Operation and Commercial
Operation. Within thirty days after the date of the First Amendment
hereto, Cogenerator will furnish Company with a legal opinion of its
counsel that the Plant (with the increased capacity as provided in the
First Amendment) is self qualified as a Qualifying Facility.
Cogenerator covenants that it will exert its best efforts to maintain
said Plant as a Qualifying Facility."
-25-
<PAGE>
As herein amended, the Agreement shall remain in full force and effect.
EXECUTED on the date first above written.
FALCON SEABOARD OIL COMPANY
By /s/ David H. Dewhurst
---------------------------------------
Title President
---------------------------------------
TEXAS UTILITIES ELECTRIC COMPANY
By /s/ Michael D. Spence
---------------------------------------
Michael D. Spence, President
Texas Utilities Generating
Company
<PAGE>
SECOND AMENDMENT TO AGREEMENT
THIS AGREEMENT, dated May 27, 1988, by and between FALCON SEABOARD OIL
COMPANY, hereinafter called "Cogenerator" and TEXAS UTILITIES ELECTRIC COMPANY,
hereinafter called "Company",
W I T N E S S E T H:
The parties have heretofore entered into an agreement dated July 30,
1986, for the sale by Cogenerator and purchase by Company of electric power and
energy. Such agreement, as amended, is hereinafter called the "Agreement".
In consideration of the agreements herein made, the parties hereby
agree as follows:
1
Section 2.04 of the Agreement is hereby amended to add thereto a
Subsection (e) as follows:
"(e) Partial Operating Period shall mean the period of time
beginning on the date of Partial Commercial Operation and ending on
the date of Commercial Operation."
2
The Agreement is amended to add thereto a new Section 3.13 as follows:
"3.13 Reimbursement of Company Costs.
(a) From and after July, 1987, Cogenerator shall reimburse
Company fully for all actual costs
<PAGE>
incurred by Company in connection with this Agreement in obtaining
regulatory approvals, contract administration, and dispatching.
Costs for regulatory approval and contract administration will be
payable only if incurred at the request of Cogenerator. Costs of
dispatching will not exceed $600.00 per month. Such actual costs
shall include, without limitation:
(i) Payroll - Labor and services;
(ii) Costs and fees billed to Company by outside
contractors, consultants, and attorneys;
(iii) Miscellaneous Expense.
(b) Company shall bill Cogenerator monthly for such costs,
and payment by Cogenerator to Company shall be due within thirty
(30) days after the date the bill is sent.
(c) Company may offset amounts due hereunder against amounts
due to Cogenerator hereunder."
3
Section 5.07 of the Agreement is amended by adding thereto a Subsection
(g) as follows:
"(g) During the Partial Operating Period (subject to other
provisions hereof, such as Sections 5.05, 5.06, 5.08, 12.01 and 13.03),
Cogenerator may deliver 55 MW of
-2-
<PAGE>
electrical capacity and associated energy at all times and will deliver
such additional electrical capacity and energy, up to Firm Capacity,
and for such periods as Company may, from time to time, request.
Company shall not request, nor will Cogenerator be obligated for,
deliveries of Energy during any month in the Partial Operating Period
to the extent such deliveries exceed, in the aggregate, the energy that
would be produced by operating the Plant at 82% of Firm Capacity during
the hours of 8:00 A.M. to 10 P.M. of each weekday (Monday through
Friday) during such month. In the event Cogenerator delivers energy,
other than Trial Energy, to Company in contravention of this
subsection, said energy shall be excluded from billing kWh and from
calculation of all capacity factors under this Agreement."
4
Section 5.13 of the Agreement is amended to add thereto Subsections (d)
and (e) as follows:
"(d) The preceding provisions of this section are not applicable
during the Partial Operating Period. During that Period, 55 MW of
capacity and energy are not subject to backdown pursuant to this
section and capacity and energy in excess of 55 MW will be delivered by
Cogenerator only at Company's request as specified in Section 5.07(g).
-3-
<PAGE>
(e) During Backdowns, TU Electric may, at its option, notify
Cogenerator that TU Electric is willing to accept energy at generation
levels in excess of the level otherwise allowed during the Backdown and
at a price based on a discount from prices set forth in Section 7.08
('Discount Energy'). If Cogenerator is willing to sell Discount
Energy, it shall notify TU Electric of that fact and of the price of
such energy on a spot gas basis. If TU Electric finds such price to be
satisfactory, it shall so notify Cogenerator, and Cogenerator shall
thereafter sell and deliver during such Backdown, and TU Electric shall
purchase and receive, such Discount Energy. Discount Energy shall be
accounted for as if the unit or units were backed down."
5
Section 5.14 of the Agreement is amended to add thereto a Subsection
(c) as follows:
"(c) Excess energy will not be delivered during the Partial
Operating Period unless requested by Company."
6
That portion of Section 7.02 of the Agreement, preceding the last two
sentences of such Section, is amended to read as follows:
"7.02 Billing Determinants. The billing determinants for the
payments to Cogenerator shall be:
-4-
<PAGE>
(a) total net energy (in kwh) generated by the Plant and delivered to
Company each month, less Excess Energy and Discount Energy generated by the
Plant and delivered to the Company each month, as metered on the Company
side of the Cogenerator Substation (billing kwh), except as otherwise
provided in Section 7.08(b)(ii) with respect to WACOG kwh.
(b) Billing Capacity (billing kw).
(c) total Excess Energy (in kwh) generated by the Plant and delivered
to Company during each hour and totalled for each month (Excess Energy kwh).
(d) Discount Energy delivered in a month pursuant to agreement as
specified in Section 5.13(e)."
7
Section 7.03 of the Agreement is amended to read as follows:
"7.03 Initial Capacity Factors.
(a) For a period beginning on the date of Partial Commercial Operation
and ending after the expiration of six (6) full calendar months after the
date of Partial Commercial Operation for the purposes of Section 7.05 of
this Agreement (but not for any other Section), Annual Capacity Factor
shall be deemed to be equal to 82.00%. This deemed Capacity Factor has no
effect whatsoever on the calculation of the various Capacity Factors under
Section 7.06 at any time and applies to Section 7.05
-5-
<PAGE>
only through the end of six (6) full calendar months beginning on the date
of Partial Commercial Operation.
(b) After the expiration of six (6) full calendar months after the date
of Partial Commercial Operation, if the Annual Capacity Factor has failed to
be equal to, or to exceed, the deemed Capacity Factor specified in
Subsection (a) at any time during said period, then an adjustment to the
previous capacity payments shall be made pursuant to Section 7.05 as if no
Capacity Factors had been deemed whatsoever. The adjustment shall equal the
difference between (i) the capacity payments actually made and (ii) the
capacity payments that would have been made if no Capacity Factors had
been deemed pursuant to Subsection (a). Such adjustment will be calculated
after the exclusion of any month or months so elected by Cogenerator
pursuant to Section 7.04. Any such adjustment shall bear interest at the
Commercial Paper Rate from the end of the sixth full calendar month after
the date of Partial Commercial Operation and shall be repayable in twelve
equal monthly installments beginning on the last day of the seventh full
calendar month after the date of Partial Commercial Operation. As used in
this Agreement, "Commercial Paper Rate" means the lesser of (i) the interest
rate on 30-day high grade unsecured notes sold through dealers by major
corporations as such rate is published in The Wall
-6-
<PAGE>
Street Journal or (ii) the highest rate permitted by applicable law, in
effect on the first business day of each calendar month in which
interest accrues hereunder."
8
Section 7.04 of the Agreement is amended to read as follows:
"7.04 Exclusion of Months. Prior to the end of the seventh full
calendar month after the date of Partial Commercial Operation,
Cogenerator shall notify Company in writing which month or months (not
to exceed two) immediately following the date of Partial Commercial
Operation that Cogenerator chooses to exclude from the calculation of
Annual Capacity Factor; provided, that such excluded month or months,
if any, must be the first full calendar month or the first two full
calendar months after the date of Partial Commercial Operation. If
Cogenerator makes no such notification, then no calendar months will be
so excluded."
9
Subsections (b), (c), and (f) of Section 7.05 of the Agreement are
amended to read as follows:
"(b) After expiration of the Partial Operating Period, if the
Peak Month Capacity Factor, as determined at the end of any month in
accordance with Section 7.06 is less than 75.00%, then the Billing
Capacity for such
-7-
<PAGE>
month shall be reduced proportionally by five percent (5%) of Firm
Capacity for each one percent (1%) by which Peak Month Capacity Factor
is less than 75% (e.g., if Peak Month Capacity Factor is 72.95%,
Billing Capacity is 89.75% of Firm Capacity); or
(c) After expiration of the Partial Operating Period, if the Peak
Hour Capacity Factor, as determined at the end of any month in
accordance with Section 7.06, is less than 82.00%, then the Billing
Capacity for such month shall be reduced proportionally by five percent
(5%) of Firm Capacity for each one percent (1%) by which Peak Hour
Capacity Factor is less than 82.00%; or"
"(f) Any partial reductions of Billing Capacity pursuant to (b),
(c), or (g) of this section are not additive, but only the largest
reduction shall apply (e.g., if Peak Month Capacity Factor is 72.95%
and Peak Hour Capacity Factor is 80.00%, then Billing Capacity equals
89.75% of Firm Capacity); however, a reduction of Billing Capacity
pursuant to (d) or (e) above is additive with reductions under (b),
(c), or (g) (e.g., if Peak Month Capacity Factor is 72.95%, Peak Hour
Capacity Factor is 80.00%, and Tested Capacity is 89.00 megawatts while
Firm Capacity is 90.00 megawatts for fifteen (15) out of the thirty
(30) days in the month, then Billing Capacity equals 87.25% of Firm
Capacity)."
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<PAGE>
10
Section 7.05 of the Agreement is amended to add thereto a new
Subsection (g) as follows:
"(g) During the Partial Operating Period, if the Annual Capacity
Factor, as determined at the end of any month in accordance with
Section 7.06, is less than eighty-two percent (82.00%), then the
Billing Capacity for such month shall be reduced proportionally by five
percent (5%) of Firm Capacity for each one percent (1%) by which
Annual Capacity Factor is less than eighty-two percent (82.00%);"
11
Subsections (a), (b), and (c) of Section 7.06 of the Agreement are
amended to read as follows:
"7.06 Definition of Capacity Factors.
(a)(i) During the Partial Operating Period, Annual Capacity
Factor shall be determined by dividing the total net energy (in
kWh) delivered to Company under this Agreement during the specific
hours when deliveries of capacity and energy are requested by
Company in the current month and the prior eleven (11) months, by
the sum of the products of the number of hours in specific
incremental time periods and the capacity level requested by
Company from Cogenerator in said incremental time periods. Hours in
which Company
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<PAGE>
has not requested or is not entitled to request Cogenerator to
deliver capacity and energy shall be excluded. If less than twelve
(12) full calendar months have occurred since the date of Partial
Commercial Operation the Annual Capacity Factor shall be
determined using only such lesser number of months.
(ii) After expiration of the Partial Operating Period, Annual
Capacity Factor shall be determined by dividing the total net
energy (in mwh) delivered to Company during the current month and
the prior 11 months, by the product of the number of hours in such
month and the prior 11 months and the Firm Capacity (in mW) as
determined at the end of the prior month. If less than 12 full
calendar months have occurred since the date of Commercial
Operation or the end of any months excluded by Cogenerator pursuant
to Section 7.04, whichever is later, the Annual Capacity Factor
shall be determined using only such lesser number of months.
(b) Peak Month Capacity Factor shall be determined by dividing
the total net energy (in mwh) delivered to Company during (i) the
current month, if it be a Peak Month, and the last six prior Peak
Months, or (ii) the last seven prior Peak Months if the current
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<PAGE>
month is not a Peak Month, by the product of the number of hours in
such seven Peak Months and Firm Capacity for the immediately preceding
month. If less than seven full calendar Peak Months have occurred
since the expiration of Partial Operating Period or the end of any
months excluded by Cogenerator pursuant to Section 7.04, whichever is
later, then Peak Month Capacity Factor will be determined by using
only said lesser number of months. If no calendar Peak Months have
occurred since the expiration of Partial Operating Period and any
months excluded by Cogenerator pursuant to Section 7.04, then Peak
Month Capacity Factor shall be deemed to be 75.00%.
(c) Peak Hour Capacity Factor shall be determined by dividing the
total net energy (in mwh) delivered to Company during Peak Hours of
Peak Days in (i) the current month, if it be a Peak Hour Month, and
the last six prior Peak Hour Months, or (ii) the last seven prior Peak
Hour Months if the current month is not a Peak Hour Month, by the
product of the number of Peak Hours in Peak Days in such seven
Peak Hour Months and Firm Capacity for the immediately preceding
month. If less than seven calendar Peak Hour Months have occurred
since the expiration of Partial Operating Period or at the end of any
months excluded by Cogenerator pursuant to Section 7.04, whichever is
later, then Peak Hour
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<PAGE>
Capacity Factor will be determined by using the Peak Hours in Peak Days
in such lesser number of Peak Hour Months. If no Peak Hour Months have
occurred since the expiration of Partial Operating Period and any
months excluded by Cogenerator pursuant to Section 7.04, then Peak Hour
Capacity Factor shall be deemed to be 82.00%."
12
Subsection (f) of Section 7.06 is deleted.
13
Section 10.07(a) is amended to read as follows:
"(a) Any sums due Cogenerator according to the monthly statement
are to be paid by wire transfer on the next-to-last business day of
the month in which the statement is to be rendered."
As herein and heretofore amended, the Agreement shall remain in full
force and effect.
This amendment shall be of no force or effect until executed by the
parties and consent hereto is given by Power Resources, Inc. and by Credit
Suisse, Agent Bank for Credit Suisse and Kansallis-Osake-Pankki. When effective,
this amendment shall be applicable from and including the date of Partial
Commercial Operation.
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<PAGE>
EXECUTED on the date first above written.
FALCON SEABOARD OIL COMPANY
By /s/ David H. Dewhurst
--------------------------------
Title President
TEXAS UTILITIES ELECTRIC COMPANY
By /s/ Michael D. Spence
--------------------------------
Title Div. President
POWER RESOURCES, INC. hereby consents to the foregoing amendment,
agreeing to be bound thereby, this the 5th day of May, 1988.
POWER RESOURCES, INC.
By /s/ David H. Dewhurst
--------------------------------
Title President
CREDIT SUISSE, a bank organized under the laws of Switzerland and
KANSALLIS-OSAKE-PANKKI, a bank organized under the laws of Finland, both acting
through their agent, CREDIT SUISSE, a New
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<PAGE>
York banking corporation, execute this instrument solely to indicate their
consent thereto, this the 13th day of May, 1988.
CREDIT SUISSE
By /s/ Illegible
--------------------------------
Title Assistant Vice President
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<PAGE>
--------------------------------------------------------------------------------
GROUND LEASE
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THIS GROUND LEASE (the "Lease") is made as of November 24,
1993, by and between IMPERIAL IRRIGATION DISTRICT, an irrigation district
organized and existing under the laws of the State of California ("Landlord"),
and SALTON SEA POWER GENERATION L.P., a California limited partnership and
SALTON SEA BRINE PROCESSING L.P., a California limited partnership (together,
"Tenant").
ARTICLE 1 DEFINITIONS
1.1 Unless the context shall otherwise require, the following
capitalized terms used herein shall have the following meanings:
1.1.1 "DAMAGES" means any losses, damages, liabilities,
claims, judgments, liens, penalties, costs and expenses, including, without
limitation, reasonable attorneys' and consultants' fees.
1.1.2 "EFFECTIVE DATE" means November 24, 1993.
1.1.3 "FACILITIES" means those certain geothermal electrical
power generating facilities commonly known as Unocal Salton Sea Units 1 and 2,
together with all wells and wellsites, pipelines, utility installations,
machinery, equipment, buildings and other items associated therewith or related
thereto and located on the Premises.
1.1.4 "FINANCING" means term financing for the Facilities and,
if Tenant so elects, for the construction and subsequent term financing of any
Increased Capacity Improvements, whether in the same or separate transactions.
1.1.5 "GEOTHERMAL LEASE" means that certain Lease dated as of
November 29, 1960, between Landlord and Joseph I. O'Neill, Jr. and Ashman &
Hilliard, recorded on November 29, 1960 in Book 1064, Page 526 of Official
Records of Imperial County, (a) as amended prior to November 24, 1993, (b) as
amended and restated by that certain Amended and Restated Geothermal Lease and
Agreement dated as of November 24, 1993, between Landlord and Magma Land and (c)
as hereafter amended or supplemented.
1.1.6 "INCREASED CAPACITY IMPROVEMENTS" means any increase in
the combined installed capacity of the Facilities as such capacity existed as of
the Effective Date, which directly results from (a) the replacement of existing
generators in one or more of the Facilities with generators of a higher
nameplate rating, (b) the installation of additional generators in one or more
of the Facilities, (c) the reconstruction or replacement of a Facility for the
purpose of increasing its installed capacity and/or (d) any additional
geothermal electrical power generating facility which may in the future be
constructed on the Premises.
1.1.7 "LAW" OR "LAWS" means all applicable laws, statutes,
ordinances, rules, regulations and orders of any federal, state or local
governmental agency.
1.1.8 "MAGMA LAND" means Magma Land Company I, a Nevada
corporation, and its grantees, successors and assigns.
1.1.9 "PERSON" means an individual, a corporation, a
partnership, an association, a trust or any other entity or organization,
including a governmental agency.
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1.1.10 "PREMISES" means the real property described on Exhibit
"A" attached hereto.
1.1.11 "PROJECT LENDER" means the lender or lenders
collectively advancing all or a portion of the Financing, and their respective
agents, trustees (including, without limitation, collateral agents, security
agents and loan trustees), grantees, successors and assigns.
1.1.12 "PROJECT LENDER'S LIEN" means any security interest
taken by the Project Lender in Tenant's right, title and interest under this
Lease.
1.1.13 "PROJECT LENDER'S LOAN DOCUMENTS" means all
instruments, agreements and other documents evidencing or relating to the
Financing and/or the security therefor.
1.1.14 "RENTAL COMMENCEMENT DATE" means January 1, 1994.
ARTICLE 2 LEASE
2.1 Landlord hereby leases the Premises to Tenant, and Tenant
hereby leases the Premises from Landlord, on the terms and conditions, and
subject to the reservations, set forth in this Lease.
2.2 The rights of Tenant under this Lease are and shall remain
junior, subordinate and subject to:
2.2.1 The right, title and interest of Magma Land under the
Geothermal Lease. Without limiting the generality of the foregoing, the rights
of Tenant hereunder shall be subject to the rights of Magma Land to use the
Premises for any operations, activities and purposes permitted under the
Geothermal Lease, including, without limitation, for: (a) drilling, producing,
transporting, injecting and processing geothermal substances in connection with
the operation of the Facilities and any Increased Capacity Improvements; and (b)
for Operations (as that term is defined in the Geothermal Lease) in connection
with, for the benefit of and for purposes incidental to Operations on lands in
the vicinity of and outside the Premises, including, without limitation, the
right to (i) drill and maintain wells on the Premises which bottomhole on lands
other than the Premises and (ii) install and maintain pipelines on the Premises
which carry geothermal substances to or from lands other than the Premises.
2.2.2 The right, title and interest of Magma Land and Salton
Sea Brine Processing L.P. under that certain Easement Grant Deed and Agreement
Regarding Rights for Geothermal Development dated as of March 31, 1993.
2.2.3 The rights of the lessee under that certain
Agricultural Lease effective July 1, 1993, between Landlord and Richard Elmore
and Howard Elmore, which Landlord represents, warrants and covenants to Tenant
(a) will expire on June 30, 1994, and will not be renewed, extended or replaced
and (b) does not affect the portion of the Premises upon which the Facilities
are situated.
ARTICLE 3 TERM
3.1 The term of this Lease shall commence upon the Effective Date,
and, unless sooner terminated as provided in this Lease, shall expire on
November 24, 2026.
ARTICLE 4 RENT
4.1 Tenant shall pay to Landlord, without abatement, deduction or
offset, "Base Annual Rent" for the Premises, commencing on the Rental
Commencement Date and continuing thereafter on the first day of each calendar
year throughout the term of this Lease, in the amount of Forty-Six Thousand,
Eight Hundred Dollars ($46,800.00).
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<PAGE>
4.2 The Base Annual Rent shall be subject to adjustment every five
(5) years as follows:
4.2.1 On every fifth (5th) anniversary of the Rental
Commencement Date, the Base Annual Rent shall be adjusted to reflect the
increase, if any, in the Consumer Price Index published by the Bureau of Labor
Statistics of the Department of Labor for All Urban Consumers, All Items, for
the Los Angeles-Anaheim-Riverside Metropolitan Area (the "CPI"), as follows: The
Base Annual Rent amount provided in Section 4.1 hereof shall be multiplied by a
fraction, the numerator of which shall be the CPI for the month of September
immediately preceding such adjustment, and the denominator of which shall be the
CPI for the month of September, 1993. The sum so calculated shall constitute the
new Base Annual Rent hereunder, but in no event shall such new Base Annual Rent
be less than the Base Annual Rent payable for the year immediately preceding
such adjustment.
4.2.2 In the event that the publication of the CPI shall be
transferred to any other governmental agency or shall be discontinued, then the
index most nearly the same as the CPI, as determined in good faith by Landlord,
shall be used to make such adjustments.
4.2.3 Tenant shall continue to pay Base Annual Rent at the
rate previously in effect until the next adjustment, if any, is determined.
Thereafter, the Base Annual Rent shall be paid at the increased rate.
4.3 Rent for any period during the term hereof which is for less
than one year shall be prorated based on a three hundred and sixty-five (365)
day year. Rent shall be payable in lawful money of the United States to Landlord
at the address stated herein or to such other persons or at such other places as
Landlord may designate in writing.
ARTICLE 5 TAXES, ASSESSMENTS AND UTILITIES
5.1 Tenant shall pay all real and personal property taxes and
assessments, general or special, levied against (a) this Lease or any right,
title or interest of Tenant in the Premises, (b) the Facilities and any
Increased Capacity Improvements and/or (c) any geothermal substances used to
fuel the Facilities and any Increased Capacity Improvements, including, without
limitation, any possessory interest, license, production, severance or excise
taxes, but excluding income, inheritance and estate taxes.
5.1.1 All payments of real property taxes shall be prorated,
on the basis of a 365-day year, for the applicable portion of the tax fiscal
years at the commencement and expiration of the term of this Lease.
5.1.2 If the Premises are assessed together with other real
or personal property of Landlord apart from the Premises, the taxes imposed on
the entire assessed property shall be prorated, and Tenant shall pay that amount
which equals the product obtained by multiplying the entire tax by a fraction,
the numerator of which equals the value of the Premises and the denominator of
which equals the value of all of the property so assessed.
5.1.3 Tenant may contest the legal validity or amount of any
taxes for which Tenant is responsible under this Lease, and may institute such
proceedings as Tenant considers necessary or appropriate in connection
therewith. If Tenant contests any such taxes, Tenant may withhold or defer
payment or pay under protest, but shall protect Landlord and the Premises from
any lien by surety bond or other appropriate security reasonably acceptable to
Landlord. Landlord hereby appoints Tenant as Landlord's attorney-in-fact for the
purpose of making all payments to any taxing authorities and for the purpose of
contesting any taxes affecting the Premises, conditioned on Tenant's preventing
any liens from being levied on the Premises or on Landlord by reason of the
non-payment of such taxes.
5.2 Tenant agrees to pay, before the same become delinquent, all
charges for gas, electricity, sewage, water, telephone, trash removal, and other
similar or dissimilar public services or commodities furnished to the
3
<PAGE>
Premises, the Facilities or any Increased Capacity Improvements during the term
of this Lease, including all installation, connection and disconnection charges.
5.3 It is the intent of the parties hereto that the rent provided
in this Lease shall be absolutely net to Landlord, and that, except as otherwise
expressly provided in this Lease, Tenant shall pay all costs and charges of
every kind and nature incurred for, against, or in connection with the Premises
which may arise or become due from and after the Rental Commencement Date and
during the term hereof, including, without limitation, all taxes, utilities,
insurance premiums and maintenance costs; provided, however, that nothing herein
shall be construed as requiring Tenant to pay any installment of interest or
principal owing on any encumbrance against the Premises for which Landlord is
the obligor. All such costs and charges at the commencement and the end of the
term of this Lease shall be appropriately prorated between the parties.
ARTICLE 6 USE
6.1 Tenant shall use and permit the use of the Premises only for
the construction, maintenance, repair, replacement and operation of the
Facilities and any Increased Capacity Improvements, and for any uses associated
therewith or incidental thereto. Further, Tenant may plant, irrigate, fertilize,
nurture and harvest crops on the Premises, or permit licensees or subtenants to
do the same, and any rentals from such agricultural use shall belong exclusively
to Tenant.
6.2 Tenant shall, at Tenant's expense, promptly comply with all
Laws now in effect or which may hereafter come into effect during the term
hereof, relating in any manner to the Premises or the occupation and use by
Tenant of the Premises. Tenant shall conduct its business in a lawful and
commercially reasonable manner, and shall not use or permit the use of the
Premises in any manner that will create waste or nuisance. Except as otherwise
provided in this Lease, Tenant shall indemnify, defend and hold harmless
Landlord from and against any and all Damages which may be imposed upon or
incurred by Landlord or asserted against Landlord by any third Person, arising
out of or attributable to Tenant's operations on the Premises.
6.3 Notwithstanding Section 6.2 hereof (in which the clause "in
all material respects" has not been used to modify the effect of the word
"comply" in the first sentence thereof), Tenant shall, at Tenant's expense,
comply in all material respects with all environmental Laws now in effect or
which may come into effect during the term hereof, including, without
limitation, the Resource Conversation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Hazardous Materials
Transportation Act, the Toxic Substances Control Act, the Clean Air Act, the
Clean Water Act, the California Hazardous Waste Control Act, the California
Hazardous Substance Act, the Porter-Cologne Water Quality Control Act and all
applicable regulations promulgated pursuant thereto.
6.4 Tenant shall indemnify, defend and hold harmless Landlord from
and against any and all Damages which may be imposed upon or incurred by
Landlord or asserted against Landlord by any third Person in connection with any
violation of the provisions of Section 6.3 hereof, arising out of or
attributable to (a) the assets, business, or operations of Tenant at or on the
Premises or (b) any acts or omissions of or by Union Oil Company of California
on the Premises prior to March 31, 1993, which, were said Union Oil Company of
California a party hereto, would constitute a material violation of Section 6.3
hereof.
6.5 Without in any way limiting the scope of Tenant's obligations
under the indemnification provisions of Section 6.4 hereof, Tenant shall be
responsible for all investigations, studies, cleanup, corrective action or
response or remedial action required by any local, state or federal governmental
agency now or hereafter authorized to regulate environmental matters or by any
consent decree, or court or administrative order now or hereafter applicable to
the Premises, or by any Law now or hereafter in effect.
6.6 As between Landlord and Tenant, Tenant shall have the
responsibility and right to manage and control all investigations and any
environmental cleanup, remediation, or related activities, and may negotiate
with
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and fulfill any requirements or claims made by a governmental entity or third
party, and may settle or contest such requirements or third-party claims.
6.7 Tenant hereby accepts the Premises in its condition existing
as of the Effective Date, subject to all applicable Laws governing and
regulating the use of the Premises, and all recorded easements, covenants,
conditions, restrictions and other matters of record (including, without
limitation, the Geothermal Lease), and Tenant accepts this Lease subject
thereto. Tenant acknowledges that it has satisfied itself by its own independent
investigation that the Premises are suitable for its intended use, and that
neither Landlord nor Landlord's agents or employees has made any representation
or warranty as to the present or future suitability of the Premises for the
conduct of Tenant's business.
ARTICLE 7 MAINTENANCE, REPAIRS AND ALTERATIONS
7.1 Throughout the term, Tenant shall, at Tenant's sole cost and
expense, maintain the Premises in good condition and repair, ordinary wear and
tear excepted, in accordance with all Laws; provided, however, that subject to
the provisions of any Project Lender's Loan Documents, Tenant shall not be
required to repair, restore or remedy any damage to or destruction of the
Facilities, and may instead elect to raze the improvements so damaged or
destroyed, and provided further, that following any such razing, Tenant shall be
entitled to terminate this Lease and the obligation to pay rent contained
herein, so long as Tenant complies with Section 7.4 hereof.
7.2 Tenant shall be free to make any alterations or additions to
the Premises, and may from time to time construct any Increased Capacity
Improvements and any other improvements permitted under Section 6.1 hereof,
subject to the following:
7.2.1 Tenant shall pay when due, all claims for labor or
materials furnished to or for Tenant at or for use on the Premises, which claims
are or may be secured by any mechanic's or materialmen's lien against the
Premises, and shall indemnify and defend Landlord against any such liens or
claims of lien.
7.2.2 If Tenant shall, in good faith, contest the validity of
any lien, claim or demand, then Tenant shall, at its sole expense, defend itself
and Landlord against the same and shall pay and satisfy any adverse judgment
that may be rendered thereon before the enforcement thereof against Landlord or
the Premises, upon the condition that if Landlord shall require, Tenant shall
furnish to Landlord a surety bond satisfactory to Landlord in an amount equal to
such contested lien claim or demand, indemnifying Landlord against liability for
the same and holding the Premises free from the effect of such lien or claim.
7.3 Notwithstanding any other provision of this Lease, the
Facilities, any Increased Capacity Improvements and any of Tenant's other
fixtures and personal property, whether or not affixed to the Premises, shall be
deemed severed from and not a part of the underlying real property and shall not
merge therewith, and shall remain the property of Tenant at all times during and
after the term of this Lease, and may be removed by Tenant from the Premises;
and all insurance proceeds received in connection with any damage to or
destruction of the Facilities, any Increased Capacity Improvements and/or such
other property shall belong exclusively to Tenant.
7.4 Within a reasonable period of time (not to exceed one hundred
and eighty (180) days) after the expiration or earlier termination of the term
of this Lease, Tenant shall, in accordance with good operating practice and in
compliance with Law, (a) remove from the Premises the Facilities, any Increased
Capacity Improvements and any and all other facilities, structures, pipelines,
machinery, equipment, fixtures and personal property (except wells and casings)
located on the Premises, (b) level and fill all sump holes and mud pits and cap
or plug any wells constructed or drilled on the Premises, (c) to the extent
reasonably practicable, demolish and remove all foundations, fix all
excavations, return the Premises to grade, and leave the Premises safe and free
from debris and (d) surrender the Premises to Landlord in good condition and
repair, ordinary wear and tear excepted.
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Notwithstanding the foregoing, Tenant shall not be required to remove from the
Premises any facilities, structures, pipelines, machinery, equipment and other
fixtures or personal property installed or constructed by, or take any other
actions required in this Section 7.4 with respect to the property or activities
of, Magma Land or any Transferee (as that term is defined in the Geothermal
Lease) other than Salton Sea Brine Processing L.P., in each case to the extent
such installation, construction and operations were conducted pursuant to the
rights reserved to Magma Land under the Geothermal Lease.
7.5 Tenant shall maintain and repair, in accordance with
reasonable engineering standards, all those dikes and levees on the Premises, if
any, which Tenant is from time to time expressly required to maintain and repair
pursuant to any applicable permit issued by the County of Imperial in connection
with Tenant's operations, and Landlord assumes no responsibility therefor;
provided, however, that Landlord shall maintain and repair, in accordance with
reasonable engineering standards, all dikes and levees on other property of
Landlord in the vicinity of the Premises (except those dikes and levees which
Magma Land is required to maintain and repair pursuant to the provisions of the
Geothermal Lease), and Tenant assumes no responsibility therefor.
7.6 Tenant shall be entitled, without charge, to use in connection
with its operations or for maintaining or repairing any dike or levee, any earth
or rock located on the Premises; provided, however, that notwithstanding Section
7.4 hereof, Tenant shall not be responsible for fixing any excavations or
returning the Premises to grade to the extent that (a) such use of earth or rock
was for the purpose of maintaining or repairing any dike or levee or (b) soils
were taken or utilized by Landlord under Section 7.7 hereof.
7.7 Landlord reserves the right to enter the Premises and to take
and utilize the soils contained therein as fill for flood control purposes, at
no charge to Landlord; provided, however, that (a) in exercising its rights
under this Section 7.7, Landlord shall not interfere with or cause any material
delay, or increase in the cost of, Tenant's operations on the Premises and (b)
Landlord shall indemnify, defend and hold harmless Tenant from and against any
and all Damages, whether or not arising out of third-party claims, which may be
imposed upon or incurred by Tenant or asserted against Tenant by any other
Person, arising out of or attributable to such entry and use of such soils by
Landlord. Without limiting the generality of the foregoing, Landlord shall not
take or use any soil from any portion of the Premises which, at the time of such
entry by Landlord, is being used as, or has been set aside for, the site of any
facilities, well pads or other improvements, nor shall Landlord's use of such
soils impair the lateral or subjacent support for any such site. In the event of
any conflict between the rights of Landlord to take and utilize soils under this
Section 7.7 and the rights of Tenant to use earth or rock under Section 7.6
hereof, the rights of Landlord under this Section 7.7 shall take priority.
7.8 Notwithstanding any other provision of this Lease, each party
hereto hereby waives any claim against the other party hereto for Damages caused
by any change or changes in the level of the Salton Sea; provided, however, that
such waiver shall not apply to Damages which may be imposed upon or incurred by
a party hereto or asserted against a party hereto by a third Person, arising out
of or attributable to the gross negligence or intentional acts or omissions of
the other party hereto or the failure of such other party to perform its
obligations under Section 7.5 hereof. The parties hereto agree that such waiver
shall include, without limitation, Damages caused by flooding, seepage or other
circumstances attributable to any change or changes in the level of the Salton
Sea, and that such waiver is part of the consideration under this Lease.
ARTICLE 8 ASSIGNMENT AND SUBLETTING
8.1 Tenant may, at any time and from time to time during the term
of this Lease, without the consent of Landlord, transfer, assign, alienate,
license, sublet or grant to any Person all or any portion of the right, title or
interest then held by it in the Premises or under this Lease (a "Transfer").
8.2 Notwithstanding Section 8.1 hereof, but subject to Article 9
hereof, any Transfer of all of the right, title and interest of Tenant under
this Lease shall require the consent of Landlord, which consent shall not
unreasonably be withheld; provided, however, that without the consent of
Landlord, Tenant shall be free to Transfer
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all or any portion of the right, title or interest held by it in the Premises or
under this Lease: (a) to (i) any affiliate of Tenant, (ii) any partnership in
which Tenant or an affiliate of Tenant is a general partner or (iii) any Person
for whom Tenant or an affiliate of Tenant acts as the operator of the Premises;
or (b) through a sale-leaseback transaction, so long as Tenant or an affiliate
of Tenant is the lessee in such sale-leaseback transaction.
8.3 In the event that Landlord's consent to a Transfer is required
under Section 8.2 hereof, Tenant shall submit a written request to Landlord for
such consent, which request shall be accompanied by reasonably pertinent details
concerning the Person to whom such Transfer is proposed to be made, and Landlord
shall have forty-five (45) calendar days in which to approve or disapprove of
such Transfer. Landlord's failure to disapprove of such Transfer within such
forty-five (45) day period shall be conclusively deemed to constitute Landlord's
approval thereof. In no event shall Landlord be entitled to require the payment
of any additional consideration in exchange for its approval of any Transfer
requiring its consent hereunder.
8.4 Upon any Transfer of less than all of the right, title and
interest of Tenant under this Lease, Tenant shall be and remain ultimately
liable to Landlord for the performance of all obligations hereunder.
8.5 Upon (a) a Transfer of all the right, title and interest of
Tenant under this Lease, (b) the assumption by the assignee of all remaining
obligations of Tenant hereunder and (c) the giving of Landlord's consent thereto
if so required under Section 8.2 hereof, Tenant shall be released from, and
shall have no further obligations or liability hereunder.
ARTICLE 9 RIGHTS OF LENDER
9.1 Tenant may, from time to time in one or more transactions,
without obtaining the consent of Landlord, hypothecate, mortgage, pledge or
alienate all or any portion of Tenant's right, title and interest under this
Lease to the Project Lender. Tenant or the Project Lender shall give written
notice to Landlord of the Project Lender's Lien and the Project Lender's address
for notices hereunder; provided, however, that any failure to give such notice
shall not be grounds for denying the Project Lender the rights and protections
provided in this Article 9, so long as Landlord has received actual notice of
the Project Lender's Lien.
9.2 Any surrender or abandonment in whole or in part of this
Lease, or any material amendment hereto or termination hereof, shall be
ineffective and of no force or effect unless and until the prior written consent
of the Project Lender has been obtained thereto.
9.3 The Project Lender shall have the right, but not the
obligation, at any time prior to the expiration or earlier termination of this
Lease, and without the payment of any penalty, to (a) make any payments due
hereunder, (b) do any other act or thing required of Tenant hereunder and (c) do
any act or thing that may be necessary or appropriate to be done in the
performance and observance of the terms hereof to prevent any default under or
termination of this Lease. All payments so made and all things so done and
performed by the Project Lender shall be as effective to prevent any default
under or termination of this Lease as they would have been if made, done and
performed by Tenant instead of by the Project Lender; provided, however, that no
such payment or performance shall by itself be deemed to create a
landlord-tenant relationship between Landlord and such Project Lender.
9.4 Tenant shall not be in default under this Lease unless Tenant
fails to perform the obligations required of it hereunder within the time
periods set forth herein, including all applicable cure periods. If Tenant fails
to cure any default hereunder within the time so provided, then, commencing upon
receipt by the Project Lender of written notice from Landlord to the effect that
Tenant has failed to cure such default within such time, the Project Lender
shall have an additional thirty (30) days to cure such default if such default
is a monetary default, or ninety (90) days to cure such default if such default
is a non-monetary default; provided, however, that if any such non-monetary
default cannot reasonably be cured within such additional ninety (90) day
period, then the Project Lender shall have such additional time to cure such
non-monetary default as is reasonably necessary under the
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circumstances, so long as (a) the Project Lender shall have fully cured within
such ninety (90) day period any default in the performance of any non-monetary
obligations of Tenant hereunder that can reasonably be cured within such ninety
(90) day period and shall thereafter continue to faithfully perform all such
monetary and other obligations and to diligently pursue such cure to completion
and (b) if possession of the Premises is reasonably required in order to effect
such cure, the Project Lender shall have acquired Tenant's interest hereunder or
commenced foreclosure or other appropriate proceedings in the nature thereof
within such ninety (90) day period or prior to the expiration thereof, and shall
be diligently prosecuting any such proceedings to completion. All rights of
Landlord to terminate this Lease as a result of the occurrence of any default by
Tenant shall be subject to, and expressly conditioned upon, (i) the Project
Lender's having received the notice specified above in this Section 9.4 and (ii)
the Project Lender's having failed to take the actions set forth in this Section
9.4.
9.5 Any default by Tenant under this Lease that cannot be remedied
by the Project Lender shall nevertheless be deemed to have been remedied so long
as (a) the Project Lender shall have taken the actions described in clauses (a)
and (b) of Section 9.4 hereof within the time periods provided therein, (b) if
the Project Lender shall have commenced foreclosure or other appropriate
proceedings in the nature thereof under clause (b) of Section 9.4 hereof, then
the Project Lender shall have completed such foreclosure or other appropriate
proceedings or otherwise obtained possession of the Premises and (c) the Project
Lender shall perform all obligations of Tenant under this Lease which arise
thereafter and which can reasonably be performed by the Project Lender.
9.6 If the Project Lender is prohibited by any process or
injunction issued by any court or by reason of any action of any court having
jurisdiction over any bankruptcy, reorganization, insolvency or other
debtor-relief proceeding involving Tenant, from commencing or prosecuting
foreclosure or other appropriate proceedings in the nature thereof, then the
times specified in Sections 9.4 and 9.5 hereof for commencing or prosecuting
such foreclosure or other proceedings shall be extended for the period of such
prohibition.
9.7 Landlord shall deliver to the Project Lender a duplicate copy
of any and all notices of default that Landlord may from time to time deliver to
Tenant pursuant to the provisions hereof, and such copies shall be delivered to
the Project Lender at, or as near as possible to, the same time such notices are
delivered to Tenant. No notice of default by Landlord to Tenant hereunder shall
be deemed to have been given unless and until a copy thereof shall have been
delivered to the Project Lender as provided in this Section 9.7.
9.8 Foreclosure of the Project Lender's Lien or any sale
thereunder, whether by judicial proceedings or otherwise, or any conveyance or
transfer of the interest of Tenant under this Lease from Tenant to the Project
Lender through, or in lieu of, foreclosure or other appropriate proceedings in
the nature thereof, shall not require the consent of Landlord or constitute a
breach of any provision of or a default under this Lease, and upon such
foreclosure, sale or conveyance Landlord shall recognize the Project Lender, or
any other foreclosure sale purchaser, as Tenant hereunder. In the event the
Project Lender becomes the Tenant under this Lease as provided herein, then the
Project Lender shall be personally liable for the obligations of Tenant under
this Lease only for the period of time that the Project Lender remains the
Tenant hereunder, and the Project Lander shall have the right to assign this
Lease without any restriction otherwise imposed on Tenant hereunder; provided,
however, that the assignee of the Project Lender shall have expressly assumed
all of the obligations of Tenant hereunder. Notwithstanding any other provision
of this Lease, in the event that the Project Lender (a) performs any monetary or
other obligation of Tenant under this Lease, (b) acquires any portion of the
right, title or interest in the leasehold estate created by this Lease, (c)
continues Tenant's operation of the Premises, the Facilities and/or any
Increased Capacity Improvements under this Lease and/or (d) becomes personally
liable to Landlord hereunder, then the Project Lender's liability to Landlord
shall be limited by and to the Project Lender's right, title and interest, if
any, in the Facilities and any Increased Capacity Improvements, and Landlord
shall have no recourse against the Project Lender in excess of, and other than
to proceed against, such right, title and interest; provided, however, that in
the event the Project Lender continues the operations of Tenant on the Premises
for a period of time (commencing on the date the Project Lender obtains
possession of the Premises) in excess of two (2) years, then the foregoing
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limitation on liability shall not exculpate the Project Lender from personal
liability to Landlord for Damages incurred by Landlord arising out of or
attributable to the negligent or intentional acts of the Project Lender on the
Premises.
9.9 Upon Landlord's receipt of any notice in the nature of a
notice of default with respect to any obligation of Landlord secured by any lien
upon the Premises, Landlord shall immediately deliver a copy of such notice to
Tenant and to the Project Lender. If and whenever Tenant or the Project Lender
shall deem it necessary or appropriate to do so in order to protect its
respective rights under this Lease, it may, at its option, pay and discharge any
mortgage or other lien attached to the Premises or any portion thereof, and in
such event it shall be subrogated to all the rights of the mortgagee,
beneficiary, owner or holder of such mortgage or other lien.
9.10 In the event that this Lease is rejected by a trustee or
debtor-in-possession in any bankruptcy or insolvency proceeding, and if, within
sixty (60) days after such rejection, the Project Lender shall so request,
Landlord shall execute and deliver to the Project Lender a new ground lease of
the Premises. Such new ground lease shall be for a term equal to the remainder
of the term of this Lease before giving effect to such rejection, and shall
contain the same covenants, agreements, terms, provisions and limitations as
contained in this Lease (except for any requirements which shall have been
fulfilled by Tenant prior to such rejection).
9.11 Landlord and Tenant acknowledge, agree and covenant that
notwithstanding the union of the fee simple title with any right, title or
interest in the leasehold estate created hereby or under any other document or
instrument in Landlord, Tenant, Project Lender, or any other Person, whether by
purchase or otherwise, it is the declared intention of the parties hereto that
the separation of the fee simple estate and the leasehold estate shall be
maintained and that a merger shall not take place without the prior written
consent of the Project Lender.
9.12 Tenant and Landlord shall cooperate in including herein, by
suitable amendment from time to time, any provision which any Project Lender or
proposed Project Lender reasonably requests for the purpose of implementing the
Project Lender-protective provisions contained in this Article 9 and affording
the Project Lender or proposed Project Lender reasonable protection of its
Project Lender's Lien in the event of a default by Tenant; provided, however,
that Landlord shall not be required to include herein any additional provision
which materially impairs the rights of Landlord under this Lease. Tenant and
Landlord each agree to execute and deliver (and to acknowledge, if necessary for
recording purposes) any document or instrument necessary to give effect to any
such provision.
9.13 Landlord shall, upon not less than ten (10) days prior written
notice from Tenant or from any existing or proposed Project Lender (the
"Requesting Party"), execute, acknowledge and deliver to the Requesting Party a
statement in writing (a) certifying that this Lease has not been modified and is
in full force and effect (or, if so modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect) and the date to which any payments due under this Lease are paid in
advance, if any, and (b) acknowledging that there are not, to Landlord's
knowledge, any uncured defaults under this Lease on the part of Tenant, or
specifying such defaults if any are claimed. Any such statements may be
conclusively relied upon by the Requesting Party. The failure of Landlord to
deliver such statement within such time shall be conclusive upon Landlord that
this Lease is in full force and effect and has not been modified, and that there
are no uncured defaults in the performance of Tenant hereunder.
9.14 The Project Lender shall be an express third party beneficiary
of the covenants contained in this Lease, with rights and benefits under, and
the ability to enforce, this Lease.
ARTICLE 10 INSURANCE
10.1 At all times during the term of this Lease, Tenant shall
procure and maintain the following policies of insurance, each of which shall be
obtained from an insurance company rated at least B+ by A.M. Best Company and
shall provide that it cannot be canceled or terminated without at least thirty
(30) days prior notice to Landlord:
10.1.1 Worker's compensation insurance as required by Law;
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10.1.2 Comprehensive general liability insurance with a limit
of no less than $1,000,000, combined single limit, bodily injury and property
damage, for each occurrence; and
10.1.3 Excess public liability insurance in the form of an
umbrella policy, which umbrella policy shall afford coverage of not less than
$5,000,000 per occurrence over and above the coverage provided by the policy
described in Section 10.1.2 hereof.
10.2 In the event that Tenant has not renewed or replaced any such
insurance policy within ten (10) days prior to the cancellation or termination
thereof, then Landlord shall be entitled to cause such policy or policies to be
renewed or replaced, and shall be entitled to invoice Tenant for the premiums
paid by Landlord in connection with such renewal or replacement. Tenant shall
reimburse Landlord for the amount of such invoice within ten (10) days after
receipt thereof, and Tenant's failure to so reimburse Landlord within such ten
(10) day period shall be a material default hereunder.
ARTICLE 11 CONDEMNATION
11.1 In the event of a taking by eminent domain or by inverse
condemnation for any public or quasi-public use under any Law, the proceeds
therefrom shall be distributed (a) first, to Tenant to the extent of all amounts
necessary to pay in full all sums outstanding under the Financing and (b)
second, to the parties hereto in accordance with their interests as they may
appear (which, in the case of Tenant, shall include, without limitation, the
Facilities, any Increased Capacity Improvements and any lost income therefrom);
provided, however, that Landlord shall not exercise its eminent domain powers in
any manner which would in whole or in part deny Tenant the rights and benefits
provided in this Lease.
ARTICLE 12 DEFAULT AND REMEDIES
12.1 Subject to the provisions of Article 9 hereof, the occurrence
of any one or more of the following events shall constitute a material default
by Tenant under this Lease:
12.1.1 The failure by Tenant to make any payment of rent or
any other payment required to be made by Tenant hereunder, as and when due,
where such failure shall continue for a period of thirty (30) business days
after written notice thereof from Landlord to Tenant.
12.1.2 The failure by Tenant to observe or perform any of the
material covenants, conditions or provisions of this Lease to be observed or
performed by Tenant other than those referenced in Section 12.1.1 hereof, where
such failure shall continue for a period of sixty (60) days after written notice
thereof from Landlord to Tenant; provided, however, that if the nature of
Tenant's noncompliance is such that more than sixty (60) days are reasonably
required for its cure, then Tenant shall not be deemed to be in default if
Tenant commences such cure within said sixty (60) day period and thereafter
diligently pursues such cure to completion.
12.1.3 (a) The making by Tenant of any general arrangement for
the benefit of creditors, (b) Tenant's becoming a "debtor" as defined in 11
U.S.C. section 101, unless, in the case of a petition filed against Tenant, the
same is dismissed within sixty (60) days after filing, (c) the appointment of a
trustee or receiver to take possession of substantially all of Tenant's assets
located on the Premises or of Tenant's interest under this Lease, where
possession is not restored within sixty (60) days, or (d) the attachment,
execution or other judicial seizure of substantially all of Tenant's assets
located at the Premises or of Tenant's interest under this Lease, where such
seizure is not discharged within sixty (60) days. In the event that any
provision of this Section 12.1.3 is contrary to any applicable Law, such
provision shall be of no force or effect.
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12.2 Subject to the provisions of Article 9 hereof, in the event of
any material default of this Lease by Tenant, Landlord may take any of the
following actions:
12.2.1 Terminate Tenant's right to possession of the Premises
by any lawful means, in which case this Lease and the term hereof shall
terminate, and Tenant shall immediately surrender possession of the Premises to
Landlord. In such event, Landlord shall be entitled to recover from Tenant all
damages incurred by Landlord by reason of Tenant's default, including, but not
limited to: (a) the unpaid rent which had been earned at the time of
termination; (b) the amount by which the unpaid rent which would have been
earned after termination until the time of award exceeds the amount of such
rental loss that Tenant proves could have been reasonably avoided; (c) the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that Tenant proves could be
reasonably avoided; and (d) any other amount necessary to compensate Landlord
for the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease.
12.2.2 Maintain Tenant's right to possession, in which case
this Lease shall continue in effect whether or not Tenant shall have vacated or
abandoned the Premises. In such event, Landlord shall be entitled to enforce all
of Landlord's rights and remedies under this Lease, including the right to
recover the rent as it becomes due hereunder.
12.2.3 Pursue any other remedy now or hereafter available to
Landlord under the Laws or judicial decisions of the State of California.
12.3 Tenant hereby acknowledges that the late payment by Tenant to
Landlord of any installment of rent or any other sum due hereunder will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of
which will be extremely difficult to ascertain. Accordingly, if any installment
of rent or any other sum due from Tenant hereunder shall not be received by
Landlord within ten (10) days after such amount shall be due, then Tenant shall
pay to Landlord a late charge equal to six percent (6%) of such overdue amount.
The parties hereby agree that such late charge represents a fair and reasonable
estimate of the costs Landlord will incur by reason of such late payment by
Tenant. Acceptance of such late charge by Landlord shall in no event constitute
a waiver of Tenant's default with respect to such overdue amount, or prevent
Landlord from exercising any of the other rights and remedies granted hereunder.
12.4 Except as expressly provided herein, any amount due to
Landlord hereunder that is not paid when due shall bear interest at the greater
of (a) ten percent (10%) per annum or (b) five percent (5%) per annum above the
discount rate established by the Federal Reserve Bank of San Francisco on
advances to member banks under Section 13 or 13(a) of the Federal Reserve Act as
in effect on the Rental Commencement Date, from the date due until fully paid.
Payment of such interest shall not excuse or cure any default by Tenant under
this Lease.
12.5 Notwithstanding any other provision of this Lease, Landlord
shall not commence any action or proceeding in which termination of this Lease
is sought as a remedy unless Landlord also includes therein a prayer for
damages; nor shall Landlord allege, in any such action or proceeding, that it
should be entitled to terminate this Lease because damages would be an
inadequate remedy. Tenant shall conclusively be deemed to have remedied any
default upon which such a prayer for termination of this Lease is based, if,
within thirty (30) days after the entry of a final, non-appealable judgment in
such action or proceeding (or, if such action or proceeding is appealable but
has not been appealed, then within thirty (30) days following the end of the
applicable appeal period), Tenant pays to Landlord the full amount of the
damages awarded to Landlord in such action or proceeding. The failure of Tenant
to pay to Landlord the full amount of such damages award within such thirty (30)
day period shall, subject to the rights of the Project Lender set forth in
Article 9 hereof, entitle Landlord to terminate this Lease by giving written
notice of such termination to Tenant and to the Project Lender.
12.6 Except in connection with the failure of Tenant to pay a
damages award under and within the time period set forth in Section 12.5 hereof,
Tenant may cure any monetary default hereunder by depositing the amount in
controversy (not including claimed consequential, special, exemplary or punitive
damages) in escrow with any
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reputable third party escrow, or by interpleading the same, which amount shall
remain undistributed until final decision by a court of competent jurisdiction
or upon agreement of the parties hereto.
ARTICLE 13 MISCELLANEOUS LEASE PROVISIONS
13.1 Landlord may, at all reasonable times and upon reasonable
notice to Tenant, enter on and inspect the Premises; provided, however, that
such entry and inspection shall be conducted so as to not unreasonably interfere
with Tenant's operations. The foregoing inspection rights shall be exercised
only at the sole risk and cost of Landlord, and Landlord shall indemnify, defend
and hold harmless Tenant from and against any and all Damages which may be
imposed upon or incurred by Tenant or asserted against Tenant by any third
Person, arising out of or attributable to such entry on or inspection of the
Premises, and any activities conducted by or on behalf of Landlord in connection
therewith.
13.2 Tenant hereby acknowledges that Landlord shall have no
obligation whatsoever to provide guard service or other security measures for
the benefit of the Premises. Tenant assumes all responsibility for the
protection of Tenant, its agents, invitees and their property from the acts of
third parties.
13.3 Tenant shall surrender possession of the Premises to Landlord
at the expiration or earlier termination of the term of this Lease. If Tenant
fails to surrender the Premises at the expiration or earlier termination of this
Lease, Tenant shall defend and indemnify Landlord from all liability and expense
resulting from the delay or failure to do so, including, without limitation,
claims made by any succeeding tenant founded on or resulting from Tenant's
failure to do so.
13.4 If Tenant, with Landlord's consent, remains in possession of
the Premises or any part thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month upon all the provisions of this
Lease pertaining to the obligations of Tenant, except that the rent payable
shall be one hundred and twenty-five percent (125%) of the rent payable
immediately preceding the termination date of this Lease.
13.5 No waiver by Landlord of any provision hereof shall be deemed
a waiver of any other provision hereof or of any subsequent breach by Tenant of
the same or any other provisions. The acceptance of rent hereunder by Landlord
shall not be a waiver of any preceding breach by Tenant of any provision hereof,
other than the failure of Tenant to pay the particular rent so accepted,
regardless of Landlord's knowledge of such preceding breach at the time of
acceptance of such rent.
13.6 No remedy or election hereunder shall be deemed exclusive but
shall, wherever possible, be cumulative with all other remedies at Law or in
equity.
13.7 All monetary obligations of Tenant to Landlord under the terms
of this Lease shall be deemed to be rent.
ARTICLE 14 NOTICES
14.1 Any notices, statements, demands, correspondence or
other communications required or permitted to be given hereunder shall be in
writing and shall be given (a) personally, (b) by certified or registered mail,
postage prepaid, return receipt requested, or (c) by overnight or other courier
or delivery service, freight prepaid, to the following address, or, in the case
of notices to the Project Lender, as provided in the notice of the Project
Lender's lien delivered to Landlord under Section 9.1 hereof.
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If to Landlord:
Imperial Irrigation District
333 E. Barioni Blvd.
Imperial, CA 92251
Attention: Secretary, Board of Directors
If to Tenant:
Salton Sea Power Generation L.P.
Salton Sea Brine Processing L.P.
4365 Executive Drive, Suite 900
San Diego, California 92121
Attention: Legal Department
Except as otherwise provided in Article 9 hereof, (i) notices delivered by hand
shall be deemed received when delivered and (ii) notices sent by certified or
registered mail or by overnight or other courier or delivery service shall be
deemed received on the first to occur of (A) five (5) days after deposit in the
United States mail or with such overnight or other courier or delivery service,
addressed to such address or addresses, (B) written acceptance of delivery by
the recipient or (C) written rejection of delivery by the recipient. Each party
hereto may change its address for receipt of notices by sending notice hereunder
of such change to the other party hereto in the manner specified in this
Section, and the Project Lender may change its address for receipt of notices by
sending notice hereunder to each of the parties hereto in the manner specified
in this Section. Notwithstanding the foregoing, amounts payable to Landlord
hereunder shall be deemed paid three (3) days after a check for the same,
addressed to Landlord's address above, is deposited in the United States mail,
first-class postage prepaid.
ARTICLE 15 FORCE MAJEURE
15.1 Neither Landlord nor Tenant shall be liable in damages to the
other for any act, omission or circumstance (an "Event of Force Majeure")
occasioned by or in consequence of any acts or omissions of the other party
hereto, acts of God, acts of the public enemy, wars, blockades, insurrections,
riots, civil disturbances, strikes, lockouts, delays in transportation,
epidemics, landslides, lightning, earthquakes, fires, storms, floods,
explosions, sabotage, the binding order of any court or governmental authority
which has been contested in good faith, the failure of any governmental
authority to issue any permit, entitlement, approval or authorization within one
hundred and twenty (120) days after an application for the same has been
submitted, the effect of any Laws, or any other event or circumstance beyond the
reasonable control of such party which prevents or hinders such party from
performing its obligations hereunder, whether or not similar to the matters and
conditions herein enumerated. In no event, however, shall an Event of Force
Majeure relieve Tenant from the obligation to pay rent or any other payment due
under this Lease.
ARTICLE 16 GENERAL PROVISIONS
16.1 In addition to any other indemnities herein set forth, each
party hereto (the "Indemnifying Party") shall indemnify, defend and hold
harmless the other party hereto (the "Indemnified Party") from and against any
and all Damages, whether or not arising out of third-party claims, which may be
imposed upon or incurred by the Indemnified Party or asserted against the
Indemnified Party by any third Person, arising out of or attributable to the
failure of the Indemnifying Party to perform its obligations as provided in this
Lease.
16.2 The parties hereto shall cooperate each with the other to
fully effectuate the purposes and intent of this Lease. Without limiting the
generality of the foregoing, the parties covenant that they will execute, cause
to be acknowledged and deliver any documents or instruments reasonably necessary
to implement the intentions expressed or implied herein.
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16.3 Tenant shall, at its own expense, obtain such governmental
approvals as shall be necessary to cause the Premises to comply with any Laws
relating to subdivision or zoning. Without limiting the generality of Section
16.2 hereof, Landlord shall fully cooperate with Tenant's efforts to obtain such
governmental approvals and, promptly upon written notice from Tenant, shall
execute and deliver any and all applications, documents and instruments
necessary or appropriate, in the reasonable discretion of Tenant, to apply for,
process, obtain and/or implement all or any portion or element of any such
governmental approval.
16.4 The partners in Salton Sea Power Generation L.P. and Salton
Sea Brine Processing L.P. shall be entitled to (a) merge or by other corporate
reorganization combine the same into a single entity, or replace one or both of
the same with one or more other entities, and Landlord acknowledges and agrees
that no such merger or replacement shall have any affect on the rights and
obligations of the parties under this Lease.
16.5 The parties shall execute, cause to be acknowledged and deliver a
memorandum of this Lease, which shall be recorded in the Official Records of
Imperial County, California, and shall be in the form attached hereto as Exhibit
"B".
16.6 If either party hereto commences litigation for the
enforcement, termination, cancellation or rescission hereof, or for damages for
the breach hereof, the prevailing party shall be entitled to recover its
reasonable attorneys' fees and court and other costs incurred.
16.7 Each provision of this Lease performable by Tenant shall be
deemed both a covenant and a condition. As used herein, the neuter gender
includes the masculine and the feminine, and the singular number includes the
plural, and vice versa. This Lease shall be governed by the Laws of the State of
California. This Lease shall be construed equally as against the parties hereto,
and shall not be construed against the party responsible for its drafting. Time
is of the essence with respect to the obligations to be performed under this
Lease. All exhibits to which reference is made in this Lease are incorporated
into this Lease. The liability of Salton Sea Power Generation L.P. and Salton
Sea Brine Processing L.P. hereunder shall be joint and several.
16.8 This Lease contains all agreements of the parties with respect
to the subject matter of this Lease, and all prior or contemporaneous
agreements, understandings, correspondence and negotiations, whether oral or
written, pertaining to the subject matter of this Lease, shall be of no further
force or effect, and are superseded hereby.
16.9 Any obligations referred to herein to be performed at any time
after the expiration or termination of this Lease, and all indemnities and hold
harmless agreements provided herein, shall survive the expiration or earlier
termination of this Lease.
16.10 No termination or amendment of any of the provisions of this
Lease shall be effective unless in writing, signed by the parties in interest at
the time of the amendment.
16.11 The invalidity of any provision of this Lease as determined by
a court of competent jurisdiction shall in no way affect the validity of any
other provision hereof.
16.12 This Lease and the covenants contained herein shall be binding
upon and inure to the benefit of the parties hereto and their respective
grantees, assignees, successors and assigns.
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IN WITNESS WHEREOF, Landlord and Tenant have executed this
Lease as of the date first above written.
LANDLORD:
IMPERIAL IRRIGATION DISTRICT,
an irrigation district organized and existing
under the laws of the State of California
By: /s/ Ralph W. Boeker
----------------------------------------
Name: Ralph W. Boeker
--------------------------------------
Its: Vice Chairman
---------------------------------------
TENANT:
SALTON SEA POWER GENERATION L.P.,
a California limited partnership
By: Salton Sea Power Company,
a Nevada corporation, its general partner
By: /s/ Jon R. Peele
------------------------------------
Name: Jon R. Peele
----------------------------------
Title: Vice President, Secretary
--------------------------------
SALTON SEA BRINE PROCESSING L.P.,
a California limited partnership
By: Salton Sea Power Company,
a Nevada corporation, its general partner
By: /s/ Jon R. Peele
------------------------------------
Name: Jon R. Peele
----------------------------------
Title: Vice President, Secretary
---------------------------------
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EXHIBIT "A"
Description of the Premises
The following real property located in the County of Imperial, State of
California:
LOTS 5 AND 6, AND THE SOUTHWEST QUARTER OF THE NORTHWEST
QUARTER OF SECTION 5, TOWNSHIP 12 SOUTH, RANGE 13 EAST, SAN
BERNADINO MERIDIAN, ACCORDING TO OFFICIAL PLAT THEREOF;
EXCEPTING THEREFROM ALL MINERALS (INCLUDING, WITHOUT
LIMITATION, ALL GEOTHERMAL SUBSTANCES) LYING BELOW THE SURFACE
OF SAID LAND.
<PAGE>
EXHIBIT "B"
Memorandum of Ground Lease
<PAGE>
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Salton Sea Power Generation L.P.
Salton Sea Brine Processing L.P.
551 West Main Street
Suite 1
Brawley, California 92227
Attn: Mr. Vincent Signorotti
---------------------------------------------------------------------------
Assessor's Parcel Number: 020-110-19.
The undersigned declare that this document conveys leasehold
rights for a definite term of years, and hence NO DOCUMENTARY TRANSFER TAX IS
DUE.
The real property described herein is located in an
unincorporated area of Imperial County, State of California.
MEMORANDUM OF GROUND LEASE
THIS MEMORANDUM OF GROUND LEASE (the "Memorandum") is made as
of November 24, 1993, at San Diego, California, between IMPERIAL IRRIGATION
DISTRICT, an irrigation district organized and existing under the laws of the
State of California ("Landlord"), and SALTON SEA POWER GENERATION L.P., a
California limited partnership and SALTON SEA BRINE PROCESSING L.P., a
California limited partnership (together, "Tenant").
1 This Memorandum is executed concurrently with that certain
Ground Lease of even date herewith, between Landlord and Tenant (the "Lease").
2 Pursuant to the Lease, Landlord hereby leases to Tenant,
on all of the terms and conditions and subject to all of the reservations
contained in the Lease, the real property described on Exhibit "A" attached
hereto.
3 The term of the Lease shall commence upon the date first
above written, and, unless sooner terminated as provided in the Lease, shall
expire on November 24, 2026.
4 The terms and conditions of the Lease are incorporated
herein by reference. This Memorandum is prepared for the purpose of recordation
only, and in no way modifies the terms and conditions of the Lease. If there is
any inconsistency between the terms and conditions of this Memorandum and the
terms and conditions of the Lease, the terms and conditions of the Lease shall
control.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Memorandum
as of the date first above written.
LANDLORD:
IMPERIAL IRRIGATION DISTRICT,
an irrigation district organized and existing
under the laws of the State of California
By: /s/ Ralph W. Boeker
----------------------------------------
Name: Ralph W. Boeker
--------------------------------------
Its: Vice Chairman
---------------------------------------
TENANT:
SALTON SEA POWER GENERATION L.P.,
a California limited partnership
By: Salton Sea Power Company,
a Nevada corporation, its general partner
By: /s/ Jon R. Peele
------------------------------------
Name: Jon R. Peele
----------------------------------
Title: Vice President, Secretary
--------------------------------
SALTON SEA BRINE PROCESSING L.P.,
a California limited partnership
By: Salton Sea Power Company,
a Nevada corporation, its general partner
By: /s/ Jon R. Peele
------------------------------------
Name: Jon R. Peele
----------------------------------
Title: Vice President, Secretary
---------------------------------
<PAGE>
ACKNOWLEDGMENTS
STATE OF California )
-------------------------
)
COUNTY OF San Diego )
------------------------
On December 21, 1993, before me, Cheryl Ciabattini, Notary Public,
personally appeared Jon R. Peele, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Cheryl Ciabattini
---------------------------------
Notary Public
STATE OF California )
-------------------------
)
COUNTY OF San Diego )
------------------------
On December 21, 1993, before me, Cheryl Ciabattini, Notary Public,
personally appeared Ralph W. Boeker, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Cheryl Ciabattini
---------------------------------
Notary Public
<PAGE>
EXHIBIT "A"
Description of the Premises
The following real property located in the County of Imperial, State of
California:
LOTS 5 AND 6, AND THE SOUTHWEST QUARTER OF THE NORTHWEST
QUARTER OF SECTION 5, TOWNSHIP 12 SOUTH, RANGE 13 EAST, SAN
BERNADINO MERIDIAN, ACCORDING TO OFFICIAL PLAT THEREOF;
EXCEPTING THEREFROM ALL MINERALS (INCLUDING, WITHOUT
LIMITATION, ALL GEOTHERMAL SUBSTANCES) LYING BELOW THE SURFACE
OF SAID LAND.
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FIRST AMENDMENT TO GROUND LEASE
================================================================================
THIS FIRST AMENDMENT TO GROUND LEASE (the "Amendment") is made
as of December 15, 1993, by and between IMPERIAL IRRIGATION DISTRICT, an
irrigation district organized and existing under the laws of the State of
California ("Landlord"), and SALTON SEA POWER GENERATION L.P., a California
limited partnership and SALTON SEA BRINE PROCESSING L.P., a California limited
partnership (together, "Tenant").
A. Landlord and Tenant are parties to that certain Ground
Lease dated as of November 24, 1993, which affects the real property described
in Exhibit "A" attached hereto (the "ground Lease").
B. Landlord and Tenant desire to amend the Ground Lease as
provided herein.
NOW THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements set forth herein, and for other good and
valuable consideration, the receipt of which is hereby acknowledged, Landlord
and Tenant hereby agree as follows:
1. Section 6.4 of the Ground Lease is hereby deleted in its
entirety and replaced with the following:
6.4 Tenant shall indemnify, defend and hold
harmless Landlord from and against any and all
Damages which may be imposed upon or incurred by
Landlord or asserted against Landlord by any third
Person in connection with any violation of the
provisions of Section 6.3 hereof, arising out of or
attributable to (a) the assets, business, or
operations of Tenant at or on the Premises or (b) any
acts or omissions of or by Union Oil Company of
California on the Premises prior to March 31, 1993,
which, were said Union Oil Company of California a
party hereto, would constitute a material violation
of Section 6.3 hereof.
2. In the event that any inconsistency exists between the
terms and provisions of this Amendment and the terms and provisions of the
Ground Lease, the terms and provisions of this Amendment shall prevail, and any
such inconsistent terms and provisions contained herein shall be construed as
superseding and amending the terms and provisions of the Ground Lease. Except as
expressly modified by this Amendment, the Ground Lease shall be unchanged and
shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this
Lease as of the date first above written.
LANDLORD:
IMPERIAL IRRIGATION DISTRICT,
an irrigation district organized and existing
under the laws of the State of California
By: /s/ illegible
-----------------------------------
Name:
---------------------------------
Its:
----------------------------------
TENANT:
SALTON SEA POWER GENERATION L.P.,
a California limited partnership
By: Salton Sea Power Company,
a Nevada corporation, its general partner
By: /s/ illegible
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
SALTON SEA BRINE PROCESSING L.P.,
a California limited partnership
By: Salton Sea Power Company,
a Nevada corporation, its general partner
By: /s/ illegible
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
<PAGE>
EXHIBIT "A"
Description of the Premises
The following real property located in the County of Imperial, State of
California:
LOTS 5 AND 6, AND THE SOUTHWEST QUARTER OF THE NORTHWEST
QUARTER OF SECTION 5, TOWNSHIP 12 SOUTH, RANGE 13 EAST, SAN
BERNADINO MERIDIAN, ACCORDING TO OFFICIAL PLAT THEREOF;
EXCEPTING THEREFROM ALL MINERALS (INCLUDING, WITHOUT
LIMITATION, ALL GEOTHERMAL SUBSTANCES) LYING BELOW THE SURFACE
OF SAID LAND.
<PAGE>
================================================================================
GROUND LEASE
================================================================================
THIS GROUND LEASE (the "Lease") is made as of March 31, 1993,
by and between MAGMA LAND COMPANY I, a Nevada corporation ("Landlord"), and
SALTON SEA POWER GENERATION L.P., a California limited partnership and SALTON
SEA BRINE PROCESSING L.P., a California limited partnership (together,
"Tenant").
ARTICLE 1 - DEFINITIONS
1.1 Unless the context shall otherwise require, the following
capitalized terms used herein shall have the following meanings:
1.1.1 "DAMAGES" means any losses, damages, liabilities,
claims, judgments, liens, penalties, costs and expenses, including, without
limitation, reasonable attorneys' and consultants' fees.
1.1.2 "EASEMENT AGREEMENT" means that certain Easement Grant
Deed and Agreement Regarding Rights for Geothermal Development dated as of March
31, 1993, between Landlord and Salton Sea Brine Processing L.P.
1.1.3 "EFFECTIVE DATE" means March 31, 1993.
1.1.4 "FACILITY" means that certain geothermal electrical
generating facility commonly known as Unocal Salton Sea Unit 3, together with
all wells and wellsites, pipelines, utility installations, machinery, equipment,
buildings and other items associated therewith or related thereto which are
located on the Premises.
1.1.5 "FACILITY SITE" shall have the meaning given in Section
16.1 hereof.
1.1.6 "FINANCING" means term financing for the Facility and,
subject to Section 8.2 hereof, for the construction and subsequent term
financing of any Increased Capacity Improvements, whether in the same or
separate transactions.
1.1.7 "GOVERNMENTAL APPROVALS" means all applicable
authorizations, consents, approvals, permissions, permits, franchises, licenses,
waivers, exceptions or variances of, and any filings, applications and
declarations submitted in order to obtain any of the same from, any Governmental
Authority.
1.1.8 "GOVERNMENTAL AUTHORITY" means any federal, state or
local governmental body, or any political subdivision, agency, subagency or
instrumentality thereof, including, without limitation, the courts and any
quasi-adjudicative bodies with jurisdiction.
1.1.9 "INCREASED CAPACITY IMPROVEMENTS" means any
improvements, machinery or equipment, the purpose of which is to increase the
installed capacity of the Facility beyond the installed capacity that existed as
of the Effective Date, including, without limitation, (a) the replacement of an
existing generator in the Facility with a generator of a higher nameplate
rating, (b) the installation of one or more additional generators in the
Facility or (c) the installation or replacement of any other machinery or
equipment at or in the Facility for the purpose of increasing its installed
capacity.
1
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1.1.10 "LAW" OR "LAWS" means all applicable laws, statutes,
ordinances, rules, regulations, decrees, policies, orders, permits,
requirements, judgments, decisions, injunctions and findings of or issued by any
Governmental Authority.
1.1.11 "OFFICIAL RECORDS" means the official records of the
County of Imperial, State of California.
1.1.12 "OPTIONED PREMISES AREA" shall have the meaning given
in Section 16.3 hereof.
1.1.13 "PARTIAL TERMINATION OPTION" shall have the meaning
given in Section 16.3 hereof.
1.1.14 "PERSON" means an individual, a corporation, a
partnership, an association, a trust or any other entity or organization,
including a Governmental Authority.
1.1.15 "PREMISES" means the real property described on Exhibit
"A" attached hereto; subject, however, to the right of Landlord to terminate the
Lease as to the Optioned Premises Area as provided in Article 16 hereof.
1.1.16 "PROJECT LENDER" means the lender or lenders
collectively advancing all or a portion of the Financing, and their respective
agents, trustees (including, without limitation, collateral agents, security
agents and loan trustees), grantees, successors and assigns.
1.1.17 "PROJECT LENDER'S LIEN" means any security interest
taken by the Project Lender in Tenant's right, title and interest under this
Lease.
1.1.18 "PROJECT LENDER'S LOAN DOCUMENTS" means all
instruments, agreements and other documents evidencing or relating to the
Financing and/or the security therefor.
1.1.19 "RENTAL COMMENCEMENT DATE" means January 1, 1994.
1.1.20 "RESERVED AREA" shall have the meaning given in Section
16.1 hereof.
ARTICLE 2 - LEASE
2.1 Landlord hereby leases the Premises to Tenant, and Tenant hereby
leases the Premises from Landlord, on the terms and conditions, and subject to
the reservations, set forth in this Lease.
2.2 Landlord hereby reserves from the leasehold estate granted to
Tenant hereunder the right to use the Premises for the following purposes:
2.2.1 To obtain, extract, develop, transport, utilize, sell
and dispose of the Reserved Geothermal Brine and the Geothermal Brine Scale.
Subject to the applicable limitations on such use provided in the Easement
Agreement, the right reserved by Landlord under this Section 2.2.1 includes the
right to (a) drill, maintain and operate wells, install, maintain and operate
pipelines, construct, maintain and operate any Plants Utilizing Grantor's
Reserved Brine, and conduct any other activities and operations and install or
construct any other improvements, equipment or machinery, necessary or
convenient in connection with, or incidental to, the rights reserved by Landlord
under Sections 2.4.1 and 2.4.2 of the Easement Agreement and (b) to, in a
commercially reasonable manner, "tap" into the pipelines or other Brine
Facilities carrying or containing any Partially Spent Geothermal Brine, Excess
Extracted Geothermal Brine and/or Geothermal Brine Scale from the Facilities to
injection wells, thereby affording to Landlord (i) access to such Partially
Spent Geothermal Brine, Excess Extracted Geothermal Brine and/or Geothermal
Brine Scale and (ii) the ability to return Totally Spent Geothermal Brine to
such pipelines or other Brine Facilities for purposes of injection, in each case
in an oxygen-free environment. (All capitalized terms used in this Section and
not defined herein shall have the meaning given such terms in the Easement
Agreement.)
2
<PAGE>
2.2.2 To obtain, extract, develop, transport, utilize, sell
and dispose of geothermal substances produced from, and injected into, wells
which bottomhole in the Reserved Geothermal Lands, and, in connection therewith,
to drill, maintain and operate wells drilled into the Reserved Geothermal Lands,
install, maintain and operate pipelines, construct, maintain and operate any
Future Non-Easement Area Plants, and conduct any other activities and
operations, and install or construct any other improvements, equipment or
machinery, necessary or convenient in connection with, or incidental to, the
rights reserved by Landlord under Section 2.5 of the Easement Agreement. (All
capitalized terms used in this Section and not defined herein shall have the
meaning given such terms in the Easement Agreement.) The rights reserved by
Landlord under this Section 2.2.2 shall be in addition to, and not a limitation
upon, the rights of Landlord, as the holder of a fee interest in the minerals
underlying the Premises, to enter and utilize the Premises in connection with
its obtaining, extracting, developing, transporting, utilizing, selling and
disposing of such minerals (including, without limitation, the geothermal
substances) thereunder, which rights are implied by Law, including, without
limitation, rights of ingress and egress for access and utility purposes.
2.3 Notwithstanding the foregoing, Landlord shall use its best efforts
to minimize the effect of its use of the Facility Site under Sections 2.2.1 and
2.2.2 hereof on Tenant's operation and maintenance of the Facility and any
Increased Capacity Improvements, and Landlord shall pay all reasonable costs
actually incurred by Tenant as a result of Landlord's exercise, on the Facility
Site, of the rights reserved to Landlord in Sections 2.2.1 and 2.2.2 hereof.
2.4 Tenant shall not at any time during the term of this Lease, without
the prior written consent of Landlord, which consent may be withheld in
Landlord's sole discretion, (a) construct or install any structure, building,
well, pipeline or other improvements, equipment or machinery upon the Reserved
Area (including, without limitation, any Increased Capacity Improvements), (b)
grade or otherwise disturb the surface of the Reserved Area or (c) except as
otherwise expressly provided in this Lease, conduct any other activities or
operations in or on the Reserved Area.
2.5 Landlord shall have and retain the right to, if and to the extent
reasonably deemed necessary by Landlord, from time to time designate a right of
way on, over, across and through the Facility Site for nonexclusive ingress,
egress and use by Landlord for purposes of access to any portion of the Reserved
Area and/or the construction, installation, operation and maintenance of utility
lines and pipelines for the transportation of geothermal substances in
connection with any geothermal electrical generating facility and/or other
commercial or industrial facility or improvements hereafter constructed in, on
or under the Reserved Area, the Reserved Geothermal Lands (as that term is
defined in the Easement Agreement) or any lands pooled or unitized therewith;
provided, however, that the location and use of such right of way shall not
unreasonably interfere with the operation of, or deny Tenant access to, the
Facility.
2.6 The rights of Tenant under this Lease are and shall remain junior,
subordinate and subject to the right, title and interest of Landlord under the
Easement Agreement.
2.7 The rights reserved by Landlord under this Article and elsewhere in
this Lease shall be assignable by Landlord to its grantees, assignees,
successors and assigns.
ARTICLE 3 - TERM
3.1 The term of this Lease shall commence upon the Effective Date, and,
unless sooner terminated as provided in this Lease, shall expire on November 24,
2026.
3
<PAGE>
ARTICLE 4 - RENT
4.1 Tenant shall pay to Landlord, without abatement, deduction or
offset, "Base Annual Rent" for the Premises, commencing on the Rental
Commencement Date and continuing thereafter on the first day of each calendar
year throughout the term of this Lease, in an amount equal to (a) Four Hundred
Dollars ($400) multiplied by (b) the number of acres of the Facility Site.
4.2 The Base Annual Rent shall be subject to adjustment every five (5)
years as follows:
4.2.1 On every fifth (5th) anniversary of the Rental
Commencement Date, the Base Annual Rent shall be adjusted to reflect the
increase, if any, in the Consumer Price Index published by the Bureau of Labor
Statistics of the Department of Labor for All Urban Consumers, All Items, for
the Los Angeles-Anaheim-Riverside Metropolitan Area (the "CPI"), as follows: The
Base Annual Rent amount provided in Section 4.1 hereof shall be multiplied by a
fraction, the numerator of which shall be the CPI for the month of September
immediately preceding such adjustment, and the denominator of which shall be the
CPI for the month of September, 1993. The sum so calculated shall constitute the
new Base Annual Rent hereunder, but in no event shall such new Base Annual Rent
be less than the Base Annual Rent payable for the year immediately preceding
such adjustment.
4.2.2 In the event that the publication of the CPI shall be
transferred to any other Governmental Authority or shall be discontinued, then
the index most nearly the same as the CPI, as determined in good faith by
Landlord, shall be used to make such adjustments.
4.2.3 Tenant shall continue to pay Base Annual Rent at the
rate previously in effect until the next adjustment, if any, is determined.
Thereafter, the Base Annual Rent shall be paid at the increased rate.
4.3 Rent for any period during the term hereof which is for less than
one year shall be prorated based on a three hundred and sixty-five (365) day
year. Rent shall be payable in lawful money of the United States to Landlord at
the address stated herein or to such other persons or at such other places as
Landlord may designate in writing.
ARTICLE 5 - TAXES, ASSESSMENTS AND UTILITIES
5.1 Tenant shall pay all real and personal property taxes and
assessments, general or special, levied against (a) this Lease or any right,
title or interest of Tenant in the Premises and (b) the Facility and any
Increased Capacity Improvements, including, without limitation, any possessory
interest, license, production, severance or excise taxes, but excluding income,
inheritance and estate taxes (collectively, "Tenant's Taxes"); provided,
however, that Landlord shall pay all real and personal property taxes and
assessments, general or special, levied against (i) any right, title or interest
of Landlord in the Reserved Area and/or (ii) any facilities, structures, wells,
pipelines, improvements, machinery or equipment owned or leased by Landlord on
the Premises.
5.2 Tenant shall pay all Tenant's Taxes before delinquency, whether
chargeable against Landlord or Tenant. Tenant shall make all payments of
Tenant's Taxes directly to the charging Governmental Authority before
delinquency and before any fine, interest or penalty shall become due or be
imposed by operation of Law for their nonpayment, and, at the election of
Landlord to be exercised from time to time by notice to Tenant, shall either be
paid to Landlord or directly to the charging Governmental Authority. If the
payment of any or all of the Tenant's Taxes in installments is permitted
(whether or not interest accrues on the unpaid balance), Tenant may, at Tenant's
election, utilize the permitted installment method, but shall pay each
installment (with any interest) before delinquency.
5.3 All payments of Tenant's Taxes shall be prorated, on the basis of a
365-day year, for the applicable portion of the tax fiscal years at the
commencement and expiration of the term of this Lease.
4
<PAGE>
5.4 If Tenant's Taxes are assessed together with the taxes assessed
against the assets described in clauses (i) and (ii) of Section 5.1 hereof or
together with taxes on any other real or personal property of Landlord or any
other Person, then Landlord shall, in good faith, separate out Tenant's Taxes
from such other taxes, using any reasonable method of allocation as Landlord may
determine.
5.5 Tenant may contest the legal validity or amount of any of Tenant's
Taxes, and may institute such proceedings as Tenant considers necessary or
appropriate in connection therewith. If Tenant contests any of Tenant's Taxes,
then Tenant may withhold or defer payment or pay under protest, but shall
protect Landlord, the Premises, the Facility, any Increased Capacity
Improvements and any Plants Utilizing Grantor's Reserved Brine and Future
Non-Easement Area Plants (as those terms are defined in the Easement Agreement)
from and against any tax lien imposed in connection with such non-payment, by
surety bond or other appropriate security reasonably acceptable to Landlord.
5.6 Tenant shall pay, before the same become delinquent, all charges
for gas, electricity, sewage, water, telephone, trash removal and other similar
or dissimilar public services or commodities furnished to the Facility Site, the
Facility and/or any Increased Capacity Improvements during the term of this
Lease, including all installation, connection and disconnection charges.
5.7 It is the intent of the parties hereto that the rent provided in
this Lease shall be absolutely net to Landlord with respect to the Facility
Site, and that, except as otherwise expressly provided in this Lease, Tenant
shall pay all costs and charges of every kind and nature incurred for, against,
or in connection with the Facility Site which may arise or become due from and
after the Rental Commencement Date and during the term hereof, including,
without limitation, all taxes, utilities, insurance premiums and maintenance
costs; provided, however, that nothing herein shall be construed as requiring
Tenant to pay any installment of interest or principal owing on any encumbrance
against the Premises for which Landlord is the obligor. All such costs and
charges at the commencement and the end of the term of this Lease shall be
appropriately prorated between the parties.
ARTICLE 6 - USE
6.1 Subject to Section 2.4 hereof, Tenant shall use and permit the use
of the Premises only for the construction, maintenance, repair, replacement and
operation of the Facility and, subject to Section 8.2 hereof, any Increased
Capacity Improvements, and for any uses associated therewith or incidental
thereto.
6.2 Tenant shall, at Tenant's expense, promptly comply in all material
respects with all Laws now in effect or which may hereafter come into effect
during the term hereof, relating in any manner to the Premises or the occupation
and use by Tenant of the Facility Site. Further, Tenant shall comply in all
material respects with any covenants, conditions and restrictions of record and
with the requirements of any fire insurance underwriters or rating bureaus.
Tenant shall conduct its business in a lawful and commercially reasonable
manner, and shall not use or permit the use of the Premises in any manner that
will create waste or nuisance. Tenant shall indemnify, defend and hold harmless
Landlord from and against any and all Damages which may be imposed upon or
incurred by Landlord or asserted against Landlord by any third Person, arising
out of or attributable to Tenant's activities or operations on the Premises.
6.3 Tenant shall, at Tenant's expense, comply in all material respects
with all environmental Laws now in effect or which may come into effect during
the term hereof, including, without limitation, the Resource Conversation and
Recovery Act, the Comprehensive Environmental Response, Compensation and
Liability Act, the Hazardous Materials Transportation Act, the Toxic Substances
Control Act, the Clean Air Act, the Clean Water Act, the California Hazardous
Waste Control Act, the California Hazardous Substance Act, the Porter-Cologne
Water Quality Control Act and all applicable regulations promulgated pursuant
thereto.
6.4 Without limiting the generality of Section 6.2 hereof, Tenant shall
indemnify, defend and hold harmless Landlord from and against any and all
Damages which may be imposed upon or incurred by Landlord
5
<PAGE>
or asserted against Landlord by any third Person in connection with any
violation of the provisions of Section 6.3 hereof, arising out of or
attributable to (a) the assets, business, or operations of Tenant at or on the
Premises or (b) any acts or omissions of or by Union Oil Company of California
or any of its predecessors-in-interest on the Premises prior to the Effective
Date, which, were said Union Oil Company or such predecessors a party hereto,
would constitute a material violation of Section 6.3 hereof.
6.5 Without in any way limiting the scope of Tenant's obligations under
the indemnification provisions of Section 6.4 hereof, but subject to Landlord's
obligation under Section 2.3 hereof to pay all reasonable costs actually
incurred by Tenant as a result of Landlord's exercise, on the Facility Site, of
the rights reserved to Landlord under Sections 2.2.1 and 2.2.2 hereof, Tenant
shall be responsible for all investigations, studies, cleanup, corrective action
or response or remedial action required by any Governmental Authority now or
hereafter authorized to regulate environmental matters or by any consent decree,
or court or administrative order now or hereafter applicable to the Premises, or
by any Law now or hereafter in effect.
6.6 As between Landlord and Tenant, Tenant shall have the
responsibility and right to participate in the management and control of all
investigations and any environmental cleanup, remediation, or related
activities. However, Tenant may not negotiate with or fulfill any requirements
or claims made by a Governmental Authority or third Person, or settle or contest
such requirements or third-party claims without the express approval of
Landlord, and Landlord shall have the right to participate fully in any and all
meetings, negotiations or decisions relevant to the investigation or remediation
of the violation of the provisions of this Article 6 at the Premises.
6.7 Tenant hereby accepts the Premises in its condition existing as of
the Effective Date, subject to all applicable Laws governing and regulating the
use of the Premises, and all recorded easements, covenants, conditions,
restrictions and other matters of record, and Tenant accepts this Lease subject
thereto and to the Easement Agreement. Tenant acknowledges that it has satisfied
itself by its own independent investigation that the Facility Site is suitable
for its intended use, and that neither Landlord nor Landlord's agents or
employees has made any representation or warranty as to the present or future
suitability of the Facility Site for the conduct of Tenant's business or
operations.
ARTICLE 7 - MAINTENANCE AND REPAIRS
7.1 Throughout the term, Tenant shall, at Tenant's sole cost and
expense, maintain the Facility Site in good condition and repair, ordinary wear
and tear excepted, in accordance with (a) all Laws, (b) any insurance
underwriting board or insurance inspection bureau having or claiming
jurisdiction, and (c) any insurance company insuring all or any part thereof.
7.2 Tenant shall maintain and repair, in accordance with reasonable
engineering standards, all dikes and levees located on the Premises. Landlord
shall maintain and repair, in accordance with reasonable engineering standards,
all dikes and levees located outside of the Premises which Landlord is obligated
to maintain under the Geothermal Rights Documents (as that terms is defined in
the Easement Agreement) or under any Governmental Approval or by Law.
7.3 Landlord reserves the right to enter the Premises and to take and
utilize the soils and rock contained therein as fill for flood control purposes,
at no charge to Landlord; provided, however, that (a) in exercising its rights
under this Section 7.3, Landlord shall not interfere with or cause any material
delay, or increase in the cost of, Tenant's operations on the Facility Site and
(b) Landlord shall indemnify, defend and hold harmless Tenant from and against
any and all Damages, whether or not arising out of third-party claims, which may
be imposed upon or incurred by Tenant or asserted against Tenant by any other
Person, arising out of or attributable to Landlord's use of any such soils
and/or rock on the Facility Site. Without limiting the generality of the
foregoing, Landlord shall not take or use any soil or rock from any portion of
the Facility Site which, at the time of such entry by Landlord, is being used as
the site of the Facility or any Increased Capacity Improvements, nor shall
Landlord's use of such soils and/or rock impair the lateral or subjacent support
for any such site.
6
<PAGE>
7.4 Notwithstanding any other provision of this Lease, Tenant hereby
waives any claim against Landlord for Damages caused by any change or changes in
the level of the Salton Sea; provided, however, that such waiver shall not apply
to Damages which may be imposed upon or incurred by Tenant or asserted against
Tenant by a third Person, arising out of or attributable to the gross negligence
or intentional acts or omissions of Landlord or by reason of Landlord's failure
to perform its obligations under Section 7.2 hereof. The parties hereto agree
that such waiver shall include, without limitation, Damages caused by flooding,
seepage or other circumstances attributable to any change or changes in the
level of the Salton Sea, and that such waiver is part of the consideration under
this Lease.
ARTICLE 8 - ALTERATIONS AND ADDITIONS
8.1 Subject to Section 8.2 hereof, Tenant shall be entitled, at its own
cost and expense, to construct, install, erect, maintain, repair and operate the
Increased Capacity Improvements on the Facility Site, and upon commencement of
construction thereof, the same shall for all purposes be deemed to be included
within the term "Facility" hereunder. In the event Tenant elects to construct or
install the Increased Capacity Improvements, then it shall obtain and maintain
in force all Governmental Approvals necessary or appropriate in connection
therewith.
8.2 Landlord's approval shall not be required for Tenant's minor
alterations or additions to the Facility or for the construction or installation
of the Increased Capacity Improvements, so long as such alterations or additions
and/or such construction or installation does not have a Construction Cost in
excess of One Million Dollars ($1,000,000). As used herein, the term
"Construction Cost" collectively includes all costs that would constitute the
basis of a valid claim or claims under the mechanic's lien Laws, including,
without limitation, costs for any demolition or removal of existing
improvements, equipment or machinery or parts thereof, as well as costs for the
preparation, construction and completion of new improvements, equipment or
machinery. Any alterations or additions to the Facility, and any construction or
installation of the Increased Capacity Improvements, which has a Construction
Cost in excess of One Million Dollars ($1,000,000), shall require Landlord's
prior written consent, which shall not unreasonably be withheld. All alterations
and additions, and all Increased Capacity Improvements, whether or not requiring
Landlord's consent hereunder, shall be completed in a good and workmanlike
manner and of good quality and materials.
8.3 Tenant shall use only reputable licensed contractors in making any
alterations or additions to the Facility and in installing or constructing the
Increased Capacity Improvements, and Landlord may require Tenant to provide to
Landlord, at Tenant's sole cost and expense, a lien and completion bond in an
amount equal to one and one-half (1 1/2) times the estimated cost of such
alterations or additions or such Increased Capacity Improvements, as the case
may be, to insure Landlord against liability for any mechanic's and
materialmen's liens and to ensure completion of the work. Should Tenant make any
alterations or additions or construct any Increased Capacity Improvements
without the prior written consent of Landlord where such consent is required
hereunder, or use other than a reputable licensed contractor, Landlord may, at
any time during the term of this Lease, require that Tenant remove any part or
all of the same from the Premises.
8.4 Tenant shall pay, when due, all claims for labor or materials
furnished to or for Tenant at or for use on the Premises, which claims are or
may be secured by any mechanic's or materialmen's lien against the Premises, the
Facility, any Increased Capacity Improvements or any interest therein.
8.5 Tenant shall give Landlord not less than ten (10) days notice prior
to Tenant's commencement of any alterations or additions to the Facility or of
any construction or installation of the Increased Capacity Improvements, and
Landlord shall have the right to post notices of non-responsibility in or on the
Premises as provided by Law. If Tenant shall, in good faith, contest the
validity of any mechanic's or materialmen's lien or claim, then Tenant shall, at
its sole expense, defend itself and Landlord against the same and shall pay and
satisfy any adverse judgment that may be rendered thereon before the enforcement
thereof, upon the condition that if Landlord shall so require, Tenant shall
furnish to Landlord a surety bond satisfactory to Landlord in an amount equal to
such
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contested lien or claim, indemnifying Landlord against liability for the same
and holding the Premises, the Facilities and any Increased Capacity Improvements
free from the effect of such lien or claim. In addition, Landlord may require
Tenant to pay Landlord's reasonable attorneys' fees and costs in participating
in such action, if Landlord shall decide it is in Landlord's best interest to so
participate.
8.6 Notwithstanding any other provision of this Lease, the Facility,
any Increased Capacity Improvements and all of Tenant's other fixtures and
personal property, whether or not affixed to the Premises, shall be deemed
severed from and not a part of the underlying real property and shall not merge
therewith, and, subject to the rights of Landlord under Section 9.3 hereof,
shall remain the property of Tenant at all times during and after the term of
this Lease, and may be removed by Tenant from the Premises.
ARTICLE 9 - DAMAGE OR DESTRUCTION; TERMINATION
9.1 If the Facility, any Increased Capacity Improvements, or any
portion of any thereof are damaged or destroyed during the term of this Lease,
then, subject to the provisions of the Project Lender's Loan Documents, and
following written notice to Landlord, Tenant may elect to: (a) repair, restore
or remedy such damage or destruction; or (b) dismantle and raze the Facility and
all Increased Capacity Improvements (if any then exist) in accordance with
Section 9.2 hereof, and, upon Tenant's completion of the restoration and other
requirements set forth in such Section 9.2, each of Tenant or Landlord, by
written notice to the other, shall be entitled to terminate this Lease.
9.2 Within a reasonable period of time (not to exceed one hundred and
twenty (120) days) after (a) Tenant delivers notice to Landlord of its intent to
dismantle and raze the Facility and all Increased Capacity Improvements under
Section 9.1 hereof or (b) the expiration or earlier termination by Landlord of
this Lease, Tenant shall, at its sole cost and expense, in accordance with good
operating practice and in compliance with Law, (i) remove the Facility and all
Increased Capacity Improvements (except wells and casings from the Premises),
(ii) level and fill all sump holes and mud pits and cap or plug any wells
constructed or drilled on the Premises (except those wells, if any, drilled by
Landlord or its licensee in connection with operation of any Plants Utilizing
Grantor's Reserved Brine or Future Non-Easement Area Plants (as those terms are
defined in the Easement Agreement), (iii) to the extent reasonably practicable,
demolish and remove all foundations and fix all excavations associated with the
Facility or any Increased Capacity Improvements, return the surface of the
Premises to grade, and leave such surface safe and free from debris and (iv)
surrender the Premises to Landlord in good condition and repair. Notwithstanding
the foregoing, Tenant shall not remove from the Premises the Facility or any
Increased Capacity Improvements, or any portion thereof (or take any other
actions required under this Section 9.2 with respect thereto), as to which
Landlord has exercised the option set forth in Section 9.3 hereof.
9.3 Notwithstanding any other provision of this Lease, upon the
expiration or earlier termination by Landlord of this Lease, or upon receipt by
Landlord of Tenant's notice of its intent to dismantle and raze the Facility and
all Increased Capacity Improvements under Section 9.1 hereof, as the case may
be, Landlord shall have an option to acquire all or any portion or portions of
the Facility and/or such Increased Capacity Improvements from Tenant, whereupon:
(a) in the event Landlord desires to exercise such option in connection with the
expiration of this Lease, such option shall be exercised by written notice to
Tenant not less than one hundred and twenty (120) days before the expiration
date of this Lease; (b) in the event Landlord desires to exercise such option in
connection with the earlier termination by Landlord of this Lease, such option
shall be exercised by written notice given concurrently with the notice of such
termination; and (c) in the event Landlord desires to exercise such option in
connection with its receipt of notice of Tenant's election to dismantle and raze
the Facility and all Increased Capacity Improvements as provided in Section 9.1
hereof, such option shall be exercised by written notice to Tenant within thirty
(30) days following Landlord's receipt of such notice from Tenant. In each such
case, such notice shall specify which portions (or all, if Landlord so elects)
of the Facility and/or Increased Capacity Improvements are to be acquired by
Landlord. In the event Landlord exercises such option as provided herein, then
it shall pay to Tenant an amount equal to the fair market value of the portions
(or all, if applicable) of the Facility and/or Increased Capacity Improvements
to be acquired by Landlord (which fair market value shall be determined as of
the date on which Landlord exercises such option), and payment of such amount
shall be deemed payment in full for those portions (or all, if applicable) of
the
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Facility and/or Increased Capacity Improvements so acquired from Tenant. In the
event Landlord and Tenant cannot agree upon such fair market value, then the
same shall be determined by an independent appraiser appointed by the American
Arbitration Association at the request of either party hereto, and the
determination made by such independent appraiser shall be conclusive and binding
in all respects upon the parties hereto. Upon the payment of such sum, (i)
Tenant shall, by documents and instruments reasonably satisfactory to Landlord,
assign, transfer and convey to Landlord those portions (or all, if applicable)
of the Facility and/or Increased Capacity Improvements so acquired by Landlord,
and all personal property, Governmental Approvals and contract rights associated
therewith and (ii) Landlord shall, by documents and instruments reasonably
satisfactory to Tenant, assume Tenant's obligations with respect to those
portions (or all, if applicable) of the Facility and/or Increased Capacity
Improvements so acquired by Landlord. Notwithstanding the foregoing, the option
granted to Landlord under this Section 9.3 shall be subject and subordinate to
the Project Lender's Lien and to any rights of the Project Lender under Article
11 hereof.
ARTICLE 10 - ASSIGNMENT AND SUBLETTING
10.1 Subject to Article 11 hereof, Tenant shall not voluntarily or by
operation of Law, transfer, assign, alienate, license, sublet or grant to any
Person all or any portion of the right, title or interest then held by it in the
Premises or under this Lease without first obtaining the prior written consent
of Landlord, which shall not unreasonably be withheld.
ARTICLE 11 - RIGHTS OF PROJECT LENDER
11.1 Tenant may, from time to time in one or more transactions, without
obtaining the consent of Landlord, hypothecate, mortgage, pledge or alienate all
or any portion of Tenant's right, title and interest under this Lease to the
Project Lender. Tenant or the Project Lender shall give written notice to
Landlord of the Project Lender's Lien and the Project Lender's address for
notices hereunder; provided, however, that any failure to give such notice shall
not be grounds for denying the Project Lender the rights and protections
provided in this Article 11, so long as Landlord has received actual notice of
the Project Lender's Lien.
11.2 Any surrender or abandonment in whole or in part of this Lease, or
any material amendment hereto or termination hereof, shall be ineffective and of
no force or effect unless and until the prior written consent of the Project
Lender has been obtained thereto.
11.3 The Project Lender shall have the right, but not the obligation,
at any time prior to the termination of this Lease, and without the payment of
any penalty, to (a) make any payments due hereunder, (b) do any other act or
thing required of Tenant hereunder and (c) do any act or thing that may be
necessary or appropriate to be done in the performance and observance of the
terms hereof to prevent any default under or termination of this Lease. All
payments so made and all things so done and performed by the Project Lender
shall be as effective to prevent any default under or termination of this Lease
as they would have been if made, done and performed by Tenant instead of by the
Project Lender.
11.4 Tenant shall not be in default under this Lease unless Tenant
fails to perform the obligations required of it hereunder within the time
periods set forth herein, including all applicable cure periods. If Tenant fails
to cure any default hereunder within the time so provided, then, commencing upon
receipt by the Project Lender of written notice from Landlord to the effect that
Tenant has failed to cure such default within such time, the Project Lender
shall have an additional thirty (30) days to cure such default if such default
is a monetary default, or ninety (90) days to cure such default if such default
is a non-monetary default; provided, however, that if any such non-monetary
default cannot reasonably be cured within such additional ninety (90) day
period, then the Project Lender shall have such additional time to cure such
non-monetary default as is reasonably necessary under the circumstances, so long
as (a) the Project Lender shall have fully cured within such ninety (90) day
period any
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default in the performance of any non-monetary obligations of Tenant hereunder
that can reasonably be cured within such ninety (90) day period and shall
thereafter continue to faithfully perform all such monetary and other
obligations and to diligently pursue such cure to completion and (b) if
possession of the Premises is reasonably required in order to effect such cure,
the Project Lender shall have acquired Tenant's interest hereunder or commenced
foreclosure or other appropriate proceedings in the nature thereof within such
ninety (90) day period or prior to the expiration thereof, and shall be
diligently prosecuting any such proceedings to completion. All rights of
Landlord to terminate this Lease as a result of the occurrence of any default by
Tenant shall be subject to, and expressly conditioned upon, (i) the Project
Lender's having received the notice specified above in this Section 11.4 and
(ii) the Project Lender's having failed to take the actions set forth in this
Section 11.4.
11.5 Any default by Tenant under this Lease that cannot be remedied by
the Project Lender shall nevertheless be deemed to have been remedied so long as
(a) the Project Lender shall have taken the actions described in clauses (a) and
(b) of Section 11.4 hereof within the time periods provided therein, (b) if the
Project Lender shall have commenced foreclosure or other appropriate proceedings
in the nature thereof under clause (b) of Section 11.4 hereof, then the Project
Lender shall have completed such foreclosure or other appropriate proceedings or
otherwise obtained possession of the Premises and (c) the Project Lender shall
perform all obligations of Tenant under this Lease which arise thereafter and
which can reasonably be performed by the Project Lender.
11.6 If the Project Lender is prohibited by any process or injunction
issued by any court or by reason of any action of any court having jurisdiction
over any bankruptcy, reorganization, insolvency or other debtor-relief
proceeding involving Tenant, from commencing or prosecuting foreclosure or other
appropriate proceedings in the nature thereof, then the times specified in
Sections 11.4 and 11.5 hereof for commencing or prosecuting such foreclosure or
other proceedings shall be extended for the period of such prohibition.
11.7 Landlord shall deliver to the Project Lender a duplicate copy of
any and all notices of default that Landlord may from time to time deliver to
Tenant pursuant to the provisions hereof, and such copies shall be delivered to
the Project Lender at, or as near as possible to, the same time such notices are
delivered to Tenant. No notice of default by Landlord to Tenant hereunder shall
be deemed to have been given unless and until a copy thereof shall have been
delivered to the Project Lender as provided in this Section 11.7.
11.8 Foreclosure of the Project Lender's Lien or any sale thereunder,
whether by judicial proceedings or otherwise, or any conveyance or transfer of
the interest of Tenant under this Lease from Tenant to the Project Lender
through, or in lieu of, foreclosure or other appropriate proceedings in the
nature thereof, shall not require the consent of Landlord or constitute a breach
of any provision of or a default under this Lease, and upon such foreclosure,
sale or conveyance Landlord shall recognize the Project Lender, or any other
foreclosure sale purchaser, as Tenant hereunder. In the event the Project Lender
becomes the Tenant under this Lease as provided herein, then the Project Lender
shall be personally liable for the obligations of Tenant under this Lease only
for the period of time that the Project Lender remains the Tenant hereunder, and
the Project Lander shall have the right to assign this Lease without any
restriction otherwise imposed on Tenant hereunder; provided, however, that the
assignee of the Project Lender shall have expressly assumed all of the
obligations of Tenant hereunder. Notwithstanding any other provision of this
Lease, in the event that the Project Lender (a) performs any monetary or other
obligation of Tenant under this Lease, (b) acquires any portion of the right,
title or interest in the leasehold estate created by this Lease, (c) continues
Tenant's operation of the Premises, the Facility and/or any Increased Capacity
Improvements under this Lease and/or (d) becomes personally liable to Landlord
hereunder, then the Project Lender's liability to Landlord shall be limited by
and to the Project Lender's right, title and interest, if any, in the Facility
and any Increased Capacity Improvements, and Landlord shall have no recourse
against the Project Lender in excess of, and other than to proceed against, such
right, title and interest.
11.9 Upon Landlord's receipt of any notice in the nature of a notice of
default with respect to any obligation of Landlord secured by any lien upon the
Premises, Landlord shall immediately deliver a copy of such notice to Tenant and
to the Project Lender. If and whenever Tenant or the Project Lender shall deem
it necessary
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or appropriate to do so in order to protect its respective rights under this
Lease, it may, at its option, pay and discharge any mortgage or other lien
(including, without limitation, the lien of general or special property taxes or
assessments) attached to the Premises or any portion thereof, and in such event
it shall be subrogated to all the rights of the mortgagee, beneficiary, owner or
holder of such mortgage or other lien.
11.10 In the event that this Lease is rejected by a trustee or
debtor-in-possession in any bankruptcy or insolvency proceeding, and if, within
sixty (60) days after such rejection, the Project Lender shall so request,
Landlord shall execute and deliver to the Project Lender a new ground lease of
the Premises. Such new ground lease shall be for a term equal to the remainder
of the term of this Lease before giving effect to such rejection, and shall
contain the same covenants, agreements, terms, provisions and limitations as
contained in this Lease (except for any requirements which shall have been
fulfilled by Tenant prior to such rejection).
11.11 Landlord and Tenant acknowledge, agree and covenant that
notwithstanding the union of the fee simple title with any right, title or
interest in the leasehold estate created hereby or under any other document or
instrument in Landlord, Tenant, Project Lender, or any other Person, whether by
purchase or otherwise, it is the declared intention of the parties hereto that
the separation of the fee simple estate and the leasehold estate shall be
maintained and that a merger shall not take place without the prior written
consent of the Project Lender.
11.12 Tenant and Landlord shall cooperate in including herein, by
suitable amendment from time to time, any provision which the Project Lender or
any proposed Project Lender reasonably requests for the purpose of implementing
the Project Lender-protective provisions contained in this Article 11 and
affording the Project Lender or proposed Project Lender reasonable protection of
its Project Lender's Lien in the event of a default by Tenant; provided,
however, that Landlord shall not be required to include herein any additional
provision which materially impairs the rights of Landlord under this Lease.
Tenant and Landlord each agree to execute and deliver (and to acknowledge, if
necessary for recording purposes) any document or instrument necessary to give
effect to any such provision.
11.13 Landlord or Tenant (the "Responding Party") shall at any time
upon not less than ten (10) days' prior written notice from any other party
hereto or from the Project Lender (the "Requesting Party") execute, acknowledge
and deliver to the Requesting Party a statement in writing (a) certifying, as
applicable, that this Lease is unmodified and in full force and effect (or, if
modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect) and the date to which any
payments due hereunder are paid in advance, if any, and (b) acknowledging that
there are not, to the Responding Party's knowledge, any uncured defaults
hereunder on the part of the other party hereto, or specifying such defaults if
any are claimed. Any such statements may be conclusively relied upon by the
Requesting Party and by any prospective purchaser or lessee of, or lender
proposing to take a security interest in, the Facility, any Increased Capacity
Improvements, the Premises, the Reserved Geothermal Lands, any Plants Utilizing
Grantor's Reserved Brine and/or any Future Non-Easement Area Plants (as those
terms are defined in the Easement Agreement), or any portion thereof or interest
therein. The failure of the Responding Party to deliver such statement within
such time shall be conclusive upon such Responding Party that (i) this Lease is
in full force and effect and has not been modified and (ii) there are no uncured
defaults in the performance of the other party hereto.
11.14 The Project Lender shall be an express third party beneficiary of
the covenants contained in this Lease, with rights and benefits under, and the
ability to enforce, this Lease.
ARTICLE 12 - INSURANCE
12.1 At all times during the term of this Lease, Tenant shall procure
and maintain the following policies of insurance, each of which shall be
obtained from an insurance company rated at least B+ by A.M. Best Company and
shall provide that it cannot be canceled or terminated without at least thirty
(30) days prior notice to Landlord:
12.1.1 Worker's compensation insurance as required by Law;
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12.1.2 Comprehensive general liability insurance with a limit
of no less than $1,000,000, combined single limit, bodily injury and property
damage, for each occurrence; and
12.1.3 Excess public liability insurance in the form of an
umbrella policy, which umbrella policy shall afford coverage of not less than
$5,000,000 per occurrence over and above the coverage provided by the policy
described in Section 12.1.2 hereof.
12.2 Notwithstanding the foregoing, for so long as the Project Lender's
Loan Documents remain in effect, Tenant shall procure and maintain such policies
of insurance, in such amounts and containing such provisions, as are required
under the Project Lender's Loan Documents.
12.3 In the event that Tenant has not renewed or replaced any insurance
policy required under this Article 12 within ten (10) days prior to the
cancellation or termination thereof, then Landlord shall be entitled (but not
obligated) to cause such policy or policies to be renewed or replaced, and shall
be entitled to invoice Tenant for the premiums paid by Landlord in connection
with such renewal or replacement. Tenant shall reimburse Landlord for the amount
of such invoice within ten (10) days after receipt thereof, and Tenant's failure
to so reimburse Landlord within such ten (10) day period shall be a material
default hereunder.
ARTICLE 13 - CONDEMNATION
13.1 In the event of a taking of all or any portion of the Facility
Site by eminent domain or by inverse condemnation for any public or quasi-public
use under any Law, the proceeds therefrom shall be distributed (a) first, to
Tenant to the extent of all amounts necessary to pay in full any sums
outstanding under the Financing and (b) second, to the parties hereto in
accordance with their interests as they may appear.
ARTICLE 14 - DEFAULT AND REMEDIES
14.1 Subject to the provisions of Article 11 hereof, the occurrence of
any one or more of the following events shall constitute a material default by
Tenant under this Lease:
14.1.1 The vacation or abandonment of the Premises by Tenant
for a continuous period of sixty (60) days or more, whether or not the rent is
paid.
14.1.2 The failure by Tenant to make any payment of rent or
any other payment required to be made by Tenant hereunder within five (5)
business days after the same shall become due, where such failure shall continue
for a period of five (5) business days after written notice thereof from
Landlord to Tenant.
14.1.3 The failure by Tenant to observe or perform any of the
material covenants, conditions or provisions of this Lease to be observed or
performed by Tenant other than those referenced in Section 14.1.2 hereof, where
such failure shall continue for a period of thirty (30) days after written
notice thereof from Landlord to Tenant; provided, however, that if the nature of
Tenant's noncompliance is such that more than thirty (30) days are reasonably
required for its cure, then Tenant shall not be deemed to be in default if
Tenant commences such cure within said thirty (30) day period and thereafter
diligently pursues such cure to completion.
14.1.4 (a) The making by Tenant of any general arrangement for
the benefit of creditors, (b) Tenant's becoming a "debtor" as defined in 11
U.S.C. ' 101, unless, in the case of a petition filed against Tenant, the same
is dismissed within sixty (60) days after filing, (c) the appointment of a
trustee or receiver to take possession of substantially all of Tenant's assets
located on the Premises or of Tenant's interest under this Lease, where
possession is not restored within sixty (60) days, or (d) the attachment,
execution or other judicial seizure of substantially all of Tenant's assets
located at the Premises or of Tenant's interest under this Lease, where such
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seizure is not discharged within sixty (60) days. In the event that any
provision of this Section 14.1.4 is contrary to any applicable Law, such
provision shall be of no force or effect.
14.2 Subject to the provisions of Article 11 hereof, in the event of
any material default of this Lease by Tenant, Landlord may at any time
thereafter, with or without notice or demand and without limiting Landlord in
the exercise of any right or remedy which Landlord may have by reason of such
default, take any of the following actions:
14.2.1 Terminate Tenant's right to possession of the Premises
by any lawful means, in which case this Lease and the term hereof shall
terminate, and Tenant shall, subject to Section 9.2 hereof, immediately
surrender possession of the Premises to Landlord. In such event, Landlord shall
be entitled to recover from Tenant all damages incurred by Landlord by reason of
Tenant's default, including, but not limited to: (a) the unpaid rent which had
been earned at the time of termination; (b) the amount by which the unpaid rent
which would have been earned after termination until the time of award exceeds
the amount of such rental loss that Tenant proves could have been reasonably
avoided; (c) the amount by which the unpaid rent for the balance of the term
after the time of award exceeds the amount of such rental loss that Tenant
proves could be reasonably avoided; and (d) any other amount necessary to
compensate Landlord for the detriment proximately caused by Tenant's failure to
perform its obligations under this Lease.
14.2.2 Maintain Tenant's right to possession, in which case
this Lease shall continue in effect whether or not Tenant shall have vacated or
abandoned the Premises. In such event, Landlord shall be entitled to enforce all
of Landlord's rights and remedies under this Lease, including the right to
recover the rent as it becomes due hereunder.
14.2.3 Pursue any other remedy now or hereafter available to
Landlord under the Laws of the State of California.
14.3 Landlord shall not be in default in the performance of its
obligations under this Lease unless Landlord fails to perform obligations
required of Landlord within sixty (60) days after written notice by Tenant to
Landlord, specifying wherein Landlord has failed to perform such obligation;
provided, however, that if the nature of Landlord's obligation is such that more
than sixty (60) days are required for its performance, then Landlord shall not
be in default if Landlord commences performance within such sixty (60) day
period and thereafter diligently pursues the same to completion.
14.4 Tenant hereby acknowledges that the late payment by Tenant to
Landlord of any installment of rent or any other sum due hereunder will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of
which will be extremely difficult to ascertain. Accordingly, if any installment
of rent or any other sum due from Tenant hereunder shall not be received by
Landlord within ten (10) days after such amount shall be due, then, without any
requirement for notice to Tenant, Tenant shall pay to Landlord a late charge
equal to six percent (6%) of such overdue amount. The parties hereby agree that
such late charge represents a fair and reasonable estimate of the costs Landlord
will incur by reason of such late payment by Tenant. Acceptance of such late
charge by Landlord shall in no event constitute a waiver of Tenant's default
with respect to such overdue amount, or prevent Landlord from exercising any of
the other rights and remedies granted hereunder.
14.5 Except as expressly provided herein, any amount due to Landlord
hereunder that is not paid when due shall bear interest at the greater of (a)
ten percent (10%) per annum or (b) five percent (5%) per annum above the
discount rate established by the Federal Reserve Bank of San Francisco on
advances to member banks under Section 13 or 13(a) of the Federal Reserve Act as
in effect on the Rental Commencement Date, from the date due until fully paid.
Payment of such interest shall not excuse or cure any default by Tenant under
this Lease.
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ARTICLE 15 - MISCELLANEOUS LEASE PROVISIONS
15.1 Landlord and its agents shall have the right to enter the Premises
and inspect the Facility and any Increased Capacity Improvements and the
operations and activities of Tenant, at any reasonable time and from time to
time. Landlord shall indemnity, defend and hold harmless Tenant from and against
any and all Damages which may be imposed upon or incurred by Tenant or asserted
against Tenant by any third Person, arising out of or attributable to such
inspection of the Facility and any Increased Capacity Improvements.
15.2 Upon Tenant's paying the rent for the Premises and observing and
performing all of the covenants, conditions and provisions on Tenant's part to
be observed and performed hereunder, Tenant shall have quiet possession of the
Premise for the entire term hereof subject to all of the provisions of this
Lease.
15.3 Tenant hereby acknowledges that Landlord shall have no obligation
whatsoever to provide guard service or other security measures for the benefit
of the Premises. Tenant assumes all responsibility for the protection of Tenant,
its agents, invitees and their property from the acts of third parties.
15.4 Tenant shall surrender possession of the Premises to Landlord at
the expiration or earlier termination of the term of this Lease. If Tenant fails
to surrender the Premises at the expiration or earlier termination of this
Lease, Tenant shall defend and indemnify Landlord from all liability and expense
resulting from the delay or failure to do so, including, without limitation,
claims made by any succeeding tenant founded on or resulting from Tenant's
failure to do so.
15.5 If Tenant, with Landlord's consent, remains in possession of the
Premises or any part thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month upon all the provisions of this
Lease pertaining to the obligations of Tenant, except that the rent payable
shall be one hundred and twenty-five percent (125%) of the rent payable
immediately preceding the termination date of this Lease.
15.6 No waiver by Landlord of any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Tenant of
the same or any other provisions. The acceptance of rent hereunder by Landlord
shall not be deemed a waiver of any preceding breach by Tenant of any provision
hereof, other than the failure of Tenant to pay the particular rent so accepted,
regardless of Landlord's knowledge of such preceding breach at the time of
acceptance of such rent.
15.7 No remedy or election of or by Landlord hereunder shall be deemed
exclusive, but shall, wherever possible, be cumulative with all other remedies
available at Law or in equity.
15.8 All monetary obligations of Tenant to Landlord under the terms of
this Lease shall be deemed to be rent.
15.9 Landlord reserves to itself the right, from time to time, to grant
such easements, rights and dedications as Landlord deems necessary or desirable,
and to cause the recordation of final, parcel or other maps or restrictions, so
long as such easements, rights, dedications, maps and restrictions do not
unreasonably interfere with Tenant's use of the Facility Site or operation of
the Facility or any Increased Capacity Improvements. Tenant shall promptly
execute any of the aforementioned documents reasonably requested by Landlord,
and its failure to do so shall constitute a material default under this Lease.
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<PAGE>
ARTICLE 16 - RESERVED AREA
16.1 Landlord and Tenant acknowledge that Landlord intends in the
future to record one or more parcel or final maps (collectively, the "Map")
subdividing the Premises into two or more separate parcels or lots complying
with the California Subdivision Map Act (Govt. Code ' 66410 et seq.) consisting
of: (a) the site of the Facility, which shall be the Southwest Quarter of the
Northeast Quarter of Section 5, Township 12 South, Range 13 East, San Bernadino
Meridian (the "Facility Site"); and (b) one or more other parcels, which shall
together consist of the remainder of the Premises (the "Reserved Area").
16.2 Tenant shall, at Landlord's expense and at no cost to Tenant,
cooperate in all respects with Landlord's efforts to obtain and record the Map,
including, without limitation, by executing any and all documents and
instruments as may reasonably be required by Landlord or any applicable
Governmental Authority in connection therewith.
16.3 Landlord shall have an option (the "Partial Termination Option")
to at any time terminate this Lease as to all or any part of the Reserved Area,
by delivering written notice (the "Partial Termination Notice") to Tenant
describing the portion or portions of the Reserved Area as to which this Lease
is to terminate (such portion or portions, together, the "Optioned Premises
Area") together with the payment to Tenant of the sum of Ten Dollars ($10.00),
which shall be the entire consideration for such termination; provided, however,
that Landlord's right to exercise the Partial Termination Option shall be
contingent upon, and the Partial Termination Notice shall not be given until
after, the approval and recordation of the Map by the County of Imperial. The
term of the Partial Termination Option shall be the same as, and shall run
concurrently with, the term of this Lease as set forth in Article 4 hereof.
16.4 At such time as (a) the Map shall have been recorded in the
Official Records and (b) Tenant shall have received the Partial Termination
Notice (along with the Ten Dollars ($10.00) consideration provided in Section
16.3 hereof), (i) Tenant shall promptly execute, acknowledge, deliver and cause
to be recorded in the Official Records a quitclaim deed satisfactory to Landlord
pursuant to which Tenant shall quitclaim to Landlord all its right, title and
interest in and to the Optioned Premises Area and (ii) Tenant shall cause the
Project Lender to promptly execute, acknowledge, deliver and cause to be
recorded in the Official Records a partial release of the Project Lender's Lien
satisfactory to Landlord, pursuant to which the Project Lender shall release all
its right, title and interest in and to the Optioned Premises Area; and upon the
recordation of such quitclaim deed and such partial release, Tenant shall
surrender and deliver possession of the Optioned Premises Area to Landlord. By
taking a security interest in this Lease, the Project Lender unconditionally and
irrevocably agrees to execute, acknowledge, deliver and cause said partial
release to be recorded as and when provided in this Section 16.4. In no event
shall any such quitclaim entitle Tenant to any reduction in or offset against
any of the rents or other payments due to Landlord hereunder.
ARTICLE 17 - NOTICES
17.1 Any notices, statements, demands, correspondence or other
communications required or permitted to be given hereunder shall be in writing
and shall be given (a) personally, (b) by certified or registered mail, postage
prepaid, return receipt requested, or (c) by overnight or other courier or
delivery service, freight prepaid, to the following address, or, in the case of
notices to the Project Lender, as provided in the notice of the Project Lender's
Lien delivered to Landlord under Section 11.1 hereof.
If to Landlord:
Magma Land Company I
4365 Executive Drive, Suite 900
San Diego, California 92121
Attention: Legal Department
15
<PAGE>
If to Tenant:
Salton Sea Power Generation L.P.
Salton Sea Brine Processing L.P.
4365 Executive Drive, Suite 900
San Diego, California 92121
Attention: Legal Department
Except as otherwise provided in Article 11 hereof, (i) notices delivered by hand
shall be deemed received when delivered and (ii) notices sent by certified or
registered mail or by overnight or other courier or delivery service shall be
deemed received on the first to occur of (A) five (5) days after deposit in the
United States mail or with such overnight or other courier or delivery service,
addressed to such address or addresses, (B) written acceptance of delivery by
the recipient or (C) written rejection of delivery by the recipient. Each party
hereto may change its address for receipt of notices by sending notice hereunder
of such change to the other party hereto in the manner specified in this
Section, and the Project Lender may change its address for receipt of notices by
sending notice hereunder to each of the parties hereto in the manner specified
in this Section. Notwithstanding the foregoing, amounts payable to Landlord
hereunder shall be deemed paid three (3) days after a valid check for the same,
addressed to Landlord's address above, is deposited in the United States mail,
first-class postage prepaid.
ARTICLE 18 - FORCE MAJEURE
18.1 Neither Landlord nor Tenant shall be liable in damages to the
other for any act, omission or circumstance (an "Event of Force Majeure")
occasioned by or in consequence of any acts or omissions of the other party
hereto, acts of God, acts of the public enemy, wars, blockades, insurrections,
riots, civil disturbances, strikes, lockouts, delays in transportation,
epidemics, landslides, lightning, earthquakes, fires, storms, floods,
explosions, sabotage, the binding order of any Governmental Authority which has
been contested in good faith, the failure of any Governmental Authority to issue
any Governmental Approval within one hundred and twenty (120) days after an
application for the same has been submitted, the effect of any Laws, or any
other event or circumstance beyond the reasonable control of such party which
prevents or hinders such party from performing its obligations hereunder,
whether or not similar to the matters and conditions herein enumerated. In no
event, however, shall an Event of Force Majeure relieve Tenant from the
obligation to pay rents or any other payments due to Landlord under this Lease.
ARTICLE 19 - GENERAL PROVISIONS
19.1 In addition to any other indemnities herein set forth, each party
hereto (the "Indemnifying Party") shall indemnify, defend and hold harmless the
other party hereto (the "Indemnified Party") from and against any and all
Damages which may be imposed upon or incurred by the Indemnified Party or
asserted against the Indemnified Party by any third Person, arising out of or
attributable to the failure of the Indemnifying Party to perform its obligations
as provided in this Lease.
19.2 The parties hereto shall cooperate each with the other to fully
effectuate the purposes and intent of this Lease. Without limiting the
generality of the foregoing, the parties hereto covenant that they will execute,
cause to be acknowledged and deliver any documents or instruments reasonably
necessary to implement the intentions expressed or implied herein.
19.3 The partners in Salton Sea Power Generation L.P. and Salton Sea
Brine Processing L.P. shall be entitled to (a) cause one of the same to purchase
the assets of the other or (b) merge or by other corporate reorganization
combine the same into a single entity, and Landlord acknowledges and agrees that
no such purchase, merger or reorganization shall have any effect on the rights
and obligations of the parties under this Lease. In the event of any such
purchase, merger or reorganization, such purchasing or combined entity, as the
16
<PAGE>
case may be, shall be deemed to be the "Grantee" under the Easement Agreement,
and shall assume and be responsible for all the obligations of, and be bound by
all the reservations and limitations imposed upon, the Grantee under the
Easement Agreement, all of which obligations, reservations and limitations shall
thereafter apply to both the Brine Facilities (as that term is defined in the
Easement Agreement) and the Facility (notwithstanding that the Easement
Agreement may, in imposing certain of such obligations, refer only to the "Brine
Facilities" or the "Power Facilities").
19.4 The parties shall execute, cause to be acknowledged and deliver a
memorandum of this Lease, which shall be recorded in the Official Records, and
shall be in the form attached hereto as Exhibit "B".
19.5 If either party hereto commences litigation for the enforcement,
termination, cancellation or rescission hereof, or for damages for the breach
hereof, the prevailing party shall be entitled to recover its reasonable
attorneys' fees and court and other costs incurred.
19.6 Each provision of this Lease performable by Tenant shall be deemed
both a covenant and a condition. As used herein, the neuter gender includes the
masculine and the feminine, and the singular number includes the plural, and
vice versa. This Lease shall be governed by the Laws of the State of California.
This Lease shall be construed equally as against the parties hereto, and shall
not be construed against the party responsible for its drafting. Time is of the
essence with respect to the obligations to be performed under this Lease. All
exhibits to which reference is made in this Lease are incorporated into this
Lease. The liability of Salton Sea Power Generation L.P. and Salton Sea Brine
Processing L.P. hereunder shall be joint and several. Captions in this Lease are
inserted for convenience of reference only and do not define, describe or limit
the scope or intent of this Lease or any of the terms hereof.
19.7 This Lease contains all agreements of the parties hereto with
respect to the subject matter of this Lease, and all prior or contemporaneous
agreements, understandings, correspondence and negotiations, whether oral or
written, pertaining to the subject matter of this Lease, shall be of no further
force or effect, and are superseded hereby.
19.8 Any obligations referred to herein to be performed at any time
after the expiration or termination of this Lease, and all indemnities and hold
harmless agreements provided herein, shall survive the expiration or earlier
termination of this Lease.
19.9 No amendment or modification of this Lease or any provision hereof
shall be effective unless in writing and signed by the parties in interest at
the time of the amendment.
19.10 The invalidity of any provision of this Lease as determined by a
court of competent jurisdiction shall in no way affect the validity of any other
provision hereof.
19.11 This Lease and the covenants contained herein shall be binding
upon and inure to the benefit of the parties hereto and their respective
grantees, assignees, successors and assigns.
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<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this
Lease as of the date first above written.
LANDLORD:
MAGMA LAND COMPANY I,
a Nevada corporation
By: /s/ illegible
------------------------------------
Name:
----------------------------------
Its:
-----------------------------------
TENANT:
SALTON SEA POWER GENERATION L.P.,
a California limited partnership
By: Salton Sea Power Company,
a Nevada corporation, its general partner
By: /s/ illegible
------------------------------------
Name:
----------------------------------
Its:
-----------------------------------
SALTON SEA BRINE PROCESSING L.P.,
a California limited partnership
By: Salton Sea Power Company,
a Nevada corporation, its general partner
By: /s/ illegible
------------------------------------
Name:
----------------------------------
Its:
-----------------------------------
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<PAGE>
EXHIBIT "A"
Description of the Premises
The following real property located in the County of Imperial, State of
California:
GOVERNMENT LOTS 3 AND 4, AND THE SOUTH HALF OF THE NORTHEAST
QUARTER OF SECTION 5, TOWNSHIP 12 SOUTH, RANGE 13 EAST, SAN
BERNADINO MERIDIAN, ACCORDING TO OFFICIAL PLAT THEREOF;
EXCEPTING THEREFROM ALL MINERALS (INCLUDING, WITHOUT
LIMITATION, ALL GEOTHERMAL SUBSTANCES) LYING BELOW THE SURFACE
OF SAID LAND.
<PAGE>
EXHIBIT "B"
Form of Memorandum of Ground Lease
<PAGE>
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Salton Sea Power Generation L.P.
Salton Sea Brine Processing L.P.
551 West Main Street
Suite 1
Brawley, California 92227
Attn: Mr. Vincent Signorotti
--------------------------------------------------------------------------------
Assessor's Parcel Number: 020-110-39.
The undersigned declare that this document conveys leasehold
rights for a definite term of years, and hence NO DOCUMENTARY TRANSFER TAX IS
DUE.
The real property described herein is located in an
unincorporated area of Imperial County, State of California.
MEMORANDUM OF GROUND LEASE
THIS MEMORANDUM OF GROUND LEASE (the "Memorandum") is made as
of March 31, 1993, at San Diego, California, between MAGMA LAND COMPANY I, a
Nevada corporation ("Landlord"), and SALTON SEA POWER GENERATION L.P., a
California limited partnership and SALTON SEA BRINE PROCESSING L.P., a
California limited partnership (together, "Tenant").
1 This Memorandum is executed concurrently with that certain
Ground Lease of even date herewith, between Landlord and Tenant (the "Lease").
2 Pursuant to the Lease, Landlord hereby leases to Tenant, on
all of the terms and conditions and subject to all of the reservations contained
in the Lease, the real property described on Exhibit "A" attached hereto.
3 Pursuant to the Lease, (a) Landlord has reserved certain
rights to further develop the Premises and (b) Landlord has reserved an option
to terminate the Lease as to all or any part of the Optioned Premises Area, as
that term is defined in the Lease.
4 The term of the Lease shall commence upon the date first
above written, and, unless sooner terminated as provided in the Lease, shall
expire on November 24, 2026.
5 The terms and conditions of the Lease are incorporated
herein by reference. This Memorandum is prepared for the purpose of recordation
only, and in no way modifies the terms and conditions of the Lease. If there is
any inconsistency between the terms and conditions of this Memorandum and the
terms and conditions of the Lease, the terms and conditions of the Lease shall
control.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Memorandum
as of the date first above written.
LANDLORD:
MAGMA LAND COMPANY I,
a Nevada corporation
By:
------------------------------------
Name:
----------------------------------
Its:
-----------------------------------
TENANT:
SALTON SEA POWER GENERATION L.P.,
a California limited partnership
By: Salton Sea Power Company,
a Nevada corporation, its general partner
By:
------------------------------------
Name:
----------------------------------
Its:
-----------------------------------
SALTON SEA BRINE PROCESSING L.P.,
a California limited partnership
By: Salton Sea Power Company,
a Nevada corporation, its general partner
By:
------------------------------------
Name:
----------------------------------
Its:
-----------------------------------
<PAGE>
EXHIBIT "A"
Description of the Premises
The following real property located in the County of Imperial, State of
California:
GOVERNMENT LOTS 3 AND 4, AND THE SOUTH HALF OF THE NORTHEAST
QUARTER OF SECTION 5, TOWNSHIP 12 SOUTH, RANGE 13 EAST, SAN
BERNADINO MERIDIAN, ACCORDING TO OFFICIAL PLAT THEREOF;
EXCEPTING THEREFROM ALL MINERALS (INCLUDING, WITHOUT
LIMITATION, ALL GEOTHERMAL SUBSTANCES) LYING BELOW THE SURFACE
OF SAID LAND.
<PAGE>
GROUND LEASE
PREAMBLE
THIS GROUND LEASE (the "Lease") is made as of October 26, 1988, by and
between MAGMA POWER COMPANY, a Nevada corporation ("Landlord"), and LEATHERS,
L.P., a limited partnership organized under the laws of the State of California
("Tenant").
AGREEMENT
1. Certain Definitions. Unless the context shall otherwise require,
capitalized terms used and not otherwise defined herein shall have the
respective meanings assigned thereto in Schedule Z hereto, which shall be
incorporated by reference herein.
2. Lease.
2.1. Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, the "Premises," as that term is defined in Section 3 hereof, on the
terms and conditions, and subject to the reservations, set forth in this Lease.
2.2. Landlord hereby reserves from the Leasehold estate granted to
Tenant by this Lease the right to use the surface of the Leathers Property in
order to obtain, use, extract and develop the Reserved Geothermal Brine and the
Geothermal Brine Scale, together with reasonable access thereto for road and
utility purposes, but only to the extent that such use does not cause any
material interference with Tenant's construction, operation and maintenance of
the Leathers Facility. The right reserved by Landlord in this Section 2.2
includes, without limitation, the right to construct, operate and maintain
pipelines, buildings, structures, equipment and other improvements over, under
and upon the surface of the Leathers Property, including, but not limited to,
Additional Power Production Facilities, and warehouse(s) for the storage of
Critical Parts and Equipment and other parts and equipment owned or within the
control of Landlord which may be stored in such warehouse(s) for use in
Additional Power Production Facilities and to use the surface of the Leathers
Property in a commercially reasonable manner in order to "tap" into the
Supporting Equipment and any other equipment or piping carrying or containing
Geothermal Brine or Geothermal Brine Scale from the Leathers Facility to
injection wells thereby affording to Landlord access to such Geothermal Brine
and the Geothermal Brine Scale in an oxygen-free environment; provided, however,
that, notwithstanding any other provision in this Lease to the contrary,
Landlord shall pay all costs, direct and indirect, incurred by Tenant as a
result of Landlord's exercising the rights reserved to
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Landlord in this Section 2. Notwithstanding any other provision in this Lease to
the contrary, in the event that Landlord desires to exercise its rights under
this Section 2.2, Landlord shall obtain the prior written consent of Tenant,
which consent shall not be unreasonably withheld. The standards to be applied by
Tenant in giving or withholding such consent shall be as provided in Section
2.3.4 of the Easement Agreement.
2.3. The rights reserved by Landlord from the leasehold estate granted
to Tenant pursuant to this Lease shall be assignable by Landlord in whole or in
part to successors and assigns. Without limiting the generality of the
foregoing, Landlord may sell, assign, encumber and grant leasehold estates in
such rights to other persons.
3. Premises.
3.1. The "Premises" that are the subject of this Lease consist of the
Leathers Property as more particularly described in Exhibit "A" hereto, BUT
EXCLUDING THEREFROM all rights reserved by Landlord as set forth in Section 2
hereof.
3.2. Concurrent with the delivery of this Lease, Landlord has delivered
to Tenant a Grant Deed of all improvements existing on or in the Premises at the
Recordation Date as that term is defined in Section 4 hereof. Such improvements
shall be held, used, altered and disposed of by Tenant in accordance with the
terms and conditions of this Lease.
3.3. At any time and from time to time during the term of this Lease,
within thirty (30) days after written request from Landlord, Tenant shall enter
into an amendment to this Lease, which shall delete from the legal description
of the Leathers Property that portion thereof as to which any other Person has a
right to possession, in accordance with the following:
3.3.1. Both the portion of the Leathers Property being released from
the encumbrance of this Lease, and the portion of the Leathers Property
remaining subject to the encumbrance of this Lease after such release, shall be
legal lots in compliance with the California Subdivision Map Act and other state
or local ordinances thereunder; and
3.3.2. The amendment shall contain all cross-easements, covenants,
conditions, restrictions and agreements reasonably requested by Tenant to
facilitate the construction, operation and maintenance of the Leathers Facility
at a level which allows the Leathers Facility to drill for, produce, extract,
store, utilize, reclaim, convert, sell, transfer, dispose and Process Geothermal
Brine
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<PAGE>
up to the amount necessary to meet the Leathers Facility Brine Requirement in
connection with the generation of electrical energy at the Leathers Facility.
4. Term. The term of this Lease shall commence upon the recordation of a
Memorandum of this Lease in the Office of the County Recorder of Imperial
County, California (the "Recordation Date"), and, unless sooner terminated as
provided in this Lease, shall end on the date which is thirty-two (32) years
following August 15, 1988 (the "Expiration Date").
5. Rent.
5.1. In addition to other sums payable by the term of this lease, Tenant
shall pay to Landlord, without abatement, deduction or offset, the following
sums:
5.1.1. As "Base Monthly Rent" for the Premises for the period
beginning on May 1, 1988 and continuing monthly thereafter throughout the term
of this Lease, but subject to adjustment as provided in Section 5.2 hereof, the
sum of $1,667.00 per month, payable in advance on the first day of each month.
5.1.2. Rent for any period during the term hereof which is for less
than one month shall be prorated based upon the actual number of days elapsed in
the calendar month involved. Rent shall be payable in lawful money of the United
States to Landlord at the address stated herein or to such other persons or at
such other places as Landlord may designate in writing.
5.2. The Base Monthly Rent shall be subject to annual adjustments as
follows:
5.2.1. For purposes of this Lease, a "Lease Year" shall be deemed to
begin on January 1 of each calendar year throughout the term of this Lease.
5.2.2. For the Lease Year beginning on January 1, 1989, and for each
Lease Year thereafter, the Base Monthly Rent of $1,667.00 payable under Section
5.1.1 hereof shall be adjusted to reflect the increase, if any, in the Consumer
Price Index published by the Bureau of Labor Statistics of the Department of
Labor for All Urban Consumers, All Items, for the Los Angeles-Anaheim-Riverside
Metropolitan Area (the "CPI""), as hereinafter provided.
5.2.3. The Base Monthly Rent payable pursuant to Section 5.2.2
hereof shall be calculated as follows: the Base Monthly Rent of $1,667.00
payable under Section 5.1.1 hereof above shall be multiplied by a fraction, the
numerator of which shall be the CPI for the month of
3
<PAGE>
September in the year preceding the Lease Year for which the adjustment is to be
made, and the denominator of which shall be the CPI for the month of September
1987. The sum so calculated shall constitute the new Base Monthly Rent
hereunder, but in no event shall such new Base Monthly Rent be less than the
Base Monthly Rent payable for the month immediately preceding the Lease Year for
which the adjustment is to be made.
5.2.4. In the event that the publication of the CPI shall be
transferred to any other governmental department or bureau or agency or shall be
discontinued, then the index most nearly the same as the CPI, as determined in
good faith by Landlord, shall be used to make such calculations.
5.2.5. Tenant shall continue to pay Base Monthly Rent at the rate
previously in effect until the increase, if any, is determined. Within ten (10)
days following the date on which the increase is determined, Tenant shall make
such payment to Landlord as will bring the increased Base Monthly Rent current,
commencing with the effective date of such increase at the beginning of the
Lease Year for which the adjustment is to be made through the date of any
installments of Base Monthly Rent then due. Thereafter, the Base Monthly Rent
shall be paid at the increased rate.
6. Taxes, Assessments and Utilities.
6.1. As used in this Lease, the term "real property tax" shall include
any form of real estate tax or assessment, general, special, ordinary or
extraordinary, and any license, fee, rental tax, tax on the right to do
business, when Landlord's collection of rent under this Lease is defined as
doing business, improvement bond, levy or tax (other than inheritance, personal
income or estate taxes) imposed on the Leathers Property or any portion thereof
by any authority having the direct or indirect power to tax, including any city,
county, state or federal government, or any school, agricultural, sanitary,
fire, street, drainage or other improvement district thereof, as against any
legal or equitable interest of Landlord in the Leathers Property or in any
portion thereof, as against Landlord's right to rent or other income therefrom,
and as against Landlord's business of leasing the Premises. The term "real
property tax" shall also include any tax, fee, levy, assessment or charge (a) in
substitution of, partially or totally, any tax, fee, levy, assessment or charge
hereinafter included within the definition of "real property tax," or (b) the
nature of which was heretofore included within the definition of "real property
tax," or (c) which is imposed for any service or right not charged prior to June
1, 1978, or (d) which is imposed as a result of a change in ownership, as
defined by
4
<PAGE>
applicable local statutes for property tax purposes, or which as added to a tax
or charge heretofore included within the definition of "real property tax" by
reason of such change of ownership, or (e) which is imposed by reason of this
transaction, any modifications or changes hereto, or any transfers hereof.
6.2. Tenant shall pay before delinquency all real property taxes, all
personal property taxes, and all taxes, charges and assessments of every other
description levied on or assessed against the Leathers Property and the Leathers
Facility and personal property owned or leased by Tenant located thereon, the
leasehold estate created hereby, or any subleasehold estate, to the full extent
of installments falling due during the term, whether chargeable against Landlord
or Tenant. Tenant shall make all such payments directly to the charging
authority before delinquency and before any fine, interest or penalty shall
become due or be imposed by operation of law for their nonpayment. If, however,
the law expressly permits the payment of any or all of the above items in
installments (whether or not interest accrues on the unpaid balance), Tenant
may, at Tenant's election, utilize the permitted installment method, but shall
pay each installment with any interest before delinquency.
6.3. All payments of taxes or assessments shall be prorated for any
portion of a tax fiscal year at the commencement or expiration of the term of
this Lease, except as provided in Section 6.4 hereof. Such proration shall be
made by multiplying the entire tax or assessment by a fraction which, in the
case of determining Tenant's liability for such taxes and assessments, shall
have a numerator equal to the number of days that this Lease is in effect during
the tax fiscal year for which the calculation is being made, and shall have a
denominator equal to 365 or 366, as the case may be.
6.4. For permitted installment payments of special taxes or assessments
where at least the first installment fell due before the Recordation Date,
Tenant shall pay all installments falling due after the Recordation Date. For
permitted installment payments of special taxes or assessments where the first
installment falls due before the expiration of the term, Tenant shall pay only
the installment(s) falling due before the expiration of the term.
6.5. If the Premises are assessed with other real or personal property
of Landlord apart from the Leathers Property, all taxes imposed on the entire
assessed property shall be prorated, and Tenant shall pay that amount which
equals the product obtained by multiplying the entire tax by a fraction, the
numerator of which equals the value of the
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<PAGE>
Leathers Property and the denominator of which equals the value of all of the
property so assessed.
6.6. Tenant may contest the legal validity or amount of any taxes,
assessments or charges for which Tenant is responsible under this Lease, and may
institute such proceedings as Tenant considers necessary. If Tenant contests any
such tax, assessment or charge, Tenant may withhold or defer payment or pay
under protest, but shall protect Landlord and the Leathers Property from any
lien by surety bond or other appropriate security reasonably acceptable to
Landlord. Landlord appoints Tenant as Landlord's attorney-in-fact for the
purpose of making all payments to any taxing authorities and for the purpose of
contesting any taxes, assessments or charges affecting the Premises, conditioned
on Tenant's preventing any liens from being levied on the Leathers Property or
on Landlord.
6.7. Tenant agrees to pay, before the same become delinquent, all
charges for gas, electricity, heat, light, power, sewage, water, telephone,
trash removal, and other similar or dissimilar public services or commodities
furnished to the Premises and the Leathers Facility during the term of this
Lease, including all installation, connection and disconnection charges.
6.8. All taxes, assessments, utilities, insurance premiums, maintenance
costs and other rent payable hereunder shall be paid as "triple-net" rent,
without deduction or offset. It is the intent of the parties that the rent
provided in this Lease shall be absolutely net to Landlord, and that, except
as otherwise expressly provided in this Lease, Tenant shall pay all costs and
charges of every kind and nature incurred for, against, or in connection with
the Premises which may arise or become due from and after the Recordation Date
and during the term hereof. Provided, however, that nothing herein shall be
construed to require Tenant to pay any installment of interest or principal
owing on any encumbrance against the Leathers Property for which Landlord is
the obligor. All such costs and charges at the commencement and the end of the
term of this Lease shall be appropriately prorated between the parties.
7. Use.
7.1. Tenant shall continuously use the permit the use of the Premises
only for construction, maintenance and operation of the Leathers Facility,
substantially in accordance with the Plans and Specifications and any "as-built"
plans and as contemplated by the Operating Agreements.
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<PAGE>
7.2. This Lease is and shall be subject and subordinate to the rights
reserved by Landlord with respect to the Premises as set forth in Section 2
hereof.
7.3. Tenant shall, at Tenant's expense, promptly comply in all material
respects with all applicable statutes, ordinances, rules, regulations, orders,
covenants and restrictions of record, and requirements of any fire insurance
underwriters or rating bureaus, now in effect or which may hereafter come into
effect, whether or not they reflect a change in policy from that now existing,
during the term or any part of the term hereof, relating in any manner to the
Premises and the occupation and use by Tenant of the Premises. Tenant shall
conduct its business in a lawful manner and shall not use or permit the use of
the Premises in any manner that will create unnecessary waste of assets or a
nuisance.
7.4. Without limiting the generality of the foregoing Tenant shall, at
Tenant's expense, comply with all applicable federal, state, regional and local
environmental statutes, ordinances, rules, regulations and orders now in effect
or which may hereafter come into effect including, without limitation, the
Resource Conversation and Recovery Act, the Comprehensive Environmental Response
Compensation and Liability Act, the Hazardous Materials Transportation Act, the
Toxic Substances Control Act, the Clean Air Act, the Clean Water Act, the
California Hazardous Waste Control Act, the California Hazardous Substance Act,
the Porter-Cologne Water Quality Control Act and any all regulations promulgated
pursuant thereto.
7.5. Tenant agrees to indemnify, defend by counsel reasonably
acceptable to Landlord, and hold harmless Landlord, its subsidiaries,
affiliates, successors and assigns and their respective directors, officers,
employees, shareholders, representatives and agents from and against and in
respect of any and all claims, damages (including, without limitation,
diminution in value), losses, liabilities and expenses, lawsuits, deficiencies,
interest, penalties, attorneys' fees and all amounts paid in defense or
settlement of the foregoing whether or not arising out of third-party claims,
which may be imposed upon or incurred by Landlord or asserted against Landlord
by any other party or parties in connection with any violation of the provisions
of this Section 7 arising out of, resulting from, or attributable to, the
assets, business, or operations of Tenant at the Leathers Property. Tenant's
obligations pursuant to this subsection shall exist regardless of whether
Landlord is alleged or held to be strictly or jointly and severally liable,
unless such liability is by reason of Landlord's gross negligence or willful
misconduct.
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7.6. Without in any way limiting the scope of Tenant's obligations
under the indemnification provisions of this Section 7, but subject to
Landlord's obligation under Section 2 hereof to pay all direct and indirect
costs associated with Landlord's exercise of the rights reserved to it in
Section 2 hereof, Tenant will be responsible for all investigations, studies,
cleanup, corrective action or response or remedial action required by any local,
state or federal government agency now or hereafter authorized to regulate
environmental or other matters or by any consent decree, or court or
administrative order now or hereafter applicable to the Leathers Property, or by
any federal, state or local law, regulations, rule or ordinance now or
hereinafter in effect.
7.7. As between Landlord and Tenant, Tenant shall have the
responsibility and right to participate in the management and control of all
investigations and any environmental cleanup, remediation, or related
activities. Tenant, however, may not negotiate with, fulfill any requirements or
claims made by a governmental entity or third party, settle or contest such
requirement or third-party claim without the express approval of Landlord, and
Landlord shall have the right to participate fully in any and all meetings,
negotiations or decisions relevant to the investigation or remediation of the
violation of the provisions of this Section 7 at the Leathers Property.
7.8. Tenant hereby accepts the Premises in its condition existing as of
the Recordation Date, subject to all applicable zoning, municipal, county and
state laws, ordinances and regulations governing and regulating the use of the
Premises, and all exceptions set forth in the Leathers Property Preliminary
Title Report and other matters of record or otherwise disclosed to Tenant prior
to the date hereof, and accepts this Lease subject thereto. Tenant acknowledges
that it has satisfied itself by its own independent investigation that the
Premises are suitable for its intended use, and that neither Landlord nor
Landlord's agent or agents has made any representation or warranty as to the
present or future suitability of the Premises for the conduct of Tenant's
business.
8. Maintenance, Repairs, Alterations.
8.1. Throughout the term, Tenant shall, at Tenant's sole cost and
expense, maintain the Premises and the Leathers Facility in good condition and
repair, ordinary wear and tear excepted, in accordance with all applicable laws,
rules, ordinances, orders and regulations of (a) federal, state, county,
municipal and other governmental agencies and bodies having or claiming
jurisdiction and all their respective departments, bureaus, and officials,
(b) any insurance underwriting board or insurance inspection bureau
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having or claiming jurisdiction, and (c) any insurance company insuring all or
any part thereof.
8.2. Except as provided below, and subject to the provisions of the
Project Lender's Loan Documents, Tenant shall promptly and diligently repair,
restore and remedy all damage to or destruction of all or any part of the
Leathers Facility, if the cost of the work so required does not exceed fifth
percent (50%) of the entire replacement value of all such improvements;
provided, however, that Tenant shall have no obligation to repair, restore and
remedy any such damage or destruction arising out of the gross negligence or
willful misconduct of Landlord unless the gross negligence or willful
misconduct of Tenant contributes to such damage or destruction, in which case
the cost of repairs, restoration and remedial work shall be apportioned among
Landlord and Tenant in direct proportion to their respective culpability with
respect to such damage or destruction. If the cost does exceed fifty percent
(50%) of the entire replacement value of all such improvements, Tenant may
nevertheless repair, restore and remedy the same, or may by notice given
within sixty (60) days after the date on which the damage or destruction occurs
elect instead to raze the improvements damaged or destroyed. Within ninety (90)
days after such notice, Landlord may be notice elect to repair, restore and
remedy such damage or destruction at Landlord's cost and expense, and Tenant
shall not raze the improvements until the expiration of the time for Landlord's
notice of election.
8.3. Tenant has the right to contest by appropriate judicial or
administrative proceedings, without cost or expense to Landlord, the validity or
application of any law, ordinance, order, rule, regulation or requirement
(collectively called "law") that Tenant repair, maintain, alter or replace any
improvements in whole or in part, and Tenant shall not be in default for failing
to do such work until a reasonable time following final determination of
Tenant's contest. If requested by Landlord, Tenant shall first furnish to
Landlord a bond, satisfactory to Landlord in form, amount and insurer,
guaranteeing compliance by Tenant with the contested law and indemnifying
Landlord against all liability that Landlord may sustain by reason of Tenant's
failure or delay in complying with the law. Landlord may, but is not required
to, contest any such law independently of Tenant. Landlord may, and if requested
by Tenant shall, join in Tenant's contest.
8.4. Landlord's approval is not required for Tenant's minor alterations
or additions to any improvements with a Construction Cost not exceeding
$7,500,000. "Construction Cost" includes all costs that would constitute the
basis of a valid claim or claims under the mechanics' lien laws, including costs
for any demolition or removal of existing improvements or parts thereof, as
well as costs for
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preparation, construction and completion of all new improvements. All
alterations or additions with a Construction Cost in excess of $7,500,000 shall
require Landlord's prior written consent.
8.5. Tenant shall use only reputable licensed contractors in making any
alterations or additions, and Landlord may require Tenant to provide to
Landlord, at Tenant's sole cost and expense, a lien and completion bond in an
amount equal to one and one-half times the estimated cost of such improvements,
to insure Landlord against any liability for any mechanic's and materialmen's
liens and to insure completion of the work. Should Tenant make any alterations
or additions without the prior written consent of Landlord where such consent
is necessary, or use other than a reputable licensed contractor, Landlord may,
at any time during the term of this Lease, require that Tenant remove any part
or all of the same.
8.6. Tenant shall pay, when due, all claims for labor or materials
furnished to or for Tenant at or for use in the Premises, which claims are or
may be secured by any mechanic's or materialmen's lien against the Leathers
Property or any interest therein.
8.7. Tenant shall give Landlord not less than ten (10) days' notice
prior to the commencement of any alterations or additions to the Premises by
Tenant, and Landlord shall have the right to post notices of non-responsibility
in or on the Premises as provided by law. If Tenant shall, in good faith,
contest the validity of any lien, claim or demand, then Tenant shall, at its
sole expense, defend itself and Landlord against the same and shall pay and
satisfy any adverse judgment that may be rendered thereon before the enforcement
thereof against the Landlord or the Leathers Property, upon the condition that
if Landlord shall require, Tenant shall furnish to Landlord a surety bond
satisfactory to Landlord in an amount equal to such contested lien claim or
demand, indemnifying Landlord against liability for the same and holding the
Leathers Property free from the effect of such lien or claim. In addition,
Landlord may require Tenant to pay Landlord's reasonable attorneys' fees and
costs in participating in such action, if Landlord shall decide it is to
Landlord's best interest so to do.
8.8 All alterations and additions which may be made to the Premises by
Tenant shall be made and done in a good and workmanlike manner and of good
quality and materials, and, subject to the provisions of Sections 8.11 and 8.13
hereof, shall be the property of Landlord at the expiration of the term of the
Lease. Notwithstanding the provisions of this Section, and provided that Tenant
is not in default under this Lease, Tenant's personal property and equipment,
other than that which is affixed to the Premises
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so that it cannot be removed without material damage to the Premises, shall
remain the Property of Tenant and may be removed by Tenant, subject to the
provisions of Section 8.11 hereof.
8.9. Promptly upon completion of any alterations or additions to the
Premises, Tenant shall provide Landlord with two (2) sets of "as-built" plans
and specifications.
8.10. Subject to Landlord's right to require the Decommissioning of the
Leathers Facility pursuant to Section 8.11 and 8.13 hereof, on the last day of
the term hereof, or on any sooner termination, Tenant shall surrender the
Premises and all improvements thereon to Landlord, in good condition and repair,
ordinary wear and tear excepted, clean and free of debris. Any damage or
deterioration of the Premises or improvements shall not be deemed ordinary wear
and tear if the same could have been prevented by good maintenance practices by
Tenant. Tenant shall repair any damage to the Premises occasioned by the
installation or removal of Tenant's trade fixtures, alterations, furnishings and
equipment.
8.11. Notwithstanding any other provision in this Lease to the
contrary, in the event the Leathers Facility or the Premises is wholly or
partially damaged or destroyed on or after the date which is exactly five (5)
years prior to the date on which this Lease terminates pursuant to Section 4
hereof, and the cost to repair, restore or reconstruct the Leathers Facility and
the Premises is at least $7,500,000, Tenant, not later than fifteen (15) days
after the event causing such damage or destruction, shall give written notice to
Landlord detailing the facts that qualify the casualty under this provision.
Landlord, not later than fifteen (15) days following receipt of such notice from
Tenant, shall by written notice to Tenant inform Tenant whether (a) Landlord
desires the Decommissioning by Tenant of the Leathers Facility and the Premises
or (b) Landlord desires the surrender by Tenant of the Leathers Facility and the
Premises at the end of the term of this Lease. In the event Landlord elects to
have Tenant Decommission the Leathers Facility and the Premises pursuant to the
provisions of this Section 8.11, (a) Tenant shall forthwith commence such
Decommissioning and shall diligently proceed until such Decommissioning is
complete, (b) Tenant shall have the right to all proceeds of insurance received
on account of such casualty and (c) Tenant shall surrender the Premises to
Landlord immediately after such Decommissioning and this Lease and all of
Tenant's obligations hereunder shall terminate except for Tenant's obligations
to indemnify Landlord pursuant to Section 7.3 hereof and to pay any rent which
accrued pursuant to Section 5 hereof. In the event Landlord elects to have
Tenant surrender the Leathers
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Facility and the Premises to Landlord at the end of the term of this Lease, then
the provisions of Section 8.13 shall cease to be effective and Tenant shall
forthwith commence to repair, restore and reconstruct the Leathers Facility and
the Premises in the manner and subject to the terms provided in Section 8.2
hereof.
8.12. Except as provided in Section 8.13 hereof, all improvements
constructed by Tenant on the Premises shall, at the expiration of the term or
earlier termination of this Lease, without compensation to Tenant, become
Landlord property free and clear of all claims to or against them by Tenant or
any third person, and Tenant shall defend and indemnify Landlord against all
liability and loss arising from any such claims or from Landlord's exercise of
the rights conferred by this Section.
8.13. At the expiration or earlier termination of the term, Landlord
may, at Landlord's election, demand the removal from the Premises of any or all
fixtures or improvements or both (a "Decommissioning"), as specified in the
notice provided below. A demand to take effect at the normal expiration of the
term shall be effected by notice given at any time not later than nine (9)
months before the expiration date. A demand to take effect on any other
termination of this Lease shall be effected by notice given in or concurrently
with notice of such termination or within thirty (30) days after such
termination. Tenant shall comply with the notice on or before the expiration
date for normal termination, and within ninety (90) days after the notice for
other terminations. The duty imposed by this provision includes, but is not
limited to, the duty to demolish and remove all foundations, fix all
excavations, return the surface to grade, and leave the Premises safe and free
from debris and hazards, in a safe manner, in accordance with good operating
practice and in compliance with all applicable laws and regulations of any
governmental authority having jurisdiction over such operations. In the event
Landlord elects to requires such Decommissioning by Tenant, Tenant shall be
entitled to all fixtures and improvements so Decommissioned.
8.14. Without limiting the generality of Section 8.1 hereof, Tenant
shall at all times (a) repair and maintain the Water Delivery System described
in that certain Reservation of Easement attached as Exhibit "1" to that certain
Corporation Grant Deed of the Premises to Landlord recorded on October 7, 1988
in the Official Records of Imperial County as Instrument No. 88-16258 and (b)
comply with all the terms and provisions of such Reservation of Easement;
provided, however, that following the recordation of the quitclaim deed
described in Section 41.1.4 (iii) hereof, Tenant shall be responsible for
repairing and maintaining only that portion of such Water Delivery System
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which is located upon the Leathers Facility Site, as that term is defined in
Section 41.1.1 hereof.
9. Assignment and Subletting. Subject to the Provisions of Section 10
hereof, Tenant shall not voluntarily or by operation of law assign, transfer or
encumber all or any part of Tenant's interest in this Lease or in the Premises,
without Landlord's prior written consent, which consent Landlord shall not
unreasonably withhold.
10. Rights of Lender.
10.1. Notwithstanding any other provisions in this Lease to the
contrary, Tenant may, from time to time, without notifying or obtaining the
consent of Landlord, hypothecate, mortgage, pledge or alienate Tenant's interest
in this Lease to the Project Lender. The Project Lender shall give prompt
written notice to Landlord if (i) its entering into a credit agreement
evidencing the Project Lender's Loan and the total amount of funds available
thereunder, or of the nature of the transaction, (ii) any amendments to said
credit agreement and (iii) the Project Lender's address for notices hereunder;
provided, however, that any failure by the Project Lender to give such notice
shall not be grounds for denying the Project Lender the rights and protection
provided in this Section 10.
10.2. For the protection of the Project Lender, Landlord agrees as
follows:
10.2.1. Landlord shall not accept any abandonment of this Lease, nor
shall Landlord consent to any amendment, modification or termination hereof,
provided, that Landlord has received actual or constructive notice of the
Project Lender's Lien, unless and until Tenant presents evidence to Landlord
that Tenant has obtained the prior written consent of the Project Lender.
10.2.2. The Project Lender shall have the right, but not the
obligation, at any time prior to the expiration or earlier termination of this
Lease, and without payment of any penalty, to make any payments due hereunder,
and to do any other act or thing required of Tenant hereunder, and to do any act
or thing that may be necessary and proper to be done in the performance and
observance of the terms hereof to prevent any default under or termination of
this Lease. All payments so made and all things so done and performed by the
Project Lender shall be as effective to prevent any default under or termination
of this Lease as they would have been if made, done and performed by Tenant
instead of by the Project Lender. Landlord hereby agrees that upon Landlord's
receipt of any notice in the nature of a notice of default with respect to any
obligation of Landlord
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under the Geothermal Leases, Landlord shall immediately deliver a copy of such
notice to Tenant and to the Project Lender provided that Landlord has received
actual or constructive notice of the Project Lender's Lien.
10.2.3. Tenant shall not be in default under this Lease unless Tenant
fails to perform the obligations required of it hereunder within the time
periods set forth herein, including all applicable cure periods. If Tenant fails
to cure any default within the time so provided, the, upon written notice from
Landlord to the Project Lender, the Project Lender shall have an additional
ninety (90) days to cure such default; provided, however, that if such default
cannot reasonably be cured within such additional ninety (90) day period, then
the Project Lender shall have such additional time to cure the default as is
reasonably necessary under the circumstances, so long as (a) the Project Lender
shall have fully cured within such ninety (90) day period any default in the
payment and performance of any monetary or other obligations of Tenant hereunder
that do no require possession of the Premises and shall thereafter continue to
faithfully perform all such monetary and other obligations, (b) the Project
Lender shall have acquired Tenant's interest hereunder or commenced foreclosure
or other appropriate proceedings in the nature thereof within such period or
prior thereto, and shall be diligently prosecuting any such proceedings to
completion, and (c) the Project Lender shall take all reasonable measures within
its control (including steps to obtain control) to continue Tenant's operations
of the Leathers Facility under this Lease. All rights of Landlord to terminate
this Lease as a result of the occurrence of any default by Tenant shall be
subject to, and expressly conditioned upon, (i) the Project Lender's having
received the notice specified above in this Section 10.2.3, and (ii) the Project
Lender's having failed to remedy such default or to acquire Tenant's interest
hereunder or commence foreclosure or other appropriate proceedings or to take
reasonable measures to continue Tenant's operations of the Leathers Facility as
set forth in this Section 10.2.3.
10.2.4. Any default by Tenant under this Lease that cannot be remedied
by the Project Lender shall nevertheless be deemed to have been remedied if (a)
within ninety (90) days after receiving written notice from Landlord setting
forth the nature of such default, or prior thereto, the Project Lender shall
have acquired Tenant's interest hereunder or shall have commenced foreclosure or
other appropriate proceedings in the nature thereof, (b) the Project Lender
shall diligently prosecute any such proceedings to completion, (c) the Project
Lender shall have taken reasonable measures within its control (including steps
to obtain control) to continue Tenant's operations of the Leathers Facility in
accordance with the terms of this Lease,
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(d) the Project Lender shall have fully cured within such ninety (90) day period
any default in the payment and performance of any monetary or other obligations
of Tenant hereunder that do not require possession of the pRemises and shall
thereafter continue to faithfully perform all such monetary and other
obligations, and (e) after gaining possession of the Premises, the Project
Lender shall perform all obligations of Tenant hereunder and which arise
thereafter.
10.2.5. If the Project Lender is prohibited by any process or
injunction issued by any court or by reason of any action of any court having
jurisdiction over any bankruptcy, reorganization, insolvency or other
debtor-relief proceeding involving Tenant, from commencing or prosecuting
foreclosure or other appropriate proceedings in the nature thereof, then the
times specified in Sections 10.2.3 and 10.2.4 hereof for commencing or
prosecuting such foreclosure or other proceedings shall be extended for the
period of such prohibition; provided, however, that the Project Lender shall
have fully cured any default in the payment or performance of any monetary or
other obligations of Tenant under this Lease that do not require possession of
the Premises, and shall continue to pay and perform such monetary and other
obligations as and when they fall due, and shall have taken reasonable measures
within its control (including steps to obtain control) to continue Tenant's
operations of the Leathers Facility.
10.2.6. Landlord shall mail or deliver to the Project Lender a
duplicate copy of any and all written notices that Landlord may from time to
time give to or serve upon Tenant pursuant to the provisions hereof, and such
copies shall be mailed or delivered to the Project Landlord to Tenant hereunder
shall be deemed to have been given unless and until a copy thereof shall have
been given unless and until a copy thereof shall have been mailed or delivered
to the Project Lender.
10.2.7. Foreclosure of the Project Lender's Lien or any sale
thereunder, whether by judicial proceedings or otherwise, or any conveyance or
transfer of the interest of Tenant under this Lease from Tenant to the Project
Lender through, or in lieu of, foreclosure or other appropriate proceedings in
the nature thereof, shall not require the consent of Landlord or constitute a
breach of any provision of or a default under this Lease, and upon such
foreclosure, sale or conveyance Landlord shall recognize the Project Lender, or
any other foreclosure sale purchaser, as Tenant hereunder. In the event the
Project Lender becomes the Tenant under this Lease as provided herein, then the
Project Lender shall be personally liable for the obligations of Tenant under
this Lease only for the period of time that
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the Project Lender remains Tenant hereunder, and the Project Lender shall have
the right to assign this Lease thereafter without any restriction otherwise
imposed on Tenant hereunder; provided, however, that the assignee of the Project
Lender shall have expressly assumed all of the obligations of Tenant hereunder.
notwithstanding any other provision of this Lease, in the event that the Project
Lender (a) performs any monetary or other obligation of Tenant under this Lease,
(b) acquires any portion of the right, title or interest in the leasehold estate
created by this Lease, (c) continues Tenant's operations of the Premises under
this Lease and/or (d) becomes personally liable to Landlord hereunder, then the
Project Lender's obligations and liability to Landlord shall be limited by and
to the Project Lender's right, title and interest, if any, in the leasehold
estate created by this Lease, and Landlord shall have no recourse against the
Project Lender in excess of, and other than to proceed against, such right,
title and interest.
10.2.8. Upon Landlord's receipt of any notice in the nature of a notice
of default with respect to any obligation of Landlord secured by any lien upon
the Premises, Landlord shall immediately deliver a copy of such notice to Tenant
and to the Project Lender. If and whenever the Project Lender shall deem it
necessary or appropriate to do so in order to protect its rights under this
Lease, it may, at its option, pay and discharge any mortgage or other lien
(including, without limitation, the lien of general or special property taxes or
special assessments) attached to the Premises or any portion thereof, and in
such event it shall be subrogated to all the rights of the mortgagee,
beneficiary, owner or holder of such mortgage or other lien.
10.2.9. In the event that this Lease is rejected by a trustee or
debtor-in-possession in any bankruptcy or insolvency proceeding or it terminated
for any other reason (except as a result of a default hereunder which was
curable hereunder but which was not appropriately cure as provided herein) and
if, within sixty (60) days after such rejection or other termination, the
Project Lender shall so request, Landlord will execute and deliver to the
Project Lender a new ground lease of the Leathers Property. Such new ground
lease shall be for a term equal to the remainder of the term of this Lease
before giving effect to such rejection or other termination, and shall contain
the same covenants, agreements, terms, provisions and limitations as contained
in this Lease (except or any requirements which shall have been fulfilled by
Tenant prior to such rejection or other termination). Landlord shall, at the
expense of the Project Lender and at no expense to Landlord, cooperate with the
Project Lender and take such action in compliance with law as Project Lender
shall reasonably request to remove Tenant from the Leathers Property.
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10.2.10. Landlord and Tenant acknowledge, agree and covenant that
notwithstanding the union of the fee simple title with any right, title or
interest in the leasehold estate created hereby or under any other document or
instrument in Landlord, Tenant, Project Lender, or any other Person or entity,
whether by purchase or otherwise, it is the declared intention of the parties
hereto that the separation of the fee simple estate and the leasehold estate
shall be maintained and a merger shall not take place without the prior written
consent of the Project Lender.
10.3. Tenant and Landlord shall cooperate in including here, by
suitable amendment from time to time, any provision which any Project Lender or
proposed Project Lender reasonably requests for the purpose of implementing the
Project Lender-protective provisions contained in this Section 10 and affording
the Project Lender or proposed Project Lender reasonable protection of its
Project Lender's Lien in the event of a default by Tenant. Tenant and Landlord
each agree to execute and deliver (and to acknowledge, if necessary for
recording purposes) any document or instrument necessary to give effect to any
such provision.
10.4. The Project Lender's mortgage documents shall contain provisions
that all notices of default under the note and related documents must be sent to
Landlord as well as Tenant, and that Landlord shall have the right to cure any
default after the time for Tenant to cure it has expired. Neither Landlord's
right to cure any default nor any exercise of such a right shall constitute an
assumption of liability under the note or related document.
10.5. On the recording of the Project Lender's Lien, Tenant shall, at
Tenant's expense, cause to be recorded in the office of the County Recorded of
Imperial County, California, a written request executed and acknowledged by
Landlord for a copy of all notices of default and all notices of sale under the
Project Lender's Lien as provided by the statutes of the State of California.
Inclusion in the body of the recorded Project Lender's Lien itself of a request
for notice having the effect described above shall constitute compliance with
this provision.
10.6. On the commencement of the term, the fee title to the Premises
shall be free and clear of all mortgage liens other than those expressly agreed
to in accordance with this Lease. Thereafter, any mortgage placed on the
Premises by Landlord shall be subject to this Lease, to any mortgage then in
existence on the leasehold estate as permitted by this Lease, and to Tenant's
right as permitted by the this Lease subsequently to encumber the leasehold
estate.
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11. Insurance. So long as the Credit Facility remails a valid and
binding obligation of Tenant, Tenant shall procure and maintain such policies of
insurance in such amounts as are necessary to comply with the Insurance
Requirements. After such time as the Credit Facility ceases to be a valid and
binding obligation of Tenant or otherwise terminates in accordance with its
terms, Tenant shall procure and maintain, for the remainder of the term of this
Lease, such policies of insurance, in such amounts, as Landlord shall reasonable
request, but in no event shall Tenant be required to procure and maintain
insurance in excess of the Insurance Requirement.
12. Condemnation. In the event of a taking by eminent domain or by
inverse condemnation for any public or quasi-public use under any statute, the
proceeds therefrom shall be distributed (a) first, to Tenant to the extent of
all amounts necessary to pay in full the Project Lender's Loan and (b) second,
to the parties hereto in accordance with their interests as they may appear.
13. Default and Remedies.
13.1. Subject to the provisions of Section 10 hereof, the occurrence of
any one or more of the following events shall constitute a material default by
Tenant under this Lease:
13.1.1. The vacation or abandonment of the Premises by Tenant for a
continuous period of sixty (60) days or more, whether or not the rent is paid.
13.1.2. The failure by Tenant to make any payment of rent or any other
payment required to be made by Tenant hereunder, as and when due, where such
failure shall continue for a period of three (3) business days after written
notice thereof from Landlord to Tenant.
13.1.3. The failure by Tenant to observe or perform any of the material
covenants, conditions or provisions of this Lease to be observed or performed by
Tenant other than those referenced in Sections 13.1.1 and 13.1.2 above, where
such failure shall continue for a period of thirty (30) days after written
notice thereof from Landlord to Tenant; provided, however, that if the nature of
Tenant's noncompliance is such that more than thirty (30) days are reasonably
required for its cure, then Tenant shall not be deemed to be in default if
Tenant commences such cure within said thirty (30) day period and thereafter
diligently pursues such cure to completion.
13.1.4. The making by Tenant of any general arrangement or general
assignment for the benefit of creditors; Tenant's becoming a "debtor" as defined
in
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11 U.S.C. section 101 or any successor statute thereto, unless, in the case of a
petition filed against Tenant, the same is dismissed within sixty (60) days
after filing; the appointment of a trustee or receiver to take possession of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where possession is not restored within sixty (60) days;
or the attachment execution or other judicial seizure of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this Lease,
where such seizure is not discharged within sixty (60) days. In the event that
any provision of this Section 13.1.4 is contrary to any applicable law, such
provision shall be of no force or effect.
13.2. Subject to the provisions of Section 10 hereof, in the event of
any material default or breach o this Lease by Tenant, Landlord may at any time
thereafter, with or without notice or demand and without limiting Landlord in
the exercise of any right or remedy which Landlord may have by reason of such
default:
13.2.1. Terminate Tenant's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate, and
Tenant shall immediately surrender possession of the Premises to Landlord. In
such event Landlord shall be entitled to recover from Tenant all damages
incurred by Landlord by reason of Tenant's default, including, but not limited
to: (a) the unpaid rent which had been earned at the time of termination; (b)
the amount by which the unpaid rent which would have been earned after
termination until the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided; (c) the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided; and
(d) any other amount necessary to compensate Landlord for all of the detriment
proximately caused by the Tenant's failure to perform its obligations under
this Lease.
13.2.2. Maintain Tenant's right to possession, in which case this Lease
shall continue in effect whether or not Tenant shall have vacated or abandoned
the Premises. In such Event, Landlord shall be entitled to enforce all of
Landlord's rights and remedies under this Lease, including the right to recover
the rent as it becomes due hereunder.
13.2.3. Use Tenant's personal property and trade fixtures without
compensation and without liability for their use or damage, or store them for
the account of and at the cost of Tenant. The election of one remedy for any one
item of personal property or trade fixture shall not
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foreclose an election of any other remedy for another item or for the same
item at a later time.
13.2.4. Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decisions of the State of California.
13.3. After expiration of the applicable time for curing a particular
default, or before the expiration of that time in the event of emergency,
Landlord may at Landlord's election, but shall not be obligated to, make any
payment required of Tenant under this Lease or under any note or other related
loan document pertaining to the financing of improvements on the Premises, or
perform or comply with any covenant or condition imposed on Tenant under this
Lease or any such note or related loan document, and any amount so paid, plus
the reasonable cost of any such performance or compliance, shall be deemed to be
additional rent payable by Tenant with the next succeeding installment of rent.
No such act shall constitute a waiver of default or of any remedy for default or
render Landlord liable for any loss or damage resulting from any such act.
13.4. Landlord shall not be in default in the performance of its
obligations under this Lease unless Landlord fails to perform obligations
required of Landlord within sixty (60) days after written notice by Tenant to
Landlord and to the holder of any mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been furnished to Tenant
in writing, specifying wherein Landlord has failed to perform such obligation;
provided, however, that if the nature of Landlord obligation is such that more
than sixty (60) days are required for performance, then Landlord shall not be in
default if Landlord commences performance within such sixty (60) day period and
thereafter diligently pursues the same completion.
13.5. Tenant hereby acknowledges that late payment by Tenant to
Landlord of any installment of rent or any other sum due hereunder will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of
which will be extremely difficult to ascertain. Accordingly, if any installment
of rent or any other sum due from Tenant shall not be received by Landlord
within ten (10) days after such amount shall be due, then, without any
requirement for notice to Tenant, Tenant shall pay to Landlord a late charge
equal to six percent (6%) of such overdue amount. The parties hereby agree that
such late charge represents a fair and reasonable estimate of the costs Landlord
will incur by reason of late payment by Tenant. Acceptance of such late charge
by Landlord shall in no event constitute a waiver of Tenant's default with
respect to such overdue amount, or
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prevent Landlord from exercising any of the other rights and remedies granted
hereunder.
14. Estoppel Certificates.
14.1. Either party hereto (the "Responding Party") shall, at any time
upon not less than ten (10) days prior written notice from the other party
hereto or from the Project Lender (the "Requesting Party"), execute, acknowledge
and deliver to the Requesting Party a statement in writing (a) certifying, as
applicable, that this Lease is unmodified and in full force and effect (or, if
modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect) and the date to which any
payments due hereunder are paid, (b) acknowledging that there are not, to the
Responding Party's knowledge, any uncured defaults hereunder on the part of the
other party hereto (or specifying such defaults if any are claimed), and (c)
setting forth such other information reasonably and customarily included in
estoppel certificates as may be requested by the Requesting Party and known to
the Responding Party. Any such statements may be conclusively relied upon by any
prospective purchaser or encumbrancer of this Lease. The failure of the
Responding Party to deliver such statement within such time shall be conclusive
upon such Responding Party that (i) this Lease is in full force and effect and
has not been modified, and (ii) there are no uncured defaults in the performance
of the other party hereto.
15. Landlord's Liability. The term "Landlord" as used herein shall mean
only the owner or owners, at the time in question, of fee title to the Premises,
and in the event of any transfer of such title or interest, Landlord herein
named (and, in case of any subsequent transfers, then the grantor) shall be
relived from and after the date of such transfer of all liability as respects
Landlord's obligations thereafter to be performed, provided that any funds in
the hands of Landlord or the then grantor at the time of such transfer in which
Tenant has an interest shall be delivered to the grantee.
16. Severability. The invalidity of any provision of this Lease as
determined by a court of competent jurisdiction shall in no way affect the
validity of any other provision hereof.
17. Interest on Past-Due Obligations. Except as expressly herein
provided, any amount due to Landlord not paid when due shall bear interest at
the greater of (a) ten percent (10%) per annum, or (b) five percent (5%) per
annum above the discount rate established by the Federal Reserve Bank of San
Francisco on advances to member banks under Section 13 or 13 (a) of the Federal
Reserve Act as in effect on the 25th day of the month preceding the date of this
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Lease, from the date due until fully paid. Payment of such interest shall not
excuse or cure any default by Tenant under this Lease.
18. Time of Essence. Time is of the essence with respect to the
obligations to be performed under this Lease.
19. Additional Rent. All monetary obligations of Tenant to Landlord
under the terms of this Lease shall be deemed to be rent.
20. Incorporation of Prior Agreements. This Lease and the related
documents referred to herein specifically by name contain all agreements of the
parties with respect to the subject matter of this Lease. No prior or
contemporaneous agreement or understanding pertaining to any such matter shall
be effective.
21. Amendments. This Lease may be amended in writing only, signed by
the parties in interest at the time of the amendment.
22. Notices. Any notices required or permitted to be given hereunder
shall be in writing and may be given by personal delivery or by registered or
certified mail, and shall be deemed sufficiently given if delivered or addressed
to Tenant or to Landlord at the address noted below. Mailed notices shall be
deemed given upon actual receipt at the address required, or forty-eight (48)
hours following deposit in the mail, postage prepaid, whichever first occurs.
Either party may by notice to the other specify a different address for notice
purposes.
To Landlord:
Magma Power Company
11770 Bernardo Plaza court
Suite 366
San Diego, California 92128
To Tenant:
Leathers, L.P.
c/o Red Hill Geothermal, Inc.
480 West Sinclair Road
Calipatria, California 92233
23. Force Majeure.
23.1. Neither Landlord nor Tenant shall be liable in damages to the
other for any act, omission or circumstance ("Event of Force Majeure")
occasioned by or in consequence of any acts of God, acts of the public enemy,
wars, blockades, insurrections, riots, epidemics, landslides,
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lightning, earthquakes, fires, storms, floods, civil disturbances, explosions,
sabotage, the binding order of any court or governmental authority which has
been contested in good faith, Federal, State or local laws, or other event or
circumstance not within the control of such party preventing such party from
performing its obligations hereunder, whether caused or occasioned by, or
happening on account of, the act or omission of one of the parties, not within
the control of the party claiming suspension and which by the exercise of due
diligence such party is unable to prevent or overcome.
23.1.1. Such Events of Force Majeure shall not relieve Landlord or
Tenant of liability in the vent of either party's concurring negligence or in
the event of either party's 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 Event of Force Majeure relieve either party of liability unless
such party shall give notice and full particulars of the same in writing to the
other party within ten (10) days of the occurrence relied on. In no event,
however, shall an Event of Force Majeure relieve Tenant from the obligation of
making payments due under this Agreement at the time of such occurrence. The
parties agree that should any Event of Force Majeure remain in existence for a
period of six (6) months, this Agreement may be terminated by the party not
claiming suspension of this Agreement under such Event of Force Majeure upon the
giving of written notice by such party to the other party and any Project
Lender; provided, however, that such six (6) month period shall be extended for
a reasonable time so long as throughout such six (6) month period the party
claiming suspension of this Lease under the Event of Force Majeure has
diligently proceeded to terminate the Event of Force Majeure and continues to do
so throughout such extension.
24. Waivers. No waiver by Landlord of any provision hereof shall be
deemed a waiver of any other provision hereof or of any subsequent breach by
Tenant of the same or any other provisions. Landlord's consent to, or approval
of, any act shall not be deemed to render unnecessary the obtaining of
Landlord's consent to or approval of any subsequent act by Tenant.
25. Acceptance of Rent. The acceptance of rent hereunder by the
Landlord shall not be a waiver of any preceding breach by Tenant of any
provision hereof, other than the failure of Tenant to pay the particular rent so
accepted, regardless of Landlord's knowledge of such preceding breach at the
time of acceptance of such rent.
26. Holding Over. If Tenant, with Landlord's consent, remains in
possession of the Premises or any part thereof after the expiration of the term
hereof, such occupancy shall be a tenancy from month to month upon all the
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provisions of this Lease pertaining to the obligations of Tenant, except that
the rent payable shall be one hundred fifty percent (150%) of the rent payable
immediately preceding the termination date of this Lease.
27. Cumulative Remedies. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
28. Covenants and Conditions. Each provision of this Lease performable
by Tenant shall be deemed both a covenant and a condition.
29. Binding Effect. Subject to any provisions hereof restricting
assignment or subletting by Tenant, this Lease shall bind the parties, their
personal representatives, successors and assigns.
30. Choice of Law. This Lease shall be governed by the laws of the
State of California. This Agreement shall be construed equally as against the
parties hereto, and shall not be construed against the party responsible for its
drafting.
31. Arbitration. All disputes arising under this Agreement shall be
settled by arbitration. The party desiring such arbitration shall give written
notice to that effect to the other party and in such notice shall appoint as an
arbitrator a disinterested person of recognized competence in the area at issue.
All selections of an arbitrator shall be subject to the consent of any Project
Lender, but only if the Project Lender notifies the parties that it desires to
approve the selection of an arbitrator, and such consent shall not be
unreasonably withheld. Within fifteen (15) days thereafter, the other party
shall, by written notice to the originating party, appoint a second person
similarly qualified as the second arbitrator. The arbitrators thus appointed
shall appoint a third person similarly qualified as the third arbitrator, and
such three arbitrators shall as promptly as possible determine such matter with
the parties, each being entitled to present evidence and argument to the
arbitrators; provided, however, that:
(i) if the second arbitrator shall not have been appointed as
aforesaid, the first arbitrator shall determine such matter; and
(ii) if the two arbitrators appointed by the party shall be unable to
agree upon the appointment of a third arbitrator within fifteen (15) days
after the appointment of the second arbitrator, they shall give written
notice of such failure to agree to the parties, and, if the parties fail to
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agree upon the selection of such third arbitrator within fifteen (15) days
thereafter, then within ten (10) days thereafter, either of the parties
upon written notice to the other party may apply for such appointment to
the Federal District Court or County Superior Court in San Diego,
California.
The arbitrator or arbitrators shall only interpret and apply the terms
and provisions of this Agreement and shall not change any such terms or
provisions or deprive either party of any right or remedy expressly or impliedly
provided for in this Agreement.
The determination of the majority of the arbitrators or the sole
arbitrator, as the case may be, shall, to the extent permitted by law, be
conclusive upon the parties. The arbitrator or arbitrators shall give written
notice to the parties stating their determination, and shall furnish to each a
copy of such determination signed by them. In the event of the failure, refusal
or inability of any arbitrator to act, a new arbitrator shall be appointed in
his stead, which appointment shall be made in the same manner as hereinbefore
provided for the appointment of the arbitrator so failing, refusing or unable to
act.
32. Attorneys' Fees. If either party hereto commences litigation or
arbitrator for the judicial or other interpretation, enforcement, termination,
cancellation or rescission hereof, or for damages for the breach hereof, the
prevailing party in any such action, trial, arbitrator or appeal thereon shall
be entitled to its reasonable attorneys' fees and court, arbitrator and other
costs incurred, to be paid by the losing party as fixed by the court or
arbitrator in the same or a separate suit, and whether or not such action is
pursued to decision or judgment.
33. Landlord's Access. Landlord and its agents shall have the right to
enter the Premises at reasonable times for the purpose of inspecting the same,
performing any services required of Landlord, taking safety measures and
exercising rights expressly reserved by Landlord under this Lease, as long as
there is no material adverse effect to Tenant's use of the Premises. All
activities of Landlord pursuant to this Section shall be without abatement of
rent, nor shall Landlord have any liability to Tenant for the same.
34. Merger. The voluntary or other surrender of this Lease by Tenant,
or a mutual cancellation hereof, or a termination by Landlord, shall not work a
merger, but shall, at the option of Landlord, terminate any or all existing
subtenancies, or may, at the option of Landlord, operate as an assignment to
Landlord of any or all of such subtenancies.
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35. Quiet Possession. Upon Tenant's paying the rent for the Premises
and observing and performing all of the covenants, conditions and provisions on
Tenant's part to be observed and performed hereunder, Tenant shall have quiet
possession of the Premise for the entire term hereof subject to all of the
provisions of this Lease.
36. Security Measures. Tenant hereby acknowledges that Landlord shall
have no obligation whatsoever to provide guard service or other security
measures for the benefit of the Premises. Tenant assumes all responsibility for
the protection of Tenant, its agents, invitees and their property from the acts
of third parties.
37. Easements and Maps. Landlord reserves to itself the right, from
time to time, to grant such easements, rights and dedications that Landlord
deems necessary or desirable, and to cause the recordation of maps or
restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises or the
operation of the Leathers Facility by Tenant. Tenant shall sign any of the
aforementioned documents reasonably requested by Landlord and failure to do so
within such period of time as constitutes a reasonable period of time to review
such documents shall constitute a material default under this Lease by Tenant
without the need for further notice to Tenant.
38. Exhibits, Addenda. All exhibits and addenda to which reference is
made in this Lease are incorporated in this Lease by the respective references
to them, whether or not they are actually attached, provided they have been
signed or initialed by the parties.
39. Tenant's Duty to Surrender. At the expiration or earlier
termination of the term, Tenant shall surrender to Landlord the possession of
the Premises. If Tenant fails to surrender the Premises at the expiration or
earlier termination of this Lease, Tenant shall defend and indemnify Landlord
from all liability and expense resulting from the delay or failure to do so,
including, without limitation, claims make by any succeeding tenant founded on
or resulting from Tenant's failure to do so.
40. Memorandum of Lease. A Memorandum of this Lease shall be recorded
(the "Ground Lease Memorandum"). The parties shall execute the Memorandum in
such form and substance as may be required by the title insurance company
insuring Tenant's leasehold estate or the interest of any Project Lender,
sufficient to give constructive notice of the Lease to subsequent purchasers and
mortgagees.
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41. The Remaining Leathers Property Area. Notwithstanding any other
provision of this Lease to the contrary:
41.1.1 Landlord and Tenant acknowledge that Landlord intends at some
time in the future to record a parcel or final map (the "Map") further
subdividing the Premises into at least the following two separate parcels or
lots complying with the California Subdivision Map Act (Gov't Code section 66410
et seq.) (the "Map Act"): (a) the site for the Leathers Facility, which shall
consist of approximately (but not less than) the southernmost twenty (20) acres
of the Premises (the "Leathers Facility Site"); and (b) one or more sites for
other purposes, which shall together consist of the remainder of the Premises
(the "Remaining Area").
41.1.2 Tenant shall, at Landlord's expense and at no cost to Tenant,
cooperate in all respects with Landlord's efforts to obtain and record the Map,
including, without limitation, by executing any and all documents and
instruments as may reasonably be required by Landlord or any applicable
governmental agency in connection therewith.
41.1.3 Landlord shall have an option (the "Remaining Area Termination
Option") to at any time terminate this Lease as to the Remaining Area upon the
payment to Tenant of the sum of Ten Dollars ($10.00); provided, however, that
Landlord's right to exercise the Remaining Area Termination Option is, in
compliance with Section 66499.30(e) of the Map Act, expressly contingent upon
the approval and recordation of the Map by the County of Imperial. The term of
the Remaining Area Termination Option shall be the same as, and shall run
concurrently with, the term of this Lease as set forth in Section 4 hereof.
41.1.4 Without limiting the generality of Section 3.3 hereof, at such
time as (a) the Map shall have been recorded in the Official Records of Imperial
County (the "Official Records") and (b) Tenant shall have received written
notice from Landlord of Landlord's intent to exercise the Remaining Area
Termination Option (along with the Ten Dollars ($10.00) consideration provided
in Section 41.1.3 hereof), Landlord and Tenant shall: (i) execute and deliver an
amendment to this Lease stating that this Lease shall thereafter encumber only
the Leathers Facility Site: (ii) execute, acknowledge deliver and cause to be
recorded in the Official Records an amendment to the Ground Lease Memorandum
stating that this Lease shall thereafter encumber only the Leathers Facility
Site; and (iii) execute, acknowledge, deliver and cause to be recorded in the
Official Records a quitclaim deed satisfactory to Landlord pursuant to which
Tenant shall quitclaim to Landlord all its right, title and interest in and to
the Remaining Area, and upon the recordation of such quitclaim deed Tenant shall
surrender and
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deliver possession of the Remaining Area to Landlord. In no event shall any such
amendment or quitclaim entitle Tenant to any reduction in or offset against the
rents and other payments due Landlord hereunder. Notwithstanding the execution,
delivery and recordation of the foregoing documents, and without limiting the
generality of Section 3.3.2 hereof, (1) for so long as this Lease is in effect,
Tenant shall retain a non-exclusive easement for ingress and egress and to
construct, install, operate and maintain production and injection pipelines over
a portion of the Remaining Area consisting of a strip of land one hundred (100)
feet wide along the eastern and/or western boundary of the Remaining Area, as
Landlord shall reasonably determine, or over any other portion of the Remaining
Area as Landlord shall reasonable determine to be appropriate, as well as
wherever pipelines already existed as of August 15, 1988 or there were planned
locations therefor as of August 15, 1988 pursuant to plans approved or prepared
by or otherwise known to Landlord or Red Hill Geothermal, Inc., a Delaware
corporation and (2) for so long as such well is in operation and the Lease is in
effect, Tenant shall retain a non-exclusive easement to operate, repair and
maintain that certain production well commonly known as "River Ranch #3,"
located at the northeast corner of the Remaining Area (together, the "Remaining
Area Pipeline Easement").
41.1.5 Tenant hereby agrees that throughout the entire term of this
Lease, it will not, without the consent of Landlord, (a) construct or install
any structure, buildings, wells or other improvements upon the Remaining Area,
except for production and injection pipelines and the River Ranch #3 production
well, all of which shall be located within the Remaining Area Pipeline Easement,
or (b) grade or otherwise disturb the surface of the Remaining Area.
41.1.6 Commencing retroactively from May 1, 1988, to the extent that
Tenant constructs, installs, operates, or maintains pipelines within the
Remaining Area Pipeline Easement (and regardless whether Tenant has or has not
quitclaimed the Remaining Area to Landlord as provided in section 41.1.4
hereof), Tenant shall pay to Landlord (in addition to any fees otherwise payable
to Landlord under this Lease) a fee equal to that paid by Tenant under the
Easement Agreement with respect to its use of surface lands owned or held by
PErsons other than Landlord; provided, however, that in the event that at any
time during the term of this Lease Landlord or a grantee of Landlord uses the
Remaining Area Pipeline Easement, and to the extent that such use overlaps with
that of Tenant hereunder, then, for so long as such use continues, Tenant shall
only be required to pay to Landlord under this Section 41.1.6 Tenant's pro-rata
share of such fees.
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41.1.7 Without limiting the generality of any other provision hereof
relating to Landlord's rights to and/or use of the Premises, Landlord shall have
and retain the right to from time to time designate a right of way and/or one or
more strips of land within, upon and over the Leathers Facility Site for
nonexclusive ingress, egress and use by Landlord and/or its grantees, assignees
and licensees for purposes of access to the Remaining Area and/or the
construction, installation, operation and maintenance of utility lines and
pipelines for the transportation of geothermal resources connected with any
additional power production geothermal electrical generating facility and/or
other commercial or industrial facility or improvements hereafter constructed
within or about the Premises or lands pooled or unitized with the Premises;
provided, however, that the location and use of such strips of land shall not
unreasonably interfere with the operation of, or deny Tenant access to, the
Leathers Facility.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date
first above written.
LANDLORD:
MAGMA POWER COMPANY, a Nevada corporation
By: /s/ Illegible
-------------------------------
Its: President
By: /s/ Illegible
-------------------------------
Its: Secretary
TENANT:
LEATHERS, L.P., a limited partnership
organized under the laws of the State of
California
By: /s/ Illegible
-------------------------------
Its: President
By: /s/ Illegible
-------------------------------
Its: Asst. Secretary
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Recording Requested By and
When Recorded Mail To:
Magma Power Company
c/o CalEnergy Company, Inc.
302 South 36th Street
Omaha, Nebraska 68131
Attention: General Counsel
--------------------------------------------------------------------
The undersigned declare that this document does not grant, assign,
transfer, convey or vest title to real property within the meaning of Section
11911 of the California Revenue and Taxation Code, and hence NO DOCUMENTARY
TRANSFER TAX IS DUE.
The real property is located in an unincorporated area of the County of
Imperial, State of California.
CLARIFICATION AND AMENDMENT
THIS CLARIFICATION AND AMENDMENT (this "Amendment") is made as of June
17, 1996, between MAGMA POWER COMPANY, a Nevada corporation ("Grantor") and
LEATHERS, L.P., a limited partnership organized under the laws of the State of
California ("Grantee").
RECITALS
1. Grantor holds certain geothermal lease rights (the "Geothermal Lease
Rights") in certain real property located within the Salton Sea Known Geothermal
Resource Area (the "SSKGRA") in Imperial County, California, which real property
is described in Exhibit "A" attached hereto (the "Geothermal Lease Rights
Properties"). A portion of the Geothermal Lease Rights Properties consists of
those certain real property interests described in Exhibit "B" attached hereto
(the "Resource Easement Rights Properties"). The Geothermal Lease Rights are set
forth in those certain geothermal leases described in Exhibit "C" attached
hereto (the "Geothermal Leases").
2. Grantee owns a geothermal electrical generating facility commonly
known as the "Leathers Facility", which utilizes Geothermal Brine from certain
of the Resource Easement Rights Properties. The Leathers Facility is located on
that certain real property described in Exhibit "D" attached hereto (the
"Leathers Property").
3. Grantee's right to maintain the Leathers Facility on the Leathers
Property is derived from that certain Ground Lease dated as of October 26, 1988
between Grantor, as Landlord, and Grantee, as Tenant (the "Ground Lease"), a
Memorandum of which was recorded on October 26, 1988 in Book 1613, Page 318, as
Instrument No. 88-17185 in the Official Records of Imperial County, California
(the "Official Records").
4. Pursuant to that certain Easement Grant Deed and Agreement Regarding
Rights For Geothermal Development dated as of August 15, 1988, as amended by
that certain First
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Amendment To Easement Grant Deed and Agreement Regarding Rights For Geothermal
Development dated as of October 26, 1988 (the "Easement Grant Deed"), a Short
Form of which was recorded on October 26, 1988 in Book 1613, Page 324, as
Instrument No. 88-17187 in the Official Records (the "Easement Short Form"),
Grantor granted to Grantee certain rights in and to the Geothermal Brine
contained in the Resource Easement Rights Properties, including, without
limitation, the right to (i) drill for, produce, Process and use Geothermal
Brine up to the amount necessary to meet the Leathers Facility Brine Requirement
and (ii) construct, use and maintain roads, pipelines, utility installations,
power lines, equipment, buildings and wells in connection therewith, subject to
certain limitations and reservations as more particularly set forth in the
Easement Grant Deed.
5. It has always been the intent of Grantor and Grantee (together, the
"Parties") that Grantor reserve and at all times have the right, at its sole
option, to (i) drill for, produce, process, extract, treat, convert, take,
divert, sell and otherwise use the Excess Unextracted Geothermal Brine,
Partially Spent Geothermal Brine, Excess Extracted Geothermal Brine, Geothermal
Brine Scale and Brine Minerals and (ii) use the Leathers Property in connection
with such reserved rights. The Parties now desire to amend the Ground Lease and
Easement Grant Deed to clarify and further define such rights, and to make
certain other modifications thereto, as set forth herein.
F. This Amendment is being executed in connection with that certain
Second Supplemental Trust Indenture (the "Supplemental Indenture") dated as of
June 20, 1996, between Salton Sea Funding Corporation, a Delaware corporation,
an Affiliate of Grantor ("Funding Corporation"), as issuer, and Chemical Trust
Company of California, a California corporation, as trustee. Chemical Trust
Company of California, a California corporation, is also acting as collateral
agent (together with its transferees, successors and assigns, the "Collateral
Agent") under that certain Collateral Agency and Intercreditor Agreement dated
as of July 21, 1995, as amended, by and among Funding Corporation and the other
parties named therein. The Collateral Agent's address is 50 California Street,
10th Floor, San Francisco, California 94111.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals, the
covenants and conditions herein contained, and other valuable consideration, the
receipt of which is hereby acknowledged, the Parties agree as follows:
ARTICLE 1. INTRODUCTORY MATTERS
1.1. CAPITALIZED TERMS. Capitalized terms used and not defined herein
shall have the meaning given the same in the Easement Grant Deed.
1.2. TERMINATION OF AGREEMENTS.
1.2.1 Grantor and Grantee hereby confirm and agree that the
Partnership Bridge Agreement dated August 15, 1988 among Grantor, Grantee, Red
Hill Geothermal, Inc., a Delaware corporation and San Felipe Energy Company, a
California corporation (the "Partnership Bridge Agreement"), has terminated and
is of no further force or effect.
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1.2.2 Grantor, Grantee and Morgan Guaranty Trust Company of
New York, in its capacity as Security Agent for certain Banks ("Morgan") under
that certain Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of October 26, 1988, executed by Grantee as Trustor, recorded on
October 26, 1988 in the Official Records as File No. 88-17188, as amended (the
"Morgan Deed of Trust"), are parties to that certain River Ranch Leasehold
Bridge Agreement dated as of October 26, 1988 (the "Leasehold Bridge
Agreement"). Morgan will shortly reconvey the Morgan Deed of Trust to Grantee,
whereupon Grantor and Grantee will be the only parties thereto. Grantor and
Grantee hereby agree that concurrently with such reconveyance, the Leasehold
Bridge Agreement shall terminate and be of no further force or effect.
ARTICLE 2. AMENDMENTS TO THE EASEMENT GRANT DEED
2.1. USE OF GEOTHERMAL BRINE. Wherever in the Easement Grant Deed
(including, without limitation, sections 2.2.1, 2.3.2, 2.3.3, 3.1.1 and 3.1.3
thereof) Grantor reserves or is given the right to "use", "utilize" or make
"use" of the Partially Spent Geothermal Brine, Excess Extracted Geothermal
Brine, Brine Minerals and/or Geothermal Brine Scale or any part thereof, Grantor
shall further have the right, privilege and power to process, extract from,
treat, convert, take, divert, sell and otherwise use the same, in such manner
and at such locations as Grantor may deem proper, and without compensation to
Grantee other than as expressly provided in the Easement Grant Deed.
2.2. OWNERSHIP OF GEOTHERMAL BRINE. To the extent that Grantor
processes, extracts, treats, converts, takes, diverts, sells or otherwise uses
the Partially Spent Geothermal Brine, Excess Extracted Geothermal Brine, Brine
Minerals and/or Geothermal Brine Scale or any part thereof as permitted under
the Easement Grant Deed or hereunder, which results in the amount thereof that
is returned to Grantee for injection or disposal being less than the amount
thereof previously delivered to or taken by Grantor, then the title otherwise
held by Grantee to any Partially Spent Geothermal Brine, Excess Extracted
Geothermal Brine, Brine Minerals and/or Geothermal Brine Scale that is not
returned to Grantee for injection or disposal shall automatically transfer to
and vest in Grantor. Without limiting the generality of the foregoing, if
Grantor makes any commercial use or sale of the Partially Spent Geothermal
Brine, Excess Extracted Geothermal Brine, Brine Minerals and/or Geothermal Brine
Scale, the economic benefits of such use or sale shall belong to Grantor.
2.3. INJECTION BY GRANTEE. In addition to its obligations under section
3.1.1 of the Easement Grant Deed, Grantee shall handle, transport, inject and
dispose of all geothermal fluids and other substances produced as a result of or
which flow from Grantor's use, processing, treatment or conversion of the
Geothermal Brine and of geothermal fluids from other lands. To the extent that
by performing the above duties Grantee incurs additional costs and expenses over
what it would have incurred had Grantor not used, processed, treated or
converted Geothermal Brine or geothermal fluids from other lands as provided
herein, then Grantor shall pay such excess costs and expenses.
2.4. RELEASE OF EXTRA QUARTER SECTION. Consistent with sections 4.2 and
4.3 of the Leasehold Bridge Agreement (which Leasehold Bridge Agreement is being
terminated as provided above), the following language is hereby added at the end
of section 2.1 of the Easement Grant Deed:
"At any time and from time to time during the term of this Agreement,
upon request
3
<PAGE>
by Grantor, Grantee shall cause GeothermEx, Inc. or another resource
engineer reasonably acceptable to Grantee to prepare an analysis of the
geothermal resource in the Resource Easement Rights Properties (the
"Resource Analysis"). If the Resource Analysis concludes that the
Resource Easement Rights Properties, less the Southeast Quarter of
Section 24, Township 11 South, Range 13 East, San Bernardino Meridian
(the "Extra Quarter Section"), would be sufficient to satisfy the
Leathers Facility Brine Requirement for the then-remaining term of this
Agreement, then Grantee shall, upon request by Grantor, forthwith
execute, acknowledge and deliver to Grantor for recordation a quitclaim
deed of all of Grantee's rights under this Agreement and the recorded
Short Form hereof in and to the Extra Quarter Section, or such other
document or instrument as Grantor may reasonably request to release to
Grantor all of Grantee's right, title and interest in and to the Extra
Quarter Section. All reasonable costs of completing the release of
Grantee's interest in the Extra Quarter Section shall be borne by
Grantor without reimbursement by Grantee, including, without
limitation, all costs incurred in having the Resource Analysis
prepared."
2.5. INSURANCE. Section 3.3 of the Easement Grant Deed is hereby
deleted in its entirety.
2.6. PROJECT LENDER PROVISIONS. Article VI of the Easement Grant Deed
is hereby revised as follows.
2.6.1 The definition of "Project Lender" is hereby deleted
from Schedule "Z" to the Easement Grant Deed, and is replaced with the
following:
"'Project Lender' means (a) the Collateral Agent (b) any Person who
succeeds to the interest of Collateral Agent under that certain Trust
Indenture dated as of July 21, 1995, between Funding Corporation, as
issuer, and Collateral Agent, as trustee (as amended, modified or
supplemented, including pursuant to the Supplemental Indenture, the
"Indenture") or (c) any other Person who acquires a first lien on the
Easement To Develop Geothermal Rights in connection with or following
(i) foreclosure of that certain Deed of Trust, Assignment of Rents,
Security Agreement and Fixture Filing dated as of June 20, 1996,
executed by Grantee as trustor, in favor of Chicago Title Company as
trustee, for the benefit of Collateral Agent as beneficiary (the "Deed
of Trust"); (ii) conveyance of the Easement To Develop Geothermal
Rights to Collateral Agent in lieu of foreclosure or (iii) the
acquisition by Collateral Agent or its nominee or designee of the
Easement To Develop Geothermal Rights by any other means. The term
"Project Lender" shall also include any person or entity that acquires
a first lien on the Easement To Develop Geothermal Rights at any time
after such foreclosure, conveyance by deed in lieu of foreclosure or
acquisition by Collateral Agent or its nominee or designee."
2.6.2 The definition of "Project Lender's Loan" is hereby
deleted from Schedule "Z" to the Easement Grant Deed, and is replaced with the
following:
"'Project Lender's Loan' means the financing provided by the Project
Lender for the Development, operation, refinancing or acquisition of
the Leathers Facility, the repayment of which is secured by the Project
Lender's Lien."
4
<PAGE>
2.6.3 Section 6.2.1 of the Easement Grant Deed is hereby
deleted in its entirety and replaced with the following:
"6.2.1 (i) So long as the Indenture is in effect, Grantor
shall not accept or consent to any amendment or modification of this
Agreement if the same would be prohibited under the Partnership Credit
Agreement (as that term is defined in the Indenture); (ii) at any time
when the Indenture is no longer in effect, Grantor shall not accept or
consent to any amendment or modification of this Agreement if the same
would have a material adverse effect on the Project Lender's Lien, and
(iii) except in a case of default by Grantee under this Agreement that
has not been cured by the Project Lender under this Section 6.2 within
the period of time provided therein, Grantor shall not accept or
consent to any abandonment of the Easement to Develop Geothermal Rights
or any termination of this Agreement, unless and until Grantee presents
evidence to Grantor that Grantee has obtained the prior written consent
of the Project Lender thereto."
2.6.4 Sections 6.2.6 and 6.3 of the Easement Grant Deed are
hereby deleted in their entireties.
2.7. ARBITRATION. The last eleven (11) words of paragraph (ii) of
section 8.11 of the Easement Grant Deed (which currently read "Federal District
Court or County Superior Court in San Diego, California") are hereby deleted and
replaced with the words "District Court in Omaha, Nebraska."
2.8. EASEMENT SHORT FORM. The Easement Short Form is hereby amended as
necessary and appropriate so that the same will in all respects be consistent
with this Amendment.
ARTICLE 3. AMENDMENTS TO THE GROUND LEASE
3.1. USE OF THE LEATHERS PROPERTY. Section 2.2 of the Ground Lease is
hereby amended as follows:
3.1.1 The word "sell" is hereby added after the word "use" in
the fourth line of such Section.
3.1.2 The words ", the Brine Minerals" are hereby added after
the words "Reserved Geothermal Brine" in the fourth line of such Section.
3.1.3 The words "and mineral extraction and processing
facilities" are hereby added after the words "Additional Power Production
Facilities" in the fourteenth and eighteenth lines of such Section.
3.1.4 The words ", Partially Spent Geothermal Brine, Brine
Minerals" are hereby added after the words "Geothermal Brine" in the
twenty-first and twenty-fourth lines of such Section.
3.1.5 The following sentence is hereby added at the end of
such Section: "Without limiting the foregoing, Landlord may conduct such
operations for purposes incidental to Landlord's or its affiliates' operations
on lands in the vicinity of and outside the Leathers Property."
5
<PAGE>
3.2. SUBDIVISION OF THE LEATHERS PROPERTY. The following language is
hereby added at the end of section 41.1.3 of the Ground Lease: "Any lender
imposing a lien against the Premises shall be deemed, by the recordation of such
lien, to have agreed to promptly partially release the Remaining Area from the
lien of its deed of trust upon Landlord's exercise of the Remaining Area
Termination Option."
3.3. DAMAGE OR DESTRUCTION. Section 8.2 of the Ground Lease is hereby
deleted in its entirety.
3.4. PROJECT LENDER PROVISIONS. Section 10 of the Ground Lease
(consisting of sections 10.1 through 10.6, inclusive) is hereby revised as
follows.
3.4.1 The definition of "Project Lender" is hereby deleted
from Schedule "Z" to the Ground Lease, and is replaced with the following:
"'Project Lender' means (a) the Collateral Agent (b) any Person who
succeeds to the interest of Collateral Agent under the Indenture or (c)
any other Person who acquires a first lien on this Lease in connection
with or following (i) foreclosure of the Deed of Trust; (ii) conveyance
of this Lease to Collateral Agent in lieu of foreclosure or (iii) the
acquisition by Collateral Agent or its nominee or designee of the Lease
by any other means. The term "Project Lender" shall also include any
person or entity that acquires a first lien on the Lease at any time
after such foreclosure, conveyance by deed in lieu of foreclosure or
acquisition by Collateral Agent or its nominee or designee."
3.4.2 The definition of "Project Lender's Loan" is hereby
deleted from Schedule "Z" to the Ground Lease, and is replaced with the
following:
"'Project Lender's Loan' means the financing provided by the Project
Lender for the Development, operation, refinancing or acquisition of
the Leathers Facility, the repayment of which is secured by the Project
Lender's Lien."
3.4.3 Section 10.2.1 of the Ground Lease is hereby deleted in
its entirety and replaced with the following:
"10.2.1 (i) So long as the Indenture is in effect, Landlord
shall not accept or consent to any amendment or modification of this
Lease if the same would be prohibited under the Partnership Credit
Agreement (as that term is defined in the Indenture); (ii) at any time
when the Indenture is no longer in effect, Landlord shall not accept or
consent to any amendment or modification of this Lease if the same
would have a material adverse effect on the Project Lender's Lien, and
(iii) except in a case of default by Tenant under this Lease that has
not been cured by the Project Lender under this Section 10.2 within the
period of time provided therein, Landlord shall not accept or consent
to any abandonment or termination of this Lease unless and until Tenant
presents evidence to Landlord that Tenant has obtained the prior
written consent of the Project Lender thereto."
3.4.4 Sections 10.2.6, 10.3, 10.4 and 10.5 of the Ground Lease
are hereby deleted in their entireties.
6
<PAGE>
3.5. INSURANCE. Section 11 of the Ground Lease is hereby deleted in its
entirety.
3.6. ARBITRATION. The last eleven (11) words of paragraph (ii) of
section 31 of the Ground Lease (which currently read "Federal District Court or
County Superior Court in San Diego, California") are hereby deleted and replaced
with the words "District Court in Omaha, Nebraska."
ARTICLE 4. GENERAL PROVISIONS
4.1. NOTICES. The address for notices to Grantor and Grantee set forth
in section 8.3 of the Easement Grant Deed and in section 22 of the Ground Lease
shall henceforth be as follows:
If to Grantor: c/o CalEnergy Company, Inc.
302 South 36th Street
Suite 400
Omaha, Nebraska 68131
Attention: General Counsel
If to Grantee: c/o CalEnergy Company, Inc.
302 South 36th Street
Suite 400-C
Omaha, Nebraska 68131
Attention: General Counsel
4.2. ASSIGNMENT. Grantor shall be entitled, from time to time and
without the prior consent of Grantee, to transfer, assign, alienate, license,
grant easements in, hypothecate, pledge or mortgage to any Person all or any
portion of Grantor's right, title or interest in, under and to the Easement
Grant Deed and this Amendment.
4.3. COVENANTS TO RUN WITH THE LAND. The Leathers Property shall be
held, conveyed, assigned, hypothecated, encumbered, leased, used and operated
subject to the covenants, terms and provisions set forth herein, in the Easement
Grant Deed and in the Ground Lease, which covenants, terms and provisions shall
run with the Leathers Property and each portion thereof and interest therein,
and shall be binding upon Grantee and each other Person having any interest
therein during their ownership thereof, and their respective grantees, heirs,
successors and assigns.
4.4. EFFECT OF THIS AMENDMENT. In the event that any inconsistency
exists between this Amendment and the Easement Grant Deed or the Ground Lease,
this Amendment shall govern, and any inconsistent terms and provisions contained
herein shall be construed as superseding and amending the terms and provisions
of the Easement Grant Deed and/or the Ground Lease, as applicable. Except as
expressly modified by this Amendment, the Easement Grant Deed and the Ground
Lease shall be unchanged and shall remain in full force and effect. This
Amendment may be executed in multiple counterparts, all of which shall
constitute one and the same Amendment.
7
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Amendment as of the
date first above written.
GRANTOR: MAGMA POWER COMPANY,
a Nevada corporation
By: /s/ John G. Sylvia
----------------------------------
Its: Senior Vice President
--------------------------------
GRANTEE: LEATHERS, L.P.,
a limited partnership organized under the
laws of the State of California
By: CalEnergy Operating Company,
a Delaware corporation, General Partner
By: /s/ John G. Sylvia
----------------------------------
Its: Senior Vice President
--------------------------------
CalEnergy Operating Company, Inc., a Delaware corporation (formerly
known as Red Hill Geothermal, Inc., a Delaware corporation) hereby confirms and
agrees that the Partnership Bridge Agreement has terminated and is of no further
force or effect.
Date: June 20, 1996 CALENERGY OPERATING COMPANY,
a Delaware corporation
By: /s/ John G. Sylvia
----------------------------------
Its: Senior Vice President
--------------------------------
San Felipe Energy Company, a California corporation, hereby confirms
and agrees that the Partnership Bridge Agreement has terminated and is of no
further force or effect.
Date: June 20, 1996 SAN FELIPE ENERGY COMPANY, a
California corporation
By: /s/ John G. Sylvia
----------------------------------
Its: Senior Vice President
--------------------------------
8
<PAGE>
ACKNOWLEDGMENTS
STATE OF New York )
--------------------------
) ss.
COUNTY OF New York
------------------------)
On June 20, 1996, before me Patricia Peterson, personally appeared John
G. Sylvia, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s) or the entity on behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature /s/ Patricia Peterson
-----------------------------
STATE OF New York )
--------------------------
) ss.
COUNTY OF New York
------------------------)
On June 20, 1996, before me Patricia Peterson, personally appeared John
G. Sylvia, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s) or the entity on behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature /s/ Patricia Peterson
-----------------------------
<PAGE>
STATE OF New York )
--------------------------
) ss.
COUNTY OF New York
------------------------)
On June 20, 1996, before me Patricia Peterson, personally appeared John
G. Sylvia, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s) or the entity on behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature /s/ Patricia Peterson
------------------------------
STATE OF New York )
--------------------------
) ss.
COUNTY OF New York
------------------------)
On June 20, 1996, before me Patricia Peterson, personally appeared John
G. Sylvia, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s) or the entity on behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature /s/ Patricia Peterson
-----------------------------------
<PAGE>
EXHIBIT "A"
Description of the Geothermal Lease Rights Properties
LEASE NO. 1:
THE SUBSURFACE OF THAT CERTAIN PORTION OF THE SOUTHWEST QUARTER OF SECTION 25,
TOWNSHIP 11 SOUTH, RANGE 13 EAST, SAN BERNARDINO MERIDIAN, COUNTY OF IMPERIAL,
STATE OF CALIFORNIA, ACCORDING TO OFFICIAL PLAT THEREOF, INCLUDING ALL MINERALS
AND GEOTHERMAL RESOURCES CONTAINED THEREIN, DESCRIBED AS FOLLOWS:
BEGINNING AT THE SOUTHWEST CORNER OF SAID SECTION 25; THENCE EAST ALONG THE
SOUTHERLY LINE THEREOF 1170 FEET; THENCE NORTH 33(degrees) 50' WEST 1130 FEET;
THENCE NORTH 71(degrees) 00' WEST 310 FEET; THENCE WEST 247.7 FEET TO THE WEST
LINE OF SAID SECTION; THENCE SOUTH ALONG THE WESTERLY LINE 1039.6 FEET TO THE
POINT OF BEGINNING. EXCEPTING ANY PORTION OF SAID SECTION NOT LYING SOUTH AND
WEST OF THE ALAMO RIVER.
LEASE NO. 2:
PARCEL 1:
SECTION 25, TOWNSHIP 11 SOUTH, RANGE 13 EAST, SAN BERNARDINO MERIDIAN, COUNTY OF
IMPERIAL, STATE OF CALIFORNIA, ACCORDING TO OFFICIAL PLAT THEREOF.
EXCEPTING THEREFROM THAT PORTION OF THE SOUTHWEST QUARTER OF SAID SECTION 25,
DESCRIBED AS FOLLOWS:
BEGINNING AT THE SOUTHWEST CORNER OF SAID SECTION 25; THENCE EAST ALONG THE
SOUTH LINE THEREOF, 1170 FEET; THENCE NORTH 33(degrees)50' WEST, 1130 FEET;
THENCE NORTH 71(degrees)0' WEST, 310 FEET; THENCE WEST 247.7 FEET TO THE WEST
LINE OF SAID SECTION; THENCE SOUTH ALONG SAID WEST LINE, 1039.6 FEET TO THE
POINT OF BEGINNING.
FURTHER EXCEPTING THEREFROM THAT PORTION OF THE SOUTHEAST QUARTER OF SAID
SECTION 25, DESCRIBED AS FOLLOWS:
PARCEL 1, AS SHOWN ON PARCEL MAP M-1901 FILED OCTOBER 6, 1988 IN BOOK 7, PAGE 86
OF PARCEL MAPS IN THE OFFICE OF THE COUNTY RECORDER OF IMPERIAL COUNTY.
PARCEL 2:
EXHIBIT "A"
Page 1 of 5
<PAGE>
THE SOUTHEAST QUARTER OF SECTION 24, IN TOWNSHIP 11 SOUTH, RANGE 13 EAST, SAN
BERNARDINO MERIDIAN, COUNTY OF IMPERIAL, STATE OF CALIFORNIA, ACCORDING TO
OFFICIAL PLAT THEREOF.
PARCEL 3:
THE EAST HALF OF THE SOUTHWEST QUARTER OF SECTION 24, IN TOWNSHIP 11 SOUTH,
RANGE 13 EAST, SAN BERNARDINO MERIDIAN, COUNTY OF IMPERIAL, STATE OF CALIFORNIA,
ACCORDING TO OFFICIAL PLAT THEREOF.
PARCEL 4:
THE NORTHEAST QUARTER OF SECTION 24, IN TOWNSHIP 11 SOUTH, RANGE 13 EAST, SAN
BERNARDINO MERIDIAN, COUNTY OF IMPERIAL, STATE OF CALIFORNIA, ACCORDING TO
OFFICIAL PLAT THEREOF.
EXCEPTING THEREFROM THE NORTH 70 FEET AND THE SOUTH 70 FEET THEREOF.
PARCEL 5:
THE NORTHWEST QUARTER OF SECTION 24, IN TOWNSHIP 11 SOUTH, RANGE 13 EAST, SAN
BERNARDINO MERIDIAN, COUNTY OF IMPERIAL, STATE OF CALIFORNIA, ACCORDING TO
OFFICIAL PLAT THEREOF.
EXCEPTING THEREFROM THAT PORTION THEREOF DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTHWEST CORNER OF SAID SECTION 24; THENCE SOUTH ALONG THE
WEST LINE OF SAID SECTION 1200 FEET; THENCE DUE EAST 540 FEET; THENCE DUE NORTH
TO THE NORTH LINE OF SAID SECTION 24, BEING 1200 FEET, MORE OR LESS; THENCE WEST
ALONG THE NORTH LINE OF SAID SECTION 24 TO THE POINT OF BEGINNING, BEING 540
FEET MORE OR LESS.
PARCEL 6:
THAT PART OF THE NORTHEAST QUARTER OF SECTION 26, IN TOWNSHIP 11 SOUTH, RANGE 13
EAST, SAN BERNARDINO MERIDIAN, COUNTY OF IMPERIAL, STATE OF CALIFORNIA,
ACCORDING TO OFFICIAL PLAT THEREOF, LYING EASTERLY OF A LINE DRAWN FROM THE
SOUTHEAST CORNER OF SAID NORTHEAST QUARTER TO A POINT IN THE NORTH LINE, WHICH
IS 1122 FEET WEST OF THE NORTHEAST CORNER OF SAID NORTHEAST QUARTER.
PARCEL 7:
ALL OIL AND GAS, MINERALS, AND OTHER SUBSTANCES AND RESOURCES UNDERLYING THAT
PORTION OF THE NORTHWEST QUARTER OF SECTION 24, TOWNSHIP 11 SOUTH, RANGE 13
EAST, COUNTY OF IMPERIAL, STATE OF CALIFORNIA, ACCORDING TO OFFICIAL PLAT
THEREOF, DESCRIBED AS FOLLOWS:
EXHIBIT "A"
Page 2 of 5
<PAGE>
BEGINNING AT THE NORTHWEST CORNER OF SAID SECTION 24; THENCE SOUTH ALONG THE
WEST LINE OF SAID SECTION 1200 FEET; THENCE DUE EAST 540 FEET; THENCE DUE NORTH
TO THE NORTH LINE OF SAID SECTION 24, BEING 1200 FEET, MORE OR LESS; THENCE WEST
ALONG THE NORTH LINE OF SAID SECTION 24 TO THE POINT OF BEGINNING, BEING 540
FEET MORE OR LESS.
AS EXCEPTED AND RESERVED IN THE DEED FROM RIVER RANCHES, INC., RECORDED JANUARY
29, 1964 IN BOOK 1176, PAGE 733 OF OFFICIAL RECORDS.
PARCEL 8:
ALL MINERALS, INCLUDING, WITHOUT LIMITATION, OIL, HYDROCARBON GAS AND OTHER
HYDROCARBON SUBSTANCES AND GEOTHERMAL RESOURCES LYING BELOW THE SURFACE OF THAT
PORTION OF THE SOUTHEAST QUARTER OF SECTION 25, TOWNSHIP 11 SOUTH, RANGE 13
EAST, SAN BERNARDINO MERIDIAN, COUNTY OF IMPERIAL, STATE OF CALIFORNIA,
DESCRIBED AS FOLLOWS:
PARCEL 1, AS SHOWN ON PARCEL MAP M-1901 FILED OCTOBER 6, 1988 IN BOOK 7, PAGE 86
OF PARCEL MAPS IN THE OFFICE OF THE COUNTY RECORDER OF IMPERIAL COUNTY.
AS EXCEPTED AND RESERVED IN THE DEED FROM RIVER RANCH, INC., RECORDED OCTOBER 7,
1988 AS INSTRUMENT NO. 88-16258, IN BOOK 1612, PAGE 399 OF OFFICIAL RECORDS.
LEASE NO. 3:
PARCEL 1:
THAT CERTAIN PORTION OF THE NORTH HALF OF SECTION 36, TOWNSHIP 11 SOUTH, RANGE
13 EAST, SAN BERNARDINO MERIDIAN, COUNTY OF IMPERIAL, STATE OF CALIFORNIA,
ACCORDING TO OFFICIAL PLAT THEREOF, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT IN THE SOUTH LINE OF SAID NORTH HALF OF SECTION 36, WHICH
POINT IS NORTH 89(degrees)59'30" WEST, 15 FEET FROM THE SOUTHEAST CORNER
THEREOF; THENCE NORTH 0(degrees)01'30" EAST, 2530.0 FEET PARALLEL WITH AND
15 FEET WEST OF THE EAST LINE TO A POINT, WHICH POINT IS SOUTH 0(degrees)01'30"
WEST 110 FEET AND NORTH 89(degrees)58'30" WEST 15 FEET FROM THE NORTHEAST
CORNER OF SAID SECTION 36; THENCE NORTH 89(degrees)58'30" WEST, 95 FEET TO A
POINT; THENCE NORTH 0(degrees)01'30" EAST, 10 FEET TO A POINT; THENCE NORTH
89(degrees)58'30" WEST, 3719.3 FEET PARALLEL WITH AND 100 FEET SOUTH OF THE
NORTH LINE OF SAID SECTION 36 TO A POINT; WHICH POINT IS SOUTH 89(degrees)58'30"
EAST, 1419.0 FEET AND SOUTH 17(degrees)41'30" EAST, 105.0 FEET FROM THE
NORTHWEST CORNER OF SAID SECTION 36; THENCE SOUTH 17(degrees)41'30" EAST, 76.5
EXHIBIT "A"
Page 3 of 5
<PAGE>
FEET TO A POINT; THENCE SOUTH 36(degrees)36'30" EAST, 1247.0 FEET TO A POINT;
THENCE SOUTH 9(degrees) 49'30" EAST, 749.0 FEET TO A POINT; THENCE SOUTH
61(degrees)10' EAST 268.0 FEET TO A POINT; THENCE SOUTH 29(degrees)47' EAST,
117.8 FEET TO A POINT IN THE WEST LINE OF THE NORTHEAST QUARTER OF SAID SECTION
36, WHICH POINT IS NORTH 0(degrees)01' EAST 498.6 FEET FROM THE CENTER OF SAID
SECTION 36; THENCE SOUTH 29(degrees)47' EAST, 574.6 FEET TO A POINT IN THE SOUTH
LINE OF SAID NORTHEAST QUARTER OF SECTION 36, WHICH POINT IS SOUTH
89(degrees)59'30" EAST 285.6 FEET FROM THE CENTER OF SAID SECTION 36; THENCE
SOUTH 89(degrees)59'30" EAST, 2339.5 FEET TO THE POINT OF BEGINNING.
PARCEL 2:
THE NORTHWEST QUARTER OF SECTION 31, TOWNSHIP 11 SOUTH, RANGE 14 EAST, SAN
BERNARDINO MERIDIAN, IN THE COUNTY OF IMPERIAL, STATE OF CALIFORNIA, ACCORDING
TO OFFICIAL PLAT THEREOF.
PARCEL 3:
THAT PORTION OF THE NORTHEAST QUARTER OF SECTION 31, TOWNSHIP 11 SOUTH, RANGE 14
EAST, SAN BERNARDINO MERIDIAN, IN THE COUNTY OF IMPERIAL, STATE OF CALIFORNIA,
ACCORDING TO OFFICIAL PLAT THEREOF, DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTH QUARTER CORNER OF SAID SECTION 31; THENCE SOUTH
89(degrees)57' EAST 12.1 FEET, MORE OR LESS, TO THE NORTHERLY PROLONGATION OF
THE EASTERLY TOE OF A HEAD DITCH AS LOCATED MARCH 15, 1955; THENCE SOUTH
4(degrees)52' EAST, 2649.06 FEET, MORE OR LESS, ALONG SAID DITCH TO A POINT ON
THE SOUTH LINE OF THE NORTHEAST QUARTER OF SAID SECTION 31; THENCE NORTH
89(degrees)58' WEST 232.8 FEET, MORE OR LESS, TO THE CENTER OF SAID SECTION 31;
THENCE NORTH 0(degrees)04' WEST, 2639.77 FEET, MORE OR LESS, ALONG THE WESTERLY
LINE OF THE NORTHEAST QUARTER OF SAID SECTION 31 TO THE POINT OF BEGINNING.
PARCEL 4:
THE EAST ONE-HALF OF SECTION 31, TOWNSHIP 11 SOUTH, RANGE 14 EAST, SAN
BERNARDINO MERIDIAN, IN THE COUNTY OF IMPERIAL, STATE OF CALIFORNIA, ACCORDING
TO OFFICIAL PLAT THEREOF, EXCEPTING THEREFROM THE PROPERTY DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTH QUARTER CORNER OF SAID SECTION 31; THENCE SOUTH
89(degrees)57' EAST 12.1 FEET, MORE OR LESS, TO THE NORTHERLY PROLONGATION OF
THE EASTERLY TOE OF A HEAD DITCH AS LOCATED MARCH 15, 1955; THENCE SOUTH
4(degrees)52' EAST, 2649.06 FEET, MORE OR LESS, ALONG SAID DITCH TO A POINT ON
THE SOUTH LINE OF THE NORTHEAST QUARTER OF SAID SECTION 31; THENCE
NORTH 89(degrees)58' WEST, 232.8 FEET, MORE OR LESS, TO THE CENTER OF SAID
SECTION 31; THENCE NORTH 0(degrees)04' WEST, 2639.77 FEET, MORE OR LESS,
ALONG THE WESTERLY LINE OF THE NORTHEAST QUARTER OF SAID
EXHIBIT "A"
Page 4 of 5
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SECTION 31 TO THE POINT OF BEGINNING.
PARCEL 5:
THAT PORTION OF THE SOUTHWEST QUARTER OF SECTION 31, TOWNSHIP 11 SOUTH, RANGE 14
EAST, SAN BERNARDINO BASE AND MERIDIAN, IN THE COUNTY OF IMPERIAL, STATE OF
CALIFORNIA, ACCORDING TO OFFICIAL PLAT THEREOF, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT WHICH IS THE CENTER OF SAID SECTION 31, THENCE SOUTHERLY TO
THE SOUTH QUARTER CORNER OF SECTION 31, THENCE WESTERLY ALONG THE SOUTH LINE OF
SECTION 31, 131 FEET TO A POINT, THENCE NORTHERLY TO A POINT IN THE LINE BETWEEN
THE WEST QUARTER CORNER AND THE CENTER OF SECTION 31, WHICH IS 88.17 FEET WEST
OF SAID CENTER, THENCE EASTERLY TO THE POINT OF BEGINNING.
EXHIBIT "A"
Page 5 of 5
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EXHIBIT "B"
Description of the Resource Easement Rights Properties
LEASE NO. 1:
THE SUBSURFACE OF THAT CERTAIN PORTION OF THE SOUTHWEST QUARTER OF SECTION 25,
TOWNSHIP 11 SOUTH, RANGE 13 EAST, SAN BERNARDINO MERIDIAN, COUNTY OF IMPERIAL,
STATE OF CALIFORNIA, ACCORDING TO OFFICIAL PLAT THEREOF, INCLUDING ALL MINERALS
AND GEOTHERMAL RESOURCES CONTAINED THEREIN, DESCRIBED AS FOLLOWS:
BEGINNING AT THE SOUTHWEST CORNER OF SAID SECTION 25; THENCE EAST ALONG THE
SOUTHERLY LINE THEREOF 1170 FEET; THENCE NORTH 33(degrees) 50' WEST 1130 FEET;
THENCE NORTH 71(degrees) 00' WEST 310 FEET; THENCE WEST 247.7 FEET TO THE WEST
LINE OF SAID SECTION; THENCE SOUTH ALONG THE WESTERLY LINE 1039.6 FEET TO THE
POINT OF BEGINNING. EXCEPTING ANY PORTION OF SAID SECTION NOT LYING SOUTH AND
WEST OF THE ALAMO RIVER.
LEASE NO. 2:
PARCEL 1:
SECTION 25, TOWNSHIP 11 SOUTH, RANGE 13 EAST, SAN BERNARDINO MERIDIAN, COUNTY OF
IMPERIAL, STATE OF CALIFORNIA, ACCORDING TO OFFICIAL PLAT THEREOF.
EXCEPTING THEREFROM THAT PORTION OF THE SOUTHWEST QUARTER OF SAID SECTION 25,
DESCRIBED AS FOLLOWS:
BEGINNING AT THE SOUTHWEST CORNER OF SAID SECTION 25; THENCE EAST ALONG THE
SOUTH LINE THEREOF, 1170 FEET; THENCE NORTH 33(degrees)50' WEST, 1130 FEET;
THENCE NORTH 71(degrees)0' WEST, 310 FEET; THENCE WEST 247.7 FEET TO THE WEST
LINE OF SAID SECTION; THENCE SOUTH ALONG SAID WEST LINE, 1039.6 FEET TO THE
POINT OF BEGINNING.
FURTHER EXCEPTING THEREFROM THAT PORTION OF THE SOUTHEAST QUARTER OF SAID
SECTION 25, DESCRIBED AS FOLLOWS:
PARCEL 1, AS SHOWN ON PARCEL MAP M-1901 FILED OCTOBER 6, 1988 IN BOOK 7, PAGE 86
OF PARCEL MAPS IN THE OFFICE OF THE COUNTY RECORDER OF IMPERIAL COUNTY.
PARCEL 2:
THE SOUTHEAST QUARTER OF SECTION 24, IN TOWNSHIP 11 SOUTH, RANGE 13
EXHIBIT "B"
Page 1 of 3
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EAST, SAN BERNARDINO MERIDIAN, COUNTY OF IMPERIAL, STATE OF CALIFORNIA,
ACCORDING TO OFFICIAL PLAT THEREOF.
PARCEL 3:
THAT PART OF THE NORTHEAST QUARTER OF SECTION 26, IN TOWNSHIP 11 SOUTH, RANGE 13
EAST, SAN BERNARDINO MERIDIAN, COUNTY OF IMPERIAL, STATE OF CALIFORNIA,
ACCORDING TO OFFICIAL PLAT THEREOF, LYING EASTERLY OF A LINE DRAWN FROM THE
SOUTHEAST CORNER OF SAID NORTHEAST QUARTER TO A POINT IN THE NORTH LINE, WHICH
IS 1122 FEET WEST OF THE NORTHEAST CORNER OF SAID NORTHEAST QUARTER.
PARCEL 4:
ALL MINERALS, INCLUDING, WITHOUT LIMITATION, OIL, HYDROCARBON GAS AND OTHER
HYDROCARBON SUBSTANCES AND GEOTHERMAL RESOURCES LYING BELOW THE SURFACE OF THAT
PORTION OF THE SOUTHEAST QUARTER OF SECTION 25, TOWNSHIP 11 SOUTH, RANGE 13
EAST, SAN BERNARDINO MERIDIAN, COUNTY OF IMPERIAL, STATE OF CALIFORNIA,
DESCRIBED AS FOLLOWS:
PARCEL 1, AS SHOWN ON PARCEL MAP M-1901 FILED OCTOBER 6, 1988 IN BOOK 7, PAGE 86
OF PARCEL MAPS IN THE OFFICE OF THE COUNTY RECORDER OF IMPERIAL COUNTY.
AS EXCEPTED AND RESERVED IN THE DEED FROM RIVER RANCH, INC., RECORDED OCTOBER 7,
1988 AS INSTRUMENT NO. 88-16258, IN BOOK 1612, PAGE 399 OF OFFICIAL RECORDS.
LEASE NO. 3:
THAT CERTAIN PORTION OF THE NORTH HALF OF SECTION 36, TOWNSHIP 11 SOUTH, RANGE
13 EAST, SAN BERNARDINO MERIDIAN, COUNTY OF IMPERIAL, STATE OF CALIFORNIA,
ACCORDING TO OFFICIAL PLAT THEREOF, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT IN THE SOUTH LINE OF SAID NORTH HALF OF SECTION 36,
WHICH POINT IS NORTH 89(degrees)59'30" WEST, 15 FEET FROM THE SOUTHEAST
CORNER THEREOF; THENCE NORTH 0(degrees)01'30" EAST, 2530.0 FEET PARALLEL WITH
AND 15 FEET WEST OF THE EAST LINE TO A POINT, WHICH POINT IS SOUTH
0(degrees)01'30" WEST 110 FEET AND NORTH 89(degrees)58'30" WEST 15 FEET FROM THE
NORTHEAST CORNER OF SAID SECTION 36; THENCE NORTH 89(degrees)58'30" WEST, 95
FEET TO A POINT; THENCE NORTH 0(degrees)01'30" EAST, 10 FEET TO A POINT; THENCE
NORTH 89(degrees)58'30" WEST, 3719.3 FEET PARALLEL WITH AND 100 FEET SOUTH OF
THE NORTH LINE OF SAID SECTION 36 TO A POINT; WHICH POINT IS SOUTH
89(degrees)58'30" EAST, 1419.0 FEET AND SOUTH 17(degrees)41'30" EAST, 105.0 FEET
FROM THE NORTHWEST CORNER OF SAID SECTION 36; THENCE SOUTH 17(degrees)41'30"
EAST, 76.5
EXHIBIT "B"
Page 2 of 3
<PAGE>
FEET TO A POINT; THENCE SOUTH 36(degrees)36'30" EAST, 1247.0 FEET TO A
POINT; THENCE SOUTH 9(degrees) 49'30" EAST, 749.0 FEET TO A POINT; THENCE SOUTH
61(degrees)10' EAST 268.0 FEET TO A POINT; THENCE SOUTH 29(degrees)47' EAST,
117.8 FEET TO A POINT IN THE WEST LINE OF THE NORTHEAST QUARTER OF SAID SECTION
36, WHICH POINT IS NORTH 0(degrees)01' EAST 498.6 FEET FROM THE CENTER OF SAID
SECTION 36; THENCE SOUTH 29(degrees)47' EAST, 574.6 FEET TO A POINT IN THE SOUTH
LINE OF SAID NORTHEAST QUARTER OF SECTION 36, WHICH POINT IS SOUTH
89(degrees)59'30" EAST 285.6 FEET FROM THE CENTER OF SAID SECTION 36; THENCE
SOUTH 89(degrees)59'30" EAST, 2339.5 FEET TO THE POINT OF BEGINNING.
EXHIBIT "B"
Page 3 of 3
<PAGE>
EXHIBIT "C"
Description of the Geothermal Leases
LEASE NO. 1:
GEOTHERMAL LEASE AND AGREEMENT DATED AS OF OCTOBER 4, 1988, AS HERETOFORE AND
HEREAFTER AMENDED AND/OR ASSIGNED, BY AND BETWEEN RED HILL GEOTHERMAL, INC., AS
LESSOR AND MAGMA POWER COMPANY, AS LESSEE, A MEMORANDUM OF WHICH WAS RECORDED ON
OCTOBER 5, 1988 AS INSTRUMENT NO. 88-16068 IN BOOK 1612, PAGE 36 OF OFFICIAL
RECORDS OF IMPERIAL COUNTY, AS HEREAFTER FROM TIME TO TIME AMENDED.
LEASE NO. 2:
GEOTHERMAL LEASE AND AGREEMENT DATED FEBRUARY 18, 1981, AS HERETOFORE AND
HEREAFTER AMENDED AND/OR ASSIGNED, BY AND BETWEEN RIVER RANCH, INC., AS LESSOR
AND IMPERIAL MAGMA, AS LESSEE, A MEMORANDUM OF WHICH WAS RECORDED ON APRIL 20,
1981 AS INSTRUMENT NO. 73 IN BOOK 1468, PAGE 206 OF OFFICIAL RECORDS OF IMPERIAL
COUNTY, AS AMENDED BY THAT CERTAIN FIRST AMENDMENT TO GEOTHERMAL LEASE AND
AGREEMENT DATED AS OF OCTOBER 10, 1988, A MEMORANDUM OF WHICH WAS RECORDED ON
OCTOBER 11, 1988 AS INSTRUMENT NO. 88-16418 IN BOOK 1612, PAGE 63 OF OFFICIAL
RECORDS OF IMPERIAL COUNTY, AS HEREAFTER FROM TIME TO TIME FURTHER AMENDED.
LEASE NO. 3:
LEASE AGREEMENT DATED AS OF JULY 25, 1978, AS HERETOFORE AND HEREAFTER AMENDED
AND/OR ASSIGNED, BY AND BETWEEN ED C. WIEST AND DOROTHY WIEST, AS LESSOR AND NEW
ALBION RESOURCES CO., INC., AS LESSEE, A SHORT FORM OF WHICH WAS RECORDED ON
AUGUST 16, 1978 AS INSTRUMENT NO. 62, IN BOOK 1420, PAGE 1375 OF OFFICIAL
RECORDS OF IMPERIAL COUNTY, AS AMENDED BY THAT CERTAIN AMENDMENT TO LEASE DATED
AS OF OCTOBER 10, 1988, RECORDED ON OCTOBER 12, 1988 AS INSTRUMENT NO. 88-16491,
IN BOOK 1612, PAGE 783 OF OFFICIAL
EXHIBIT "C"
Page 1 of 1
<PAGE>
EXHIBIT "D"
Description of the Leathers Property
PARCEL 1, AS SHOWN ON PARCEL MAP M-1901 FILED OCTOBER 6, 1988 IN BOOK 7, PAGE 86
OF PARCEL MAPS IN THE OFFICE OF THE COUNTY RECORDER OF IMPERIAL COUNTY, BEING A
PORTION OF THE SOUTHEAST QUARTER OF SECTION 25, TOWNSHIP 11 SOUTH, RANGE 13
EAST, SAN BERNARDINO MERIDIAN, IN THE COUNTY OF IMPERIAL, STATE OF CALIFORNIA.
EXCEPTING THEREFROM ALL MINERALS LYING BELOW THE SURFACE OF SAID LAND,
INCLUDING, WITHOUT LIMITATION, OIL, HYDROCARBON GAS AND OTHER HYDROCARBON
SUBSTANCES AND GEOTHERMAL RESOURCES, BUT WITHOUT THE RIGHT OF SURFACE ENTRY; AS
EXCEPTED AND RESERVED IN THE DEED FROM RIVER RANCH, INC., RECORDED OCTOBER 7,
1988 AS INSTRUMENT NO. 88-16258, IN BOOK 1612, PAGE 399 OF OFFICIAL RECORDS.
EXHIBIT "D"
Page 1 of 1
<PAGE>
GROUND LEASE
PREAMBLE
THIS GROUND LEASE (the "Lease") is made as of March 14, 1988, by and
between MAGMA POWER COMPANY, a Nevada corporation ("Landlord"), and DEL RANCH,
LTD., A CALIFORNIA LIMITED PARTNERSHIP, a limited partnership organized under
the laws of the State of California ("Tenant").
AGREEMENT
1. Certain Definitions. Unless the context shall otherwise require,
capitalized terms used and not otherwise defined herein shall have the
respective meanings assigned thereto in Schedule Z hereto, which shall be
incorporated by reference herein.
2. Lease.
2.1. Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, the "Premises," as that term is defined in Section 3 hereof, on the
terms and conditions, and subject to the reservations, set forth in this Lease.
2.2. Landlord hereby reserves from the Leasehold estate granted to
Tenant by this Lease the right to use the surface of the Del Ranch Property in
order to enable the operation of the Vulcan Facility and to obtain, use, extract
and develop the Reserved Geothermal Brine and the Geothermal Brine Scale,
together with reasonable access thereto for road and utility purposes, but only
to the extent that such use does not cause any material interference with
Tenant's construction, operation and maintenance of the Del Ranch Facility. The
right reserved by Landlord in this Section 2.2 includes, without limitation, the
right to construct, operate and maintain pipelines, buildings, structures,
equipment and other improvements over, under and upon the surface of the Del
Ranch Property, including, but not limited to, Additional Power Production
Facilities, and warehouse(s) for the storage of Critical Parts and Equipment and
other parts and equipment owned or within the control of Landlord which may be
stored in such warehouse(s) for use in Additional Power Production Facilities
and to use the surface of the Del Ranch Property in a commercially reasonable
manner in order to "tap" into the Supporting Equipment and any other equipment
or piping carrying or containing Geothermal Brine or Geothermal Brine Scale from
the Del Ranch Facility to injection wells thereby affording to Landlord access
to such Geothermal Brine and the Geothermal Brine Scale in an oxygen-free
environment; provided, however, that, notwithstanding any other provision in
this Lease to the contrary, Landlord shall pay all costs, direct and indirect,
incurred by Tenant
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as a result of Landlord's exercising the rights reserved to Landlord in this
Section 2. Notwithstanding any other provision in this Lease to the contrary, in
the event that Landlord desires to exercise its rights under this Section 2.2,
Landlord shall obtain the prior written consent of Tenant, which consent shall
not be unreasonably withheld. The standards to be applied by Tenant in giving or
withholding such consent shall be as provided in Section 2.3.4 of the Easement
Agreement.
2.3. The rights reserved by Landlord from the leasehold estate
granted to Tenant pursuant to this Lease shall be assignable by Landlord in
whole or in part to successors and assigns. Without limiting the generality of
the foregoing, Landlord may sell, assign, encumber and grant leasehold estates
in such rights to other persons.
3. Premises.
3.1. The "Premises" that are the subject of this Lease consist of
the Del Ranch Property as more particularly described in Exhibit "A" hereto, BUT
EXCLUDING THEREFROM (a) all rights reserved by Landlord as set forth in Section
2 hereof.
3.2. Concurrent with the delivery of this Lease, Landlord has
delivered to Tenant an instrument transferring ownership from Landlord to Tenant
of all improvements existing on or in the Premises at the Recordation Date as
that term is defined in Section 4 hereof. Such improvements shall be held, used,
altered and disposed of by Tenant in accordance with the terms and conditions of
this Lease.
3.3. At any time and from time to time during the term of this
Lease, within thirty (30) days after written request from Landlord, Tenant shall
enter into an amendment to this Lease, which shall delete from the legal
description of the Del Ranch Property that portion thereof as to which any other
Person has a right to possession, in accordance with the following:
3.3.1 Both the portion of the Del Ranch Property being
released from the encumbrance of this Lease, and the portion of the Del Ranch
Property remaining subject to the encumbrance of this Lease after such release,
shall be legal lots in compliance with the California Subdivision Map Act and
other state or local ordinances thereunder; and
3.3.2 The amendment shall contain all cross-easements,
covenants, conditions, restrictions and agreements reasonably requested by
Tenant to facilitate the construction, operation and maintenance of the Del
Ranch Facility at a level which allows the Del Ranch Facility to
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drill for, produce, extract, store, utilize, reclaim, convert, sell, transfer,
dispose and Process Geothermal Brine up to the amount necessary to meet the Del
Ranch Facility Brine Requirement in connection with the generation of electrical
energy at the Del Ranch Facility.
4. Term. The term of this Lease shall commence upon the recordation of
a Memorandum of this Lease in the Office of the County Recorder of Imperial
County, California (the "Recordation Date"), and, unless sooner terminated as
provided in this Lease, shall end on the date which is thirty-two (32) years
thereafter (the "Expiration Date").
5. Rent.
5.1. In addition to other sums payable by the term of this lease,
Tenant shall pay to Landlord, without abatement, deduction or offset, the
following sums:
5.1.1. As "Initial Rent" for the Premises for the period
beginning on June 30, 1987 and ending on December 31, 1987, the lump sum of
$10,000.00, payable in advance on the Recordation Date.
5.1.2. As "Base Monthly Rent" for the Premises for the period
beginning on January 1, 1988 and continuing monthly thereafter throughout the
term of this Lease, but subject to adjustment as provided in Section 5.2 hereof,
the sum of $1,667.00 per month, payable in advance on the first day of each
month.
5.1.3. Rent for any period during the term hereof which is for
less than one month shall be prorated based upon the actual number of days
elapsed in the calendar month involved. Rent shall be payable in lawful money of
the United States to Landlord at the address stated herein or to such other
persons or at such other places as Landlord may designate in writing.
5.2. The Base Monthly Rent shall be subject to annual adjustments as
follows:
5.2.1. For purpose of this Lease, a "Lease Year" shall be
deemed to begin on January 1 of each calendar year throughout the term of this
Lease.
5.2.2. For the Lease Year beginning on January 1, 1989, and
for each Lease Year thereafter, the Base Monthly Rent of $1,667.00 payable under
Section 5.1.2 hereof shall be adjusted to reflect the increase, if any, in the
Consumer Price Index published by the Bureau of Labor Statistics of the
Department of Labor for All Urban Consumers, All Items, for the Los
Angeles-Anaheim-Riverside Metropolitan Area (the "CPI"), as hereinafter
provided.
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5.2.3. The Base Monthly Rent payable pursuant to Section 5.2.2
hereof shall be calculated as follows: The Base Monthly Rent of $1,667.00
payable under Section 5.1.2 hereof above shall be multiplied by a fraction, the
numerator of which shall be the CPI for the month of September in the year
preceding the Lease Year for which the adjustment is to be made, and the
denominator of which shall be the CPI for the month of September 1987. The sum
so calculated shall constitute the new Base Monthly Rent hereunder, but in no
event shall such new Base Monthly Rent be less than the Base Monthly Rent
payable for the month immediately preceding the Lease Year for which the
adjustment is to be made.
5.2.4. In the event that the publication of the CPI shall be
transferred to any other governmental department or bureau or agency or shall
be discontinued, then the index most nearly the same as the CPI, as determined
in good faith by Landlord, shall be used to make such calculations.
5.2.5. Tenant shall continue to pay Base Monthly Rent at the
rate previously in effect until the increase, if any, is determined. Within ten
(10) days following the date on which the increase is determined, Tenant shall
make such payment to Landlord as will bring the increased Base Monthly Rent
current, commencing with the effective date of such increase at the beginning of
the Lease Year for which the adjustment is to be made through the date of any
installments of Base Monthly Rent then due. Thereafter, the Base Monthly Rent
shall be paid at the increased rate.
6. Taxes, Assessments and Utilities.
6.1. As used in this Lease, the term "real property tax" shall
include any form of real estate tax or assessment, general, special, ordinary or
extraordinary, and any license, fee, rental tax, tax on the right to do
business, when Landlord's collection of rent under this Lease is defined as
doing business, improvement bond, levy or tax (other than inheritance, personal
income or estate taxes) imposed on the Del Ranch Property or any portion thereof
by any authority having the direct or indirect power to tax, including any city,
county, state or federal government, or any school, agricultural, sanitary,
fire, street, drainage or other improvement district thereof, as against any
legal or equitable interest of Landlord in the Del Ranch Property or in any
portion thereof, as against Landlord's right to rent or other income therefrom,
and as against Landlord's business of leasing the Premises. The term "real
property tax" shall also include any tax, fee, levy, assessment or charge (a) in
substitution of, partially or totally, any tax, fee, levy,
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assessment or charge hereinafter included within the definition of "real
property tax," or (b) the nature of which was heretofore included within the
definition of "real property tax," or (c) which is imposed for any service or
right not charged prior to June 1, 1978, or (d) which is imposed as a result of
a change in ownership, as defined by applicable local statutes for property tax
purposes, or which is added to a tax or charge heretofore included within the
definition of "real property tax" by reason of such change of ownership, or (e)
which is imposed by reason of this transaction, any modifications or changes
hereto, or any transfers hereof.
6.2. Tenant shall pay before delinquency all real property taxes,
all personal property taxes, and all taxes, charges and assessments of every
other description levied on or assessed against the Del Ranch Property and the
Del Ranch Facility and personal property owned or leased by Tenant located
thereon, the leasehold estate created hereby, or any subleasehold estate, to the
full extent of installments falling due during the term, whether chargeable
against Landlord or Tenant. Tenant shall make all such payments directly to the
charging authority before delinquency and before any fine, interest or penalty
shall become due or be imposed by operation of law for their nonpayment. If,
however, the law expressly permits the payment of any or all of the above items
in installments (whether or not interest accrues on the unpaid balance), Tenant
may, at Tenant's election, utilize the permitted installment method, but shall
pay each installment with any interest before delinquency.
6.3. All payments of taxes or assessments shall be prorated for any
portion of a tax fiscal year at the commencement or expiration of the term of
this Lease, expect as provided in Section 6.4 hereof. Such proration shall be
made by multiplying the entire tax or assessment by a fraction which in the case
of determining Tenant's liability for such taxes and assessments, shall have a
numerator equal to the number of days that this Lease is in effect during the
tax fiscal year for which the calculation is being made, and shall have a
denominator equal to 365 or 366, as the case may be.
6.4. For permitted installment payments of special taxes or
assessments where at least the first installment fell due before the Recordation
Date, Tenant shall pay all installments falling due after the Recordation Date.
For permitted installment payments of special taxes or assessments where the
first installment falls due before the expiration of the term, Tenant shall pay
only the installment(s) falling due before the expiration of the term.
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<PAGE>
6.5. If the Premises are assessed with other real or personal
property of Landlord apart from the Del Ranch Property, all taxes imposed on the
entire assessed property shall be prorated, and Tenant shall pay that amount
which equals the product obtained by multiplying the entire tax by a fraction,
the numerator of which equals the value of the Del Ranch Property and the
denominator of which equals the value of all of the property so assessed.
6.6. Tenant may contest the legal validity or amount of any taxes,
assessments or charges for which Tenant is responsible under this Lease, and may
institute such proceedings as Tenant considers necessary. If Tenant contests any
such tax, assessment or charge, Tenant may withhold or defer payment or pay
under protest, but shall protect Landlord and the Del Ranch Property from any
lien by surety bond or other appropriate security reasonably acceptable to
Landlord. Landlord appoints Tenant as Landlord's attorney-in-fact for the
purpose of making all payments to any taxing authorities and for the purpose of
contesting any taxes, assessments or charges affecting the Premises, conditioned
on Tenants's preventing any liens from being levied on the Del Ranch Property or
on Landlord.
6.7. Tenant agrees to pay, before the same become delinquent, all
charges for gas, electricity, heat, light, power, sewage, water, telephone,
trash removal, and other similar or dissimilar public services or commodities
furnished to the Premises and the Del Ranch Facility during the term of this
Lease, including all installation, connection and disconnection charges.
6.8. All taxes, assessments, utilities, insurance premiums,
maintenance costs and other rent payable hereunder shall be paid as "triple-net"
rent, without deduction or offset. It is the intent of the parties that the rent
provided in this Lease shall be absolutely net to Landlord, and that, expect as
otherwise expressly provided in this Lease, Tenant shall pay all costs and
charges of every kind and nature incurred for, against, or in connection with
the Premises which may arise or become due from and after the Recordation Date
and during the term hereof. Provided, however, that nothing herein shall be
construed to require Tenant to pay any installment of interest or principal
owing on any encumbrance against the Del Ranch Property for which Landlord is
the obligor. All such costs and charges at the commencement and the end of the
term of this Lease shall be appropriately prorated between the parties.
7. Use.
7.1. Tenant shall continuously use and permit the use of the
Premises only for the construction, maintenance and operation of the Del Ranch
Facility, substan-
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tially in accordance with the Plans and Specifications and any "as-built" plans
and as contemplated by the Operating Agreements.
7.2. This Lease is and shall be subject and subordinate to the
rights reserved by Landlord with respect to the Premises as set forth in Section
2 hereof.
7.3. Tenant shall, at Tenant's expenses promptly comply in all
material respects with all applicable statutes, ordinances, rules, regulations,
orders, covenants and restrictions of record, and requirements of any fire
insurance underwriters or rating bureaus, now in effect or which may hereafter
come into effect, whether or not they reflect a change in policy from that now
existing, during the term or any part of the term hereof, relating in any manner
to the Premises and the occupation and use by Tenant of the Premises. Tenant
shall conduct its business in a lawful manner and shall not use or permit the
use of the Premises in any manner that will create unnecessary waste of assets
or a nuisance.
7.4 Without limiting the generality of the foregoing Tenant shall,
at Tenant's expense, comply with all applicable federal, state, regional and
local environmental statutes, ordinances, rules, regulations and orders now in
effect or which may hereafter come into effect including, without limitation,
the Resource Conversation and Recovery Act, the Comprehensive Environmental
Response Compensation and Liability Act, the Hazardous Materials Transportation
Act, the Toxic Substances Control Act, the Clean Air Act, the Clean Water Act,
the California Hazardous Waste Control Act, the California Hazardous Substance
Act, the Porter-Cologne Water Quality Control Act and any all regulations
promulgated pursuant thereto.
7.5 Tenant agrees to indemnify, defend by counsel reasonably
acceptable to Landlord, and hold harmless Landlord, its subsidiaries,
affiliates, successors and assigns and their respective directors, officers,
employees, shareholders, representatives and agents from and against and in
respect of any and all claims, damages (including, without limitation,
diminution in value), losses, liabilities and expenses, lawsuits, deficiencies,
interest, penalties, attorneys'fees and all amounts paid in defense or
settlement of the foregoing whether or not arising out of third-party claims,
which may be imposed upon or incurred by Landlord or asserted against Landlord
by any other party or parties in connection with any violation of the provisions
of this Section 7 arising out of, resulting from, or attributable to, the
assets, business, or operations of Tenant at the Del Ranch Property. Tenant's
obligations pursuant to this subsection shall exist regardless of whether
Landlord is alleged or held to be strictly or jointly and severally
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liable, unless such liability is by reason of the Landlord's gross negligence or
willful misconduct.
7.6 Without in any way limiting the scope of Tenant's obligations
under the indemnification provisions of this Section 7, but subject to
Landlord's obligation under Section 2 hereof to pay all direct and indirect
costs associated with Landlord's exercise of the rights reserved to it in
Section 2 hereof, Tenant will be responsible for all investigations, studies,
cleanup, corrective action or response or remedial action required by any local,
state or federal government agency now or hereafter authorized to regulate
environmental or other matters or by any consent decree, or court or
administrative order now or hereafter applicable to the Del Ranch Property, or
by any federal, state or local law, regulation, rule or ordinance now or
hereafter in effect.
7.7 As between Landlord and Tenant, Tenant shall have the
responsibility and right to participate in the management and control of all
investigations and any environmental cleanup, remediation, or related
activities. Tenant, however, may not negotiate with, fulfill any requirements
or claims made by a governmental entity or third party settle or contest such
requirement or third-party claim without the express approval of Landlord, and
Landlord shall have the right to participate fully in any and all meetings,
negotiations or decisions relevant to the investigation or remediation of the
violation of the provisions of this Section 7 at the Del Ranch Property.
7.8 Tenant hereby accepts the Premises in its condition existing as
of the Recordation Date, subject to all applicable zoning, municipal, county and
state laws, ordinances and regulations governing and regulating the use of the
Premises, and all exceptions set forth in the Del Ranch Property Preliminary
Title Report and other matters of record or otherwise disclosed to Tenant prior
to the date hereof, and accepts this Lease subject thereto. Tenant acknowledges
that is has satisfied itself by its own independent investigation that the
Premises are suitable for its intended use, and that neither Landlord nor
Landlord's agent or agents has made any representation or warranty as to the
present or future suitability of the Premises for the conduct of Tenant's
business.
8. Maintenance, Repairs, Alterations.
8.1 Throughout the term, Tenant shall, at Tenant's sole cost and
expense, maintain the Premises and the Del Ranch Facility in good condition and
repair, ordinary wear and tear excepted, in accordance with all applicable laws,
rules, ordinances, orders and regulations of (a) federal, state, county,
municipal and other governmental
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agencies and bodies having or claiming jurisdiction and all their respective
departments, bureaus, and officials, (b) any insurance underwriting board or
insurance inspection bureau having or claiming jurisdiction, and (c) any
insurance company insuring all or any part thereof.
8.2 Except a provided below, and subject to the provisions of the
Project Lender's Loan Documents, Tenant shall promptly and diligently repair,
restore and remedy all damage to or destruction of all or any part of the Del
Ranch Facility, if the cost of the work so required does not exceed fifty
percent (50%) of the entire replacement value of all such improvements;
provided, however, that Tenant shall have no obligation to repair, restore and
remedy any such damage or destruction arising out of the gross negligence or
willful misconduct of Landlord unless the gross negligence or willful
misconduct of Tenant contributes to such damage or destruction, in which case
the cost of repairs, restoration and remedial work shall be apportioned among
Landlord and Tenant in direct proportion to their respective culpability with
respect to such damage or destruction. If the cost does exceed fifty percent
(50%) of the entire replacement value of all such improvements, Tenant may
nevertheless repair, restore and remedy the same, or may by notice given within
sixty (60) days after the date on which the damage or destruction occurs elect
instead to raze the improvements damaged or destroyed. Within ninety (90) days
after such notice, Landlord may by notice elect to repair, restore and remedy
such damage or destruction at landlord's cost and expense, and Tenant shall not
raze the improvements until the expiration of the time for Landlord's notice of
election.
8.3. Tenant has the right to contest by appropriate judicial or
administrative proceedings, without cost or expense to Landlord, the validity
or application of any law, ordinance, order, rule, regulation or requirement
(collectively called "law") that Tenant repair, maintain, alter or replace any
improvements in whole or in part, and Tenant shall not be in default for
failing to do such work until a reasonable time following final determination of
Tenant's contest. If requested by Landlord, Tenant shall first furnish to
Landlord a bond, satisfactory to Landlord in form, amount and insurer,
guaranteeing compliance by Tenant with the contested law and indemnifying
Landlord against all liability that Landlord may sustain by reason of Tenant's
failure or delay in complying with the law. Landlord may, but is not required
to, contest any such law independently of Tenant. Landlord may, and if
requested by Tenant shall, join in Tenant's contest.
8.4. Landlord's approval is not required for Tenant's minor
alterations or additions to any improvements with a Construction Cost not
exceeding $7,500,000. "Construction Cost" includes all costs that would
constitute
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the basis of a valid claim or claims under the mechanics' lien laws, including
costs for any demolition or removal of existing improvements or parts thereof,
as well as costs for preparation, construction and completion of all new
improvements. All alterations or additions with a Construction Cost in excess
of $7,500,000 shall require Landlord's prior written consent.
8.5. Tenant shall use only reputable licensed contractors in making
any alterations or additions, and Landlord may require Tenant to provide to
Landlord, at Tenant's sole cost and expense, a lien and completion bond in an
amount equal to one and one-half times the estimated cost of such improvements,
to insure Landlord against any liability for any mechanic's and materialmen's
liens to insure completion of the work. Should Tenant make any alterations or
additions without the prior written consent of Landlord where such consent is
necessary, or use other than a reputable licensed contractor, Landlord may, at
any time during the term of this Lease, require that Tenant remove any part or
all of the same.
8.6. Tenant shall pay, when due, all claims for labor or materials
furnished to or for Tenant at or for use in the Premises, which claims are or
may be secured by any mechanic's or materialmen's lien against the Del Ranch
Property or any interest therein.
8.7. Tenant shall give Landlord not less than ten (10) days' notice
prior to the commencement of any alteration or additions to the Premises by
Tenant, and Landlord shall have the right to post notices of non-responsibility
in or on the Premises as provided by law. If Tenant shall, in good faith,
contest the validity of any lien, claim or demand, then Tenant shall, at its
sole expense, defend itself and Landlord against and same and shall pay and
satisfy any adverse judgment that may be rendered thereon before the
enforcement thereof against the Landlord or the Del Ranch Property, upon the
condition that if Landlord shall require, Tenant shall furnish to Landlord a
surety bond satisfactory to Landlord in an amount equal to such contested lien
claim or demand, indemnifying Landlord against liability for the same and
holding the Del Ranch Property free from the effect of such lien or claim. In
addition, Landlord may require Tenant to pay Landlord's reasonable attorneys'
fees and costs in participating in such action, if Landlord shall decide it is
to Landlord's best interest so to do.
8.8 All alterations and additions which may be made to the Premises
by Tenant shall be made and done in a good and workmanlike manner and of good
quality and materials, and, subject to the provisions of Sections 8.11 and 8.13
hereof, shall be the property of Landlord at the expiration of the term of the
Lease. Notwithstanding the
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provisions of this Section, and provided that Tenant is not in default under
this Lease, Tenant's personal property and equipment, other than that which is
affixed to the Premises so that it cannot be removed without material damage to
the Premises, shall remain the Property of Tenant and may be removed by Tenant,
subject to the provisions of Section 8.11 hereof.
8.9. Promptly upon completion of any alterations or additions to
the Premises, Tenant shall provide Landlord with two (2) sets of "as-built"
plans and specifications.
8.10. Subject to Landlord's right to require the Decommissioning of
the Del Ranch Facility pursuant to Sections 8.11 and 8.13 hereof, on the last
day of the term hereof, or on any sooner termination, Tenant shall surrender
the Premises and all improvements thereon the Landlord, in good condition and
repair, ordinary wear and tear excepted, clean and free of debris. Any damage
or deterioraion of the Premises or improvements shall not be deemed ordinary
wear and tear if the same could have been prevented by good maintenance
practices by Tenant. Tenant shall repair any damage to the Premises occasioned
by the installation or removal of Tenant's trade fixtures, alterations,
furnishings and equipment.
8.11. Notwithstanding any other provision in this Lease to the
contrary, in the event the Del Ranch Facility or the Premises is wholly or
partially damaged or destroyed on or after the date which is exactly five (5)
years prior to the date on which this Lease terminates pursuant to Section 4
hereof, and the cost to repair, restore or reconstruct the Del Ranch Facility
and the Premises is at least $7,500,000, Tenant, not later than fifteen (15)
days after the event causing such damage or destruction, shall give written
notice to Landlord detailing the facts that qualify the casualty under this
provision. Landlord, not later than fifteen (15) days following receipt of such
notice from Tenant, shall by written notice to Tenant inform Tenant whether (a)
Landlord desires the Decommissioning by Tenant of the Del Ranch Facility and
the Premises or (b) Landlord desires the surrender by Tenant of the Del Ranch
Facility and the Premises at the end of the term of this Lease. In the event
Landlord elects to have Tenant Decommission the Del Ranch Facility and the
Premises pursuant to the provisions of this Section 8.11, (a) Tenant shall
forthwith commence such Decommissioning and shall diligently proceed until such
Decommissioning is complete, (b) Tenant shall have the right to all proceeds of
insurance received on account of such casualty and (c) Tenant shall surrender
the Premises to Landlord immediately after such Decommissioning and this Lease
and all of Tenant's obligations hereunder shall terminate except for Tenant's
obligations to indemnify
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Landlord pursuant to Section 7.3 hereof and to pay any rent which
accrued pursuant to Section 5 hereof. In the event Landlord elects to have
Tenant surrender the Del Ranch Facility and the Premises to Landlord at the end
of the term of this Lease, then the provisions of Section 8.13 shall cease to
be effective and Tenant shall forthwith commence to repair, restore and
reconstruct the Del Ranch Facility and the Premises in the manner and subject
to the terms provided in Section 8.2 hereof.
8.12. Except as provided in Section 8.13 hereof, all improvements
constructed by Tenant on the Premises shall, at the expiration of the term or
earlier termination of this Lease, without compensation to Tenant, become
Landlord's property free and clear of all claims to or against them by Tenant or
any third person, and Tenant shall defend and indemnify Landlord against all
liability and loss arising from any such claims or from Landlord's exercise of
the rights conferred by this Section.
8.13. At the expiration or earlier termination of the term,
Landlord may, at Landlord's election, demand the removal from the Premises of
any or all fixtures or improvements or both (a "Decommissioning"), as specified
in the notice provided below. A demand to take effect at the normal expiration
of the term shall be effected by notice given at any time not later than nine
(9) months before the expiration date. A demand to take effect on any other
termination of this Lease shall be effected by notice given in or concurrently
with notice of such termination or within thirty (30) days after such
termination. Tenant shall comply with the notice on or before the expiration
date for normal termination, and within ninety (90) days after the notice for
other terminations. The duty imposed by this provision includes, but is not
limited to, the duty to demolish and remove all foundations, fix all
excavations, return the surface to grade, and leave the Premises safe and free
from debris and hazards, in a safe manner, in accordance with good operating
practice and in compliance with all applicable laws and regulations of any
governmental authority having jurisdiction over such operations. In the event
Landlord elects to require such Decommissioning by Tenant, Tenant shall be
entitled to all fixtures and improvements as Decommissioned.
9. Assignment and Subletting. Subject to the provisions of Section 10
hereof, Tenant shall not voluntarily or by operation of law assign, transfer,
mortgage, sublet or otherwise transfer or encumber all or any part of Tenant's
interest in this Lease or in the Premises, without Landlord's prior written
consent, which consent Landlord shall not unreasonably withhold.
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10. Rights of Lender.
10.1. Notwithstanding any other provision in this Lease to the
contrary, Tenant may, from time to time, without notifying or obtaining the
consent of Landlord, hypothecate, mortgage, pledge or alienate Tenant's interest
in this Lease to the Project Lender. The Project Lender shall give prompt
written notice to Landlord of (i) its entering into a credit agreement
evidencing the Project Lender's Loan and the total amount of funds available
thereunder, or of the nature of the transaction, (ii) any amendments to said
credit agreement and (iii) the Project Lender's address for notices hereunder;
provided, however, that any failure by the Project Lender to give such notice
shall not be grounds for denying the Project Lender the rights and protections
provided in this Section 10.
10.2. For the protection of the Project Lender, Landlord agrees as
follows:
10.2.1. Landlord shall not accept any abandonment of this
Lease, nor shall Landlord consent to any amendment, modification or termination
hereof, provided, that Landlord has received actual or constructive notice of
the Project Lender's Lien, unless and until Tenant presents evidence to Landlord
that Tenant has obtained the prior written consent of the Project Lender.
10.2.2. The Project Lender shall have the right, but not the
obligation, at any time prior to the expiration or earlier termination of this
Lease, and without payment of any penalty, to make any payments due hereunder,
and to do any other act or thing required of Tenant hereunder, and to do any act
or thing that may be necessary and proper to be done in the performance and
observance of the terms hereof to prevent any default under or termination of
this Lease. All payments so made and all things so done and permfored by the
Project Lender shall be as effective to prevent any default under or
termination of this Lease as they would have been if made, done and performed by
Tenant instead of by the Project Lender. Landlord hereby agrees that upon
Landlord's receipt of any notice in the nature of a notice of default with
respect to any obligation of Landlord under the Geothermal Leases, Landlord
shall immediately deliver a copy of such notice to Tenant and to the Project
Lender provided that Landlord has received actual or constructive notice of the
Project Lender's Lien.
10.2.2. Tenant shall not be in default under this Lease unless
Tenant fails to perform the obligations required of it hereunder within the
time periods set forth herein, including all applicable cure periods. If Tenant
fails to cure any default within the time so provided, then upon written notice
from Landlord to the Project
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Lender, the Project Lender shall have an additional ninety (90) days to cure
such default; provided, however, that if such default cannot reasonably be
cured within such additional ninety (90) day period, then the Project Lender
shall have such additional time to cure the default as is reasonably necessary
under the circumstances, so long as (a) the Project Lender shall have fully
cured within such ninety (90) day period any default in the payment and
performance of any monetary or other obligations of Tenant hereunder that do
not require possession of the Premises and shall thereafter continue to
faithfully perform all such monetary and other obligations, (b) the Project
Lender shall have acquired Tenant's interest hereunder or commenced foreclosure
or other appropriate proceedings in the nature thereof within such period or
prior thereto, and shall be diligently prosecuting any such proceedings to
completion, and (c) the Project Lender shall take all reasonable measures
within its control (including steps to obtain control) to continue Tenant's
operations of the Del Ranch Facility under this Lease. All rights of Landlord
to terminate this Lease as a result of the occurrence of any default by Tenant
shall be subject to, and expressly conditioned upon, (i) the Project Lender's
having received the notice specified above in this Section 10.2.3, and (ii) the
project Lender's having failed to remedy such default or to acquire Tenant's
interest hereunder or commence foreclosure or other appropriate proceedings or
to take reasonable measures to continue Tenant's operations of the Del Ranch
Facility as set forth in this Section 10.2.3.
10.2.4. Any default by Tenant under this Lease that cannot be
remedied by the Project Lender shall nevertheless be deemed to have been
remedied if (a) within ninety (90) days after receiving written notice from
Landlord setting forth the nature of such default, or prior thereto, the
Project Lender shall have acquired Tenant's interest hereunder or shall have
commenced foreclosure or other appropriate proceedings in the nature thereof,
(b) the Project Lender shall diligently prosecute any such proceedings to
completion, (c) the Project Lender shall have taken reasonable measures within
its control (including steps to obtain control) to continue Tenant's operations
of the Del Ranch Facility in accordance with the terms of this Lease, (d) the
Project Lender shall have fully cured within such ninety (90) day period any
default in the payment and performance of any monetary or other obligations of
Tenant hereunder that do not require possession of the Premises and shall
thereafter continue to faithfully perform all such monetary and other
obligations, and (e) after gaining possession of the Premises, the Project
Lender shall perform all obligations of Tenant hereunder and which arise
thereafter.
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10.2.5. If the Project Lender is prohibited by any process or
injunction issued by any court or by reason of any action of any court having
jurisdiction over any bankruptcy, reorganization, insolvency or other
debtor-relief proceeding involving Tenant, from commencing or prosecuting
foreclosure or other appropriate proceedings in the nature thereof, then the
times specified in Sections 10.2.3 and 10.2.4 hereof for commencing or
prosecuting such foreclosure or other proceedings shall be extended for the
period of such prohibition; provided, however, that the Project Lender shall
have fully cured any default in the payment or performance of any monetary or
other obligations of Tenant under this Lease that do not require possession of
the Premises, and shall continue to pay and perform such monetary and other
obligations as and when they fall due, and shall have taken reasonable measures
within its control (including steps to obtain control) to continue Tenant's
operations of the Del Ranch Facility.
10.2.6. Landlord shall mail or deliver to the Project Lender a
duplicate copy of any and all written notices that Landlord may from time to
time give to or serve upon Tenant pursuant to the provisions hereof, and such
copies shall be mailed or delivered to the Project Lender at, or as near as
possible to, the same time such notices are given to or served upon Tenant. No
notice by Landlord to Tenant hereunder shall be deemed to have been given unless
and until a copy thereof shall have been mailed or delivered to the Project
Lender.
10.2.7. Foreclosure of the Project Lender's Lien or any sale
thereunder, whether by judicial proceedings or otherwise, or any conveyance or
transfer of the interest of Tenant under this Lease from Tenant to the Project
Lender through, or in lieu of, foreclosure or other appropriate proceedings in
the nature thereof, shall not require the consent of Landlord or constitute a
breach of any provision of or a default under this Lease, and upon such
foreclosure, sale or conveyance Landlord shall recognize the Project Lender, or
any other foreclosure sale purchaser, as Tenant hereunder. In the event the
Project Lender becomes the Tenant under this Lease as provided herein, then the
Project Lender shall be personally liable for the obligations of Tenant under
this Lease only for the period of time that the Project Lender remains Tenant
hereunder, and the Project Lender shall have the right to assign this Lease
thereafter without any restriction otherwise imposed on Tenant hereunder;
provided, however, that the assignee of the Project Lender shall have expressly
assumed all of the obligations of Tenant hereunder. Notwithstanding any other
provision of this Lease, in the event that the Project Lender (a) performs any
monetary or other obligation of Tenant under this Lease, (b) acquires any
portion of the right, title or interest in the leasehold estate created by this
Lease, (c)
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continues Tenant's operations of the Premises under this Lease and/or (d)
becomes personally liable to Landlord hereunder, then the Project Lender's
obligations and liability to Landlord shall be limited by and to the Project
Lender's right, title and interest, if any, in the leasehold estate created by
this Lease, and Landlord shall have no recourse against the Project Lender in
excess of, and other than to proceed against, such right, title and interest, if
any, in the leasehold estate created by this Lease, and Landlord shall have no
recourse against the Project Lender in excess of, and other than to proceed
against, such right, title and interest.
10.2.8. Upon Landlord's receipt of any notice in the nature of a
notice of default with respect to any obligation of Landlord secured by any lien
upon the Premises, Landlord shall immediately deliver a copy of such notice to
Tenant and to the Project Lender. If and whenever the Project Lender shall deem
it necessary or appropriate to do so in order to protect its rights under this
Lease, it may, at its option, pay and discharge any mortgage or other lien
(including, without limitation, the lien of general or special property taxes or
special assessments) attached to the Premises or any portion thereof, and in
such event it shall be subrogated to all the rights of the mortgagee,
beneficiary, owner or holder of such mortgage or other lien.
10.2.9. In the event that this Lease is rejected by a trustee or
debtor-in-possession in any bankruptcy or insolvency proceeding or is
terminated for any other reason (except as a result of a default hereunder which
was curable hereunder but which was not appropriately cured as provided herein)
and if, within sixty (60) days after such rejection or other termination, the
Project Lender shall so request, Landlord will execute and deliver to the
Project Lender a new ground lease of the Del Ranch Property. Such new ground
lease shall be for a term equal to the remainder of the term of this Lease
before giving effect to such rejection or other termination, and shall contain
the same covenants, agreements, terms, provisions and limitations as contained
in this Lease (except for any requirements which shall have been fulfilled by
Tenant prior to such rejection or other termination). Landlord shall, at the
expense of the Project Lender and at no expense to Landlord, cooperate with the
Project Lender and take such action in compliance with law as Project Lender
shall reasonably request to remove Tenant from the Del Ranch Property.
10.2.10. Landlord and Tenant acknowledge, agree and covenant that
notwithstanding the union of the fee simple title with any right, title or
interest in the leasehold estate created hereby or under any other document or
instrument in Landlord, Tenant, Project Lender, or any other Person or entity,
whether by purchase or otherwise, it is the declared intention of the parties
hereto that the separation of the fee simple estate and the leasehold estate
shall be maintained and a merger shall not
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take place without the prior written consent of the Project Lender.
10.3. Tenant and Landlord shall cooperate in including herein, by
suitable amendment from time to time, any provision which any Project Lender or
proposed Project Lender reasonably requests for the purpose of implementing the
Project Lender-protective provisions contained in this Section 10 and affording
the Project Lender or proposed Project Lender reasonable protection of its
Project Lender's Lien in the event of a default by Tenant. Tenant and Landlord
each agree to execute and deliver (and to acknowledge, if necessary for
recording purposes) any document or instrument necessary to give effect to any
such provision.
10.4. The Project Lender's mortgage documents shall contain
provisions that all notices of default under the note and related documents must
be sent to Landlord as well as Tenant, and that Landlord shall have the right to
cure any default after the time for Tenant to cure it has expired. Neither
Landlord's right to cure any default nor any exercise of such a right shall
constitute an assumption of liability under the note or related documents.
10.5. On the recording of the Project Lender's Lien, Tenant shall,
at Tenant's expense, cause to be recorded in the office of the County Recorder
of Imperial County, California, a written request executed and acknowledged by
Landlord for a copy of all notices of default and all notices of sale under the
Project Lender's Lien as provided by the statutes of the State of California.
Inclusion in the body of the recorded Project Lender's Lien itself of a request
for notice having the effect described above shall constitute compliance with
this provision.
10.6. On the commencement of the term, the fee title to the Premises
shall be free and clear of all mortgage liens other than those expressly agreed
to in accordance with this Lease. Thereafter, any mortgage placed on the
Premises by Landlord shall be subject to this Lease, to any mortgage then in
existence on the leasehold estate as permitted by this Lease, and to Tenant's
right as permitted by this Lease subsequently to encumber the leasehold estate.
11. Insurance. So long as the Credit Facility remains a valid and
binding obligation of Tenant, Tenant shall procure and maintain such policies of
insurance in such amounts as are necessary to comply with the Insurance
Requirements. After such time as the Credit Facility ceases to be a valid and
binding obligation of Tenant or otherwise terminates in accordance with its
terms, Tenant shall procure and maintain, for the remainder of the term of this
Lease, such policies of insurance, in such amounts, as Landlord
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shall reasonably request, but in no event shall Tenant be required to procure
and maintain insurance in excess of the Insurance Requirements.
12. Condemnation. In the event of a taking by eminent domain or by
inverse condemnation for any public or quasi-public use under any statute, the
proceeds therefrom shall be distributed (a) first, to Tenant to the extent of
all amounts necessary to pay in full the Project Lender's Loan and (b) second,
to the parties hereto in accordance with their interests as they may appear.
13. Default and Remedies.
13.1 Subject to the provisions of Section 10 hereof, the occurrence
of any one or more of the following events shall constitute a material default
by Tenant under this Lease:
13.1.1. The vacation or abandonment of the Premises by Tenant
for a continuous period of sixty (60) days or more, whether or not the rent is
paid.
13.1.2. The failure by Tenant to make any payment of rent or
any other payment required to be made by Tenant hereunder, as and when due,
where such failure shall continue for a period of three (3) business days after
written notice thereof from Landlord to Tenant.
13.1.3. The failure by Tenant to observe or perform any of the
material covenants, conditions or provisions of this Lease to be observed or
performed by Tenant other than those referenced in Sections 13.1.1 and 13.1.2
above, where such failure shall continue for a period of thirty (30) days after
written notice thereof from Landlord to Tenant; provided, however, that if the
nature of Tenant's noncompliance is such that more than thirty (30) days are
reasonably required for its cure, then Tenant shall not be deemed to be in
default if Tenant commences such cure within said thirty (30) day period and
thereafter diligently pursued such cure to completion.
13.1.4. The making by Tenant of any general arrangement or
general assignment for the benefit of creditors; Tenant's becoming a "debtor" as
defined in 11 U.S.C. section 101 or any successor statute thereto, unless, in
the case of a petition filed against Tenant, the same is dismissed within sixty
(60) days after filing; the appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease, where possession is not restored within sixty
(60) days; or the attachment, execution or other judicial seizure of
substantially all of Tenant's assets located at the Premises or of Tenant's
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interest in this Lease, where such seizure is not discharged within sixty (60)
days. In the event that any provision of this Section 13.1.4 is contrary to any
applicable law, such provision shall be of no force or effect.
13.2. Subject to the provisions of Section 10 hereof, in the event
of any material default or breach of this Lease by Tenant, Landlord may at any
time thereafter, with or without notice or demand and without limiting Landlord
in the exercise of any right or remedy which Landlord may have by reason of such
default:
13.2.1. Terminate Tenant's right to possession of the Premises
by any lawful means, in which case this Lease and the term hereof shall
terminate, and Tenant shall immediately surrender possession of the Premises to
Landlord. In such event Landlord shall be entitled to recover from Tenant all
damages incurred by Landlord by reason of Tenant's default, including, but not
limited to: (a) the unpaid rent which had been earned at the time of
termination; (b) the amount by which the unpaid rent which would have been
earned after termination until the time of award exceeds the amount of such
rental loss that Tenant proves could have been reasonably avoided; (c) the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that Tenant proves could be
reasonably avoided; and (d) any other amount necessary to compensate Landlord
for all of the detriment approximately caused by the Tenant's failure to perform
its obligations under this Lease.
13.2.2. Maintain Tenant's right to possession, in which case
this Lease shall continue in effect whether or not Tenant shall have vacated or
abandoned the Premises. In such event, Landlord shall be entitled to enforce all
of Landlord's rights and remedies under this Lease, including the right to
recover the rent as it becomes due hereunder.
13.2.3. Use Tenant's personal property and trade fixtures
without compensation and without liability for their use or damage, or store
them for the account of and at the cost of Tenant. The election of one remedy
for any one item of personal property or trade fixtures shall not foreclose an
election of any other remedy for another item or for the same item at a later
time.
13.2.4. Pursue an other remedy now or hereafter available to
Landlord under the laws or judicial decisions of the State of California.
13.3. After expiration of the applicable time for curing a
particular default, or before the expiration of that time in the event of
emergency, Landlord may at
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Landlord's election, but shall not be obligated to, make any payment required of
Tenant under this Lease or under any note or other related loan document
pertaining to the financing of improvements on the Premises, or perform or
comply with any covenant or condition imposed on Tenant under this Lease or any
such note or related loan document, and any amount so paid, plus the reasonable
cost of any such performance or compliance, shall be deemed to be additional
rent payable by Tenant with the next succeeding installment of rent. No such act
shall constitute a waiver of default or of any remedy for default or render
Landlord liable for any loss or damage resulting from any such act.
13.4 Landlord shall not be in default in the performance of its
obligations under this Lease unless Landlord fails to perform obligations
required of Landlord within sixty (60) days after written notice by Tenant to
Landlord and to the holder of any mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been furnished to Tenant
in writing, specifying wherein Landlord has failed to perform such obligation;
provided, however, that if the nature of Landlord's obligation is such that more
than sixty (60) days are required for performance, then Landlord shall not be in
default if Landlord commences performance within such sixty (60) day period and
thereafter diligently pursues the same to completion.
13.5. Tenant hereby acknowledges that late payment by Tenant to
Landlord of any installment of rent or any other sum due hereunder will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of
which will be extremely difficult to ascertain. Accordingly, if any installment
of rent or any other sum due from Tenant shall not be received by Landlord
within ten (10) days after such amount shall be due, then, without any
requirement for notice to Tenant, Tenant shall pay to Landlord a late charge
equal to six percent (6%) of such overdue amount. The parties hereby agree that
such late charge represents a fair and reasonable estimate of the costs Landlord
will incur by reason of late payment by Tenant. Acceptance of such late charge
by Landlord shall in no event constitute a waiver of Tenant's default with
respect to such overdue amount, or prevent Landlord from exercising any of the
other rights and remedies granted hereunder.
14. Estoppel Certificates.
14.1 Either party hereto (the "Responding Party") shall, at
any time upon not less than ten (10) days prior written notice from the other
party hereto or from the Project Lender (the "Requesting Party"), execute,
acknowledge and deliver to the Requesting Party a statement in writing (a)
certifying, as applicable, that this Lease is unmodified
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and in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect) and the date to which any payments due hereunder are paid, (b)
acknowledging that there are not, to the Responding Party's knowledge, any
uncured defaults hereunder on the part of the other party hereto (or specifying
such defaults if any are claimed), and (c) setting forth such other information
reasonably and customarily included in estoppel certificates as may be
requested by the Requesting Party and known to the Responding Party. Any such
statements may be conclusively relied upon by any prospective purchaser or
encumbrancer of this Lease. The failure of the Responding Party to deliver such
statement within such time shall be conclusive upon such Responding Party that
(i) this Lease is in full force and effect and has not been modified, and (ii)
there are no uncured defaults in the performance of the other party hereto.
15. Landlord's Liability. The term "Landlord" as used herein shall
mean only the owner or owners, at the time in question, of fee title to the
Premises, and in the event of any transfer of such title or interest, Landlord
herein named (and, in case of any subsequent transfers, then the grantor) shall
be relieved from and after the date of such transfer of all liability as
respects Landlord's obligations thereafter to be performed, provided that any
funds in the hands of Landlord or the then grantor at the time of such transfer
in which Tenant has an interest shall be delivered to the grantee.
16. Severability. The invalidity of any provision of this Lease as
determined by a court of competent jurisdiction shall in no way affect the
validity of any other provision hereof.
17. Interest on the Past-Due Obligations. Except as expressly herein
provided, any amount due to Landlord not paid when due shall bear interest at
the greater of (a) ten percent (10%) per annum, or (b) five percent (5%) per
annum above the discount rate established by the Federal Reserve Bank of San
Francisco on advances to member banks under Section 13 or 13(a) of the Federal
Reserve Act as in effect on the 25th day of the month preceding the date of this
Lease, from the date due until fully paid. Payment of such interest shall not
excuse or cure any default by Tenant under this Lease.
18. Time of Essence. Time is of the essence with respect to the
obligations to be performed under this Lease.
19. Additional Rent. All monetary obligations of Tenant to Landlord
under the terms of this Lease shall be deemed to be rent.
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20. Incorporation of Prior Agreements. This Lease and the related
documents referred to herein specifically by name contain all agreements of the
parties with respect to the subject matter of this Lease. No prior or
contemporaneous agreement or understanding pertaining to any such matter shall
be effective.
21. Amendments. This Lease may be amended in writing only, signed by
the parties in interest at the time of the amendment.
22. Notices. Any notice required or permitted to be given hereunder
shall be in writing and may be given by personal delivery or by registered or
certified mail, and shall be deemed sufficiently given if delivered or addressed
to Tenant or to Landlord at the address noted below. Mailed notices shall be
deemed given upon actual receipt at the address required, or forty-eight (48)
hours following deposit in the mail, postage prepaid, whichever first occurs.
Either party may by notice to the other specify a different address for notice
purposes.
To Landlord:
Magma Power Company
11770 Bernardo Plaza court
Suite 366
San Diego, California 92128
To Tenant:
Del Ranch, Ltd., a California
limited partnership
c/o Red Hill Geothermal, Inc.
480 West Sinclair Road
Calipatria, California 92233
23. Force Majeure.
23.1. Neither Landlord nor Tenant shall be liable in damages to the
other for any act, omission or circumstance ("Event of Force Majeure")
occasioned by or in consequence of any acts of God, acts of the public enemy
wars, blockades, insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, storms, floods, civil disturbances, explosions, sabotage,
the binding order of any court or governmental authority which has been
contested in good faith, Federal, State or local laws, or other event or
circumstance not within the control of such party preventing such party from
performing its obligations hereunder, whether caused or occasioned by, or
happening on account of, the act or omission of one of the parties, not within
the control of the party claiming suspension and which by the exercise of due
diligence such party is unable to prevent or overcome.
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23.1.1. Such Events of Force Majeure shall not relieve
Landlord or Tenant of liability in the event of either party's concurring
negligence or in the event of either party's 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 Events of Force Majeure relieve either party
of liability unless such party shall give notice and full particulars of the
same in writing to the other party within ten (10) days of the occurrence relied
on. In no event, however, shall an Event of Force Majeure relieve Tenant from
the obligation of making payments due under this Agreement at the time of such
occurrence. The parties agree that should any Event of Force Majeure remain in
existence for a period of six (6) months, this Agreement may be terminated by
the party not claiming suspension of this Agreement under such Event of Force
Majeure upon the giving of written notice by such party to the other party and
any Project Lender; provided, however, that such six (6) month period shall be
extended for a reasonable time so long as throughout such six (6) month period
the party claiming suspension of this Lease under the Event of Force Majeure has
diligently proceeded to terminate the Event of Force Majeure and continues to do
so throughout such extension.
24. Waivers. No waiver by Landlord or any provision hereof shall be
deemed a waiver of any other provision hereof or of any subsequent breach by
Tenant of the same or any other provisions. Landlord's consent to, or approval
of, any act shall not be deemed to render unnecessary the obtaining of
Landlord's consent to or approval of any subsequent act by Tenant.
25. Acceptance of Rent. The acceptance of rent hereunder by the
Landlord shall not be a waiver of any preceding breach by Tenant of any
provision hereof, other than the failure of Tenant to pay the particular rent so
accepted, regardless of Landlord's knowledge of such preceding breach at the
time of acceptance of such rent.
26. Holding Over. If Tenant, with Landlord's consent, remains in
possession of the Premises or any part thereof after the expiration of the term
hereof, such occupancy shall be a tenancy from month to month upon all the
provisions of this Lease pertaining to the obligations of Tenant, except that
the rent payable shall be one hundred fifty percent (150%) of the rent payable
immediately preceding the termination date of this Lease.
27. Cumulative Remedies. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
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28. Covenants and Conditions. Each provision of this Lease performable
by Tenant shall be deemed both a covenant and a condition.
29. Binding Effect. Subject to any provisions hereof restricting
assignment or subletting by Tenant, this Lease shall bind the parties, their
personal representatives, successors and assigns.
30. Choice of Law. This Lease shall be governed by the laws of the
State of California. This Agreement shall be construed equally as against the
parties hereto, and shall not be construed against the party responsible for its
drafting.
31. Arbitration. All disputes arising under this Agreement shall be
settled by arbitration. The party desiring such arbitration shall give written
notice to that effect to the other party and in such notice shall appoint as an
arbitrator a disinterested person of recognized competence in the area at issue.
All selections of an arbitrator shall be subject to the consent of any Project
Lender, but only if the Project Lender notifies the parties that it desires to
approve the selection of an arbitrator, and such consent shall not be
unreasonably withheld. Within fifteen (15) days thereafter, the other party
shall, by written notice to the originating party, appoint a second person
similarly qualified as the second arbitrator. The arbitrators thus appointed
shall appoint a third person similarly qualified as the third arbitrator, and
such three arbitrators shall as promptly as possible determine such matter with
the parties, each being entitled to present evidence and argument to the
arbitrators; provided, however, that:
(i) if the second arbitrator shall not have been appointed as
aforesaid, the first arbitrator shall determine such matter; and
(ii) if the two arbitrators appointed by the party shall be unable to
agree upon the appointment of a third arbitrator within fifteen (15) days
after the appointment of the second arbitrator, they shall give written
notice of such failure to agree to the parties, and, if the parties fail to
agree upon the selection of such third arbitrator within fifteen (15) days
thereafter, then within ten (10) days thereafter, either of the parties upon
written notice to the other party may apply for such appointment to the
Federal District Court or County Superior Court in San Diego, California.
The arbitrator or arbitrators shall only interpret and apply the terms
and provisions of this Agreement and shall not change any such terms or
provisions or deprive
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either party of any right or remedy expressly or impliedly provided for in this
Agreement.
The determination of the majority of the arbitrators or the sole
arbitrator, as the case may be, shall, to the extent permitted by law, be
conclusive upon the parties. The arbitrator or arbitrators shall give written
notice to the parties stating their determination, and shall furnish to each a
copy of such determination signed by them. In the event of the failure, refusal
or inability of any arbitrator to act, a new arbitrator shall be appointed in
his stead, which appointment shall be made in the same manner as hereinbefore
provided for the appointment of the arbitrator so failing, refusing or unable to
act.
32. Attorney's Fees. If either party hereto commences litigation or
arbitration for the judicial or other interpretation, enforcement, termination,
cancellation or rescission hereof, or for damages for the breach hereof, the
prevailing party in any such action, trial, arbitration or appeal thereon shall
be entitled to its reasonable attorneys' fees and court, arbitration and other
costs incurred, to be paid by the losing party as fixed by the court or
arbitrator in the same or a separate suit, and whether or not such action is
pursued to decision or judgment.
33. Landlord's Access. Landlord and its agents shall have the right to
enter the Premises at reasonable times for the purpose of inspecting the same,
performing any services required of Landlord, taking safety measures and
exercising rights expressly reserved by Landlord under this Lease, as long as
there is no material adverse effect to Tenant's use of the Premises. All
activities of Landlord pursuant to this Section shall be without abatement of
rent, nor shall Landlord have any liability to Tenant for the same.
34. Merger. The voluntary or other surrender of this Lease by Tenant,
or a mutual cancellation hereof, or a termination by Landlord, shall not work a
merger, but shall, at the option of Landlord, terminate any or all existing
subtenancies, or may, at the option of Landlord, operate as an assignment to
Landlord or any or all of such subtenancies.
35. Quiet Possession. Upon Tenant's paying the rent for the Premises
and observing and performing all of the covenants, conditions and provisions on
Tenant's part to be observed and performed hereunder, Tenant shall have quiet
possession of the Premise for the entire term hereof subject to all of the
provisions of this Lease.
36. Security Measures. Tenant hereby acknowledges that Landlord shall
have no obligation whatsoever to provide guard service or other security
measures for the benefit of the Premises. Tenant assumes all responsibility for
the
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protection of Tenant, its agents, invitees and their property from the acts of
third parties.
37. Easements and Maps. Landlord reserves to itself the right, from
time to time, to grant such easements, rights and dedications that Landlord
deems necessary or desireable, and to cause the recordation of maps or
restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises or the
operation of the Del Ranch Facility by Tenant. Tenant shall sign any of the
aforementioned documents reasonably requested by Landlord and failure to do so
within such period of time as constitutes a reasonable period of time to review
such documents shall constitute a material default under this Lease by Tenant
without the need for further notice to Tenant.
38. Exhibits, Addenda. All exhibits and addenda to which reference is
made in this Lease are incorporated in this Lease by the respective references
to them, whether or not they are actually attached, provided they have been
signed or initialed by the parties.
39. Tenant's Duty to Surrender. At the expiration or earlier
termination of the term, Tenant shall surrender to Landlord the possession of
the Premises. If Tenant fails to surrender the Premises at the expiration or
earlier termination of this Lease, Tenant shall defend and indemnify Landlord
from all liability and expense resulting from the delay or failure to do so,
including, without limitation, claims made by any succeeding tenant founded on
or resulting from Tenant's failure to do so.
40. Memorandum of Lease. A Memorandum of this Lease shall be recorded.
The parties shall execute the Memorandum in such form and substance as may be
required by the title insurance company insuring Tenant's leasehold estate or
the interest of any Project Lender, sufficient to
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give constructive notice of the Lease to subsequent purchasers and mortgagees.
IN WITNESS WHEREOF, the parties have executed this Lease as of the
date first above written.
LANDLORD:
MAGMA POWER COMPANY, a Nevada
corporation
By: /s/ Arnold L. Johnson
-----------------------------------
Its: President
------------------------------
By: /s/ Jan R. Peele
-----------------------------------
Its: Secretary
------------------------------
TENANT:
DEL RANCH, LTD., A CALIFORNIA LIMITED
PARTNERSHIP, a limited partnership
organized under the laws of the State of
California
By: RED HILL GEOTHERMAL, INC., a
Delaware corporation, its
General Partner
By: /s/ Russ L. Gerny
-----------------------------------
Its: President
------------------------------
By: /s/ Charles C. Bowle
-----------------------------------
Its: Asst. Secretary
------------------------------
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EXHIBIT "A"
Description of the Del Ranch Property
That portion of the Southeast Quarter of the Southeast Quarter of Section 33,
Township 11 South, Range 13 East, San Bernardino Meridian, County of Imperial,
State of California, according to the Official Plat thereof shown as Parcel 2 on
Parcel Map M-1356, on file in Book 5, Page 74 of Parcel Maps in the Office of
the County Recorder of Imperial County.
Excepting therefrom, minerals, either in solid or liquid form, geothermal
steam, naturally heated water, and thermal energy below a depth of 500 feet from
the surface of said land, as reserved by Roy B. Woolsey and Louise J. Woolsey,
in the Deed recorded October 30, 1974 in Book 1368 Page 960, Official Records,
without, however, the right to enter the area within 500 feet of the surface of
the ground, nor endanger or interfere with the operation, maintenance or repair
of the facilities located within or upon said land.
<PAGE>
SCHEDULE "Z"
"Additional Power Production Facilities" means power production
geothermal electrical generating facilities developed in the SSKGRA which
Process Reserved Geothermal Brine to produce electrical energy.
"Administration Fee" means the payments to be made to Red Hill
provided for in Section 6 of the Administrative Services Agreement.
"Administrative Services Agreement" means that certain Administrative
Services Agreement dated as of March 14, 1988, as the same may be amended from
time to time, by and between Red Hill and Del Ranch, Ltd., pursuant to which Red
Hill will provide certain administrative and management services to Del Ranch,
Ltd. in connection with the operation of the Del Ranch Facility.
"Affiliate" means, when used with reference to a specified Person, (a)
any Person who directly or indirectly controls, is controlled by or is under
common control with the specified Person, (b) any Person who is an officer,
partner or trustee of, or serves in a similar capacity with respect to, the
specified Person, or for which the specified Person is an officer, partner or
trustee or serves in a similar capacity, (c) any Person who, directly or
indirectly, is the beneficial owner of 10% or more of any class of equity
securities of the specified Person, or of which the specified Person, directly
or indirectly, is the owner of 10% or more of any class of equity securities,
and (d) any relative of the specified Person.
"Average Annual Energy Price" means an amount equal to the sum of (i)
2/3 multiplied by the average of the quarterly Time Period Weighted Average
Proposed Avoided Cost Energy Winter Prices released by SCE for the calendar year
in which the calculation is being made, plus (ii) 1/3 multiplied by the average
of the quarterly Time Period Weighted Average Proposed Avoided Cost Energy
Summer Prices released by SCE for the calendar year in which the calculation is
being made. In the event that the Time Period Weighted Average Proposed Avoided
Cost Energy Winter Prices and the Time Period Weighted Average Proposed Avoided
Cost Energy Summer Prices are abandoned or changed materially or otherwise cease
to be released by SCE on a quarterly basis, the parties shall select a
substitute index to the end that the Average Annual Energy Price will reflect
SCE's average annual avoided cost energy prices. In the event the parties fail
to agree on a substitute index as provided in the immediately preceding
sentence, the matter shall be submitted to an arbitrator in accordance with
Section 21 of the Operating and Maintenance Agreement and the arbitrator shall
select the substitute index to be used.
<PAGE>
"Brine Minerals" means all mineral resources found in the Geothermal
Brine, including, without limitation, mineral resources found in the Geothermal
Brine Scale.
"BTU Energy" means the heat value in British Thermal Units which can
be extracted from Geothermal Brine.
"Capacity" shall have the same meaning as that term has in the Del
Ranch Power Purchase Contract.
"Capital Contribution" has the same meaning as that term has in the
Limited Partnership Agreement.
"Code" means the Internal Revenue Code of 1986, as amended (or any
corresponding provision or provisions of succeeding law).
"Construction Management Agreement" means that certain Construction
Management and Asset Transfer Agreement dated as of March 14, 1988, as the same
may be amended from time to time, by and between Magma and Del Ranch, Ltd.,
pursuant to which Magma will act as Del Ranch, Ltd.'s construction manager for
the construction of the Del Ranch Facility.
"Construction Management Fee" means the payments to be made to Magma
provided for in Section 9 of the Construction Management Agreement.
"Construction Manager" means Magma for purposes of the Construction
Management Agreement.
"Contract Capacity" shall have the same meaning as that term has in
the Del Ranch Power Purchase Contract.
"Conversion Date" shall have the same meaning as that term has in the
Credit Facility.
"Credit Facility" means that certain Secured Credit Agreement dated as
of March 14, 1988, as the same may be amended from time to time, among Del
Ranch, Ltd., the Banks listed on the signature pages thereto and Morgan Guaranty
Trust Company of New York, as Agent.
"Critical Parts and Equipment" means those certain equipment and parts
delineated on Exhibit "A" to the Operating and Maintenance Agreement and such
additional equipment and parts which the parties thereto agree, from time to
time, should be added to the Critical Parts and Equipment listed on said Exhibit
"A" to the Operating and Maintenance Agreement.
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"DCC" means The DOW Chemical Company, a Delaware corporation.
"DEC" means DOW Engineering Company, a Delaware corporation.
"Debt Service Reserve" means the reserve establishment pursuant to
Section 11.1 of the Operating and Maintenance Agreement.
"Debt Service Reserve Account" means the segregated bank account
established pursuant to Section 11.1 of the Operating and Maintenance Agreement.
"Decommission," "Decommissioned" or "Decommissioning" means the
obligations on the part of Del Ranch, Ltd., among other things, to remove all or
a portion of the Del Ranch Facility and, with respect to production and
injection wells and only to the extent allowed by applicable law, to cap such
wells in lieu of removal from the Del Ranch Property and the Geothermal Lease
Rights Properties in the event Magma elects to require such removal pursuant to
Sections 8.11 and 8.13 of the Ground Lease and/or Section 3.1.4 of the Easement
Agreement.
"Decommissioning Reserve" means the reserve established pursuant to
Section 11.3 of the Operating and Maintenance Agreement.
"Decommissioning Reserve Account" means the segregated bank account
established pursuant to Section 11.3 of the Operating and Maintenance Agreement.
"Del Ranch Facility" means that certain power production geothermal
electrical generating facility being constructed pursuant to the Plans and
Specifications and any "as-built" plans on the Del Ranch Property which, when
completed, will have the capacity to convert BTU Energy from Geothermal Brine
into electrical energy, together with the Supporting Equipment.
"Del Ranch Facility Brine Requirement" means that amount of Geothermal
Brine which, when Processed by the Del Ranch Facility, will yield the amount of
BTU Energy reasonably required to generate 332,880,000 kilowatt hours per year
of "Energy" as that term is defined in the Del Ranch Power Purchase Contract.
"Del Ranch Facility Projected Project Cost" means the total projected
cost of construction and development of the Del Ranch Facility as reflected on
Exhibit "I" to the Construction Management Agreement.
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<PAGE>
"Del Ranch, Ltd." means Del Ranch, Ltd., a California limited
partnership, a limited partnership organized under the laws of the State of
California, the general partners of which are Red Hill and Conejo Energy
Company, a California corporation.
"Del Ranch Power Purchase Contract" means that certain Power Purchase
Contract dated February 22, 1984, as amended, and as the same may be amended
from time to time, by and between Magma and SCE.
"Del Ranch Property" means the parcel of real property more
particularly described on Exhibit "A" to the Ground Lease, as that description
may be modified from time to time pursuant to Section 3.3 of the Ground Lease.
"Del Ranch Property Preliminary Title Report" means that certain
Preliminary Title Report No. 105342 dated February 16, 1998 a copy of which is
attached as Exhibit "L" to the Construction Management Agreement.
"Development of the Del Ranch Facility" means the design, engineering,
construction, testing and start-up of the Del Ranch Facility.
"Distribution Dates" means each March 31 and September 30.
"Dow Services Agreement" means that certain Financial and Technical
Services Agreement dated March 27, 1987 by and between Magma and DCC, a copy of
which is attached as Exhibit "A" to the Administrative Services Agreement.
"Easement Agreement" means that certain Easement Grant Deed and
Agreement Regarding Rights for Geothermal Development dated as of March 14,
1988, as the same may be amended from time to time, by and between Magma and Del
Ranch, Ltd., pursuant to which the parties have provided for an "Easement to
Develop Geothermal Rights" and related rights and obligations as described
therein.
"Energy Revenues" means all payments received by Del Ranch, Ltd. for
the sale of electricity which payments represent the "Energy" (as that term is
defined in the Del Ranch Power Purchase Contract) component of the payments
received including, without limitation, (i) payments received by Del Ranch, Ltd.
from SCE pursuant to the Del Ranch Power Purchase Contract (without deduction
for payments made pursuant to the IID Transmission Line Agreement), (ii) all
payments for Energy delivered both before and after the Firm Operation Date and
below, at and above the "Contract Capacity" level (as that term is defined in
the Del Ranch Power Purchase Contract) and (iii) all payments received by
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<PAGE>
Del Ranch, Ltd. in lieu of payments that would have been received for the Energy
component of electricity that would have been produced but for the in lieu
payments.
"Engineer" means R.W. Beck and Associates, or their successors in the
capacity of engineers and consultants with respect to the Development of the
Del Ranch Facility and the operation of the Del Ranch Facility.
"Excess Extracted Geothermal Brine" means Geothermal Brine extracted
by Del Ranch, Ltd. in connection with the operation of the Del Ranch Facility
which is in excess of the amount of Geothermal Brine needed to meet the Del
Ranch Facility Brine Requirement.
"Excess Unextracted Geothermal Brine" means all Geothermal Brine which
is not needed for the operation of the Vulcan Facility and the Del Ranch
Facility.
"Extraordinary Services" means all of the services, materials,
equipment and supplies to be performed or provided by Red Hill pursuant to
Section 3 of the Administrative Services Agreement.
"Firm Operation Date" means the first day on which Firm Operation (as
that term is defined in the Del Ranch Power Purchase Contract) occurs under the
Del Ranch Power Purchase Contract.
"Firm Operation Month" means the first month during which Firm
Operation (as that term is defined in the Del Ranch Power Purchase Contract)
occurs under the Del Ranch Power Purchase Contract.
"Geothermal Brine" means the geothermal brine contained in the Del
Ranch Geothermal Lease Unit.
"Geothermal Brine Scale" means all deposits and residue including,
without limitation, silica slurry, silica cake and sludge deposits on or in
vessels or equipment in which Geothermal Brine is transported to or from, or
Processed or stored in, the Del Ranch Facility.
"Geothermal Lease Rights" means the rights in the Geothermal Lease
Rights Properties held by Magma pursuant to the Geothermal Leases including,
without limitation, certain rights of Magma to (i) that portion of the
Geothermal Lease Rights Properties existing below the surface of the land
including, without limitation, the right to extract and take Geothermal Brine
therefrom and (ii) the Surface Properties including, without limitation, the
right to enter upon certain portions of the Surface Properties for the purposes
of (1) drilling exploratory, production and injection wells; (2) installing
pipelines for the extraction of Geothermal
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Brine; (3) extracting Geothermal Brine; and (4) constructing facilities designed
to convert the heat energy in the Geothermal Brine to electrical energy for sale
to public utilities.
"Geothermal Lease Rights Properties" means the real property located
within the SSKGRA, as more particularly described in Exhibit "A" to the Easement
Agreement.
"Geothermal Lease Rights Properties Preliminary Title Report" means,
collectively, those certain Preliminary Title Report Nos. 105340 (Severe),
105341 (Del Ranch, Inc.), 105348 (Future Energy), 105344 (Ruchti/24 Leases),
105343 (Woolsey), 105345 (McKelvey), 105346 (Wiest) and 105347 (J.F.Baretta),
dated February 16, 1988, copies of which are attached as Exhibit "C" to the
Easement Agreement.
"Geothermal Leases" means those certain geothermal leases delineated
on Exhibit "B" to the Easement Agreement.
"Geothermal Lessors" means the parties identified as the "lessors," or
their successors in interest, in each of the Geothermal Leases.
"Grantee" means Del Ranch, Ltd. for purposes of the Easement
Agreement.
"Grantor" means Magma for purposes of the Easement Agreement.
"Ground Lease" means that certain Ground Lease dated as of March 14,
1988, as the same may be amended from time to time, by and between Magma and
Del Ranch, Ltd., pursuant to which Magma leases to Del Ranch, Ltd. the Del Ranch
Property.
"Guaranteed Capacity Payment" means the payments to be made to Red
Hill provided for in Section 13 of the Operating and Maintenance Agreement.
"IID" means the Imperial Irrigation District, organized under the
Water Code of the State of California.
"IID Agreements" mean, collectively, (i) that certain Funding and
Construction Agreement dated June 29, 1987, by and among the Imperial Irrigation
District ("IID"), and certain "Participants" (as that term is defined in said
Funding and Construction Agreement) including Magma, (ii) that certain Joint
Funding Agreement dated June 29, 1987, by and among the "Participants" (as that
term is defined in said Joint Funding Agreement) including Magma and (iii) any
"IID Transmission Service Agreement For Alternative Resources" which may be
entered into between IID and Del Ranch, Ltd.,
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copies of which are attached as Exhibit "G" to the Construction Management
Agreement.
"Insurance Requirements" means policies of insurance, maintained by or
on behalf of Del Ranch, Ltd. with insurance companies rated at least B+ by A.M.
Best Company or such other insurance companies as may be acceptable to the agent
for the Project Lender, of the following type, in the following amounts, and on
the following terms:
(i) at all times after completion of construction of the Del Ranch
Facility, insurance on the Del Ranch Facility against all risks of physical
loss or damage, including flood, earthquake (to the extent possible) and
collapse and all other risks and perils normally covered in "all-risk"
policies, for the full cost of repair or replacement (excluding the costs of
the transmission lines, wells and Geothermal Brine pipelines);
(ii) as soon as possible in the course of construction of the Del Ranch
Facility and at all times after completion of construction of the Del Ranch
Facility, boiler and machinery insurance written on a comprehensive form for
the full repair and replacement value of the equipment at and of the Del
Ranch Facility;
(iii) at all times, comprehensive general liability insurance with a
limit of no less than $1,000,000 combined single limit, bodily injury and
property damage, for each occurrence;
(iv) at all times, excess public liability insurance in the form of an
umbrella policy which umbrella policy shall afford coverage of not less than
$10,000,000 per occurrence over and above the coverage provided by the
policies described above and the policy described in Exhibit "N" to the
Construction Management Agreement;
(v) on and after the Firm Operation Date, business interruption
insurance covering, for an annual term, only amounts due (including, without
limitation, interest, principal repayment and any other fees and expenses)
on the Project Lender's Loan; and
(vi) as soon as practicable after the agent for the Project Lender
shall request, such other insurance with respect to the Del Ranch Facility
in such amounts equal to the greater of such amount, and against such
insurable hazards, (x) as Magma maintains with respect to other facilities
similar to the Del Ranch Facility, which Magma owns or operates, (y) as is
usually carried by corporations of established reputation operating
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similar properties and (z) as the agent for the Project Lender may from
time to time reasonably request.
Each insurance policy set forth above (a) shall (except for the
liability insurance referred to in clause (iii) above, which shall name the
Project Lender as an additional insured) insure the Project Lender's interests
under the Project Lenders's Lien and shall provide that all insurance proceeds
payable under such policy shall, until notice from the agent for the Project
Lender to the contrary, be paid over directly to such agent for the benefit of
the Project Lender, (b) shall provide that it cannot be cancelled or terminated
without thirty days' prior written notice to such agent, (c) shall include
waivers by the insurer of all claims for the payments by the Project Lender and
such agent of insurance premiums, (d) shall (except for the liability insurance
referred to in clause (iii) above) provide for losses to be payable to the
Project Lender notwithstanding (i) any act or failure to act by the insured or
violation by the insured of warranties, declarations or conditions contained in
the policy, (ii) any foreclosure or sale or other proceeding relating to the
Del Ranch Facility or construction work in progress or (iii) any change in the
title to or ownership of the Del Ranch Facility or construction work in
progress, (e) shall (except for the liability insurance referred to in clause
(iv) above, which shall have no deductible) provide for deductibles for (i) "all
risk" coverage of no greater than $500,000 per occurrence, and (ii) business
interruption coverage of no greater than sixty (60) days, and (f) shall be in
all other respects satisfactory to the agent for the Project Lender.
"Licensee" means Del Ranch, Ltd. for purposes of the Technology
Transfer Agreement.
"Licensor" means Magma for purposes of the Technology Transfer
Agreement.
"Limited Partner" means any of the Original Limited Partners and
Substituted Limited partners as defined in the Limited Partnership Agreement.
"Limited Partnership Agreement" means that certain Amended and
Restated Limited Partnership Agreement of Del Ranch, Ltd., dated as of March 14,
1988, as the same may be amended from time to time.
"Magma" means Magma Power Company, a Nevada corporation.
"Magma Overrun Loan" means any loan made by Magma pursuant to the
Magma Undertaking.
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"Magma Undertaking" means the undertaking of Magma, substantially in
the form of Exhibit "K" to the Construction Management Agreement.
"Major Capital Expenditure Reserve" means the reserve established
pursuant to Section 11.2 of the Operating and Maintenance Agreement.
"Major Capital Expenditure Reserve Account" means the segregated bank
account established pursuant to Section 11.2 of the Operating and Maintenance
Agreement.
"Operating Agreements" means the Easement Agreement, the
Administrative Services Agreement, the Construction Management Agreement, the
Del Ranch Power Purchase Contract, the Ground Lease, the Operating and
Maintenance Agreement, the Technology Transfer Agreement and the IID Agreements.
"Operating and Maintenance Agreement" means that certain Operating and
Maintenance Agreement dated as of March 14, 1988, as the same may be amended
from time to time, by and between Del Ranch, Ltd. and Red Hill, pursuant to
which Red Hill will provide day-to-day operational and maintenance services for
Del Ranch, Ltd. in connection with the operation of the Del Ranch Facility.
"Operator" means Red Hill for purposes of the Operating and
Maintenance Agreement.
"Ordinary Services" means all of the services, materials, equipment
and supplies to be performed or provided by Red Hill on a normal day-to-day
basis pursuant to Section 2 of the Administrative Services Agreement.
"Owner" means Del Ranch, Ltd. for purposes of the Administrative
Services Agreement, the Construction Management Agreement and the Operating and
Maintenance Agreement.
"Partially Spent Geothermal Brine" means the Geothermal Brine in an
amount not exceeding the Del Ranch Facility Brine Requirement which has been
extracted and Processed by Del Ranch, Ltd. for the purpose of generating
electrical energy in connection with the operation of the Del Ranch Facility.
"Partnership Holding Account" has the same meaning as that term has in
the Limited Partnership Agreement.
"Permitted Investment" means any investment in (i) direct obligations
of the United States or any agency thereof, or obligations guaranteed by the
United States or any agency thereof, (ii) commercial paper rated in the
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highest grade by a nationally recognized credit rating agency or (iii) time
deposits with, including certificates of deposit issued by, any office located
in the United States of any bank or trust company which is organized under the
laws of the United States or any state thereof and the certificates of deposit
of which are rated in one of the two highest grades by a nationally recognized
credit rating agency, provided in each case that such investment matures within
one year from the date of acquisition thereof by Del Ranch, Ltd.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Plans and Specifications" means those certain plans and
specifications for the construction of the Del Ranch Facility, as more
particularly described on Exhibit "H" to the Construction Management Agreement.
"Principal Repayment Date" means the date on which a portion of the
principal of the Project Lender's Loan is scheduled to be repaid pursuant to the
Credit Facility.
"Process," "Processed" or "Processing" means the process by which BTU
Energy is extracted from the Geothermal Brine.
"Project Lender" means collectively the lender(s) advancing all or a
portion of the Project Lender's Loan, or the agent for such lenders.
"Project Lender's Lien" means the security interest or lien evidenced
by a first deed of trust granted by Del Ranch, Ltd. in Del Ranch, Ltd.'s
leasehold estate in the Del Ranch Property to the Project Lender to secure
repayment of any indebtedness and/or performance of any obligation created by
the Project Lender's Loan.
"Project Lender's Loan" means the financing provided by the Project
Lender for the Development of the Del Ranch Facility or the operation of the
Del Ranch Facility, the repayment of which is secured by the Project Lender's
Lien.
"Project Lender's Loan Documents" means all instruments, agreements
and other documents including, without limitation, the Credit Facility,
evidencing or related to the project Lender's Loan and the security therefor
including, without limitation, the Project Lender's Lien.
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"Red Hill" means Red Hill Geothermal, Inc., a Delaware corporation, a
general partner of Del Ranch, Ltd. Red Hill is a wholly owned subsidiary of
Magma.
"Refunded Capital Contribution" shall have the same meaning as that
term has in Section 3.6 of the Limited Partnership Agreement.
"Reimbursement Charges" means the payments to Red Hill provided for in
Section 14 of the Operating and Maintenance Agreement.
"Reserved Geothermal Brine" means the combination of Partially Spent
Geothermal Brine, Excess Extracted Geothermal Brine and Excess Unextracted
Geothermal Brine.
"SEC" means Southern California Edison Company.
"SSKGRA" means Salton Sea Known Geothermal Resource Area.
"Schedule of Projected Remaining Cost of Construction" means the
projected cost of completing construction and development of the Del Ranch
Facility as of the date of the Construction Management Agreement, as reflected
on Exhibit "J" to the Construction Management Agreement.
"Services" means the services to be provided by Red Hill pursuant to
Section 2 of the Operating and Maintenance Agreement.
"Spare Parts" means all spare parts necessary for the reliable,
continuous operation of the Del Ranch Facility, other than the Critical Parts
and Equipment.
"Subcontractor" means a person or entity who performs any duties for
or supplies any equipment or material to Red Hill, directly or indirectly, in
the performance of the Services.
"Substantial Completion Month" means the month in which the
Construction Management Agreement terminates in accordance with its terms.
"Supporting Equipment" means all items described in Section 2.2.2 of
the Easement Agreement, including all such items located on the Del Ranch
Property, and any real property interest associated therewith.
"Surface Properties" means that portion of the Geothermal Lease Rights
Properties existing above and upon the surface of the land.
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"Technology Fee" means the payments to be made to Magma provided for
in Section 3 of the Technology Transfer Agreement.
"Technology Transfer Agreement" means that certain Technology Transfer
Agreement dated as of March 14, 1988, as the same may be amended from time to
time, by and between Magma and Del Ranch, Ltd., pursuant to which Magma grants
to Del Ranch, Ltd. the nonexclusive right to use certain "Technology" and
"Know-How" which will be utilized by Del Ranch, Ltd. only in connection with the
operation of the Del Ranch Facility.
"Total Electricity Revenues" means all payments received by Del Ranch,
Ltd. for the sale of electricity including, without limitation, payments
received by Del Ranch, Ltd. from SCE pursuant to the Del Ranch Power purchase
Contract (without deduction for payments made pursuant to the IID Agreements)
including, without limitation, (i) all payments for "Energy," "capacity" and
"Capacity Bonus Payments" delivered both before and after the Firm Operation
Date and below, at and above the "Contract Capacity" level (as those terms are
defined in the Del Ranch power Purchase Contract) and (ii) all payments received
by Del Ranch, Ltd. in lieu of payments that would have been received for
electricity that would have been produced but for the in lieu payments.
"Totally Spent Geothermal Brine" means Partially Spent Geothermal
Brine which (i) has been Processed by Magma, or a licensee of Magma, for use in
connection with the operation of Additional Power Production Facilities; (ii)
has been used by Magma, or a licensee of Magma, to extract Brine Minerals; or
(iii) has been used by Magma, or a licensee of Magma, for any other use
including, without limitation, the production of steam or heat for sale to users
of steam or heat.
"Vulcan Facility" means that certain power production geothermal
electrical generating facility located on the Vulcan Geothermal Lease Unit on
property contiguous to the Del Ranch Property more particularly described on
Exhibit "D" to the Easement Agreement. The Vulcan Facility is owned by Vulcan/BN
Geothermal Power Company, a Nevada general partnership, the general partners of
which are Vulcan Power Company, a Nevada corporation, and BN Geothermal, Inc., a
Delaware corporation. Vulcan Power Company is a wholly owned subsidiary of
Magma.
"Vulcan Facility Brine Sales Agreement" means that certain Brine Sales
Agreement dated August 30, 1985, as the same may be amended from time to time,
by and between Vulcan Power Company and Vulcan/BN Geothermal Power Company,
pursuant to which Vulcan Power Company has agreed to make
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available to the Vulcan Facility certain amounts of geothermal brine from
certain portions of the Vulcan Geothermal Lease Unit for a thirty (30) year
period.
"Vulcan Geothermal Lease Unit" means that certain Vulcan Plant Unit
established pursuant to that certain Declaration and Notice of Creation of Unit
and Pooling of Lands Under Leases dated as of January 10, 1985, as amended by
that certain First Amended and Restated Declaration and Notice of Creation of
Unit and Pooling of Lands Under Leases dated as of January 18, 1988, which
evidences Magma's Geothermal Lease Rights in and to the Geothermal Lease Rights
Properties.
"Working Capital" shall have the same meaning as that term has in the
Credit Facility.
"Working Capital Requirement" shall have the same meaning as that term
has in the Credit Facility.
Additional Defined Terms. For the convenience of the parties, in
addition to the defined terms set forth in this Schedule Z, certain other terms
are defined throughout the Operating Agreements.
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Recording Requested By and
When Recorded Mail To:
Magma Power Company
c/o CalEnergy Company, Inc.
302 South 36th Street
Omaha, Nebraska 68131
Attention: General Counsel
-------------------------------------------------------------------------------
The undersigned declare that this document does not grant, assign,
transfer, convey or vest title to real property within the meaning of Section
11911 of the California Revenue and Taxation Code, and hence NO DOCUMENTARY
TRANSFER TAX IS DUE.
The real property is located in an unincorporated area of the County of
Imperial, State of California.
CLARIFICATION AND AMENDMENT
THIS CLARIFICATION AND AMENDMENT (this "Amendment") is made as of June
17, 1996, between MAGMA POWER COMPANY, a Nevada corporation ("Grantor"), and DEL
RANCH, L.P., a limited partnership organized under the laws of the State of
California and formerly known as Del Ranch, Ltd. ("Grantee").
RECITALS
1. Grantor holds certain geothermal lease rights (the "Geothermal Lease
Rights") in certain real property located within the Salton Sea Known Geothermal
Resource Area (the "SSKGRA") in Imperial County, California, which real property
is described in Exhibit "A" attached hereto (the "Geothermal Lease Rights
Properties"). The Geothermal Lease Rights are set forth in those certain
geothermal leases described in Exhibit "B" attached hereto (the "Geothermal
Leases").
2. Grantee owns a geothermal electrical generating facility commonly
known as the "Del Ranch Facility", which utilizes Geothermal Brine from certain
of the Geothermal Lease Rights Properties. The Del Ranch Facility is located on
that certain real property described in Exhibit "C" attached hereto (the "Del
Ranch Property").
3. Grantee's right to maintain the Del Ranch Facility on the Del Ranch
Property is derived from that certain Ground Lease dated as of March 14, 1988
between Grantor, as Landlord, and Grantee, as Tenant (the "Ground Lease"), a
Memorandum of which was recorded on March 14, 1988 in Book 1599, Page 913, as
Instrument No. 88-04016 in the Official Records of Imperial County, California
(the "Official Records").
4. Pursuant to that certain Easement Grant Deed and Agreement Regarding
Rights For Geothermal Development dated as of March 14, 1988 (the "Easement
Grant Deed"), a Short Form of which was recorded on March 14, 1988 in Book 1599,
Page 918, as Instrument No. 88-04018
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in the Official Records (the "Easement Short Form"), Grantor granted to Grantee
certain rights in and to the Geothermal Brine contained in the Geothermal Lease
Rights Properties, including, without limitation, the right to (i) drill for,
produce, Process and use Geothermal Brine up to the amount necessary to meet the
Del Ranch Facility Brine Requirement and (ii) construct, use and maintain roads,
pipelines, utility installations, power lines, equipment, buildings and wells in
connection therewith, subject to certain limitations and reservations as more
particularly set forth in the Easement Grant Deed.
5. It has always been the intent of Grantor and Grantee (together, the
"Parties") that Grantor reserve and at all times have the right, at its sole
option, to (i) drill for, produce, process, extract, treat, convert, take,
divert, sell and otherwise use the Excess Unextracted Geothermal Brine,
Partially Spent Geothermal Brine, Excess Extracted Geothermal Brine, Geothermal
Brine Scale and Brine Minerals and (ii) use the Del Ranch Property in connection
with such reserved rights. The Parties now desire to amend the Ground Lease and
Easement Grant Deed to clarify and further define such rights, and to make
certain other modifications thereto, as set forth herein.
F. This Amendment is being executed in connection with that certain
Second Supplemental Trust Indenture (the "Supplemental Indenture") dated as of
June 20, 1996, between Salton Sea Funding Corporation, a Delaware corporation,
an Affiliate of Grantor ("Funding Corporation"), as issuer, and Chemical Trust
Company of California, a California corporation, as trustee. Chemical Trust
Company of California, a California corporation, is also acting as collateral
agent (together with its transferees, successors and assigns, the "Collateral
Agent") under that certain Collateral Agency and Intercreditor Agreement dated
as of July 21, 1995, as amended, by and among Funding Corporation and the other
parties named therein. The Collateral Agent's address is 50 California Street,
10th Floor, San Francisco, California 94111.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals, the
covenants and conditions herein contained, and other valuable consideration, the
receipt of which is hereby acknowledged, the Parties agree as follows:
ARTICLE 1. INTRODUCTORY MATTERS
1.1. CAPITALIZED TERMS. Capitalized terms used and not defined herein
shall have the meaning given the same in the Easement Grant Deed.
ARTICLE 2. AMENDMENTS TO THE EASEMENT GRANT DEED
2.1. USE OF GEOTHERMAL BRINE. Wherever in the Easement Grant Deed
(including, without limitation, sections 2.2.1, 2.3.2, 2.3.3, 3.1.1 and 3.1.3
thereof) Grantor reserves or is given the right to "use", "utilize" or make
"use" of the Partially Spent Geothermal Brine, Excess Extracted Geothermal
Brine, Brine Minerals and/or Geothermal Brine Scale or any part thereof, Grantor
shall further have the right, privilege and power to process, extract from,
treat, convert, take, divert, sell and otherwise use the same, in such manner
and at such locations as Grantor may deem proper, and without compensation to
Grantee other than as expressly provided in the Easement Grant Deed.
2.2. OWNERSHIP OF GEOTHERMAL BRINE. To the extent that Grantor
processes, extracts, treats, converts, takes, diverts, sells or otherwise uses
the Partially Spent Geothermal Brine, Excess Extracted Geothermal Brine, Brine
Minerals and/or Geothermal Brine Scale or any part thereof as
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permitted under the Easement Grant Deed or hereunder, which results in the
amount thereof that is returned to Grantee for injection or disposal being less
than the amount thereof previously delivered to or taken by Grantor, then the
title otherwise held by Grantee to any Partially Spent Geothermal Brine, Excess
Extracted Geothermal Brine, Brine Minerals and/or Geothermal Brine Scale that is
not returned to Grantee for injection or disposal shall automatically transfer
to and vest in Grantor. Without limiting the generality of the foregoing, if
Grantor makes any commercial use or sale of the Partially Spent Geothermal
Brine, Excess Extracted Geothermal Brine, Brine Minerals and/or Geothermal Brine
Scale, the economic benefits of such use or sale shall belong to Grantor.
2.3. INJECTION BY GRANTEE. In addition to its obligations under section
3.1.1 of the Easement Grant Deed, Grantee shall handle, transport, inject and
dispose of all geothermal fluids and other substances produced as a result of or
which flow from Grantor's use, processing, treatment or conversion of the
Geothermal Brine and of geothermal fluids from other lands. To the extent that
by performing the above duties Grantee incurs additional costs and expenses over
what it would have incurred had Grantor not used, processed, treated or
converted Geothermal Brine or geothermal fluids from other lands as provided
herein, then Grantor shall pay such excess costs and expenses.
2.4. INSURANCE. Section 3.3 of the Easement Grant Deed is hereby
deleted in its entirety.
2.5. PROJECT LENDER PROVISIONS. Article VI of the Easement Grant Deed
is hereby revised as follows:
2.5.1 The definition of "Project Lender" is hereby deleted
from Schedule "Z" to the Easement Grant Deed, and is replaced with the
following:
"'Project Lender' means (a) the Collateral Agent (b) any Person who
succeeds to the interest of Collateral Agent under that certain Trust
Indenture dated as of July 21, 1995, between Funding Corporation, as
issuer, and Collateral Agent, as trustee (as amended, modified or
supplemented, including pursuant to the Supplemental Indenture, the
"Indenture") or (c) any other Person who acquires a first lien on the
Easement To Develop Geothermal Rights in connection with or following
(i) foreclosure of that certain Deed of Trust, Assignment of Rents,
Security Agreement and Fixture Filing dated as of June 20, 1996,
executed by Grantee as trustor, in favor of Chicago Title Company as
trustee, for the benefit of Collateral Agent as beneficiary (the "Deed
of Trust"); (ii) conveyance of the Easement To Develop Geothermal
Rights to Collateral Agent in lieu of foreclosure or (iii) the
acquisition by Collateral Agent or its nominee or designee of the
Easement To Develop Geothermal Rights by any other means. The term
"Project Lender" shall also include any person or entity that acquires
a first lien on the Easement To Develop Geothermal Rights at any time
after such foreclosure, conveyance by deed in lieu of foreclosure or
acquisition by Collateral Agent or its nominee or designee."
2.5.2 The definition of "Project Lender's Loan" is hereby
deleted from Schedule "Z" to the Easement Grant Deed, and is replaced with the
following:
"'Project Lender's Loan' means the financing provided by the Project
Lender for the Development, operation, refinancing or acquisition of
the Del Ranch Facility, the repayment of which is secured by the
Project Lender's Lien."
2.5.3 Section 6.2.1 of the Easement Grant Deed is hereby
deleted in its entirety and
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replaced with the following:
"6.2.1 (i) So long as the Indenture is in effect, Grantor
shall not accept or consent to any amendment or modification of this
Agreement if the same would be prohibited under the Partnership Credit
Agreement (as that term is defined in the Indenture); (ii) at any time
when the Indenture is no longer in effect, Grantor shall not accept or
consent to any amendment or modification of this Agreement if the same
would have a material adverse effect on the Project Lender's Lien, and
(iii) except in a case of default by Grantee under this Agreement that
has not been cured by the Project Lender under this Section 6.2 within
the period of time provided therein, Grantor shall not accept or
consent to any abandonment of the Easement to Develop Geothermal Rights
or any termination of this Agreement, unless and until Grantee presents
evidence to Grantor that Grantee has obtained the prior written consent
of the Project Lender thereto."
2.5.4 Sections 6.2.6 and 6.3 of the Easement Grant Deed are
hereby deleted in their entireties.
2.6. ARBITRATION. The last eleven (11) words of paragraph (ii) of
section 8.11 of the Easement Grant Deed (which currently read "Federal District
Court or County Superior Court in San Diego, California") are hereby deleted and
replaced with the words "District Court in Omaha, Nebraska."
2.7. EASEMENT SHORT FORM. The Easement Short Form is hereby amended as
necessary and appropriate so that the same will in all respects be consistent
with this Amendment.
ARTICLE 3. AMENDMENTS TO THE GROUND LEASE
3.1. USE OF THE DEL RANCH PROPERTY. Section 2.2 of the Ground Lease is
hereby amended as follows:
3.1.1 The word "sell" is hereby added after the word "use" in
the fourth line of such Section.
3.1.2 The words ", the Brine Minerals" are hereby added after
the words "Reserved Geothermal Brine" in the fifth line of such Section.
3.1.3 The words "and mineral extraction and processing
facilities" are hereby added after the words "Additional Power Production
Facilities" in the fifteenth and nineteenth lines of such Section.
3.1.4 The words ", Partially Spent Geothermal Brine, Brine
Minerals" are hereby added after the words "Geothermal Brine" in the
twenty-second and twenty-fifth lines of such Section.
3.1.5 The following sentence is hereby added at the end of
such Section: "Without limiting the foregoing, Landlord may conduct such
operations for purposes incidental to Landlord's or its affiliates' operations
on lands in the vicinity of and outside the Del Ranch Property."
3.2. SUBDIVISION OF THE DEL RANCH PROPERTY.
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3.2.1 In the event that Grantor's proposed use of the Del
Ranch Property (as permitted under Section 3.1 hereof or in the Ground Lease)
causes it to reasonably determine that compliance with the California
Subdivision Map Act (Government Code Section 66410 et seq.) and the county
ordinances enacted thereunder (together, the "Map Act") may be necessary, then
Grantor shall be entitled to apply for, process and cause to be recorded such
subdivision maps as may be necessary to cause such portion or portions of the
Del Ranch Property as may be designated by Grantor to be subdivided in
compliance with the Map Act. All costs of such application, processing and
recordation shall be borne by Grantor. Grantee and Grantor shall cooperate each
with the other, to ensure that such maps will be adequate for Grantor's proposed
use and to record such reciprocal easements as may be necessary in connection
with their existing and proposed operations, and Grantee shall promptly execute
such maps as and when requested by Grantor. Notwithstanding the foregoing, in no
event shall Grantor subdivide the Del Ranch Property in a manner that will have
a material adverse effect on Grantee's ability to operate the Del Ranch
Facility.
3.2.2 Grantee hereby irrevocably and unconditionally grants to
Grantor an option (the "Partial Termination Option"), exercisable at any time
during the term of the Ground Lease upon the payment to Grantee of the sum of
Ten Dollars ($10.00), to terminate the Ground Lease as to any parcel (each, a
"Terminated Parcel") created as a result of such subdivision (other than the
parcel on which the Del Ranch Facility is located). Upon Grantor's exercise of
the Partial Termination Option, (a) Grantor and Grantee shall execute and cause
to be acknowledged and recorded an amendment to the Ground Lease deleting from
the description of the "Premises" each parcel as to which the Ground Lease has
been so terminated (each, a "Terminated Parcel"), along with a corresponding
quitclaim deed from Grantee to Grantor of all Grantee's right, title and
interest in the Terminated Parcels, and (b) Grantee shall deliver possession of
the Terminated Parcels to Grantor. Any lender imposing a lien against the Del
Ranch Property shall be deemed, by the recordation of such lien, to have agreed
to promptly partially release the Terminated Parcels from the lien of its deed
of trust upon Grantor's exercise of the Partial Termination Option.
3.3. DAMAGE OR DESTRUCTION. Section 8.2 of the Ground Lease is hereby
deleted in its entirety.
3.4. PROJECT LENDER PROVISIONS. Section 10 of the Ground Lease
(consisting of sections 10.1 through 10.6, inclusive) is hereby revised as
follows.
3.4.1 The definition of "Project Lender" is hereby deleted
from Schedule "Z" to the Ground Lease, and is replaced with the following:
"'Project Lender' means (a) the Collateral Agent (b) any Person who
succeeds to the interest of Collateral Agent under the Indenture or (c)
any other Person who acquires a first lien on this Lease in connection
with or following (i) foreclosure of the Deed of Trust; (ii) conveyance
of this Lease to Collateral Agent in lieu of foreclosure or (iii) the
acquisition by Collateral Agent or its nominee or designee of the Lease
by any other means. The term "Project Lender" shall also include any
person or entity that acquires a first lien on the Lease at any time
after such foreclosure, conveyance by deed in lieu of foreclosure or
acquisition by Collateral Agent or its nominee or designee."
3.4.2 The definition of "Project Lender's Loan" is hereby
deleted from Schedule "Z" to the Ground Lease, and is replaced with the
following:
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"'Project Lender's Loan' means the financing provided by the Project
Lender for the Development, operation, refinancing or acquisition of
the Del Ranch Facility, the repayment of which is secured by the
Project Lender's Lien."
3.4.3 Section 10.2.1 of the Ground Lease is hereby deleted in
its entirety and replaced with the following:
"10.2.1 (i) So long as the Indenture is in effect, Landlord
shall not accept or consent to any amendment or modification of this
Lease if the same would be prohibited under the Partnership Credit
Agreement (as that term is defined in the Indenture); (ii) at any time
when the Indenture is no longer in effect, Landlord shall not accept
or consent to any amendment or modification of this Lease if the same
would have a material adverse effect on the Project Lender's Lien, and
(iii) except in a case of default by Tenant under this Lease that has
not been cured by the Project Lender under this Section 10.2 within the
period of time provided therein, Landlord shall not accept or consent
to any abandonment or termination of this Lease unless and until Tenant
presents evidence to Landlord that Tenant has obtained the prior
written consent of the Project Lender thereto."
3.4.4 Sections 10.2.6, 10.3, 10.4 and 10.5 of the Ground
Lease are hereby deleted in their entireties.
3.5. INSURANCE. Section 11 of the Ground Lease is hereby deleted in
its entirety.
3.6. ARBITRATION. The last eleven (11) words of paragraph (ii) of
section 31 of the Ground Lease (which currently read "Federal District Court or
County Superior Court in San Diego, California") are hereby deleted and replaced
with the words "District Court in Omaha, Nebraska."
ARTICLE 4. GENERAL PROVISIONS
4.1. NOTICES. The address for notices to Grantor and Grantee set
forth in section 8.3 of the Easement Grant Deed and in section 22 of the
Ground Lease shall henceforth be as follows:
If to Grantor: c/o CalEnergy Company, Inc.
302 South 36th Street
Suite 400
Omaha, Nebraska 68131
Attention: General Counsel
If to Grantee: c/o CalEnergy Company, Inc.
302 South 36th Street
Suite 400-C
Omaha, Nebraska 68131
Attention: General Counsel
4.2. ASSIGNMENT. Grantor shall be entitled, from time to time and
without the prior consent of Grantee, to transfer, assign, alienate, license,
grant easements in, hypothecate, pledge or mortgage to any Person all or any
portion of Grantor's right, title or interest in, under and to the Easement
Grant Deed and this Amendment.
4.3. COVENANTS TO RUN WITH THE LAND. The Del Ranch Property shall be
held, conveyed,
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assigned, hypothecated, encumbered, leased, used and operated subject to the
covenants, terms and provisions set forth herein, in the Easement Grant Deed and
in the Ground Lease, which covenants, terms and provisions shall run with the
Del Ranch Property and each portion thereof and interest therein, and shall be
binding upon Grantee and each other Person having any interest therein during
their ownership thereof, and their respective grantees, heirs, successors and
assigns.
4.4. EFFECT OF THIS AMENDMENT. In the event that any inconsistency
exists between this Amendment and the Easement Grant Deed or the Ground Lease,
this Amendment shall govern, and any inconsistent terms and provisions contained
herein shall be construed as superseding and amending the terms and provisions
of the Easement Grant Deed and/or the Ground Lease, as applicable. Except as
expressly modified by this Amendment, the Easement Grant Deed and the Ground
Lease shall be unchanged and shall remain in full force and effect. This
Amendment may be executed in multiple counterparts, all of which shall
constitute one and the same Amendment.
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IN WITNESS WHEREOF, the Parties have executed this Amendment as of the
date first above written.
GRANTOR: MAGMA POWER COMPANY,
a Nevada corporation
By: /s/ John G. Sylvia
---------------------------------
Its: Senior Vice President
--------------------------------
GRANTEE: DEL RANCH, L.P.,
a limited partnership organized under the
laws of the State of California
By: CalEnergy Operating Company,
a Delaware corporation,
General Partner
By: /s/ John G. Sylvia
---------------------------------
Its: Senior Vice President
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8
<PAGE>
ACKNOWLEDGMENTS
STATE OF New York )
---------------------------- ) ss.
COUNTY OF New York )
---------------------------
On June 20, 1996, before me, Patricia Peterson, personally appeared
John G. Sylvia, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s) or the entity on behalf of which
the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature /s/ Patricia Peterson
------------------------------------
STATE OF New York )
---------------------------- ) ss.
COUNTY OF New York )
---------------------------
On June 20, 1996, before me, Patricia Peterson, personally appeared
John G. Sylvia, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s) or the entity on behalf of which
the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature /s/ Patricia Peterson
------------------------------------
<PAGE>
EXHIBIT "A"
Description of the Geothermal Lease Rights Properties
Parcel 1:
The Southeast Quarter of the Southeast Quarter of Section 32, Township
11 South, Range 13 East, San Bernardino Meridian, in the County of
Imperial, State of California, according to Official Plat thereof.
Parcel 2:
Parcel A:
The Southwest Quarter of Section 33, Township 11 South, Range 13 East,
San Bernardino Meridian, in the County of Imperial, State of
California, according to Official Plat thereof.
Parcel B:
The West Half of the Southeast Quarter of Section 33, Township 11
South, Range 13 East, San Bernardino Meridian, in the County of
Imperial, State of California, according to Official Plat thereof,
excepting therefrom the following portion thereof:
Beginning at the Southwest Corner of Parcel 1 as shown in Book 5
Page 74 of Parcel Maps, said Point being on the South Line of
said Section 33; thence North 0 (degrees) 00'12" West 662.00 feet
along the West Line of Parcels 1 and 2 of said Map; thence West
382.00 feet parallel to the South Line of said Section, thence
South 0 (degrees) 00'12" East 662.00 feet parallel to the West
Line of Parcel 1 to a Point in the South Line of said Section,
thence East 382.00 feet along the South Line of said Section to
the True Point of Beginning.
Parcel C:
All minerals, whether in solid or liquid form, geothermal steam and
thermal energy within that portion of the West Half of the Southeast
Quarter of Section 33, Township 11 South, Range 13 East, San Bernardino
Meridian, in the County of Imperial, State of California, according to
Official Plat thereof, described as follows:
Beginning at the Southwest Corner of Parcel 1 as shown in Book 5
Page 74 of Parcel Maps, said Point being on the South Line of
said Section 33; thence North 0 (degrees) 00'12" West 662.00 feet
along the West Line of Parcels 1 and 2 of said Map; thence West
382.00 feet parallel to the South Line of said Section, thence
South 0 (degrees) E00'12" East 662.00 feet parallel to the West
Line of Parcel 1 to a Point in the South Line of said Section,
thence East 382.00 feet along the South Line of said Section to
the True Point of Beginning.
Parcel 3:
EXHIBIT "A"
Page 1 of 3
<PAGE>
Lots 3 and 4 and the South One-Half of the Northeast Quarter of Section
4, Township 12 South, Range 13 East, San Bernardino Meridian, in the
County of Imperial, State of California, according to Official Plat
thereof.
Parcel 4:
Parcel A:
That Portion of the Northeast Quarter of Section 33, in Township 11
South, Range 13 East, San Bernardino Meridian, in the County of
Imperial, State of California, according to Official Plat thereof,
described as follows:
Beginning at the Northeast Corner of said Section 33;
thence South 00 (degrees) 03' East, 2,640 feet to the East
Quarter Corner of said Section 33; thence with the
East-West Center Line of said Section, South 89 (degrees)
53' West, 2,489.12 feet to a Point from which a one-inch
iron pipe bears North 00E10' West 37.48 feet distant;
thence passing within the said Northeast Quarter North 00
(degrees) 10' West 1,319.78 feet to a 1-1/2 inch iron pipe
on the North line of the One-Half Northeast Quarter; thence
with said North Line East 3.0 feet to a 1-1/2 inch iron
pipe; thence North 00 (degrees) 10' West 1,319.78 feet to a
point on the North Line of said Section 33; thence with
said North Line North 89 (degrees) 53' East 2,491.39 feet
to the Place of Beginning.
Parcel B:
Beginning at the Quarter Corner on the North Line of said Section 33;
thence with said North Line North 89 (degrees) 53' East 116.43 feet
to a Point; thence passing within the said Northeast Quarter South 00
(degrees) 10' East, 2,639.55 feet to a point on the East-West Center
Line of said Section; thence with said East-West Center Line South 89
(degrees) 53' West 121.29 feet to the Center Quarter Corner of said
Section; thence with the North-South Center Line of said Section,
North 00 (degrees) 03' West 2,639.53 feet to the Place of Beginning.
Parcel 5:
Parcel A:
The Northeast Quarter of the Southeast Quarter of Section 33, in
Township 11 South, Range 13 East, San Bernardino Meridian, in the
County of Imperial, State of California, according to Official Plat
thereof.
Parcel B:
All minerals, whether in solid or liquid form, geothermal steam and
thermal energy lying below a depth of 500 feet below the surface of the
following land: The Southeast Quarter of the Southeast Quarter of
Section 33, in Township 11 South, Range 13 East, San Bernardino
Meridian, in the County of Imperial, State of California, according to
Official Plat thereof.
EXHIBIT "A"
Page 2 of 3
9
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Parcel 6:
The North Half of the Northwest Quarter of Section 34, Township 11
South, Range 13 East, San Bernardino Meridian, County of Imperial,
State of California, according to Official Plat thereof.
Parcel 7:
The South Half of the Northwest Quarter of Section 34, Township 11
South, Range 13 East, San Bernardino Meridian, County of Imperial,
State of California, according to the Official Plat thereof.
Parcel 8:
The West Half of the Northeast Quarter of Section 34, Township 11
South, Range 13 East, San Bernardino Meridian, according to the
Official Plat thereof.
--------------------
Parcel 1/Severe; Parcel 2/Del Ranch; Parcel 3/Future Energy; Parcel
4/Ruchti; Parcel 5/Woolsey; Parcel 6/McKelvey; Parcel 7/Wiest; Parcel
8/J.F. Baretta.
EXHIBIT "A"
Page 3 of 3
<PAGE>
EXHIBIT "B"
Description of the Geothermal Leases
Parcel 1:
Geothermal Lease and Agreement dated March 31, 1978, as heretofore and
hereafter amended and/or assigned, by and between Luella B. Severe, as
Lessor, and Imperial Magma, a corporation, as Lessee, as disclosed by
that certain Geothermal Lease and Agreement (Short Form) of even date
therewith, recorded on April 6, 1978, in Book 1414, Page 666 of
Official Records.
Parcel 2:
Geothermal Lease and Agreement dated May 1, 1980, as heretofore and
hereafter amended and/or assigned, by and between Del Ranch, Inc., a
corporation, as Lessor, and Imperial Magma, a corporation and New
Albion Resources Co., a corporation, as Lessee, as disclosed by that
certain Memorandum of Geothermal Lease and Agreement (Short Form) of
even date therewith, recorded on August 7, 1980, in Book 1456, Page
1373 of Official Records.
Parcel 3:
Lease Agreement dated June 16, 1980, as heretofore and hereafter
amended and/or assigned, by and between Future Energy, a limited
partnership, as Lessor, and New Albion Resources Co., a corporation, as
Lessee, as disclosed by that certain Lease Agreement and First
Amendment (Memorandum) of even date therewith, recorded on February 13,
1981 in Book 1465, Page 191 of Official Records.
Parcel 4:
Lease Agreement dated February 2, 1981, as heretofore and hereafter
amended and/or assigned, by and between Lakeview Lutheran Church of
Madison, Wisconsin, as Lessor, and New Albion Resources Co., a
corporation, as Lessee, as disclosed by that certain Lease Agreement
(Short Form) of even date therewith, recorded on April 24, 1981, in
Book 1468, Page 590 of Official Records.
Lease Agreement dated January 29, 1981, as heretofore and hereafter
amended and/or assigned, by and between Daryl Pierro, as Lessor, and
New Albion Resources Co., a corporation, as Lessee, as disclosed by
that certain Lease Agreement (Short Form) of even date therewith,
recorded on April 24, 1981, in Book 1468, Page 593 of Official Records.
Lease Agreement dated January 5, 1981, as heretofore and hereafter
amended and/or assigned, by and between Mrs. Carol S. Soik, as Lessor,
and New Albion Resources Co., a corporation, as Lessee, as disclosed by
that certain Lease Agreement (Short Form) of even date therewith,
recorded on April 24, 1981, in
EXHIBIT "B"
Page 1 of 5
<PAGE>
Book 1468, Page 596 of Official Records.
Lease Agreement dated February 12, 1981, as heretofore and hereafter
amended and/or assigned, by and between Augie Lincoln Hoffman, as
Lessor, and New Albion Resources Co., a corporation, as Lessee, as
disclosed by that certain Lease Agreement (Short Form) of even date
therewith, recorded on June 4, 1981, in Book 1470, Page 372 of Official
Records.
Lease Agreement dated January 27, 1981, as heretofore and hereafter
amended and/or assigned, by and between Donna H. Gore, as Lessor, and
New Albion Resources Co., a corporation, as Lessee, as disclosed by
that certain Lease Agreement (Short Form) of even date therewith,
recorded on March 18, 1981, in Book 1466, Page 1449 of Official
Records.
Lease Agreement dated November 22, 1980, as heretofore and hereafter
amended and/or assigned, by and between Anita Ruchti, as Lessor, and
New Albion Resources Co., a corporation, as Lessee, as disclosed by
that certain Lease Agreement (Short Form) of even date therewith,
recorded on February 13, 1981, in Book 1465, Page 148 of Official
Records.
Lease Agreement dated December 1, 1980, as heretofore and hereafter
amended and/or assigned, by and between Barbara LaVergne, as Lessor,
and New Albion Resources Co., a corporation, as Lessee, as disclosed
by that certain Lease Agreement (Short Form) of even date therewith,
recorded on February 13, 1981, in Book 1465, Page 151 of Official
Records.
Lease Agreement dated January 5, 1981, as heretofore and hereafter
amended and/or assigned, by and between Janice Johnson, as Lessor, and
New Albion Resources Co., a corporation, as Lessee, as disclosed by
that certain Lease Agreement (Short Form) of even date therewith,
recorded on February 13, 1981, in Book 1465, Page 145 of Official
Records.
Lease Agreement dated January 5, 1981, as heretofore and hereafter
amended and/or assigned, by and between Constance Corby, as Lessor,
and New Albion Resources Co., a corporation, as Lessee, as disclosed
by that certain Lease Agreement (Short Form) of even date therewith,
recorded on February 13, 1981, in Book 1465, Page 142 of Official
Records.
Lease Agreement dated November 28, 1980, as heretofore and hereafter
amended and/or assigned, by and between Eleanor L. Kearney, as
Lessor, and New Albion Resources Co., a corporation, as Lessee, as
disclosed by that certain Lease Agreement (Short Form) of even date
therewith, recorded on March 18, 1981, in Book 1466, Page 1441 of
Official Records.
Lease Agreement dated November 18, 1980, as heretofore and hereafter
amended and/or assigned, by and between Clara F. Ruchti, as Lessor,
and New Albion Resources Co., a corporation, as Lessee, as disclosed
by that certain Lease
EXHIBIT "B"
Page 2 of 5
<PAGE>
Agreement (Short Form) of even date therewith, recorded on February
13, 1981, in Book 1465, Page 139 of Official Records.
Lease Agreement dated December 30, 1980, as heretofore and hereafter
amended and/or assigned, by and between Mrs. Mary Ruchti, as Lessor,
and New Albion Resources Co., a corporation, as Lessee, as disclosed
by that certain Lease Agreement (Short Form) of even date therewith,
recorded on February 13, 1981, in Book 1465, Page 154 of Official
Records.
Lease Agreement dated December 10, 1980, as heretofore and hereafter
amended and/or assigned, by and between Mrs. Marjorie Briskey, as
Lessor, and New Albion Resources Co., a corporation, as Lessee, as
disclosed by that certain Lease Agreement (Short Form) of even date
therewith, recorded on March 18, 1981, in Book 1466, Page 1437 of
Official Records.
Lease Agreement dated December 30, 1980, as heretofore and hereafter
amended and/or assigned, by and between Robert R. Ruchti, II, as
Lessor, and New Albion Resources Co., a corporation, as Lessee, as
disclosed by that certain Lease Agreement (Short Form) of even date
therewith, recorded on February 13, 1981, in Book 1465, Page 158 of
Official Records.
Lease Agreement dated February 12, 1981, as heretofore and hereafter
amended and/or assigned, by and between Mrs. Marylou Williams, as
Lessor, and New Albion Resources Co., a corporation, as Lessee, as
disclosed by that certain Lease Agreement (Short Form) of even date
therewith, recorded on February 13, 1981, in Book 1465, Page 133 of
Official Records.
Lease Agreement dated February 12, 1981, as heretofore and hereafter
amended and/or assigned, by and between Mrs. Helene Zimmerman, as
Lessor, and New Albion Resources Co., a corporation, as Lessee, as
disclosed by that certain Lease Agreement (Short Form) of even date
therewith, recorded on February 13, 1981, in Book 1465, Page 136 of
Official Records.
Lease Agreement dated January 27, 1981, as heretofore and hereafter
amended and/or assigned, by and between Mrs. Gladys Hoffman, as Lessor,
and New Albion Resources Co., a corporation, as Lessee, as disclosed by
that certain Lease Agreement (Short Form) of even date therewith,
recorded on February 13, 1981, in Book 1465, Page 178 of Official
Records.
Lease Agreement dated January 27, 1981, as heretofore and hereafter
amended and/or assigned, by and between Ernest W. Hoffman, as Lessor,
and New Albion Resources Co., a corporation, as Lessee, as disclosed by
that certain Lease Agreement (Short Form) of even date therewith,
recorded on March 18, 1981, in Book 1466, Page 1445 of Official
Records.
Lease Agreement dated January 29, 1981, as heretofore and hereafter
amended and/or assigned, by and between Arnold H. Ruchti, as Lessor,
and New Albion Resources Co., a corporation, as Lessee, as disclosed by
that certain Lease Agreement (Short Form) of even date therewith,
recorded on February 13, 1981, in
EXHIBIT "B"
Page 3 of 5
<PAGE>
Book 1465, Page 174 of Official Records.
Lease Agreement dated January 2, 1981, as heretofore and hereafter
amended and/or assigned, by and between Phyllis Davidson, as Lessor,
and New Albion Resources Co., a corporation, as Lessee, as disclosed by
that certain Lease Agreement (Short Form) of even date therewith,
recorded on February 13, 1981, in Book 1465, Page 165 of Official
Records.
Lease Agreement dated January 2, 1981, as heretofore and hereafter
amended and/or assigned, by and between Kristen Davidson, as Lessor,
and New Albion Resources Co., a corporation, as Lessee, as disclosed by
that certain Lease Agreement (Short Form) of even date therewith,
recorded on February 13, 1981, in Book 1465, Page 168 of Official
Records.
Lease Agreement dated January 2, 1981, as heretofore and hereafter
amended and/or assigned, by and between William B. Davidson, as Lessor,
and New Albion Resources Co., a corporation, as Lessee, as disclosed by
that certain Lease Agreement (Short Form) of even date therewith,
recorded on February 13, 1981, in Book 1465, Page 171 of Official
Records.
Lease Agreement dated January 2, 1981, as heretofore and hereafter
amended and/or assigned, by and between Todd Davidson, as Lessor, and
New Albion Resources Co., a corporation, as Lessee, as disclosed by
that certain Lease Agreement (Short Form) of even date therewith,
recorded on February 13, 1981, in Book 1465, Page 162 of Official
Records.
Lease Agreement dated June 16, 1986, as heretofore and hereafter
amended and/or assigned, by and between Future Energy, as Lessor, and
New Albion Resources Co., a corporation, as Lessee, as disclosed by
that certain Lease Agreement and First Amendment (Memorandum) of even
date therewith, recorded on February 13, 1981, in Book 1465, Page 191
of Official Records.
Parcel 5:
Geothermal Lease and Agreement dated January 1, 1980, as heretofore and
hereafter amended and/or assigned, by and between Roy B. Woolsey and
Louise J. Woolsey, as Lessor, and Imperial Magma, a corporation and New
Albion Resources Co., a corporation, as Lessee, as disclosed by that
certain Memorandum of Geothermal Lease and Agreement (Short Form) of
even date therewith, recorded on August 14, 1980, in Book 1457, Page
248 of Official Records.
Parcel 6:
Lease and Agreement dated August 1, 1963, as heretofore and hereafter
amended and/or assigned, by and between Raymond G. McKelvey, Margo R.
McKelvey and Janet U. McKelvey, Executrix of the Estate of D.P.
McKelvey, as Lessor, and Earth Energy, Inc., a Delaware corporation and
Magma Power Company, a Nevada
EXHIBIT "B"
Page 4 of 5
<PAGE>
corporation, as Lessee, as disclosed by that certain Memorandum of
Lease and Agreement of even date therewith, recorded on January 13,
1964, in Book 1174, Page 807 of Official Records.
Parcel 7:
Lease Agreement dated July 25, 1978, as heretofore and hereafter
amended and/or assigned, by and between Ed C. Wiest and Dorothy Wiest,
as Lessor, and New Albion Resources Co., a corporation, as Lessee, as
disclosed by that certain Lease Agreement (Short Form) of even date
therewith, recorded on August 16, 1978, in Book 1420, Page 1369 of
Official Records.
Parcel 8:
Geothermal Lease and Agreement dated January 1, 1979, as heretofore and
hereafter amended and/or assigned, by and between John F. Baretta,
Suzanne Baretta and Victoria L. Roluffs, as Lessors, and Magma Power
Company, a corporation, as Lessee, as disclosed by that certain
Geothermal Lease and Agreement (Short Form) of even date therewith,
recorded on December 14, 1979, in Book 1444, Page 1307 of Official
Records.
Geothermal Lease and Agreement dated January 1, 1979, as heretofore and
hereafter amended and/or assigned, by and between Kathryn E. Wood, as
Lessor, and Magma Power Company, a corporation, as Lessee, as disclosed
by that certain Geothermal Lease and Agreement (Short Form) dated April
10, 1979, recorded on July 16, 1979, in Book 1436, Page 1765 of
Official Records.
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Parcel 1/Severe; Parcel 2/Del Ranch; Parcel 3/Future Energy; Parcel
4/Ruchti; Parcel 5/Woolsey; Parcel 6/McKelvey; Parcel 7/Wiest; Parcel
8/J.F. Baretta.
EXHIBIT "B"
Page 5 of 5
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EXHIBIT "C"
Description of the Del Ranch Property
That portion of the Southeast Quarter of the Southeast Quarter of
Section 33, Township 11 South, Range 13 East, San Bernardino Meridian,
County of Imperial, State of California, according to the Official Plat
thereof shown as Parcel 2 on Parcel Map M-1356, on file in Book 5, Page
74 of Parcel Maps in the Office of the County Recorder of Imperial
County.
Excepting therefrom, minerals, either in solid or liquid form,
geothermal steam, naturally heated water, and thermal energy below a
depth of 500 feet from the surface of said land, as reserved by Roy B.
Woolsey and Louise J. Woolsey, in the Deed recorded October 30, 1974 in
Book 1368 Page 960, Official Records, without, however, the right to
enter the area within 500 feet of the surface of the ground, nor
endanger or interfere with the operation, maintenance or repair of the
facilities located within or upon said land.
EXHIBIT "C"
Page 1 of 1
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GROUND LEASE
PREAMBLE
THIS GROUND LEASE (the "Lease") is made as of March 14, 1988, by and
between MAGMA POWER COMPANY, a Nevada corporation ("Landlord"), and ELMORE,
LTD., A CALIFORNIA LIMITED PARTNERSHIP, a limited partnership organized under
the laws of the State of California ("Tenant").
AGREEMENT
1. Certain Definitions. Unless the context shall otherwise require,
capitalized terms used and not otherwise defined herein shall have the
respective meanings assigned thereto in Schedule Z hereto, which shall be
incorporated by reference herein.
2. Lease.
2.1. Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, the "Premises," as that term is defined in Section 3 hereof, on the
terms and conditions, and subject to the reservations, set forth in this Lease.
2.2 Landlord hereby reserves from the Leasehold estate granted to
Tenant by this Lease the right to use the surface of the Elmore Property in
order to obtain, use, extract and develop the Reserved Geothermal Brine and the
Geothermal Brine Scale, together with reasonable access thereto for road and
utility purposes, but only to the extent that such use does not cause any
material interference with Tenant's construction, operation and maintenance of
the Elmore Facility. The right reserved by Landlord in this Section 2.2
includes, without limitation, the right to construct, operate and maintain
pipelines, buildings, structures, equipment and other improvements over, under
and upon the surface of the Elmore Property, including, but not limited to,
Additional Power Production Facilities, and warehouse(s) for the storage of
Critical Parties and Equipment and other parts and equipment owned or within the
control of Landlord which may be stored in such warehouse(s) for use in
Additional Power Production Facilities and to use the surface of the Elmore
Property in a commercially reasonable manner in order to "tap" into the
Supporting Equipment and any other equipment or piping carrying or containing
Geothermal Brine or Geothermal Brine Scale from the Elmore Facility to injection
wells thereby affording to Landlord access to such Geothermal Brine and the
Geothermal Brine Scale in an oxygen-free environment; provided, however, that,
notwithstanding any other provision in this Lease to the contrary, Landlord
shall pay all costs, direct and indirect, incurred by Tenant as a result of
Landlord's exercising the rights reserved to
1
<PAGE>
Landlord in this Section 2. Notwithstanding any other provision in this Lease to
the contrary, in the event that Landlord desires to exercise its rights under
this Section 2.2, Landlord shall obtain the prior written consent of Tenant,
which consent shall not be unreasonably withheld. The standards to be applied by
Tenant in giving or with holding such consent shall be as provided in Section
2.3.4 of the Easement Agreement.
2.3 The rights reserved by Landlord from the leasehold estate granted
to Tenant pursuant to this Lease shall be assignable by Landlord in whole or in
part to successors and assigns. Without limiting the generality of the
foregoing, Landlord may sell, assign, encumber and grant leasehold estates in
such rights to other persons.
3. Premises.
3.1. The "Premises" that are the subject of this Lease consist of
the Elmore Property as more particularly described in Exhibit "A" hereto, BUT
EXCLUDING THEREFROM (a) all rights reserved by Landlord as set forth in Section
2 hereof.
3.2 Concurrent with the delivery of this Lease, Landlord has
delivered to Tenant an instrument transferring ownership from Landlord to Tenant
of all improvements existing on or in the Premises at the Recordation Date as
that term is defined in Section 4 hereof. Such improvements shall be held, used,
altered and disposed of by Tenant in accordance with the terms and conditions of
this Lease.
3.3 At any time and from time to time during the term of this Lease,
within thirty (30) days after written request from Landlord, Tenant shall enter
into an amendment to this Lease, which shall delete from the legal description
of the Elmore Property that portion thereof as to which any other Person has a
right to possession, in accordance with the following:
3.3.1 Both the portion of the Elmore Property being released
from the encumbrance of this Lease, and the portion of the Elmore Property
remaining subject to the encumbrance of this Lease after such release, shall be
legal lots in compliance with the California Subdivision Map Act and other state
or local ordinances thereunder; and
3.3.2. The amendment shall contain all cross-easements,
covenants, conditions, restrictions and agreements reasonably requested by
Tenant to facilitate the construction, operation and maintenance of the Elmore
Facility at a level which allows the Elmore Facility to drill for, produce,
extract, store, utilize, reclaim, convert,
2
<PAGE>
sell, transfer, dispose and Process Geothermal Brine up to the amount necessary
to meet the Elmore Facility Brine Requirement in connection with the generation
of electrical energy at the Elmore Facility.
4. Term. The term of this Lease shall commence upon the recordation of
a Memorandum of this Lease in the Office of the County Recorder of Imperial
County, California (the "Recordation Date"), and, unless sooner terminated as
provided in this Lease, shall end on the date which is thirty-two (32) years
thereafter (the "Expiration Date").
5. Rent
5.1. In addition to other sums payable by the term of this lease,
Tenant shall pay to Landlord, without abatement, deduction or offset, the
following sums:
5.1.1. As "Initial Rent" for the Premises for the period
beginning on June 30, 1987 and ending on December 31, 1987, the lump sum of
$10,000.00, payable in advance on the Recordation Date.
5.1.2. As "Base Monthly Rent" for the Premises for the period
beginning on January 1, 1988 and continuing monthly thereafter throughout the
term of this Lease, but subject to adjustment as provided in Section 5.2
hereof, the sum of $1,667.00 per month, payable in advance on the first day of
each month.
5.1.3. Rent for any period during the term hereof which is for
less than one month shall be prorated based upon the actual number of days
elapsed in the calendar month involved. Rent shall be payable in lawful money of
the United States to Landlord at the address stated herein or to such other
persons or at such other places as Landlord may designate in writing.
5.2. The Base Monthly Rent shall be subject to annual adjustments as
follows:
5.2.1. For purposes of this Lease, a "Lease Year" shall be
deemed to begin on January 1 of each calendar year throughout the term of this
Lease.
5.2.2. For the Lease Year beginning on January 1, 1989, and for
each Lease Year thereafter, the Base Monthly Rent of $1,667.00 payable under
Section 5.1.2 hereof shall be adjusted to reflect the increase, if any, in the
Consumer Price Index published by the Bureau of Labor Statistics of the
Department of Labor for All Urban Consumers, All Items, for the Los
Angeles-Anaheim-Riverside Metropolitan Area (the "CPI"), as hereinafter
provided.
3
<PAGE>
5.2.3. The Base Monthly Rent payable pursuant to Section 5.2.2.
hereof shall be calculated as follows: The Base Monthly Rent of $1,667.00
payable under Section 5.1.2 hereof above shall be multiplied by a fraction, the
numerator of which shall be the CPI for the month of September in the year
preceding the Lease Year for which the adjustment is to be made, and the
denominator of which shall be the CPI for the month of September 1987. The sum
so calculated shall constitute the new Base Monthly Rent hereunder, but in no
event shall such new Base Monthly Rent be less than the Base Monthly Rent
payable for the month immediately preceding the Lease Year for which the
adjustment is to be made.
5.2.4. In the event that the publication of the CPI shall be
transferred to any other governmental department or bureau or agency or shall be
discontinued, then the index most nearly the same as the CPI, as determined in
good faith by Landlord, shall be used to make such calculations.
5.2.5. Tenant shall continue to pay Base Monthly Rent at the
rate previously in effect until the increase, if any, is determined. Within ten
(10) days following the date on which the increase is determined, Tenant shall
make such payment to Landlord as will bring the increased Base Monthly Rent
current, commencing with the effective date of such increase at the beginning of
the Lease Year for which the adjustment is to be made through the date of any
installments of Base Monthly Rent then due. Thereafter, the Base Monthly Rent
shall be paid at the increased rate.
6. Taxes, Assessments and Utilities.
6.1. As used in this Lease, the term "real property tax" shall
include any form of real estate tax or assessment, general, special, ordinary or
extraordinary, and any license, fee, rental tax, tax on the right to do
business, when Landlord's collection of rent under this Lease is defined as
doing business, improvement bond, levy or tax (other than inheritance, personal
income or estate taxes) imposed on the Elmore Property or any portion thereof by
any authority having the direct or indirect power to tax, including any city,
county, state or federal government, or any school, agricultural, sanitary,
fire, street, drainage or other improvement district thereof, as against any
legal or equitable interest of Landlord in the Elmore Property or in any portion
thereof, as against Landlord's right to rent or other income therefrom, and as
against Landlord's business of leasing the Premises. The term "real property
tax" shall also include any tax, fee, levy, assessment or charge (a) in
substitution of, partially or totally, any tax, fee, levy, assessment or charge
hereinafter included within the
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definition of "real property tax," or (b) the nature of which was heretofore
included within the definition of "real property tax," or (c) which is imposed
for any service or right not charged prior to June 1, 1978, or (d) which is
imposed as a result of a change in ownership, as defined by applicable local
statutes for property tax purposes, or which is added to a tax or charge
heretofore included within the definition of "real property tax" by reason of
such change of ownership, or (e) which is imposed by reason of this transaction,
any modifications or changes hereto, or any transfers hereof.
6.2. Tenant shall pay before delinquency all real property taxes,
all personal property taxes, and all taxes, charges and assessments of every
other description levied on or assessed against the Elmore Property and the
Elmore Facility and personal property owned or leased by Tenant located thereon,
the leasehold estate created hereby, or any subleasehold estate, to the full
extent of installments falling due during the term, whether chargeable against
Landlord or Tenant. Tenant shall make all such payments directly to the charging
authority before delinquency and before any fine, interest or penalty shall
become due or be imposed by operation of law for their nonpayment. If, however,
the law expressly permits the payment of any or all of the above items in
installments (whether or not interest accrues on the unpaid balance), Tenant
may, at Tenant's election, utilize the permitted installment method, but shall
pay each installment with any interest before delinquency.
6.3. All payments of taxes or assessments shall be prorated for any
portion of tax fiscal year at the commencement or expiration of the term of this
Lease, except as provided in Section 6.4 hereof. Such proration shall be made by
multiplying the entire tax or assessment by a fraction which, in the case of
determining Tenant's liability for such taxes and assessments, shall have a
numerator equal to the number of days that this Lease is in effect during the
tax fiscal year for which the calculation is being made, and shall have a
denominator equal to 365 or 366, as the case may be.
6.4. For permitted installment payments of special taxes or
assessments where at least the first installment fell due before the Recordation
Date, Tenant shall pay all installments falling due after the Recordation Date.
For permitted installment payments of special taxes or assessments where the
fist installment falls due before the expiration of the term, Tenant shall pay
only the installment(s) falling due before the expiration of the term.
6.5. If the Premises are assessed with other real or personal
property of Landlord apart from the Elmore
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Property, all taxes imposed on the entire assessed property shall be prorated,
and Tenant shall pay that amount which equals the product obtained by
multiplying the entire tax by a fraction, the numerator of which equals the
value of the Elmore Property and the denominator of which equals the value of
all of the property so assessed.
6.6. Tenant may contest the legal validity or amount of any taxes,
assessments or charges for which Tenant is responsible under this Lease, and may
institute such proceedings as Tenant considers necessary. If Tenant contests any
such tax, assessment or charge, Tenant may withhold or defer payment or pay
under protest, but shall protect Landlord and the Elmore Property from any lien
by surety bond or other appropriate security reasonably acceptable to Landlord.
Landlord appoints Tenant as Landlord's attorney-in-fact for the purpose of
making all payments to any taxing authorities and for the purpose of contesting
any taxes, assessments or charges affecting the Premises, conditioned on
Tenant's preventing any liens from being levied on the Elmore Property or on
Landlord.
6.7. Tenant agrees to pay, before the same become delinquent, all
charges for gas, electricity, heat, light, power, sewage, water, telephone,
trash removal, and other similar or dissimilar public services or commodities
furnished to the Premises and the Elmore Facility during the term of this Lease,
including all installation, connection and disconnection charges.
6.8. All taxes, assessments, utilities, insurance premiums,
maintenance costs and other rent payable hereunder shall be paid as "triple-net"
rent, without deduction or offset. It is the intent of the parties that the rent
provided in this Lease shall be absolutely net to Landlord, and that except as
otherwise expressly provided in this Lease, Tenant shall pay all costs and
charges of every kind and nature incurred for, against, or in connection with
the Premises which may arise or become due from and after the Recordation Date
and during the term hereof. Provided, however, that nothing herein shall be
construed to require Tenant to pay any installment of interest or principal
owing on any encumbrance against the Elmore Property for which Landlord is the
obligor. All such costs and charges at the commencement and the end of the term
of this Lease shall be appropriately prorated between the parties.
7. Use.
7.1. Tenant shall continuously use and permit the use of the
Premises only for the construction, maintenance and operation of the Elmore
Facility, substantially in accordance with the Plans and Specifications and
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any "as-built" plans and as contemplated by the Operating Agreements.
7.2. This Lease is and shall be subject and subordinate to the
rights reserved by Landlord with respect to the Premises as set forth in Section
2 hereof.
7.3. Tenant shall, at Tenant's expense, promptly comply in all
material respects with all applicable statutes, ordinances, rules, regulations,
orders, covenants and restrictions of record, and requirements of any fire
insurance underwriters or rating bureaus, now in effect or which may hereafter
come into effect, whether or not they reflect a change in policy from that now
existing, during the term or any part of the term hereof, relating in any manner
to the Premises and the occupation and use by Tenant of the Premises. Tenant
shall conduct its business in a lawful manner and shall not use or permit the
use of the Premises in any manner that will create unnecessary waste of assets
or a nuisance.
7.4. Without limiting the generality of the foregoing Tenant shall,
at Tenant's expense, comply with all applicable federal, state, regional and
local environmental statutes, ordinances, rules, regulations and orders now in
effect or which may hereafter come into effect including, without limitation,
the Resource Conversation and Recovery Act, the Comprehensive Environmental
Response Compensation and Liability Act, the Hazardous Materials Transportation
Act, the Toxic Substances Control Act, the Clean Air Act, the Clean Water Act,
the California Hazardous Waste Control Act, the California Hazardous Substance
Act, the Porter-Cologne Water Quality Control Act and any all regulations
promulgated pursuant thereto.
7.5. Tenant agrees to indemnify, defend by counsel reasonably
acceptable to Landlord, and hold harmless Landlord, its subsidiaries,
affiliates, successors and assigns and their respective directors, officers,
employees, shareholders, representatives and agents from and against and in
respect of any and all claims, damages (including, without limitation,
diminution in value), losses, liabilities and expenses, lawsuits, deficiencies,
interest, penalties, attorneys' fees and all amounts paid in defense or
settlement of the foregoing whether or not arising out of third-party claims,
which may be imposed upon or incurred by Landlord or asserted against Landlord
by any other party or parties in connection with any violation of the provisions
of this Section 7 arising out of, resulting from, or attributable to, the
assets, business, or operations of Tenant at the Elmore Property. Tenant's
obligations pursuant to this subsection shall exist regardless of whether
Landlord is alleged or held to be strictly or jointly and severally liable,
unless such
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liability is by reason of Landlord's gross negligence or willful misconduct.
7.6. Without in any way limiting the scope of Tenant's obligations
under the indemnification provisions of this Section 7, but subject to
Landlord's obligation under Section 2 hereof to pay all direct and indirect
costs associated with Landlord's exercise of the rights reserved to it in
Section 2 hereof, Tenant will be responsible for all investigations, studies,
cleanup, corrective action or response or remedial action required by any local,
state or federal government agency now or hereafter authorized to regulate
environmental or other matters or by any consent decree, or court or
administrative order now or hereafter applicable to the Elmore Property, or by
any federal, state or local law, regulation, rule or ordinance now or hereafter
in effect.
7.7. As between Landlord and Tenant, Tenant shall have the
responsibility and right to participate in the management and control of all
investigations and any environmental cleanup, remediation, or related
activities. Tenant, however, may not negotiate with, fulfill any requirements or
claims made by a governmental entity or third party, settle or contest such
requirement or third-party claim without the express approval of Landlord, and
Landlord shall have the right to participate fully in any and all meetings,
negotiations or decisions relevant to the investigation or remediation of the
violation of the provisions of this Section 7 at the Elmore Property.
7.8. Tenant hereby accepts the Premises in its condition existing as
of the Recordation Date, subject to all applicable zoning, municipal, county and
state laws, ordinances and regulations governing and regulating the use of the
Premises, and all exceptions set forth in the Elmore Property Preliminary Title
Report and other matters of record or otherwise disclosed to Tenant prior to the
date hereof, and accepts this Lease subject thereto. Tenant acknowledges that it
has satisfied itself by its own independent investigation that the Premises are
suitable for its intended use, and that neither Landlord nor Landlord's agent or
agents has made any representation or warranty as to the present or future
suitability of the Premises for the conduct of Tenant's business.
8. Maintenance, Repairs, Alterations.
8.1. Throughout the term, Tenant shall, at Tenant's sole cost and
expense, maintain the Premises and the Elmore Facility in good condition and
repair, ordinary wear and tear excepted, in accordance with all applicable laws,
rules, ordinances, orders and regulations of (a) federal, state, county,
municipal and other governmental agencies and
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bodies having or claiming jurisdiction and all their respective departments,
bureaus, and officials, (b) any insurance underwriting board or insurance
inspection bureau having or claiming jurisdiction, and (c) any insurance company
insuring all or any part thereof.
8.2. Except as provided below, and subject to the provisions of the
Project Lender's Loan Documents, Tenant shall promptly and diligently repair,
restore and remedy all damage to or destruction of all or any part of the Elmore
Facility, if the cost of the word so required does not exceed fifty percent
(50%) of the entire replacement value of all such improvements; provided,
however, that Tenant shall have no obligation to repair, restore and remedy any
such damage or destruction arising our of the gross negligence or willful
misconduct of Landlord unless the gross negligence or willful misconduct of
Tenant contributes to such damage or destruction, in which case the cost of
repairs, restoration and remedial work shall be apportioned among Landlord and
Tenant in direct proportion to their respective culpability with respect to such
damage or destruction. If the cost does exceed fifty percent (50% of the entire
replacement value of all such improvements, Tenant may nevertheless repair,
restore and remedy the same, or may be notice given within sixty (60) days after
the date on which the damage or destruction occurs elect instead to raze the
improvements damaged or destroyed. Within ninety (90) days after such notice,
Landlord may be notice elect to repair, restore and remedy such damage or
destruction at Landlord's cost and expense, and Tenant shall not raze the
improvements until the expiration of the time for Landlord's notice of election.
8.3. Tenant has the right to contest by appropriate judicial or
administrative proceedings, without cost or expense to Landlord, the validity or
application of any law, ordinance, order, rule, regulation or requirement
(collectively called "law") that Tenant repair, maintain, alter or replace any
improvements in whole or in apart, and Tenant shall not be in default for
failing to do such work until a reasonable time following final determination of
Tenant's contest. If requested by Landlord, Tenant shall first furnish to
Landlord a bond, satisfactory to Landlord in form, amount and insurer,
guaranteeing compliance by Tenant with the contested law and indemnifying
Landlord against all liability that Landlord may sustain by reason of Tenant's
failure or delay in complying with the law. Landlord may, but is not required
to, contest any such law independently of Tenant. Landlord may, and if requested
by Tenant shall, join in Tenant's contest.
8.4. Landlord's approval is not required for Tenant's minor
alterations or additions to any improvements with a Construction Cost not
exceeding $7,500,000. "Construction Cost" includes all costs that would
constitute
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the basis of a valid claim or claims under the mechanics' lien laws, including
costs for any demolition or removal of existing improvements or parts thereof,
as well as costs for preparation, construction and completion of all new
improvements. All alterations or additions with a Construction Cost in excess of
$7,500,000 shall require Landlord's prior written consent.
8.5. Tenant shall use only reputable licensed contractors in making
any alterations or additions, and Landlord may require Tenant to provide to
Landlord, at Tenant's sole cost and expense, a lien and completion bond in an
amount equal to one and one-half times the estimated cost of such improvements,
to insure Landlord against any liability for any mechanic's and materialmen's
liens and to insure completion of the work. Should Tenant make any alterations
or additions without the prior written consent of Landlord where such consent is
necessary, or use other than a reputable licensed contractor, Landlord may, at
any time during the term of this Lease, require that Tenant remove any part or
all of the same.
8.6. Tenant shall pay, when due, all claims for labor or materials
furnished to or for Tenant at or for use in the Premises, which claims are or
may be secured by any mechanic's or materialmen's lien against the Elmore
Property or any interest therein.
8.7. Tenant shall give Landlord not less than ten (10) days' notice
prior to the commencement of any alterations or additions to the Premises by
Tenant, and Landlord shall have the right to post notices of non-responsibility
in or on the Premises as provided by law. If Tenant shall, in good faith,
contest the validity of any lien, claim or demand, then Tenant shall, at its
sole expense, defend itself and Landlord against the same and shall pay and
satisfy any adverse judgment that may be rendered thereon before the enforcement
thereof against the Landlord against liability for the same and holding the
Elmore Property free from the effect of such lien or claim. In addition,
Landlord may require Tenant to pay Landlord's reasonable attorneys' fees and
costs in Participating in such action, if Landlord shall decide it is to
Landlord's best interest so to do.
8.8. All alterations and additions which may be made to the Premises
by Tenant shall be made and done in a good and workmanlike manner and of good
quality and materials, and, subject to the provisions of Sections 8.11 and 8.13
hereof, shall be the property of Landlord at the expiration of the term of the
Lease. Notwithstanding the
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provisions of this Section, and provided that Tenant is not in default under
this Lease, Tenant's personal property and equipment, other than that which is
affixed to the Premises so that it cannot be removed without material damage to
the Premises, shall remain the Property of Tenant and may be removed by Tenant,
subject to the provisions of Section 8.11 hereof.
8.9. Promptly upon completion of any alterations or additions to the
Premises, Tenant shall provide Landlord with two (2) sets of "as-built" plans
and specifications.
8.10 Subject to Landlord's right to require the Decommissioning of
the Elmore Facility pursuant to Sections 8.11 and 8.13 hereof, on the last day
of the term hereof, or on any sooner termination, Tenant shall surrender the
Premises and all improvements thereon to Landlord, in good condition and repair,
ordinary wear and tear excepted, clean and free of debris. Any damage or
deterioration or the Premises or improvements shall not be deemed ordinary wear
and tear if the same could have been prevented by good maintenance practices by
Tenant. Tenant shall repair any damage to the Premises occasioned by the
installation or removal or Tenant's trade fixtures, alterations, furnishings and
equipment.
8.11. Notwithstanding any other provision in this Lease to the
contrary, in the event the Elmore Facility or the Premises is wholly or
partially damaged or destroyed on or after the date which is exactly five (5)
years prior to the date on which this Lease terminates pursuant to Section 4
hereof, and the cost to repair, restore or reconstruct the Elmore Facility and
the Premises is at least $7,500,000, Tenant, not later than fifteen (15) days
after the event causing such damage or destruction, shall give written notice to
Landlord detailing the facts that qualify the casualty under this provision.
Landlord, not later than fifteen (15) days following receipt of such notice from
Tenant, shall by written notice to Tenant inform Tenant whether (a) Landlord
desires the Decommissioning by Tenant of the Elmore Facility and the premises or
(b) Landlord desires the surrender by Tenant of the Elmore Facility and the
Premises at the end of the term of this Lease. In the event Landlord elects to
have Tenant Decommission the Delmore Facility and the Premises pursuant to the
provisions of this Section 8.11, (a) Tenant shall forthwith commence such
Decommissioning and shall diligently proceed until such Decommissioning is
complete, (b) Tenant shall have the right to all proceeds of insurance received
on account of such casualty and (c) Tenant shall surrender the Premises to
Landlord immediately after such Decommissioning and this Lease and all of
Tenant's obligations hereunder shall terminate except for Tenant's obligations
to indemnify Landlord pursuant to Section 7.3
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hereof and to pay any rent which accrued pursuant to Section 5 hereof. In the
event Landlord elects to have Tenant surrender the Elmore Facility and the
Premises to Landlord at the end of the term of this Lease, then the provisions
of Section 8.13 shall cease to be effective and Tenant shall forthwith commence
to repair, restore and reconstruct the Elmore Facility and the Premises in the
manner and subject to the terms provided in Section 8.2 hereof.
8.12. Except as provided in Section 8.13 hereof, all improvements
constructed by Tenant on the Premises shall, at the expiration of the term or
earlier termination of this Lease, without compensation to Tenant, become
Landlord's property free and clear of all claims to or against them by Tenant or
any third person, and Tenant shall defend and indemnify Landlord against all
liability and loss arising from any such claims or from Landlord's exercise of
the rights conferred by this Section.
8.13. At the expiration or earlier termination of the term, Landlord
may, at Landlord's election, demand the removal from the Premises of any or all
fixtures or improvements or both (a "Decommissioning"), as specified in the
notice provided below. A demand to take effect at the normal expiration of the
term shall be effected by notice given at any time not later than nine (9)
months before the expiration date. A demand to take effect on any other
termination of this Lease shall be effected by notice given in or concurrently
with notice of such termination or within thirty (30) days after such
termination. Tenant shall comply with the notice on or before the expiration
date for normal termination, and within ninety (90) days after the notice for
other terminations. The duty imposed by this provision includes, but is not
limited to, the duty to demolish and remove all foundations, fix all
excavations, return the surface to grade, and leave the Premises safe and free
from debris and hazards, in a safe manner, in accordance with good operating
practice and in compliance with all applicable laws and regulations of any
governmental authority having jurisdiction over such operations. In the event
Landlord elects to require such Decommissioning by Tenant, Tenant shall be
entitled to all fixtures and improvements so Decommissioned.
9. Assignment and Subletting. Subject to the provisions of Section 10
hereof, Tenant shall not voluntarily or by operation of law assign, transfer,
mortgage, sublet or otherwise transfer or encumber all or any part of Tenant's
interest in this Lease or in the Premises, without Landlord's prior written
consent, which consent Landlord shall not unreasonably withhold.
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10. Rights of Lender.
10.1. Notwithstanding any other provision in this Lease to the
contrary, Tenant may, from time to time, without notifying or obtaining the
consent of Landlord, hypothecate, mortgage, pledge or alienate Tenant's interest
in this Lease to the Project Lender. The Project Lender shall give promptly
written notice to Landlord of (i) its entering into a credit agreement
evidencing the Project Lender's Loan and the total amount of funds available
thereunder, or of the nature of the transaction, (ii) any amendments to said
credit agreement and (iii) the Project Lender's address for notices hereunder;
provided, however, that any failure by the Project Lender to give such notice
shall not be grounds for denying the Project Lender the rights and protections
provided in this Section 10.
10.2. For the protection of the Project Lender, Landlord agrees as
follows:
10.2.1 Landlord shall not accept any abandonment of this Lease,
nor shall Landlord consent to any amendment, modification or termination hereof,
provided, that Landlord has received actual or constructive notice of the
Project Lender's Lien, unless and until Tenant presents evidence to Landlord
that Tenant has obtained the prior written consent of the Project Lender.
10.2.2. The Project Lender shall have the right, but not the
obligation, at any time prior to the expiration or earlier termination of this
Lease, and without payment of any penalty, to make any payments due hereunder,
and to do any other act or thing required of Tenant hereunder, and to do any act
or thing that may be necessary and proper to be done in the performance and
observance of the terms hereof to prevent any default under or termination of
this Lease. All payments so made and all things so done and performed by the
Project Lender shall be as effective to prevent any default under or termination
of this Lease as they would have been if made, done and performed by Tenant
instead of by the Project Lender. Landlord hereby agrees that upon Landlord's
receipt of any notice in the nature of a notice of default with respect to any
obligation of Landlord under the Geothermal Leases, Landlord shall immediately
deliver a copy of such notice to Tenant and to the Project Lender provided that
Landlord has received actual or constructive notice of the Project Lender's
Lien.
10.2.3. Tenant shall not be in default under this Lease unless
Tenant fails to perform the obligations required of it hereunder within the time
periods set forth herein, including all applicable cure periods. If Tenant fails
to cure any default within the time so provided, then, upon written notice from
Landlord to the Project
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Lender, the Project Lender shall have an additional ninety (90) days to cure
such default; provided, however, that if such default cannot reasonably be cured
within such additional ninety (90) day period, then the Project Lender shall
have such additional time to cure the default as is reasonably necessary under
the circumstances, so long as (a) the Project Lender shall have fully cured
within such ninety (90) day period any default in the payment and performance of
any monetary or other obligations of Tenant hereunder that do not require
possession of the Premises and shall thereafter continue to faithfully perform
all such monetary and other obligations, (b) the Project Lender shall have
acquired Tenant's interest hereunder or commenced foreclosure or other
appropriate proceedings in the nature thereof within such period or prior
thereto, and shall be diligently prosecuting any such proceedings to completion,
and (c) the Project Lender shall take all reasonable measures within its control
(including steps to obtain control) to continue Tenant's operations of the
Elmore Facility under this Lease. All rights of Landlord to terminate this Lease
as a result of the occurrence of any default by Tenant shall be subject to, and
expressly conditioned upon, (i) the Project Lender's having received the notice
specified above in this Section 10.2.3, and (ii) the Project Lender's having
failed to remedy such default or to acquire Tenant's interest hereunder or
commence foreclosure or others appropriate proceedings or to take reasonable
measures to continue Tenant's operations of the Elmore Facility as set forth in
this Section 10.2.3.
10.2.4. Any default by Tenant under this Lease that cannot be
remedied by the Project Lender shall nevertheless by deemed to have been
remedied if (a) within ninety (90) days after receiving written notice from
Landlord setting forth the nature of such default, or prior thereto, the Project
Lender shall have acquired Tenant's interest hereunder or shall have commenced
foreclosure or other appropriate proceedings in the nature thereof, (b) the
Project Lender shall diligently prosecute any such proceedings to completion,
(c) the Project Lender shall have taken reasonable measures within its control
(including steps to obtain control) to continue Tenant's operations of the
Elmore Facility in accordance with the terms of this Lease, (d) the Project
Lender shall have fully cured within such ninety (90) day period any default in
the payment and performance of any monetary or other obligations of Tenant
hereunder that do not require possession of the Premises and shall thereafter
continue to faithfully perform all such monetary and other obligations, and (e)
after gaining possession of the Premises, the Project Lender shall perform all
obligations of Tenant hereunder and which arise thereafter.
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10.2.5. If the Project Lender is prohibited by any process or
injunction issued by any court or by reason of any action of any court having
jurisdiction over any bankruptcy, reorganization, insolvency or other
debto-relief proceeding involving Tenant, from commencing or prosecuting
foreclosure or other appropriate proceedings in the nature thereof, then the
times specified in Sections 10.2.3 and 10.2.4 hereof for commencing or
prosecuting such foreclosure or other proceedings shall be extended for the
period of such prohibition; provided, however, that the Project Lender shall
have fully cured any default in the payment or performance of any monetary or
other obligations of Tenant under this Lease that do not require possession of
the Premises, and shall continue to pay and perform such monetary and other
obligations as and when they fall due, and shall have taken reasonable measures
within its control (including steps to obtain control) to continue Tenant's
operations of the Elmore Facility.
10.2.6. Landlord shall mail or deliver to the Project Lender a
duplicate copy of any and all written notices that Landlord may from time to
time give to or serve upon Tenant pursuant to the provisions hereof, and such
copies shall be mailed or delivered to the Project Lender at, or as near as
possible to, the same time such notices are given to or served upon Tenant. No
notice by Landlord to Tenant hereunder shall be deemed to have been given unless
and until a copy thereof shall have been mailed or delivered to the Project
Lender.
10.2.7. Foreclosure of the Project Lender's Lien or any sale
thereunder, whether by judicial proceedings or otherwise, or any conveyance or
transfer of the interest of Tenant under this Lease from Tenant to the Project
Lender through, or in lieu of, foreclosure or other appropriate proceedings in
the nature thereof, shall not require the consent of Landlord or constitute a
breach of any provision of or a default under this Lease, and upon such
foreclosure, sale or conveyance Landlord shall recognize the Project Lender, or
any other foreclosure sale purchaser, as the Tenant hereunder. In the event the
Project Lender becomes the Tenant this Lease as provided herein, then the
Project Lender shall be personally liable for the obligations of Tenant under
this Lease only for the period of time that the Project Lender remains Tenant
hereunder, and the Project Lender shall have the right to assign this Lease
thereafter without any restriction otherwise imposed on Tenant hereunder;
provided, however, that the assignee of the Project Lender shall have expressly
assumed all of the obligations of Tenant hereunder. Notwithstanding any other
provision of this Lease, in the event that the Project Lender (a) performs any
monetary of other obligation of Tenant under this Lease, (b) acquires any
portion of the right, title or interest in the leasehold estate created by this
Lease, (c)
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continues Tenant's operations of the Premises under this Lease and/or (d)
becomes personally liable to Landlord hereunder, then the Project Lender's
obligations and liability to Landlord shall be limited by and to the Project
Lender's right, title and interest, if any, in the leasehold estate created by
this Lease, and Landlord shall have no recourse against the Project Lender in
excess of, and other than to proceed against, such right, title and interest.
10.2.8. Upon Landlord's receipt of any notice in the nature of
a notice of default with respect to any obligation of Landlord secured by any
lien upon the Premises, Landlord shall immediately deliver a copy of such notice
to Tenant and the Project Lender. If and whenever the Project Lender shall deem
it necessary or appropriate to do so in order to protect its rights under this
Lease, it may, at its option, pay and discharge any mortgage or other lien
(including, without limitation, the lien of general or special property taxes or
special assessments) attached to the Premises or any portion thereof, and in
such event it shall be subrogated to all the rights of the mortgagee,
beneficiary, owner or holder or such mortgage or other lien.
10.2.9. In the event that this Lease is rejected by a trustee
or debtor-in-possession in any bankruptcy or insolvency proceeding or is
terminated for any other reason (except as a result of a default hereunder which
was curable hereunder but which was not appropriately cured as provided herein)
and if, within sixty (60) days after such rejection or other termination, the
Project Lender shall so request, Landlord will execute and deliver to the
Project Lender a new ground lease of the Elmore Property. Such new ground lease
shall be for a term equal to the remainder of the term of this Lease before
giving effect to such rejection or other termination, and shall contain the same
covenants, agreements, terms, provisions and limitations as contained in this
Lease (except for any requirements which shall have been fulfilled by Tenant
prior to such rejection or other termination). Landlord shall, at the expense of
the Project Lender and at no expense to Landlord, cooperate with the Project
Lender and take such action in compliance with law as Project Lender shall
reasonably request to remove Tenant from the Elmore Property.
10.2.10. Landlord and Tenant acknowledge, agree and covenant
that notwithstanding the union of the fee simple title with any right, title or
interest in the leasehold estate created hereby or under any other document or
instrument in Landlord, Tenant, Project Lender, or any other Person or entity,
whether by purchase or otherwise, it is the declared intention of the parties
hereto that the separation of the fee simple estate and the leasehold estate
shall be maintained and a merger shall not
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take place without the prior written consent of the Project Lender.
10.3. Tenant and Landlord shall cooperate in including herein, by
suitable amendment from time to time, any provision which any Project Lender or
proposed Project Lender reasonably requests for the purpose of implementing the
Project Lender-protective provisions contained in this Section 10 and affording
the Project Lender or proposed Project Lender reasonable protection of its
Project Lender's Lien in the event of a default by Tenant. Tenant and Landlord
each agree to execute and deliver (and to acknowledge, if necessary for
recording purposes) any document or instrument necessary to give effect to any
such provision.
10.4. The Project Lender's mortgage documents shall contain
provisions that all notice of default under the note and related documents must
be sent to Landlord as well as Tenant, and that Landlord shall have the right to
cure any default after the time for Tenant to cure it has expired. Neither
Landlord's right to cure any default nor any exercise of such a right shall
constitute an assumption of liability under the note or related documents.
10.5. On the recording of the Project Lender's Lien, Tenant shall, at
Tenant's expense, cause to be recorded in the office of the County Recorder of
Imperial County, California, a written request executed and acknowledged by
Landlord for a copy of all notices of default and all notices of sale under the
Project Lender's Lien as provided by the statutes of the State of California.
Inclusion in the body of the recorded Project Lender's Lien itself of a request
for notice having the effect described above shall constitute compliance with
this provision.
10.6. On the commencement of the term, the fee title to the Premises
shall be free and clear of all mortgage liens other than those expressly agreed
to in accordance with this Lease. Thereafter, any mortgage placed on the
Premises by Landlord shall be subject to this Lease, to any mortgage then in
existence on the leasehold estate as permitted by this Lease, and to Tenant's
right as permitted by this Lease subsequently to encumber the leasehold estate.
11. Insurance. So long as the Credit Facility remains a valid and
binding obligation of Tenant, Tenant shall procure and maintain such policies of
insurance in such amounts as are necessary to comply with the Insurance
Requirements. After such time as the Credit Facility ceases to be a valid and
binding obligation of Tenant or otherwise terminates in accordance with its
terms, Tenant shall procure and maintain, for the remainder of the term of this
Lease, such policies of insurance, in such amounts, as Landlord
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shall reasonably request, but in no event shall Tenant be required to procure
and maintain insurance in excess of the Insurance Requirements.
12. Condemnation. In the event of a taking by eminent domain or by
inverse condemnation for any public or quasi-public use under any statute, the
proceeds therefrom shall be distributed (a) first, to Tenant to the extent of
all amounts necessary to pay in full the Project Lender's Loan and (b) second,
to the parties hereto in accordance with their interests as they may appear.
13. Default and Remedies
13.1 Subject to the provisions of Section 10 hereof, the occurrence
of any one or more of the following events shall constitute a material default
by Tenant under this Lease:
13.1.1. The vacation or abandonment of the Premises by Tenant for a
continuous period of sixty (60) days or more, whether or not the rent is paid.
13.1.2. The failure by Tenant to make any payment of rent or
any other payment required to be made by Tenant hereunder, as and when due,
where such failure shall continue for a period of three (3) business days after
written notice thereof from Landlord to Tenant.
13.1.3. The failure by Tenant to observe or perform any of the
material covenants, conditions or provisions of this Lease to be observed or
performed by Tenant other than those referenced in Sections 13.1.1 and 13.1.2
above, where such failure shall continue for a period of thirty (30) days after
written notice thereof from Landlord to Tenant; provided, however, that if the
nature of Tenant's noncompliance is such that more than thirty (30) days are
reasonably required for its cure, then Tenant shall not be deemed to be in
default if Tenant commences such cure within said thirty (30) day period and
thereafter diligently pursues such cure to completion.
13.1.4. The making by Tenant of any general arrangement or
general assignment for the benefit of creditors; Tenant's becoming a "debtor" as
defined in 11 U.S.C. section 101 or any successor statute thereto, unless, in
the case of a petition filed against Tenant, the same is dismissed within sixty
(60) days after filing; the appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease, where possession is not restored within sixty
(60) days; or the attachment, execution or other judicial seizure of
substantially all of Tenant's assets located at the Premises or of Tenant's
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interest in this Lease, where such seizure is not discharges within sixty (60)
days. In the event that any provision of this Section 13.1.4 is contrary to any
applicable law, such provision shall be of no force or effect.
13.2. Subject to the provision of Section 10 hereof, in the event of
any material default or breach of this Lease by Tenant, Landlord may at any time
thereafter, with or without notice or demand and without limiting Landlord in
the exercise of any right or remedy which Landlord may have by reason of such
default:
13.2.1. Terminate Tenant's right to possession of the Premises
by any lawful means, in which case this Lease and the term hereof shall
terminate, and Tenant shall immediately surrender possession of the Premises to
landlord. In such event Landlord shall be entitled to recover from Tenant all
damages incurred by Landlord by reason of Tenant's default, including, but not
limitd to: (a) the unpaid rent which had been earned at the time of termination;
(b) the amount by which the unpaid rent which would have been earned after
termination until the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided; (c) the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided; and
(d) any other amount necessary to compensate Landlord for all of the detriment
approximately caused by the Tenant's failure to perform its obligations under
this Lease.
13.2.2. Maintain Tenant's right to possession, in which case
this Lease shall continue in effect whether or not Tenant shall have vacated or
abandoned the Premises. In such event, Landlord shall be entitled to enforce all
of landlord's rights and remedies under this Lease, including the right to
recover the rent as it becomes due hereunder.
13.2.3. Use Tenant's personal property and trade fixtures
without compensation and without liability for their use or damage, or store
them for the account of and at the cost of Tenant. The election of one remedy
for any one item of personal property or trade fixtures shall not foreclose an
election of any other remedy for another item or for the same item at a later
time.
13.2.4. Pursue any other remedy now or hereafter available to
Landlord under the laws or judicial decisions of the State of California.
13.3. After expiration of the applicable time for curing a
particular default, or before the expiration of that time in the event of
emergency, Landlord may at
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Landlord's election, but shall not be obligated to, make any payment required of
Tenant under this Lease or under any note or other related loan document
pertaining to the financing of improvements on the Premises, or perform or
comply with any covenant or condition imposed on Tenant under this Lease or any
such note or related loan document, and any amount so paid, plus the reasonable
cost of any such performance or compliance, shall be deemed to be additional
rent payable by Tenant with the next succeeding installment of rent. No such act
shall constitute a waiver of default or of any remedy for default or render
Landlord liable for any loss or damage resulting from any such act.
13.4 Landlord shall not be in default in the performance of its
obligations under this Lease unless Landlord fails to perform obligations
required of Landlord within sixty (60) days after written notice by Tenant to
Landlord and to the holder of any mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been furnished to Tenant
in writing, specifying wherein Landlord has failed to perform such obligation;
provided, however, that if the nature of Landlord's obligation is such that more
than sixty (60) days are required for performance, then Landlord shall not be in
default if Landlord commences performance within such sixty (60) day period and
thereafter diligently pursues the same to completion.
13.5. Tenant hereby acknowledges that late payment by Tenant to
Landlord of any installment of rent of any other sum due hereunder will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of
which will be extremely difficult to ascertain. Accordingly, if any installment
of rent or any other sum due from Tenant shall not be received by Landlord
within ten (10) days after such amount shall be due, then, without any
requirement for notice to Tenant, Tenant, Tenant shall pay to Landlord a late
charge equal to six percent (6%) of such overdue amount. The parties hereby
agree that such late charge represents a fair and reasonable estimate of the
costs Landlord will incur by reason of late payment by Tenant. Acceptance of
such late charge by Landlord shall in no event constitute a waiver of Tenant's
default with respect to such overdue amount, or prevent Landlord from exercising
any of the other rights and remedies granted hereunder.
14. Estoppel Certificates.
14.1 Either party hereto (the "Responding Party") shall, at any time
upon not less than ten (10) days prior written notice from the other party
hereto or from the Project Lender (the "Requesting Party"), execute, acknowledge
and deliver to the Requesting Party a statement in writing (a) certifying, as
applicable, that this Lease is unmodified
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and in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect) and the date to which any payments due hereunder are paid, (b)
acknowledging that there are not, to the Responding Party's knowledge, any
uncured defaults hereunder on the part of the other party hereto (or specifying
such defaults if any are claime), and (c) setting forth such other information
reasonably and customarily included in estoppel certificates as may be
requested by the Requesting Party and known to the Responding Party. Any such
statements may be conclusively relied upon by any prospective purchaser or
encumbrancer of this Lease. The failure of the responding Party to deliver such
statement within such time shall be conclusive upon such Responding Party that
(i) this Lease is in full force and effect and has not been modified, and (ii)
there are no uncured defaults in the performance of the other party hereto.
15. Landlord's Liability. The term "Landlord" as used herein shall mean
only the owner or owners, at the time in question, of fee title to the
Premises, and in the event of any transfer of such title to the Premises, and
in the event of any transfer of such title or interest, Landlord herein named
(and, in case of any subsequent transfers, then the grantor) shall be relieved
from and after the date of such transfer of all liability as respects
Landlord's obligations thereafter to be performed, provided that any funds in
the hands of Landlord or the then grantor at the time of such transfer in which
Tenant has an interest shall be delivered to the grantee.
16. Severability. The invalidity of any provision of this Lease as
determined by a court of competent jurisdiction shall in no way affect the
validity of any other provision hereof.
17. Interest on the Past-Due Obligations. Except as expressly herein
provided, any amount due to Landlord not paid when due shall bear interest at
the greater of (a) ten percent (10%) per annum, or (b) five percent (5%) per
annum above the discount rate established by the Federal Reserve Bank of San
Francisco on advances to member banks under Section 13 or 13(a) of the Federal
reserve Act as in effect on the 25th day of the month preceding the date of this
Lease, from the date due until fully paid. Payment of such interest shall not
excuse or cure any default by Tenant under this Lease.
18. Time of Essence. Time is of the essence with respect to the
obligations to be performed under this Lease.
19. Additional Rent. All monetary obligations of Tenant to Landlord under
the terms of this Lease shall be deemed to be rent.
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20. Incorporation of Prior Agreements. This Lease and the related
documents referred to herein specifically by name contain all agreements of the
parties with respect to the subject matter of this Lease. No prior or
contemporaneous agreement or understanding pertaining to any such matter shall
be effective.
21. Amendments. This Lease may be amended in writing only, signed by
the parties in interest at the time of the amendment.
22. Notices. Any notice required or permitted to be given hereunder
shall be in writing and may be given by personal delivery or by registered or
certified mail, and shall be deemed sufficiently given if delivered or addressed
to Tenant or to Landlord at the address noted below. Mailed notices shall be
deemed given upon actual receipt at the address required, or forty-eight (48)
hours following deposit in the mail, postage prepaid, whichever first occurs.
Either party may by notice to the other specify a different address for notice
purposes.
To Landlord:
Magma Power Company
11770 Bernardo Plaza court
Suite 366
San Diego, California 92128
To Tenant:
Elmore, Ltd., a California
limited partnership
c/o Red Hill Geothermal, Inc.
480 West Sinclair Road
Calipatria, California 92233
23. Force Majeure.
23.1. Neither Landlord nor Tenant shall be liable in damages to the
other for any act, omission or circumstance ("Event of Force Majeure")
occasioned by or in consequence of any acts of God, acts of the public enemy,
wars, blockades, insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, storms, floods, civil disturbances, explosions, sabotage,
the binding order of any court or governmental authority which has been
contested in good faith, Federal, State or local laws, or other event or
circumstance not within the control of such party preventing such party from
performing its obligations hereunder, whether caused or occasioned by, or
happening on account of, the act or omission of one of the parties, not within
the control of the party claiming suspension and which by the exercise of due
diligence such party is unable to prevent or overcome.
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23.1.1. Such Events of Force Majeure shall not relieve Landlord
or Tenant of liability in the event of either party's concurring negligence or
in the event of either party's 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 Events of Force Majeure relieve either party of
liability unless such party shall give notice and full particulars of the same
in writing to the other party within ten (10) days of the occurrence relied on.
In no event, however, shall an Event of Force Majeure relieve Tenant from the
obligation of making payments due under this Agreement at the time of such
occurrence. The parties agree that should any Event of Force Majeure remain in
existence for a period of six (6) months, this Agreement may be terminated by
the party not claiming suspension of this Agreement under such Event of Force
Majeure upon the giving of written notice by such party to the other party and
Project Lender; provided, however, that such six (6) month period shall be
extended for a reasonable time so long as throughout such six (6) month period
the party claiming suspension of this Lease under the Event of Force Majeure has
diligently proceeded to terminate the Event of Force Majeure and continues to do
so throughout such extension.
24. Waivers. No waiver by Landlord or any provision hereof shall be
deemed a waiver of any other provision hereof or of any subsequent breach by
Tenant of the same or any other provisions. Landlord's consent to, or approval
of, any act shall not be deemed to render unnecessary the obtaining of
Landlord's consent to or approval of any subsequent act by Tenant.
25. Acceptance of Rent. The acceptance of rent hereunder by the
Landlord shall not be a waiver of any preceding breach by Tenant of any
provision hereof, other than the failure of Tenant to pay the particular rent so
accepted, regardless of Landlord's knowledge of such preceding breach at the
time of acceptance of such rent.
26. Holding Over. If Tenant, with Landlord's consent, remains in
possession of the Premises or any part thereof after the expiration of the term
hereof, such occupancy shall be a tenancy from month to month upon all the
provisions of this Lease pertaining to the obligations of Tenant, except that
the rent payable shall be one hundred fifty percent (150%) of the rent payable
immediately preceding the termination date of this Lease.
27. Cumulative Remedies. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
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28. Covenants and Conditions. Each provision of this Lease performable
by Tenant shall be deemed both a covenant and a condition.
29. Binding Effect. Subject to any provisions hereof restricting
assignment or subletting by Tenant, this Lease shall bind the parties, their
personal representatives, successors and assigns.
30. Choice of Law. This Lease shall be governed by the laws of the
State of California. This Agreement shall be construed equally as against the
parties hereto, and shall not be construed against the party responsible for its
drafting.
31. Arbitration. All disputes arising under this Agreement shall be
settled by arbitration. The party desiring such arbitration shall give written
notice to that effect to the other party and in such notice shall appoint as an
arbitrator a disinterested person of recognized competence in the area at issue.
All selections of an arbitrator shall be subject to the consent of any Project
Lender, but only if the Project Lender notifies the parties that it desires to
approve the selection of an arbitrator, and such consent shall not be
unreasonably withheld. Within fifteen (15) days thereafter, the other party
shall, by written notice to the originating party, appoint a second person
similarly qualified as the second arbitrator. The arbitrators thus appointed
shall appoint a third person similarly qualified as the third arbitrator, and
such three arbitrators shall as promptly as possible determine such matter with
the parties, each being entitled to present evidence and argument to the
arbitrators; provided, however, that:
(i) if the second arbitrator shall not have been appointed as
aforesaid, the first arbitrator shall determine such matter; and
(ii) if the two arbitrators appointed by the party shall be unable to
agree upon the appointment of a third arbitrator within fifteen (15) days
after the appointment of the second arbitrator, they shall give written
notice of such failure to agree to the parties, and, if the parties fail to
agree upon the selection of such third arbitrator within fifteen (15) days
thereafter, then within ten (10) days thereafter, either of the parties upon
written notice to the other party may apply for such appointment to the
Federal District Court of County Superior Court in San Diego, California.
The arbitrator or arbitrators shall only interpret and apply the terms
and provisions of this Agreement and shall not change any such terms or
provisions or deprive
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either party of any right or remedy expressly or impliedly provided for in this
Agreement
The determination of the majority of the arbitrators or the sole
arbitrator, as the case may be, shall, to the extent permitted by law, be
conclusive upon the parties. The arbitrator or arbitrators shall give written
notice to the parties stating their determination signed by them. In the event
of the failure, refusal or inability of any arbitrator to act, a new arbitrator
shall be appointed in his stead, which appointment shall be made in the same
manner as hereinbefore provided for the appointment of the arbitrator so
failing, refusing or unable to act.
32. Attorney's Fees. If either party hereto commences litigation or
arbitration for the judicial or other interpretation, enforcement, termination,
cancellation or rescission hereof, or for damages for the breach hereof, the
prevailing party in any such action, trial, arbitration or appeal thereon shall
be entitled to its reasonable attorneys' fees and court, arbitration and other
costs incurred, to be paid by the losing party as fixed by the court or
arbitrator in the same or a separate suit, and whether or not such action is
pursued to decision or judgment.
33. Landlord's Access. Landlord and its agents shall have the right to
enter the Premises at reasonable times for the purpose of inspecting the same,
performing any services required of Landlord, taking safety measures and
exercising rights expressly reserved by Landlord under this Lease, as long as
there is no material adverse effect to Tenant's use of the Premises. All
activities of Landlord pursuant to this Section shall be without abatement of
rent, nor shall Landlord have any liability to Tenant for the same.
34. Merger. The voluntary or other surrender of this Lease by Tenant,
or a mutual cancellation hereof, or a termination by Landlord, shall not work a
merger, but shall, at the option of Landlord, terminate any or all existing
subtenancies, or may, at the option of Landlord, operate as an assignment to
Landlord or any or all of such subtenancies.
35. Quiet Possession. Upon Tenant's paying the rent for the Premises
and observing and performing all of the covenants, conditions and provisions on
Tenant's part to be observed and performed hereunder, Tenant shall have quiet
possession of the Premise for the entire term hereof subject to all of the
provisions of this Lease.
36. Security Measures. Tenant hereby acknowledges that Landlord shall
have no obligation whatsoever to provide guard service or other security
measures for the benefit of the Premises. Tenant assumes all responsibility for
the
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protection of Tenant, it's agents, invitees and their property from the acts of
third parties.
37. Easements and Maps. Landlord reserves to itself the right, from
time to time, to grant such easements, rights and dedications that Landlord
deems necessary or desirable, and to cause the recordation of maps or
restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises or the
operation of the Elmore Facility by Tenant. Tenant shall sign any of the
aforementioned documents reasonably requested by Landlord and failure to do so
within such period of time as constitutes a reasonable period of time to review
such documents shall constitute a material default under this Lease by Tenant
without the need for further notice to Tenant.
38. Exhibits, Addenda. All exhibits and addenda to which reference is
made in this Lease are incorporated in this Lease by the respective references
to them, whether or not they are actually attached, provided they have been
signed or initialed by the parties.
39. Tenant's Duty to Surrender. At the expiration or earlier
termination of the term, Tenant shall surrender to Landlord the possession of
the Premises. If Tenant fails to surrender the Premises at the expiration or
earlier termination of this Lease, Tenant shall defend and indemnify Landlord
from all liability and expense resulting from the delay or failure to do so,
including, without limitation, claims made by any succeeding tenant founded on
or resulting from Tenant's failure to do so.
40. Memorandum of Lease. A Memorandum of this Lease shall be recorded.
The parties shall execute the Memorandum in such form and substance as may be
required by the title insurance company insuring Tenant's leasehold estate or
the interest of any Project Lender, sufficient to
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give constructive notice of the Lease to subsequent purchasers and mortgagees.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date
first above written.
LANDLORD:
MAGMA POWER COMPANY, a Nevada
corporation
By: /s/ Arnold L. Johnson
-----------------------------------
Its: President
------------------------------
By: /s/ Jon R. Peele
-----------------------------------
Its: Secretary
------------------------------
TENANT:
ELMORE, LTD., A CALIFORNIA LIMITED
PARTNERSHIP, a limited partnership
organized under the laws of the State of
California
By: RED HILL GEOTHERMAL, INC., a
Delaware corporation, its
General Partner
By: /s/ Russ L. Gerny
-----------------------------------
Its: President
------------------------------
By: /s/ Charles C. Bowle
-----------------------------------
Its: Asst. Secretary
------------------------------
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EXHIBIT "A"
Description of the Elmore Property
The South Half of the Southwest Quarter of the Southeast Quarter of Section 27,
Township 11 South, Range 13 East, San Bernardino Meridian, County of Imperial,
State of California, according to Official Plat thereof.
Excepting all mineral rights, specifically including, but not limited to,
sources of geothermal energy and power as reserved by John Jameson Elmore, Et
Ux, by Deed recorded June 5, 1974 in Book 1363, Page 1812 of Official Records.
<PAGE>
SCHEDULE "Z"
"Additional Power Production Facilities" means power production
geothermal electrical generating facilities developed in the SSKGRA which
Process Reserved Geothermal Brine to produce electrical energy.
"Administrative Fee" means the payments to be made to Red Hill provided
for in Section 6 of the Administrative Services Agreement.
"Administrative Services Agreement" means that certain Administrative
Services Agreement date as of March 14, 1998, as the same may be amended from
time to time, by and between Red Hill and Elmore, Ltd., pursuant to which Red
Hill will provide certain administrative and management services to Elmore, Ltd.
in connection with the operation of the Elmore Facility.
"Affiliate" means, when used with reference to a specified Person, (a)
any Person who directly or indirectly controls, is controlled by or is under
common control with the specified Person, (b) any Person who is an officer,
partner or trustee of, or serves in a similar capacity with respect to, the
specified Person, or for which the specified Person is an officer, partner or
trustee or serves in a similar capacity, (c) any Person who, directly or
indirectly, is the beneficial owner of 10% or more of any class of equity
securities of the specified Person, or of which the specified Person, directly
or indirectly, is the owner of 10% or more of any class of equity securities,
and (d) any relative of the specified Person.
"Average Annual Energy Price" means an amount equal to the sum of (i)
2/3 multiplied by the average of the quarterly Time Period Weighted Average
Proposed Avoided Cost Energy Winter Prices released by SCE for the calendar year
in which the calculation is being made, plus (ii) 1/3 multiplied by the average
of the quarterly Time Period Weighted Average Proposed Avoided Cost Energy
Summer Prices released by SCE for the calendar year in which the calculation is
being made. In the event that the Time Period Weighted Average Proposed Avoided
Cost Energy Winter Prices and the Time Period Weighted Average Proposed Avoided
Cost Energy Summer Prices are abandoned or changed materially or otherwise cease
to be released by SCE on a quarterly basis, the parties shall select a
substitute index to the end that the Average Annual Energy Price will reflect
SCE's average annual avoided cost energy prices. In the event the parties fail
to agree on a substitute index as provided in the immediately preceding
sentence, the matter shall be submitted to an arbitrator in accordance with
Section 21 of the Operating and Maintenance Agreement and the arbitrator shall
select the substitute index to be used.
<PAGE>
"Brine Minerals" means all mineral resources found in the Geothermal
Brine, including, without limitation, mineral resources found in the Geothermal
Brine Scale.
"BTU Energy" means the heat value in British Thermal Units which can be
extracted from Geothermal Brine.
"Capacity" shall have the same meaning as that term has in the Elmore
Power Purchase Contract.
"Capital Contribution" has the same meaning as that term has in the
Limited Partnership Agreement.
"Code" means the Internal Revenue Code of 1986, as amended (or any
corresponding provision or provisions of succeeding law).
"Construction Management Agreement" means that certain Construction
Management and Asset Transfer Agreement dated as of March 14, 1988, as the same
may be amended from time to time, by and between Magma and Elmore, Ltd.,
pursuant to which Magma will act as Elmore, Ltd.'s construction manager for the
construction of the Elmore Facility.
"Construction Management Fee" means the payments to be made to Magma
provided for in Section 9 of the Construction Management Agreement.
"Construction Manager" means Magma for purposes of the Construction
Management Agreement.
"Contract Capacity" shall have the same meaning as that term has in the
Elmore Power Purchase Contract.
"Conversion Date" shall have the same meaning as that term has in the
Credit Facility.
"Credit Facility" means that certain Secured Credit Agreement dates as
of March 14, 1988, as the same may be amended from time to time, among Elmore,
Ltd., the Banks listed on the signature pages thereto and Morgan Guaranty Trust
Company of New York, as Agent.
"Critical Parts and Equipment" means those certain equipment and parts
delineated on Exhibit "A" to the Operating and Maintenance Agreement and such
additional equipment and parts which the parties thereto agree, from time to
time, should be added to the Critical Parts and Equipment listed on said Exhibit
"A" to the Operating and Maintenance Agreement.
2
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"DCC" means The Dow Chemical Company, a Delaware corporation.
"DEC" means Dow Engineering Company, a Delaware corporation.
"Debt Service Reserve" means the reserve established pursuant to
Section 11.1 of the Operating and Maintenance Agreement.
"Debt Service Reserve Account" means the segregated bank account
established pursuant to Section 11.1 of the Operating and Maintenance Agreement.
"Decommission," "Decommissioned" or "Decommissioning" means the
obligations on the part of Elmore, Ltd., among other things, to remove all or a
portion of the Elmore Facility and, with respect to production and injection
wells and only to the extent allowed by applicable law, to cap such wells in
lieu of removal from the Elmore Property and the Geothermal Lease Rights
Properties in the event Magma elects to require such removal pursuant to
Sections 8.11 and 8.13 of the Ground Lease and/or Section 3.1.4 of the Easement
Agreement.
"Decommissioning Reserve" means the reserve established pursuant to
Section 11.3 of the Operating and Maintenance Agreement.
"Decommissioning Reserve Account" means the segregated bank account
established pursuant to Section 11.3 of the Operating and Maintenance Agreement.
"Development of the Elmore Facility" means the design, engineering,
construction, testing and start-up of the Elmore Facility.
"Distribution Dates" means each March 31 and September 30.
"Dow Services Agreement" means that certain Financial and Technical
Services Agreement dated March 27, 1987 by and between Magma and DCC, a copy of
which is attached as Exhibit "A" to the Administrative Services Agreement.
"Easement Agreement" means that certain Easement Grant Deed and
Agreement Regarding Rights for Geothermal Development dates as of March 14,
1988, as the same may be amended from time to time, by and between Magma and
Elmore, Ltd., pursuant to which the parties have provided for an "Easement to
Develop Geothermal Rights" and related rights and obligations as described
therein.
3
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"Elmore Facility" means that certain power production geothermal
electrical generating facility being constructed pursuant to the Plans and
Specifications and any "as-built" plans on the Elmore Property which, when
completed, will have the capacity to convert BTU Energy from Geothermal Brine
into electrical energy, together with the Supporting Equipment.
"Elmore Facility Brine Requirement" means that amount of Geothermal
Brine which, when Processed by the Elmore Facility, will yield the amount of BTU
energy reasonably required to generate 332,880,000 kilowatt hours per year of
"Energy" as that term is defined in the Elmore Power Purchase Contract.
"Elmore Facility Projected Project Cost" means the total projected cost
of construction and development of the Elmore Facility as reflected on Exhibit
"I" to the Construction Management Agreement.
"Elmore Geothermal Lease Unit" means that certain John J. Elmore Unit
No. 1 established pursuant to that certain Designation and Declaration of Unit
dated as of February 1, 1964, as amended by that certain First Restatement and
Partial Restructuring of Unit dated as of January 19, 1988, which evidences
Magma's Geothermal Lease Rights in and to the Geothermal Lease Rights
Properties.
"Elmore, Ltd." means Elmore, Ltd., a California limited partnership, a
limited partnership organized under the laws of the State of California, the
general partners of which are Red Hill and Niguel Energy Company, a California
corporation.
"Elmore Power Purchase Contract" means that certain Power Purchase
Contract dated June 15, 1984, as amended, and as the same may be amended from
time to time, by and between Magma Electric Company, a Nevada corporation, and
SCE.
"Elmore Property" means the parcel of real property more particularly
described on Exhibit "A" to the Ground Lease, as that description may be
modified from time to time pursuant to Section 3.3 of the Ground Lease.
"Elmore Property Preliminary Title Report" means that certain
Preliminary Title Report No. 105141-A dated February 17, 1988 a copy of which is
attached as Exhibit "L" to the Construction Management Agreement.
"Energy Revenues" means all payments received by Elmore, Ltd. for the
sale of electricity which payments represent the "Energy" (as that term is
defined in the Elmore Power Purchase Contract) component of the payments
received
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including, without limitation, (i) payments received by Elmore, Ltd. from SCE
pursuant to the Elmore Power Purchase Contract (without deduction for payments
made pursuant to the IID Transmission Line Agreement), (ii) all payments for
Energy delivered both before and after the Firm Operation Date and below, at and
above the "Contract Capacity" level (as that term is defined in the Elmore Power
Purchase Contract) and (iii) all payments received by Elmore, Ltd. in lieu of
payments that would have been received for the Energy component of electricity
that would have been produced but for the in lieu payments.
"Engineer" means R.W. Beck and Associates, or their successors in the
capacity of engineers and consultants with respect to the Development of the
Elmore Facility and the operation of the Elmore Facility.
"Excess Extracted Geothermal Brine" means Geothermal Brine extracted by
Elmore, Ltd. in connection with the operation of the Elmore Facility which is in
excess of the amount of Geothermal Brine needed to meet the Elmore Facility
Brine Requirement.
"Excess Unextracted Geothermal Brine" means all Geothermal Brine which
is not needed for the operation of the Elmore Facility.
"Extraordinary Services" means all of the services, materials,
equipment and supplies to be performed or provided by Red Hill pursuant to
Section 3 of the Administrative Services Agreement.
"Firm Operation Date" means the first day on which Firm Operation (as
that term is defined in the Elmore Power Purchase Contract) occurs under the
Elmore Power Purchase Contract.
"Firm Operation Month" means the first month during which Firm
Operation (as that term is defined in the Elmore Power Purchase Contract) occurs
under the Elmore Power Purchase Contract.
"Geothermal Brine" means the geothermal brine contained in the Elmore
Geothermal Lease Unit.
"Geothermal Brine Scale" means all deposits and residue including,
without limitation, silica slurry, silica cake and sludge deposits on or in
vessels or equipment in which Geothermal Brine is transported to or from, or
Processed or stored in, the Elmore Facility.
"Geothermal Lease Rights" means the rights in the Geothermal Lease
Rights Properties held by Magma pursuant to the Geothermal Leases including,
without limitation, certain
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rights of Magma to (i) that portion of the Geothermal Lease Rights Properties
existing below the surface of the land including, without limitation, the right
to extract and take Geothermal Brine therefrom and (ii) the Surface Properties
including, without limitation, the right to enter upon certain portions of the
Surface Properties for the purposes of (1) drilling exploratory, production and
injection wells; (2) installing pipelines for the extraction of Geothermal
Brine; (3) extracting Geothermal Brine; and (4) constructing facilities designed
to convert the heat energy in the Geothermal Brine to electrical energy for sale
to public utilities.
"Geothermal Lease Rights Properties" means the real property located
within the SSKGRA, as more particularly described in Exhibit "A" to the Easement
Agreement.
"Geothermal Lease Rights Properties Preliminary Title Report" means,
collectively, those certain Preliminary Title Report Nos. 105143 dated February
16, 1988 (McCoy), 105142 dated February 16, 1988 (L. Baretta), and 105141-B
dated February 17, 1988 (J. Elmore), copies of which are attached as Exhibit "C"
to the Easement Agreement.
"Geothermal Leases" means those certain geothermal leases delineated on
Exhibit "B" to the Easement Agreement.
"Geothermal Lessors" means the parties identified as the "lessors," or
their successors in interest, in each of the Geothermal Leases.
"Grantee" means Elmore, Ltd. for purposes of the Easement Agreement.
"Grantor" means Magma for purposes of the Easement Agreement.
"Ground Lease" means that certain Ground Lease dated as of March 14,
1988, as the same may be amended from time to time, by and between Magma and
Elmore, Ltd., pursuant to which Magma leases to Elmore, Ltd. the Elmore
Property.
"Guaranteed Capacity Payment" means the payments to be made to Red
Hill provided for in Section 13 of the Operating and Maintenance Agreement.
"IID" means the Imperial Irrigation District, organized under the Water
Code of the State of California.
"IID Agreements" mean, collectively, (i) that certain Funding and
Construction Agreement dated June 29, 1987, by and among the Imperial Irrigation
District ("IID"), and certain "Participants" (as that term is defined in said
Funding and Construction Agreement) including Magma, (ii)
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that certain Joint Funding Agreement dated June 29, 1987, by and among the
"Participants" (as that term is defined in said Joint Funding Agreement)
including Magma and (iii) any "IID Transmission Service Agreement For
Alternative Resources" which may be entered into between IID and Elmore, Ltd.,
copies of which are attached as Exhibit "G" to the Construction Management
Agreement.
"Insurance Requirements" means policies of insurance, maintained by or
on behalf of Elmore, Ltd. with insurance companies rated at least B+ by A.M.
Best Company or such other insurance companies as may be acceptable to the agent
for the Project Lender, of the following type, in the following amounts, and on
the following terms:
(i) at all times after completion of construction of the Elmore
Facility, insurance on the Elmore Facility against all risks of physical
loss or damage, including flood, earthquake (to the extent possible) and
collapse and all other risks and perils normally covered in "all-risk"
policies, for the full cost of repair or replacement (excluding the costs of
the transmission lines, wells and Geothermal Brine pipelines);
(ii) as soon as possible in the course of construction of the Elmore
Facility and at all times after completion of construction of the Elmore
Facility, boiler and machinery insurance written on a comprehensive form for
the full repair and replacement value of the equipment at and of the Elmore
Facility;
(iii) at all times, comprehensive general liability insurance with a
limit of no less than $1,000,000 combined single limit, bodily injury and
property damage, for each occurrence;
(iv) at all times, excess public liability insurance in the form of an
umbrella policy which umbrella policy shall afford coverage of not less than
$10,000,000 per occurrence over and above the coverage provided by the
policies described above and the policy described in Exhibit "N" to the
Construction Management Agreement;
(v) on and after the Firm Operation Date, business interruption
insurance covering, for an annual term, only amounts due (including, without
limitation, interest, principal repayment and any other fees and expenses)
on the Project Lender's Loan; and
(vi) as soon as practicable after the agent for the Project Lender
shall request, such other insurance with respect to the Elmore Facility in
such amounts
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equal to the greater of such amount, and against such insurable hazards,
(x) as Magma maintains with respect to other facilities similar to the
Elmore Facility, which Magma owns or operates, (y) as in usually carried
by corporations of established reputation operating similar properties and
(z) as the agent for the Project Lender may from time to time reasonably
request.
Each insurance policy set forth above (a) shall (except for the liability
insurance referred to in clause (iii) above, which shall name the Project
Lender as an additional insured) insure the Project Lender's interests under the
Project Lenders's Lien and shall provide that all insurance proceeds payable
under such policy shall, until notice from the agent for the Project Lender to
the contrary, be paid over directly to such agent for the benefit of the
Project Lender, (b) shall provide that it cannot be cancelled or terminated
without thirty days' prior written notice to such agent, (c) shall include
waivers by the insurer of all claims for the payments by the Project Lender and
such agent of insurance premiums, (d) shall (except for the liability insurance
referred to in clause (iii) above) provide for losses to be payable to the
Project Lender notwithstanding (i) any act or failure to act by the insured or
violation by the insured of warranties, declarations or conditions contained in
the policy, (ii) any foreclosure or sale or other proceeding relating to the
Elmore Facility or construction work in progress or (iii) any change in the
title to or ownership of the Elmore Facility or construction work in progress,
(e) shall (except for the liability insurance referred to in clause (iv) above,
which shall have no deductible) provide for deductibles for (i) "all risk"
coverage of no greater than $500,000 per occurrence, and (ii) business
interruption coverage of no greater than sixty (60) days, and (f) shall be in
all other respects satisfactory to the agent for the Project Lender.
"Licensee" means Elmore, Ltd. for purposes of the Technology Transfer
Agreement.
"Licensor" means Magma for purposes of the Technology Transfer Agreement.
"Limited Partner" means any of the Original Limited Partners and
Substituted Limited Partners as defined in the Limited Partnership Agreement.
"Limited Partnership Agreement" means that certain Amended and Restated
Limited Partnership Agreement of Elmore, Ltd., dated as of March 14, 1988, as
the same may be amended from time to time.
"Magma" means Magma Power Company, a Nevada corporation.
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"Magma Overrun Loan" means any loan made by Magma pursuant to the Magma
Undertaking.
"Magma Undertaking" means the undertaking of Magma, substantially in the
form of Exhibit "K" to the Construction Management Agreement.
"Major Capital Expenditure Reserve" means the reserve established pursuant
to Section 11.2 of the Operating and Maintenance Agreement.
"Major Capital Expenditure Reserve Account" means the segregated bank
account established pursuant to Section 11.2 of the Operating and Maintenance
Agreement.
"Operating Agreements" means the Easement Agreement, the Administrative
Services Agreement, the Construction Management Agreement, the Elmore Power
Purchase Contract, the Ground Lease, the Operating and Maintenance Agreement,
the Technology Transfer Agreement and the IID Agreements.
"Operating and Maintenance Agreement" means that certain Operating and
Maintenance Agreement dated as of March 14, 1998, as the same may be amended
from time to time, by and between Elmore, Ltd. and Red Hill, pursuant to which
Red Hill will provide day-to-day operational and maintenance services for
Elmore, Ltd. in connection with the operation of the Elmore Facility.
"Operator" means Red Hill for purposes of the Operating and Maintenance
Agreement.
"Ordinary Services" means all of the services, materials, equipment and
supplies to be performed or provided by Red Hill on a normal day-to-day basis
pursuant to Section 2 of the Administrative Services Agreement.
"Owner" means Elmore, Ltd. for purposes of the Administrative Services
Agreement, the Construction Management Agreement and the Operating and
Maintenance Agreement.
"Partially Spent Geothermal Brine" means the Geothermal Brine in an amount
not exceeding the Elmore Facility Brine Requirement which has been extracted
and Processed by Elmore, Ltd. for the purpose of generating electrical energy
in connection with the operation of the Elmore Facility.
"Partnership Holding Account" has the same meaning as that term has in the
Limited Partnership Agreement.
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"Permitted Investment" means any investment in (i) direct obligations of
the United States or any agency thereof, or obligations guaranteed by the
United States or any agency thereof, (ii) commercial paper rated in the highest
grade by a nationally recognized credit rating agency or (iii) time deposits
with, including certificates of deposit issued by, any office located in the
United States of any bank or trust company which is organized under the laws of
the United States or any state thereof and the certificates of deposit of which
are rated in one of the two highest grades by a nationally recognized credit
rating agency, provided in each case that such investment matures within one
year from the date of acquisition thereof by Elmore, Ltd.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Plans and Specifications" means those certain plans and specifications
for the construction of the Elmore Facility, as more particularly described on
Exhibit "H" to the Construction Management Agreement.
"Principal Repayment Date" means the date on which a portion of the
principal of the Project Lender's Loan is scheduled to be repaid pursuant to
the Credit Facility.
"Process," "Processed" or "Processing" means the process by which BTU
Energy is extracted from the Geothermal Brine.
"Project Lender" means collectively the lender(s) advancing all or a
portion of the Project Lender's Loan, or the agent for such lenders.
"Project Lender's Lien" means the security interest or lien evidenced by a
first deed of trust granted by Elmore, Ltd. in Elmore, Ltd.'s leasehold estate
in the Elmore Property to the Project Lender to secure repayment of any
indebtedness and/or performance of any obligation created by the Project
Lender's Loan.
"Project Lender's Loan" means the financing provided by the Project Lender
for the Development of the Elmore Facility or the operation of the Elmore
Facility, the repayment of which is secured by the Project Lender's Lien.
"Project Lender's Loan Documents" means all instruments, agreements and
other documents including, without limitation, the Credit Facility, evidencing
or related to the Project Lender's Loan and the security
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therefor including, without limitation, the Project Lender's Lien.
"Red Hill" means Red Hill Geothermal, Inc., a Delaware corporation, a
general partner of Elmore, Ltd. Red Hill is a wholly owned subsidiary of Magma.
"Refunded Capital Contribution" shall have the same meaning as that term
has in Section 3.6 of the Limited Partnership Agreement.
"Reimbursement Charges" means the payments to Red Hill provided for in
Section 14 of the Operating and Maintenance Agreement.
"Reserved Geothermal Brine" means the combination of Partially Spent
Geothermal Brine, Excess Extracted Geothermal Brine and Excess Unextracted
Geothermal Brine.
"SEC" means Southern California Edison Company.
"SSKGRA" means Salton Sea Known Geothermal Resource Area.
"Schedule of Projected Remaining Cost of Construction" means the projected
cost of completing construction and development of the Elmore Facility as of
the date of the Construction Management Agreement, as reflected on Exhibit "J"
to the Construction Management Agreement.
"Services" means the services to be provided by Red Hill pursuant to
Section 2 of the Operating and Maintenance Agreement.
"Spare Parts" means all spare parts necessary for the reliable, continuous
operation of the Elmore Facility, other than the Critical Parts and Equipment.
"Subcontractor" means a person or entity who performs any duties for or
supplies any equipment or material to Red Hill, directly or indirectly, in the
performance of the Services.
"Substantial Completion Month" means the month in which the Construction
Management Agreement terminates in accordance with its terms.
"Supporting Equipment" means all items described in Section 2.2.2 of the
Easement Agreement, including all such items located on the Elmore Property,
and any real property interest associated therewith.
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"Surface Properties" means that portion of the Geothermal Lease Rights
Properties existing above and upon the surface of the land.
"Technology Fee" means the payments to be made to Magma provided for in
Section 3 of the Technology Transfer Agreement.
"Technology Transfer Agreement" means that certain Technology Transfer
Agreement dated as of March 14, 1988, as the same may be amended from time to
time, by and between Magma and Elmore, Ltd., pursuant to which Magma grants to
Elmore, Ltd. the nonexclusive right to use certain "Technology" and "Know-How"
which will be utilized by Elmore, Ltd. only in connection with the operation of
the Elmore Facility.
"Total Electricity Revenues" means all payments received by Elmore, Ltd.
for the sale of electricity including, without limitation, payments received by
Elmore, Ltd. from SCE pursuant to the Elmore Power Purchase Contract (without
deduction for payments made pursuant to the IID Agreements) including, without
limitation, (i) all payments for "Energy," "capacity" and "Capacity Bonus
Payments" delivered both before and after the Firm Operation Date and below, at
and above the "Contract Capacity" level (as those terms are defined in the
Elmore Power Purchase Contract) and (ii) all payments received by Elmore, Ltd.
in lieu of payments that would have been received for electricity that would
have been produced but for the in lieu payments.
"Totally Spent Geothermal Brine" means Partially Spent Geothermal Brine
which (i) has been processed by Magma, or a licensee of Magma, for use in
connection with the operation of Additional Power Production Facilities; (ii)
has been used by Magma, or a licensee of Magma, to extract Brine Minerals; or
(iii) has been used by Magma, or a licensee of Magma, for any other use
including, without limitation, the production of steam or heat for sale to
users of steam or heat.
"Working Capital" shall have the same meaning as that term has in the
Credit Facility.
"Working Capital Requirement" shall have the same meaning as that term has
in the Credit Facility.
Additional Defined Terms. For the convenience of the parties, in addition
to the defined terms set forth in this Schedule Z, certain other terms are
defined throughout the Operating Agreements.
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RECORDING REQUESTED BY
CHICAGO TITLE COMPANY
Recording Requested By and
When Recorded Mail To:
Magma Power Company
c/o CalEnergy Company, Inc.
302 South 36th Street [SEAL OMITTED]
Omaha, Nebraska 68131
Attention: General Counsel
--------------------------------------------------------------------------------
The undersigned declare that this document does not grant, assign,
transfer, convey or vest title to real property within the meaning of Section
11911 of the California Revenue and Taxation Code, and hence NO DOCUMENTARY
TRANSFER TAX IS DUE.
The real property is located in an unincorporated area of the County of
Imperial, State of California.
CLARIFICATION AND AMENDMENT
THIS CLARIFICATION AND AMENDMENT (this "Amendment") is made as of June
17, 1996, between MAGMA POWER COMPANY, a Nevada corporation ("Grantor"), and
ELMORE, L.P., a limited partnership organized under the laws of the State of
California and formerly known as Elmore, Ltd. ("Grantee").
RECITALS
A. Grantor holds certain geothermal lease rights (the "Geothermal Lease
Rights") in certain real property located within the Salton Sea Known Geothermal
Resource Area (the "SSKGRA") in Imperial County, California, which real property
is described in Exhibit "A" attached hereto (the "Geothermal Lease Rights
Properties"). The Geothermal Lease Rights are set forth in those certain
geothermal leases described in Exhibit "B" attached hereto (the "Geothermal
Leases"). Grantor also holds that certain mineral interest described in Exhibit
"C" attached hereto (the "Grantor's Mineral Property").
B. Grantee owns a geothermal electrical generating facility commonly
known as the "Elmore Facility", which utilizes Geothermal Brine from certain of
the Geothermal Lease Rights Properties. The Elmore Facility is located on that
certain real property described in Exhibit "D" attached hereto (the "Elmore
Property").
C. Grantee's right to maintain the Elmore Facility on the Elmore
Property is derived from that certain Ground Lease dated as of March 14, 1988
between Grantor, as Landlord, and Grantee, as Tenant (the "Ground Lease"), a
Memorandum of which was recorded on March 14, 1988 in Book 1599, Page 1002, as
Instrument No. 88-04023 in the Official Records of Imperial County, California
(the "Official Records").
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D. Pursuant to that certain Easement Grant Deed and Agreement Regarding
Rights For Geothermal Development dated as of March 14, 1988 (the "Easement
Grant Deed"), a Short Form of which was recorded on March 14, 1988 in Book 1599,
Page 1007, as Instrument No. 88-04025 in the Official Records (the "Easement
Short Form"), Grantor granted to Grantee certain rights in and to the Geothermal
Brine contained in certain of the Geothermal Lease Rights Properties, including,
without limitation, the right to (i) drill for, produce, Process and use
Geothermal Brine up to the amount necessary to meet the Elmore Facility Brine
Requirement and (ii) construct, use and maintain roads, pipelines, utility
installations, power lines, equipment, buildings and wells in connection
therewith, subject to certain limitations and reservations as more particularly
set forth in the Easement Grant Deed.
E. It has always been the intent of Grantor and Grantee (together, the
"Parties") that Grantor reserve and at all times have the right, at its sole
option, to (i) drill for, produce, process, extract, treat, convert, take,
divert, sell and otherwise use the Excess Unextracted Geothermal Brine,
Partially Spent Geothermal Brine, Excess Extracted Geothermal Brine, Geothermal
Brine Scale and Brine Minerals and (ii) use the Elmore Property in connection
with such reserved rights. The Parties now desire to amend the Ground Lease and
Easement Grant Deed to clarify and further define such rights, and to make
certain other modifications thereto, as set forth herein.
F. This Amendment is being executed in connection with that certain
Second Supplemental Trust Indenture (the "Supplemental Indenture") dated as of
June 20, 1996, between Salton Sea Funding Corporation, a Delaware corporation,
an Affiliate of Grantor ("Funding Corporation"), as issuer, and Chemical Trust
Company of California, a California corporation, as trustee. Chemical Trust
Company of California, a California corporation, is also acting as collateral
agent (together with its transferees, successors and assigns, the "Collateral
Agent") under that certain Collateral Agency and Intercreditor Agreement dated
as of July 21, 1995, as amended, by and among Funding Corporation and the other
parties named therein. The Collateral Agent's address is 50 California Street,
10th Floor, San Francisco, California 94111.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals, the
covenants and conditions herein contained, and other valuable consideration, the
receipt of which is hereby acknowledged, the Parties agree as follows:
ARTICLE 1. INTRODUCTORY MATTERS
1.1. CAPITALIZED TERMS. Capitalized terms used and not defined herein
shall have the meaning given the same in the Easement Grant Deed.
ARTICLE 2. AMENDMENTS TO THE EASEMENT GRANT DEED
2.1. USE OF GEOTHERMAL BRINE. Wherever in the Easement Grant Deed
(including, without limitation, sections 2.2.1, 2.3.2, 2.3.3, 3.1.1 and 3.1.3
thereof) Grantor reserves or is given the right to "use", "utilize" or make
"use" of the Partially Spent Geothermal Brine, Excess Extracted Geothermal
Brine, Brine Minerals and/or Geothermal Brine Scale or any part thereof,
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Grantor shall further have the right, privilege and power to process, extract
from, treat, convert, take, divert, sell and otherwise use the same, in such
manner and at such locations as Grantor may deem proper, and without
compensation to Grantee other than as expressly provided in the Easement Grant
Deed.
2.2. OWNERSHIP OF GEOTHERMAL BRINE. To the extent that Grantor
processes, extracts, treats, converts, takes, diverts, sells or otherwise uses
the Partially Spent Geothermal Brine, Excess Extracted Geothermal Brine, Brine
Minerals and/or Geothermal Brine Scale or any part thereof as permitted under
the Easement Grant Deed or hereunder, which results in the amount thereof that
is returned to Grantee for injection or disposal being less than the amount
thereof previously delivered to or taken by Grantor, then the title otherwise
held by Grantee to any Partially Spent Geothermal Brine, Excess Extracted
Geothermal Brine, Brine Minerals and/or Geothermal Brine Scale that is not
returned to Grantee for injection or disposal shall automatically transfer to
and vest in Grantor. Without limiting the generality of the foregoing, if
Grantor makes any commercial use or sale of the Partially Spent Geothermal
Brine, Excess Extracted Geothermal Brine, Brine Minerals and/or Geothermal Brine
Scale, the economic benefits of such use or sale shall belong to Grantor.
2.3. INJECTION BY GRANTEE. In addition to its obligations under section
3.1.1 of the Easement Grant Deed, Grantee shall handle, transport, inject and
dispose of all geothermal fluids and other substances produced as a result of or
which flow from Grantor's use, processing, treatment or conversion of the
Geothermal Brine and of geothermal fluids from other lands. To the extent that
by performing the above duties Grantee incurs additional costs and expenses over
what it would have incurred had Grantor not used, processed, treated or
converted Geothermal Brine or geothermal fluids from other lands as provided
herein, then Grantor shall pay such excess costs and expenses.
2.4. MODIFICATIONS TO THE ELMORE GEOTHERMAL LEASE UNIT.
2.4.1 The term "Elmore Geothermal Lease Unit", as defined in
Schedule "Z" to the Easement Grant Deed, is hereby deleted and replaced with the
following:
"Elmore Geothermal Lease Unit" means that certain John J.
Elmore Unit No. 1 established pursuant to that certain Designation and
Declaration of Unit dated as of February 1, 1964 and recorded on March
27, 1964 in Book 1180, Page 519 of the Official Records, as amended by
that certain (a) First Restatement and Partial Restructuring of Unit
dated as of January 19, 1988 and recorded on February 9, 1988 in Book
1597, Page 1261 of the Official Records, (b) Second Restatement and
Partial Restructuring of Unit dated as of May 13, 1988 and recorded on
May 16, 1988 in Book 1603, Page 701 of Official Records, (c) Third
Restatement and Partial Restructuring of Unit dated as of January 19,
1989 and recorded on January 23, 1989 in Book 1617, Page 1585 of
Official Records and (d) Fourth Restatement and Partial Restructuring
of Unit dated as of April 28, 1992 and recorded on May 20, 1992 in Book
1699, Page 1675 of Official Records."
2.4.2 In order to expand the Geothermal Lease Rights
Properties to include therein lands that were previously added to the Elmore
Geothermal Lease Unit pursuant to the
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Third Restatement and Partial Restructuring of Unit and Fourth Restatement and
Partial Restructuring of Unit referred to in Section 2.4.1 hereof: (a) Exhibit
"A" to the Easement Grant Deed (including, without limitation, Exhibit "A" to
the Easement Short Form) is hereby deleted and replaced with Exhibit "A"
attached hereto; (b) Exhibit "B" to the Easement Grant Deed (including, without
limitation, Exhibit "B" to the Easement Short Form) is hereby deleted and
replaced with Exhibit "B" attached hereto; (c) Exhibit "C" attached hereto is
hereby incorporated into the Easement Grant Deed; and (d) all references to the
"Geothermal Lease Rights Properties" in the Easement Grant Deed and in this
Amendment shall hereafter be deemed to include the Grantor's Mineral Property.
2.5. INSURANCE. Section 3.3 of the Easement Grant Deed is hereby
deleted in its entirety.
2.6. PROJECT LENDER PROVISIONS. Article VI of the Easement Grant Deed
is hereby revised as follows:
2.6.1 The definition of "Project Lender" is hereby deleted
from Schedule "Z" to the Easement Grant Deed, and is replaced with the
following:
"'Project Lender' means (a) the Collateral Agent (b) any Person who
succeeds to the interest of Collateral Agent under that certain Trust
Indenture dated as of July 21, 1995, between Funding Corporation, as
issuer, and Collateral Agent, as trustee (as amended, modified or
supplemented, including pursuant to the Supplemental Indenture, the
"Indenture") or (c) any other Person who acquires a first lien on the
Easement To Develop Geothermal Rights in connection with or following
(i) foreclosure of that certain Deed of Trust, Assignment of Rents,
Security Agreement and Fixture Filing dated as of June 20, 1996,
executed by Grantee as trustor, in favor of Chicago Title Company as
trustee, for the benefit of Collateral Agent as beneficiary (the "Deed
of Trust"); (ii) the acquisition by Collateral Agent or its nominee or
designee of the Easement To Develop Geothermal Rights by any other
means. The term "Project Lender" shall also include any person or
entity that acquires a first lien on the Easement To Develop Geothermal
Rights at any time after such foreclosure, conveyance by deed in lieu
of foreclosure or acquisition by Collateral Agent or its nominee or
designee."
2.6.2 The definition of "Project Lender's Loan" is hereby
deleted from Schedule "Z" to the Easement Grant Deed, and is replaced with the
following:
"'Project Lender's Loan' means the financing provided by the Project
Lender for the Development, operation, refinancing or acquisition of
the Elmore Facility, the repayment of which is secured by the Project
Lender's Lien."
2.6.3 Section 6.2.1 of the Easement Grant Deed is hereby
deleted in its entirety and replaced with the following:
"6.2.1 (i) So long as the Indenture is in effect, Grantor
shall not accept or consent to any amendment or modification of this
Agreement if the same would be prohibited under the Partnership Credit
Agreement (as that term is
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defined in the Indenture); (ii) at any time when the Indenture is no
longer in effect, Grantor shall not accept or consent to any amendment
or modification of this Agreement if the same would have a material
adverse effect on the Project Lender's Lien, and (iii) except in a case
of default by Grantee under this Agreement that has not been cured by
the Project Lender under this Section 6.2 within the period of time
provided therein, Grantor shall not accept or consent to any
abandonment of the Easement to Develop Geothermal Rights or any
termination of this Agreement, unless and until Grantee presents
evidence to Grantor that Grantee has obtained the prior written consent
of the Project Lender thereto."
2.6.4 Sections 6.2.6 and 6.3 of the Easement Grant Deed are
hereby deleted in their entireties.
2.7. ARBITRATION. The last eleven (11) words of paragraph (ii) of
section 8.11 of the Easement Grant Deed (which currently read "Federal District
Court or County Superior Court in San Diego, California") are hereby deleted and
replaced with the words "District Court in Omaha, Nebraska."
2.8. EASEMENT SHORT FORM. The Easement Short Form is hereby amended as
necessary and appropriate so that the same will in all respects be consistent
with this Amendment.
ARTICLE 3. AMENDMENTS TO THE GROUND LEASE
3.1. USE OF THE ELMORE PROPERTY. Section 2.2 of the Ground Lease is
hereby amended as follows:
3.1.1 The word "sell" is hereby added after the word "use" in
the fourth line of such Section.
3.1.2 The words ", the Brine Minerals" are hereby added after
the words "Reserved Geothermal Brine" in the fourth line of such Section.
3.1.3 The words "and mineral extraction and processing
facilities" are hereby added after the words "Additional Power Production
Facilities" in the fourteenth and eighteenth lines of such Section.
3.1.4 The words ", Partially Spent Geothermal Brine, Brine
Minerals" are hereby added after the words "Geothermal Brine" in the
twenty-first and twenty-fourth lines of such Section.
3.1.5 The following sentence is hereby added at the end of
such Section: "Without limiting the foregoing, Landlord may conduct such
operations for purposes incidental to Landlord's or its affiliates' operations
on lands in the vicinity of and outside the Elmore Property."
3.2. SUBDIVISION OF THE ELMORE PROPERTY.
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3.2.1 In the event that Grantor's proposed use of the Elmore
Property (as permitted under Section 3.1 hereof or in the Ground Lease) causes
it to reasonably determine that compliance with the California Subdivision Map
Act (Government Code Section 66410 et seq.) and the county ordinances enacted
thereunder (together, the "Map Act") may be necessary, then Grantor shall be
entitled to apply for, process and cause to be recorded such subdivision maps as
may be necessary to cause such portion or portions of the Elmore Property as may
be designated by Grantor to be subdivided in compliance with the Map Act. All
costs of such application, processing and recordation shall be borne by Grantor.
Grantee and Grantor shall cooperate each with the other, to ensure that such
maps will be adequate for Grantor's proposed use and to record such reciprocal
easements as may be necessary in connection with their existing and proposed
operations, and Grantee shall promptly execute such maps as and when requested
by Grantor. Notwithstanding the foregoing, in no event shall Grantor subdivide
the Elmore Property in a manner that will have a material adverse effect on
Grantee's ability to operate the Elmore Facility.
3.2.2 Grantee hereby irrevocably and unconditionally grants to
Grantor an option (the "Partial Termination Option"), exercisable at any time
during the term of the Ground Lease upon the payment to Grantee of the sum of
Ten Dollars ($10.00), to terminate the Ground Lease as to any parcel (each, a
"Terminated Parcel") created as a result of such subdivision (other than the
parcel on which the Elmore Facility is located). Upon Grantor's exercise of the
Partial Termination Option, (a) Grantor and Grantee shall execute and cause to
be acknowledged and recorded an amendment to the Ground Lease deleting from the
description of the "Premises" each parcel as to which the Ground Lease has been
so terminated (each, a "Terminated Parcel"), along with a corresponding
quitclaim deed from Grantee to Grantor of all Grantee's right, title and
interest in the Terminated Parcels, and (b) Grantee shall deliver possession of
the Terminated Parcels to Grantor. Any lender imposing a lien against the Elmore
Property shall be deemed, by the recordation of such lien, to have agreed to
promptly partially release the Terminated Parcels from the lien of its deed of
trust upon Grantor's exercise of the Partial Termination Option.
3.3. DAMAGE OR DESTRUCTION. Section 8.2 of the Ground Lease is hereby
deleted in its entirety.
3.4. PROJECT LENDER PROVISIONS. Section 10 of the Ground Lease
(consisting of sections 10.1 through 10.6, inclusive) is hereby revised as
follows.
3.4.1 The definition of "Project Lender" is hereby deleted
from Schedule "Z" to the Ground Lease, and is replaced with the following:
"'Project Lender' means (a) the Collateral Agent (b) any Person who
succeeds to the interest of Collateral Agent under the Indenture or (c)
any other Person who acquires a first lien on this Lease in connection
with or following (i) foreclosure of the Deed of Trust; (ii) conveyance
of this Lease to Collateral Agent in lieu of foreclosure or (iii) the
acquisition by Collateral Agent or its nominee or designee of the Lease
by any other means. The term "Project Lender" shall also include any
person or entity that acquires a first lien on the Lease at any time
after such foreclosure, conveyance by deed in lieu of foreclosure or
acquisition by Collateral Agent or its nominee or designee."
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3.4.2 The definition of "Project Lender's Loan" is hereby
deleted from Schedule "Z" to the Ground Lease, and is replaced with the
following:
"'Project Lender's Loan' means the financing provided by the Project
Lender for the Development, operation, refinancing or acquisition of
the Elmore Facility, the repayment of which is secured by the Project
Lender's Lien."
3.4.3 Section 10.2.1 of the Ground Lease is hereby deleted in
its entirety and replaced with the following:
"10.2.1 (i) So long as the Indenture is in effect, Landlord
shall not accept or consent to any amendment or modification of this
Lease if the same would be prohibited under the Partnership Credit
Agreement (as that term is defined in the Indenture); (ii) at any time
when the Indenture is no longer in effect, Landlord shall not accept or
consent to any amendment or modification of this Lease if the same
would have a material adverse effect on the Project Lender's Lien, and
(iii) except in a case of default by Tenant under this Lease that has
not been cured by the Project Lender under this Section 10.2 within the
period of time provided therein, Landlord shall not accept or consent
to any abandonment or termination of this Lease unless and until Tenant
presents evidence to Landlord that Tenant has obtained the prior
written consent of the Project Lender thereto."
3.4.4 Sections 10.2.6, 10.3, 10.4 and 10.5 of the Ground Lease
are hereby deleted in their entireties.
3.5. INSURANCE. Section 11 of the Ground Lease is hereby deleted in its
entirety.
3.6. ARBITRATION. The last eleven (11) words of paragraph (ii) of
section 31 of the Ground Lease (which currently read "Federal District Court or
County Superior Court in San Diego, California") are hereby deleted and replaced
with the words "District Court in Omaha, Nebraska."
ARTICLE 4. GENERAL PROVISIONS
4.1. NOTICES. The address for notices to Grantor and Grantee set forth
in section 8.3 of the Easement Grant Deed and in section 22 of the Ground Lease
shall henceforth be as follows:
If to Grantor: c/o CalEnergy Company, Inc.
302 South 36th Street
Suite 400
Omaha, Nebraska 68131
Attention: General Counsel
If to Grantee: c/o CalEnergy Company, Inc.
302 South 36th Street
Suite 400-C
Omaha, Nebraska 68131
Attention: General Counsel
7
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4.2. ASSIGNMENT. Grantor shall be entitled, from time to time and
without the prior consent of Grantee, to transfer, assign, alienate, license,
grant easements in, hypothecate, pledge or mortgage to any Person all or any
portion of Grantor's right, title or interest in, under and to the Easement
Grant Deed and this Amendment.
4.3. COVENANTS TO RUN WITH THE LAND. The Elmore Property shall be held,
conveyed, assigned, hypothecated, encumbered, leased, used and operated subject
to the covenants, terms and provisions set forth herein, in the Easement Grant
Deed and in the Ground Lease, which covenants, terms and provisions shall run
with the Elmore Property and each portion thereof and interest therein, and
shall be binding upon Grantee and each other Person having any interest therein
during their ownership thereof, and their respective grantees, heirs, successors
and assigns.
4.4. EFFECT OF THIS AMENDMENT. In the event that any inconsistency
exists between this Amendment and the Easement Grant Deed or the Ground Lease,
this Amendment shall govern, and any inconsistent terms and provisions contained
herein shall be construed as superseding and amending the terms and provisions
of the Easement Grant Deed and/or the Ground Lease, as applicable. Except as
expressly modified by this Amendment, the Easement Grant Deed and the Ground
Lease shall be unchanged and shall remain in full force and effect. This
Amendment may be executed in multiple counterparts, all of which shall
constitute one and the same Amendment.
8
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Amendment as of the
date first above written.
GRANTOR: MAGMA POWER COMPANY,
a Nevada corporation
By: /s/ John G. Sylvia
-----------------------------------------
John G. Sylvia
Its: Senior Vice President
----------------------------------------
GRANTEE: ELMORE, L.P.,
a limited partnership organized under the
laws of the State of California
By: CalEnergy Operating Company,
a Delaware corporation,
General Partner
By: /s/ John G. Sylvia
------------------------------------
John G. Sylvia
Its: Senior Vice President
-----------------------------------
9
<PAGE>
ACKNOWLEDGMENTS
STATE OF NEW YORK )
----------------------------- ) ss.
COUNTY OF NEW YORK )
----------------------------
On June 20, 1996, before me Patricia Peterson, personally appeared John
G. Sylvia, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s) or the entity on behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature /s/ Patricia Peterson
--------------------------------
PATRICIA PETERSON
Notary Public, State of New York
No. 01PE4978514
Qualified in New York County
Commission Expires March 4, 1997
STATE OF NEW YORK )
----------------------------- ) ss.
COUNTY OF NEW YORK )
----------------------------
On June 20, 1996, before me Patricia Peterson, personally appeared John
G. Sylvia, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s) or the entity on behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature /s/ Patricia Peterson
--------------------------------
PATRICIA PETERSON
Notary Public, State of New York
No. 01PE4978514
Qualified in New York County
Commission Expires March 4, 1997
<PAGE>
EXHIBIT "A"
Description of the Geothermal Lease Rights Properties
Parcel 1:
The North Half of the Northwest Quarter of Section 35, Township 11
South, Range 13 East, San Bernardino Meridian, County of Imperial,
State of California, according to Official Plat thereof.
Parcel 2:
The East Half of the Northeast Quarter of Section 34, Township 11
South, Range 13 East, San Bernardino Meridian, County of Imperial,
State of California, according to Official Plat thereof.
Parcel 3:
Parcel A:
The Southwest Quarter of Section 26, the West Half of the Southeast
Quarter of Section 26, and the Southeast Quarter of Section 27, all in
Township 11 South, Range 13 East, San Bernardino Meridian, County of
Imperial, State of California, according to Official Plat thereof.
Parcel B:
The Southwest Quarter of Section 27, Township 11 South, Range 13 East,
San Bernardino Meridian, County of Imperial, State of California,
according to Official Plat thereof.
Parcel 4:
The South Half of the Northwest Quarter of Section 35, Township 11
South, Range 13 East, San Bernardino Meridian, County of Imperial,
State of California, according to Official Plat thereof.
Parcel 5:
The South Half of the Northwest Quarter of Section 26, Township 11
South, Range 13 East, San Bernardino Meridian, County of Imperial,
State of California, excepting therefrom an undivided one-half interest
in all oil, gas and mineral rights, as reserved by William T. Clarke
and Mildred L. Clarke in Deed recorded April 17, 1943 in Book 603, Page
55 of Official Records, in the Office of the County Recorder, Imperial
County, California
-------------------
Parcel 1/McCoy; Parcel 2/L. Baretta; Parcel 3/Elmore; Parcel 4/Huffman;
Parcel 5/State.
EXHIBIT "A"
Page 1 of 1
<PAGE>
EXHIBIT "B"
Description of the Geothermal Leases
Parcel 1:
Geothermal Lease and Agreement dated January 1, 1980, as heretofore and
hereafter amended and/or assigned, by and between Wallace W. McCoy and
Katherine P. McCoy, as Lessor, and Imperial Magma, a corporation and
New Albion Resources Co., a corporation, as Lessee, as disclosed by
that certain Memorandum of Geothermal Lease and Agreement (Short Form)
of even date therewith, recorded on August 7, 1980, in Book 1456, Page
1376 of Official Records.
Parcel 2:
Geothermal Lease and Agreement dated January 1, 1979, as heretofore and
hereafter amended and/or assigned, by and between Lillian M. Baretta,
as Lessor, and Magma Power Company, a corporation, as Lessee, as
disclosed by that certain Geothermal Lease and Agreement (Short Form)
of even date therewith, recorded on December 14, 1979, in Book 1444,
Page 1311 of Official Records.
Parcel 3:
Lease and Agreement dated June 1, 1963, as heretofore and hereafter
amended and/or assigned, by and between John J. Elmore and Ann Kelley
Elmore, as Lessor, and Earth Energy, Inc., a Delaware corporation and
Magma Power Company, a Nevada corporation, as Lessee, as disclosed by
that certain Memorandum of Lease and Agreement of even date therewith,
recorded on July 31, 1963, in Book 1156, Page 465 of Official Records.
Parcel 4:
Lease Agreement dated as of November 15, 1978, as heretofore and
hereafter amended and/or assigned, by and between Doil Huffman and
Vernon Huffman, as Lessor, and New Albion Resources Co., Inc., as
Lessee, as disclosed by that certain Short Form of even date therewith,
recorded on December 7, 1978, in Book 1426, Page 634 of Official
Records.
Parcel 5:
Geothermal Resources Lease effective March 1, 1992, as heretofore and
hereafter amended and/or assigned, by and between the State Lands
Commission of the State of California, as Lessor, and Magma Power
Company, a Nevada corporation, as Lessee, as disclosed by that certain
Short Form of even date therewith, recorded April 15, 1992, in Book
1697, Page 396 of Official Records.
-------------------
Parcel 1/McCoy; Parcel 2/L. Baretta; Parcel 3/Elmore; Parcel 4/Huffman;
Parcel 5/State.
EXHIBIT "B"
Page 1 of 1
<PAGE>
EXHIBIT "C"
Description of the Grantor's Mineral Property
An undivided one-half interest in all oil, gas and mineral rights
located in and under the South Half of the Northwest Quarter of Section
26, Township 11 South, Range 13 East, San Bernardino Meridian, State of
California, as reserved by William T. Clarke and Mildred L. Clarke in
Deed recorded April 17, 1943 in Book 603, Page 55 of Official Records,
in the Office of the County Recorder, Imperial County, California.
EXHIBIT "C"
Page 1 of 1
<PAGE>
EXHIBIT "D"
Description of the Elmore Property
The South Half of the Southwest Quarter of the Southeast Quarter of
Section 27, Township 11 South, Range 13 East, San Bernardino Meridian,
County of Imperial, State of California, according to Official Plat
thereof.
Excepting all mineral rights, specifically including, but not limited
to, sources of geothermal energy and power as reserved by John Jameson
Elmore, Et Ux, by Deed recorded June 5, 1974 in Book 1363, Page 1812 of
Official Records.
EXHIBIT "D"
Page 1 of 1
<PAGE>
GROUND LEASE
THIS GROUND LEASE (the "LEASE") is made as of October 13, 1998(the
"EFFECTIVE DATE"), by and between IMPERIAL MAGMA, a Nevada corporation
("LANDLORD") and SALTON SEA POWER L.L.C., a Delaware limited liability company
("TENANT").
RECITALS
A. Affiliates of Landlord and Tenant currently own and operate eight
geothermal electrical generating facilities in the Salton Sea area of Imperial
County, California, commonly known as the "Vulcan Plant", "Hoch Plant", "Elmore
Plant", "Leathers Plant" and "Salton Sea Units 1, 2, 3 and 4" (collectively,
the "EXISTING PLANTS").
B. Each of the Existing Plants and its wellfield is operated pursuant to
an easement or profit-a-prendre that entitles such Existing Plant to extract
heat from geothermal brine for electrical generating purposes. After the
Existing Plants extract heat from the geothermal brine, the partially-cooled
geothermal fluid (the "SPENT GEOTHERMAL EFFLUENT") is piped back to the
wellfield for reinjection.
C. Tenant intends to construct an additional 49 megawatt (net)
geothermal electrical facility, to be known as "Salton Sea Unit 5", which will
utilize the residual heat in the Spent Geothermal Effluent flowing from Salton
Sea Units 1, 2, 3 and 4, and which will be located just to the south thereof on
land owned in fee by Landlord, which land is the subject of this Lease.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals, the
covenants and conditions herein contained, and other valuable consideration, the
receipt of which is hereby acknowledged, Landlord and Tenant agree as follows:
ARTICLE I - DEFINITIONS
1.1 Unless the context shall otherwise require, the following
capitalized terms used herein shall have the following meanings:
1.1.1 "DAMAGES" means any losses, damages, liabilities, claims,
judgments, liens, penalties, costs and expenses, including, without limitation,
reasonable attorneys' and consultants' fees.
1.1.2 "FACILITY" means that certain 49 megawatt (net) geothermal
electrical generating facility to be known as Salton Sea Unit 5 which Tenant
intends to construct on the Premises, together with all buildings, structures,
improvements, fixtures, pipelines, utility installations, machinery, equipment
and other items associated therewith or related thereto which are or will be
located on the Premises.
1.1.3 "FACILITY SITE" shall have the meaning given in Section 16.1
hereof.
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<PAGE>
1.1.4 "FINANCING" means construction financing and any subsequent term
financing for the Facility.
1.1.5 "GOVERNMENTAL APPROVALS" means all applicable authorizations,
consents, approvals, permissions, permits, franchises, licenses, waivers,
exceptions or variances of, and any filings, applications and declarations
submitted in order to obtain any of the same from, any Governmental Authority.
1.1.6 "GOVERNMENTAL AUTHORITY" means any federal, state or local
governmental body, or any political subdivision, agency, subagency or
instrumentality thereof, including, without limitation, the courts and any
quasi-adjudicative bodies with jurisdiction.
1.1.7 "LANDLORD'S FACILITIES" means any facilities, structures, wells,
pipelines, improvements, machinery and equipment constructed, installed or
located on the Premises pursuant to (a) the Senior Rights or (b) Landlord's
Reserved Rights.
1.1.8 "LANDLORD'S RESERVED RIGHTS" shall have the meaning given in
Section 2.2 hereof.
1.1.9 "LAW" or "LAWS" means all applicable laws, statutes, ordinances,
rules, regulations, decrees, policies, orders, permits, requirements, judgments,
decisions, injunctions and findings of or issued by any Governmental Authority.
1.1.10 "LENDER" means the lender or lenders collectively advancing all
or a portion of the Financing, and their respective agents, trustees (including,
without limitation, collateral agents, security agents and loan trustees),
grantees, successors and assigns.
1.1.11 "LENDER'S LIEN" means any security interest taken by the
Lender in Tenant's right, title and interest under this Lease.
1.1.12 "LENDER'S LOAN DOCUMENTS" means all instruments, agreements and
other documents evidencing or relating to the Financing and/or the security
therefor.
1.1.13 "MATERIAL ADVERSE IMPACT" means a material adverse impact on
(a) the financial position or results of operation of the Facility, (b) the
validity or priority of the Lender's Lien, (c) the ability of Tenant to perform
its material obligations under the Lender's Loan Documents or (d) the ability of
the Lender to enforce any of the payment obligations under the Lender's Loan
Documents.
1.1.14 "OFFICIAL RECORDS" means the official records of the County of
Imperial, State of California.
1.1.15 "OPTIONED PREMISES AREA" shall have the meaning given in
Section 16.3 hereof.
1.1.16 "PARTIAL TERMINATION OPTION" shall have the meaning given in
Section 16.3 hereof.
1.1.17 "PERSON" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
Governmental Authority.
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<PAGE>
1.1.18 "PREMISES" means the real property described on Exhibit "A"
attached hereto; subject, however, to the right of Landlord to terminate the
Lease as to the Optioned Premises Area as provided in Article 16 hereof.
1.1.19 "RESERVED AREA" shall have the meaning given in Section 16.1
hereof.
1.1.20 "SENIOR RIGHTS" shall have the meaning given in Section 2.5
hereof.
ARTICLE 2 - LEASE
2.1 Landlord hereby leases the Premises to Tenant, and Tenant hereby
leases the Premises from Landlord, on the terms and conditions, and subject to
the reservations, set forth in this Lease.
2.2 Landlord hereby reserves from the leasehold estate granted to Tenant
hereunder the right to use the Premises for any purpose or purposes whatsoever
("LANDLORD'S RESERVED RIGHTS"). Without limiting the generality of the
foregoing, included within Landlord's Reserved Rights shall be the right to,
from time to time: (a) drill, operate and maintain wells and wellsites; (b)
develop, construct, operate and maintain (i) additional geothermal electrical
generating facilities, (ii) mineral extraction and processing facilities, (iii)
other commercial or industrial facilities, (iv) pipelines and pumps (whether for
the transportation of geothermal fluids, mineral solutions, water and/or other
fluids or substances), (v) transmission facilities, including without
limitation, transmission or collector lines, interconnections, transformers,
circuit breakers, footings, towers, poles, crossarms, guy lines, anchors or
wires, (vi) control, communications or radio relay systems, (vii) safety
protection facilities, (viii) signs, (ix) sumps, ponds, evaporation, settling or
storage basins, (x) roads and (xi) construction laydown facilities; (c) conduct
any other activities and operations and install or construct any other
improvements, equipment or machinery, which Grantee reasonably determines to be
necessary, useful or convenient in connection with, or incidental to, any of the
foregoing; or (d) for any purpose, but in a commercially reasonable manner,
"tap" into any pipelines or other facilities carrying or containing any
geothermal or other fluids, including, without limitation, Spent Geothermal
Effluent, together with ingress and ingress to and from, and access over, the
Premises for any of the foregoing purposes.
2.3 Notwithstanding the foregoing, (a) Landlord shall not exercise
Landlord's Reserved Rights in a manner that would reasonably be expected to have
a Material Adverse Impact, (b) Landlord shall use its best efforts to minimize
the effect of its use of the Facility Site under Section 2.2 hereof on Tenants
construction, operation and maintenance of the Facility and (c) and Landlord
shall pay all reasonable costs actually incurred by Tenant as a result of
Landlord's exercise of Landlord's Reserved Rights on the Facility Site.
2.4 Tenant shall not at any time during the term of this Lease, without
the prior written consent of Landlord, which consent may be withheld in
Landlord's sole discretion, (a) construct or install any structure, building,
well, pipeline or other improvements, equipment or machinery in or on the
Reserved Area, (b) grade or otherwise disturb the surface of the Reserved Area
or (c) except as otherwise expressly provided in this Lease, conduct any other
activities or operations in or on the Reserved Area.
2.5 Tenant acknowledges and agrees that its rights under this Lease are
and shall at all times remain junior, subordinate and subject to the right,
title and interest (collectively, the "SENIOR RIGHTS") of: (a) Magma Land
Company I, a Nevada Corporation, and its grantees, assignees, successors and
assigns, under that certain Mineral Lease dated as of August 13,1958,
3
<PAGE>
between Alice T. Nelson (formerly Alice T. Sinclair and later Alice T. Denman)
and Salton Sea Power Company, recorded on August 14, 1958, in Book 1002, Page
211 of the Official Records, as heretofore and hereafter amended, supplemented,
restated or superseded; and (b) Magma Land Company I, a Nevada Corporation, and
its grantees, assignees, successors and assigns, under that certain Amended and
Restated Easement Grant Deed and Agreement Regarding Rights For Geothermal
Development dated as of February 23, 1994, between Magma Land Company I, a
Nevada corporation, and Salton Sea Brine Processing L.P., a California limited
partnership, a Short Form of which was recorded on February 28, 1994 in Book
1762, Page 152 of the Official Records as File No. 1994-0004910, as heretofore
and hereafter amended, supplemented, restated or superseded.
2.6 Landlord's Reserved Rights and any other rights reserved by Landlord
in this Lease shall be freely assignable by Landlord, in part or in whole, to
its grantees, assignees, successors and assigns.
ARTICLE 3 - TERM
3.1 The term of this Lease shall commence upon the Effective Date, and,
unless sooner terminated as provided in this Lease, shall expire on the date
which is thirty-three (33) years after the Effective Date.
ARTICLE 4 - RENT
4.1 Tenant shall pay to Landlord, without abatement, deduction or
offset, "BASE ANNUAL RENT" for the Premises, commencing on the Effective Date
and continuing thereafter on the first day of each calendar year throughout the
term of this Lease, in an amount equal to (a) Two Hundred and Fifty Dollars
($250.00) multiplied by (b) the number of acres of the Facility Site.
4.2 The Base Annual Rent shall be subject to adjustment every five (5)
years as follows:
4.2.1 On every fifth (5th) anniversary of the Effective Date, the Base
Annual Rent shall be adjusted to reflect the increase, if any, in the Consumer
Price Index published by the Bureau of Labor Statistics of the Department of
Labor for All Urban Consumers, All Items, for the Los Angeles-Anaheim-Riverside
Metropolitan Area (the "CPI") as follows: The Base Annual Rent amount provided
in Section 4.1 hereof shall be multiplied by a fraction, the numerator of which
shall be the CPI for the month of August immediately preceding such adjustment,
and the denominator of which shall be the CPI for the month of August, 1998. The
sum so calculated shall constitute the new Base Annual Rent hereunder, but in no
event shall such new Base Annual Rent be less than the Base Annual Rent payable
for the year immediately preceding such adjustment.
4.2.2 In the event that the publication of the CPI shall be
transferred to any other Governmental Authority or shall be discontinued, then
the index most nearly the same as the CPI, as determined in good faith by
Landlord, shall be used to make such adjustments.
4.2.3 Tenant shall continue to pay Base Annual Rent at the rate
previously in effect until the next adjustment, if any, is determined.
Thereafter, the Base Annual Rent shall be paid at the increased rate.
4.3 Rent for any period during the term hereof which is for less than
one year shall be prorated based on a three hundred and sixty-five (365) day
year. Rent shall be payable in lawful
4
<PAGE>
money of the United States to Landlord at the address stated herein or to such
other persons or at such other places as Landlord may designate in writing.
ARTICLE 5 - TAXES, ASSESSMENTS AND UTILITIES
5.1 Tenant shall pay all real and personal property taxes and
assessments, general or special, levied against (a) this Lease or any right,
title or interest of Tenant in the Premises and (b) the Facility, including,
without limitation, any possessory interest, license, production, severance or
excise taxes, but excluding income, inheritance and estate taxes (collectively,
"TENANT'S TAXES"); provided, however, that Landlord shall pay all real and
personal property taxes and assessments, general or special, levied against (i)
any right, title or interest of Landlord in the Reserved Area and/or (ii) any of
Landlord's Facilities.
5.2 Tenant shall pay all Tenant's Taxes before delinquency, whether
chargeable against Landlord or Tenant. Tenant shall make all payments of
Tenant's Taxes directly to the charging Governmental Authority before
delinquency and before any fine, interest or penalty shall become due or be
imposed by operation of Law for their nonpayment, and, at the election of
Landlord to be exercised from time to time by notice to Tenant, shall either be
paid to Landlord or directly to the charging Governmental Authority. If the
payment of any or all of the Tenants Taxes in installments is permitted (whether
or not interest accrues on the unpaid balance), Tenant may, at Tenant's
election, utilize the permitted installment method, but shall pay each
installment (with any interest) before delinquency.
5.3 All payments of Tenant's Taxes shall be prorated, on the basis of a
365-day year, for the applicable portion of the tax fiscal years at the
commencement and expiration of the term of this Lease.
5.4 If Tenant's Taxes are assessed together with the taxes assessed
against the assets described in clauses (i) and (ii) of Section 5.1 hereof or
together with taxes on any other real or personal property of Landlord or any
other Person, then Landlord shall, in good faith, separate out Tenant's Taxes
from such other taxes, using any reasonable method of allocation as Landlord may
determine.
5.5 Tenant may contest the legal validity or amount of any of Tenant's
Taxes, and may institute such proceedings as Tenant considers necessary or
appropriate in connection therewith. If Tenant contests any of Tenant's Taxes,
then Tenant may withhold or defer payment or pay under protest, but shall
protect Landlord, the Premises, the Facility and Landlord's Facilities from and
against any tax lien imposed in connection with such non-payment, by surety bond
or other appropriate security reasonably acceptable to Landlord.
5.6 Tenant shall pay, before the same become delinquent, all charges for
gas, electricity, sewage, water, telephone, trash removal and other similar or
dissimilar public services or commodities furnished to the Facility Site and/or
the Facility during the term of this Lease, including all installation,
connection and disconnection charges.
5.7 It is the intent of the parties hereto that the rent provided in
this Lease shall be absolutely net to Landlord with respect to the Facility
Site, and that, except as otherwise expressly provided in this Lease, Tenant
shall pay all costs and charges of every kind and nature incurred for, against,
or in connection with the Facility Site which may arise or become due from and
after the Effective Date and during the term hereof, including, without
limitation, all Tenant's Taxes, utilities, insurance premiums and maintenance
costs; provided, however, that nothing herein shall
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be construed as requiring Tenant to pay any installment of interest or principal
owing on any encumbrance against the Premises for which Landlord is the obligor.
All such costs and charges at the commencement and the end of the term of this
Lease shall be appropriately prorated between the parties.
ARTICLE 6 - USE
6.1 Subject to Section 2.4 hereof, Tenant shall use and permit the use
of the Premises only for the construction, operation, maintenance, repair and
replacement of the Facility.
6.2 Tenant shall, at Tenant's expense, promptly comply in all material
respects with all Laws now in effect or which may hereafter come into effect
during the term hereof, relating in any manner to the Premises or the occupation
and use by Tenant of the Facility Site. Further, Tenant shall comply in all
material respects with any covenants, conditions and restrictions of record and
with the requirements of any fire insurance underwriters or rating bureaus.
Tenant shall conduct its business in a lawful and commercially reasonable
manner, and shall not use or permit the use of the Premises in any manner that
will create waste or nuisance. Tenant shall indemnify, defend and hold harmless
Landlord from and against any and all Damages which may be imposed upon or
incurred by Landlord or asserted against Landlord by any Person, arising out of
or attributable to Tenant's activities or operations on the Premises.
6.3 Tenant shall, at Tenant's expense, comply in all material respects
with all environmental Laws now in effect or which may come into effect during
the term hereof, including, without limitation, the Resource Conversation and
Recovery Act, the Comprehensive Environmental Response, Compensation and
Liability Act, the Hazardous Materials Transportation Act, the Toxic Substances
Control Act, the Clean Air Act, the Clean Water Act, the California Hazardous
Waste Control Act, the California Hazardous Substance Act, the Porter-Cologne
Water Quality Control Act and all applicable regulations promulgated pursuant
thereto.
6.4 Without limiting the generality of Section 6.2 hereof, Tenant shall
indemnify, defend and hold harmless Landlord from and against any and all
Damages which may be imposed upon or incurred by Landlord or asserted against
Landlord by any third Person in connection with any violation of the provisions
of Section 6.3 hereof, arising out of or attributable to the assets, business or
operations of Tenant at, on or with respect to the Premises.
6.5 Without in any way limiting the scope of Tenant's obligations under
the indemnification provisions of Section 6.4 hereof, but subject to Landlord's
obligation under Section 2.3 hereof to pay all reasonable costs actually
incurred by Tenant as a result of Landlord's exercise of Landlord's Reserved
Rights on the Facility Site, Tenant shall be responsible for all investigations,
studies, cleanup, corrective action or response or remedial action required by
any Governmental Authority now or hereafter authorized to regulate environmental
matters or by any consent decree, or court or administrative order now or
hereafter applicable to the Premises, or by any Law now or hereafter in effect.
6.6 As between Landlord and Tenant, Tenant shall have the responsibility
and right to participate in the management and control of all investigations and
any environmental cleanup, remediation or related activities. However, Tenant
may not negotiate with or fulfill any requirements or claims made by a
Governmental Authority or third Person, or settle or contest such requirements
or third-party claims without the express approval of Landlord which consent
will not be unreasonably withheld or delayed, and Landlord shall have the right
to participate fully in any and
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all meetings, negotiations or decisions relevant to the investigation or
remediation of any violation of the provisions of this Article 6.
6.7 Tenant hereby accepts the Premises in its condition existing as of
the Effective Date, subject to (a) all applicable Laws governing and regulating
the use of the Premises, (b) all recorded easements, covenants, conditions,
restrictions and other matters of record, (c) the Senior Rights and (d)
Landlord's Reserved Rights. Tenant acknowledges that it has satisfied itself by
its own independent investigation that the Facility Site is suitable for its
intended use, and that neither Landlord nor Landlord's agents or employees has
made any representation or warranty as to the present or future suitability of
the Facility Site for the conduct of Tenant's business or operations.
ARTICLE 7 - MAINTENANCE AND REPAIRS
7.1 Throughout the term, Tenant shall, at Tenant's sole cost and
expense, maintain the Facility Site in good condition and repair, ordinary wear
and tear excepted, in accordance with (a) all Laws, (b) any insurance
underwriting board or insurance inspection bureau having or claiming
jurisdiction and (c) any insurance company insuring all or any part thereof;
except to the extent any damage to the Facility Site arises from the exercise by
the Landlord of its Reserved Rights.
7.2 Tenant shall maintain and repair, in accordance with reasonable
engineering standards, any dikes and levees now or hereafter located on the
Premises; except to the extent any damage to any such dike or levee arises from
the exercise by the Landlord of its Reserved Rights.
7.3 Landlord reserves the right to enter the Premises and to take and
utilize the soils and rock contained therein as fill for flood control purposes,
at no charge to Landlord; provided, however, that (a) in exercising its rights
under this Section 7.3, Landlord shall not take any action that would reasonably
be expected to have a Material Adverse Impact and (b) Landlord shall indemnify,
defend and hold harmless Tenant from and against any and all Damages, whether or
not arising out of third-party claims, which may be imposed upon or incurred by
Tenant or asserted against Tenant by any other Person, arising out of or
attributable to Landlord's use of any such soils and/or rock on the Facility
Site, except to the extent caused by the negligence or wilful acts of Tenant.
7.4 Tenant hereby waives any claim against Landlord for Damages caused
by any change or changes in the level of the Salton Sea, including, without
limitation, Damages caused by flooding, seepage or other circumstances, and
Tenant hereby agrees that such waiver is part of the consideration to Landlord
under this Lease.
ARTICLE 8 - ALTERATIONS AND ADDITIONS
8.1 Tenant shall be entitled, at its own cost and expense, to construct,
install, erect, maintain, repair and operate the Facility on the Facility Site.
If Tenant constructs the Facility, then it shall obtain and maintain in force
all Governmental Approvals necessary or appropriate in connection therewith.
8.2 Landlord's approval shall not be required for Tenant's minor
alterations or additions to the Facility, so long as such alterations or
additions does not have a Construction Cost in excess of One Million Dollars
($1,000,000). As used herein, the term "CONSTRUCTION COST" collectively includes
all costs that would constitute the basis of a valid claim or claims under the
mechanic's
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lien Laws, including, without limitation, costs for any demolition or removal of
existing improvements, equipment or machinery or parts thereof, as well as costs
for the preparation, construction and completion of new improvements, equipment
or machinery. Any alterations or additions to the Facility which have a
Construction Cost in excess of One Million Dollars ($1,000,000), shall require
Landlord's prior written content, which shall not unreasonably be withheld.
Construction of the Facility, and any alterations and additions thereto, whether
or not requiring Landlord's consent hereunder, shall be completed in a good and
workmanlike manner and of good quality and materials.
8.3 Tenant shall use only reputable licensed contractors in constructing
and repairing the Facility and in making any alterations or additions thereto,
and Landlord may require Tenant to provide to Landlord, at Tenant's sole cost
and expense, a lien and completion bond in an amount equal to one and one-half
(1 1/2) times the estimated cost of such construction and/or such alterations or
additions, as the case may be, to insure Landlord against liability for any
mechanic's and materialmen's liens and to ensure completion of the work. Should
Tenant make any alterations or additions without the prior written consent of
Landlord where such consent is required hereunder, or use other than a reputable
licensed contractor, Landlord may, at any time during the term of this Lease,
require that Tenant remove any part or all of the same from the Premises.
8.4 Tenant shall pay, when due, all claims for labor or materials
furnished to or for Tenant at or for use on the Premises, which claims are or
may be secured by any mechanic's or materialmen's lien against the Premises, the
Facility or any interest therein.
8.5 Tenant shall give Landlord not less than ten (10) days notice prior
to Tenant's commencement of construction of the Facility or any alterations or
additions thereto, and Landlord shall have the right to post notices of
non-responsibility in or on the Premises as provided by Law. If Tenant shall, in
good faith, contest the validity of any mechanic's or materialmen's lien or
claim, then Tenant shall, at its sole expense, defend itself and Landlord
against the same and shall pay and satisfy any adverse judgment that may be
rendered thereon before the enforcement thereof, upon the condition that if
Landlord shall so require, Tenant shall furnish to Landlord a surety bond
satisfactory to Landlord in an amount equal to such contested lien or claim,
indemnifying Landlord against liability for the same and holding the Premises,
the Facilities and Landlord's Facilities free from the effect of such lien or
claim. In addition, Landlord may require Tenant to pay Landlord's reasonable
attorneys' fees and costs in participating in such action, if Landlord shall
decide it is in Landlord's best interest to so participate.
8.6 Notwithstanding any other provision of this Lease, the Facility and
all of Tenant's other fixtures and personal property, whether or not affixed to
the Premises, shall be deemed severed from and not a part of the underlying real
property and shall not merge therewith, and, subject to the rights of Landlord
under Section 9.3 hereof, shall remain the property of Tenant at all times
during and after the term of this Lease, and may be removed by Tenant from the
Premises.
ARTICLE 9 - DAMAGE OR DESTRUCTION; TERMINATION
9.1 If the Facility or any portion thereof is damaged or destroyed
during the term of this Lease, then, subject to the provisions of the Lender's
Loan Documents, and following written notice to Landlord, Tenant may elect to:
(a) repair, restore or remedy such damage or destruction; or
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(b) dismantle and raze the Facility in accordance with Section 9.2
hereof, and, upon Tenant's completion of the requirements set forth in such
Section 9.2, each of Tenant or Landlord, by written notice to the other, shall
be entitled to terminate this Lease.
9.2 Within a reasonable period of time (not to exceed one hundred and
twenty (120) days) after (a) Tenant delivers notice to Landlord of its intent to
dismantle and raze the Facility under Section 9.1 hereof or (b) the expiration
or earlier termination by Landlord of this Lease, Tenant shall, at its sole cost
and expense, in accordance with good operating practice and in compliance with
Law, (i) remove the Facility from the Premises, (ii) demolish and remove all
foundations and fix all excavations associated with the Facility, return the
surface of the Premises to grade, and leave such surface safe and free from
debris and (iii) surrender the Premises to Landlord in good condition and
repair. Notwithstanding the foregoing, Tenant shall not remove the Facility or
any portion thereof from the Premises (or take any other actions required under
this Section 9.2 with respect thereto), to the extent that Landlord has
exercised the option set forth in Section 9.3 hereof.
9.3 Notwithstanding any other provision of this Lease, upon the
expiration or earlier termination by Landlord of this Lease, or upon receipt by
Landlord of Tenant's notice of its intent to dismantle and raze the Facility
under Section 9.1 hereof, as the case may be, Landlord shall have an option to
acquire all or any portion or portions of the Facility from Tenant, whereupon:
(a) in the event Landlord desires to exercise such option in connection with the
expiration of this Lease, such option shall be exercised by written notice to
Tenant not less than one hundred and twenty (120) days before the expiration
date of this Lease; (b) in the event Landlord desires to exercise such option in
connection with the earlier termination by Landlord of this Lease, such option
shall be exercised by written notice given concurrently with the notice of such
termination; or (c) in the event Landlord desires to exercise such option in
connection with its receipt of notice of Tenant's election to dismantle and raze
the Facility as provided in Section 9.1 hereof, such option shall be exercised
by written notice to Tenant within thirty (30) days following Landlord's receipt
of such notice from Tenant. In each such case, such notice shall specify which
portions (or all, if Landlord so elects) of the Facility are to be acquired by
Landlord. In the event Landlord exercises such option as provided herein, then
it shall pay to Tenant an amount equal to the fair market value of the portions
(or all, if applicable) of the Facility to be acquired by Landlord (which fair
market value shall be determined as of the date on which Landlord exercises such
option), and payment of such amount shall be deemed payment in full for those
portions (or all, if applicable) of the Facility so acquired from Tenant. In the
event Landlord and Tenant cannot agree upon such fair market value, then the
same shall be determined by an independent appraiser appointed by the American
Arbitration Association at the request of either party hereto, and the
determination made by such independent appraiser shall be conclusive and binding
in all respects upon the parties hereto. Upon the payment of such sum, (i)
Tenant shall, by documents and instruments reasonably satisfactory to Landlord,
assign, transfer and convey to Landlord those portions (or all, if applicable)
of the Facility so acquired by Landlord, and all personal property, Governmental
Approvals and contract rights associated therewith and (ii) Landlord shall, by
documents and instruments reasonably satisfactory to Tenant, assume Tenant's
obligations with respect to those portions (or all, if applicable) of the
Facility so acquired by Landlord. Notwithstanding the foregoing, the option
granted to Landlord under this Section 9.3 shall be subject and subordinate to
the Lender's Lien and to any rights of the Lender under Article 11 hereof.
ARTICLE 10 - ASSIGNMENT AND SUBLETTING
10.1 Subject to Article 11 hereof, Tenant shall not voluntarily or by
operation of Law, transfer, assign, alienate, license, sublet or grant to any
Person all or any portion of the right, title
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or interest then held by it in the Premises or under this Lease without first
obtaining the prior written consent of Landlord, which shall not unreasonably be
withheld.
ARTICLE 11 -RIGHTS OF LENDER
11.1 Tenant may, from time to time in one or more transactions, without
obtaining the consent of Landlord, hypothecate, mortgage, pledge or alienate all
or any portion of Tenant's right, title and interest under this Lease to the
Lender. Tenant or the Lender shall give written notice to Landlord of the
Lender's Lien and the Lender's address for notices hereunder; provided, however,
that any failure to give such notice shall not be grounds for denying the Lender
the rights and protections provided in this Article 11, so long as Landlord has
received actual notice of the Lender's Lien.
11.2 Any surrender or abandonment in whole or in part of this Lease, any
material amendment hereto or any termination hereof other than in accordance
with Article 14 hereof, in each case which would then reasonably be expected to
have a Material Adverse Effect (as that term is defined in the Lender's Loan
Documents), shall be ineffective and of no force or effect unless and until the
prior written consent of the Lender has been obtained thereto.
11.3 The Lender shall have the right, but not the obligation, at any
time prior to the termination of this Lease, and without the payment of any
penalty, to (a) make any payments due hereunder, (b) do any other act or thing
required of Tenant hereunder and (c) do any act or thing that may be necessary
or appropriate to be done in the performance and observance of the terms hereof
to prevent any default under or termination of this Lease. All payments so made
and all things so done and performed by the Lender shall be as effective to
prevent any default under or termination of this Lease as they would have been
if made, done and performed by Tenant instead of by the Lender.
11.4 Tenant shall not be in default or material default under this Lease
unless Tenant fails to perform the obligations required of it hereunder within
the time periods set forth in this Lease, including all applicable cure periods.
If Tenant fails to cure any default hereunder within the time so provided, then,
commencing upon receipt by the Lender of written notice from Landlord to the
effect that Tenant has failed to cure such default within such time, the Lender
shall have an additional thirty (30) days to cure such default if such default
is a monetary default, or ninety (90) days to cure such default if such default
is a non-monetary default; provided, however, that if any such non-monetary
default cannot reasonably be cured within such additional ninety (90) day
period, then the Lender shall have such additional time to cure such
non-monetary default as is reasonably necessary under the circumstances, so long
as (a) the Lender shall have fully cured within such thirty (30) day period any
default in the performance of any monetary obligations of Tenant hereunder, (b)
the Lender shall have fully cured within such ninety (90) day period any default
in the performance of any non-monetary obligations of Tenant hereunder that can
reasonably be cured within such ninety (90) day period and shall thereafter
continue to faithfully perform all such monetary and other obligations and to
diligently pursue such cure to completion and (c) if possession of the Premises
is reasonably required in order to effect such cure, the Lender shall have
acquired Tenant's interest hereunder or commenced foreclosure or other
appropriate proceedings in the nature thereof within such ninety (90) day period
or prior to the expiration thereof, and shall be diligently prosecuting any such
proceedings to completion. All rights of Landlord to terminate this Lease as a
result of the occurrence of any default by Tenant shall be subject to, and
expressly conditioned upon, (i) the Lender's having received the notice
specified above in this Section 11.4 and (ii) the Lender's having failed to take
the actions set forth in this Section 11.4.
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11.5 Any default or material default by Tenant under this Lease that
cannot be remedied by the Lender shall nevertheless be deemed to have been
remedied so long as (a) the Lender shall have taken the actions described in
clauses (a), (b) and (c) of Section 11.4 hereof within the time periods
provided therein, (b) if the Lender shall have commenced foreclosure or other
appropriate proceedings in the nature thereof under clause (c) of Section 11.4
hereof, then the Lender shall have completed such foreclosure or other
appropriate proceedings or otherwise obtained possession of the Premises and (c)
the Lender shall perform all obligations of Tenant under this Lease which arise
thereafter and which can reasonably be performed by the Lender.
11.6 If the Lender is prohibited by any process or injunction issued by
any court or by reason of any action of any court having jurisdiction over any
bankruptcy, reorganization, insolvency or other debtor-relief proceeding
involving Tenant, from commencing or prosecuting foreclosure or other
appropriate proceedings in the nature thereof, then the times specified in
Sections 11.4 and 11.5 hereof for commencing or prosecuting such foreclosure or
other proceedings shall be extended for the period of such prohibition.
11.7 Landlord shall deliver to the Lender a duplicate copy of any and
all notices of default that Landlord may from time to time deliver to Tenant
pursuant to the provisions hereof, and such copies shall be delivered to the
Lender at, or as near as possible to, the same time such notices are delivered
to Tenant. No notice of default by Landlord to Tenant hereunder shall be deemed
to have been given unless and until a copy thereof shall have been delivered to
the Lender as provided in this Section 11.7.
11.8 Foreclosure of the Lender's Lien or any sale thereunder, whether by
judicial proceedings or otherwise, or any conveyance or transfer of the interest
of Tenant under this Lease from Tenant to the Lender through, or in lieu of,
foreclosure or other appropriate proceedings in the nature thereof, shall not
require the consent of Landlord or constitute a breach of any provision of or a
default under this Lease, and upon such foreclosure, sale or conveyance Landlord
shall recognize the Lender, or any other foreclosure sale purchaser, as the
tenant hereunder. In the event the Lender becomes the tenant under this Lease as
provided herein, then the Lender shall be personally liable for the obligations
of Tenant under this Lease only for the period of time that the Lender remains
the tenant hereunder, and the Project Lender shall have the right to assign this
Lease without any restriction otherwise imposed on Tenant hereunder; provided,
however, that the assignee of the Lender shall have expressly assumed all of the
obligations of Tenant hereunder.
11.9 Upon Landlord's receipt of any notice in the nature of a notice of
default with respect to any obligation of Landlord secured by any lien upon the
Premises, Landlord shall immediately deliver a copy of such notice to Tenant and
to the Lender. If and whenever Tenant or the Lender shall deem it necessary or
appropriate to do so in order to protect its respective rights under this Lease,
it may, at its option, pay and discharge any mortgage or other lien (including,
without limitation, the lien of general or special property taxes or
assessments) attached to the Premises or any portion thereof, and in such event
it shall be subrogated to all the rights of the mortgagee, beneficiary, owner or
holder of such mortgage or other lien.
11.10 In the event that this Lease is rejected by a trustee or
debtor-in-possession in any bankruptcy or insolvency proceeding, and if, within
sixty (60) days after such rejection, the Lender shall so request, Landlord
shall execute and deliver to the Lender a new ground lease of the Premises. Such
new ground lease shall be for a term equal to the remainder of the term of this
Lease before giving effect to such rejection, and shall contain the same
covenants, agreements, terms, provisions and limitations as contained in this
Lease (except for any requirements which shall have been fulfilled by Tenant
prior to such rejection).
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11.11 Landlord and Tenant acknowledge, agree and covenant that
notwithstanding the union of the fee simple title with any right, title or
interest in the leasehold estate created hereby or under any other document or
instrument in Landlord, Tenant, Lender, or any other Person, whether by purchase
or otherwise, it is the declared intention of the parties hereto that the
separation of the fee simple estate and the leasehold estate shall be maintained
and that a merger shall not take place without the prior written consent of the
Lender.
11.12 Tenant and Landlord shall cooperate in including herein, by
suitable amendment from time to time, any provision which the Lender or any
proposed Lender reasonably requests for the purpose of implementing the
Lender-protective provisions contained in this Article 11 and affording the
Lender or proposed Lender reasonable protection of its Lender's Lien in the
event of a default by Tenant; provided, however, that Landlord shall not be
required to include herein any additional provision which materially impairs the
rights of Landlord under this Lease. Tenant and Landlord each agree to execute
and deliver (and to acknowledge, if necessary for recording purposes) any
document or instrument necessary to give effect to any such provision.
11.13 Landlord or Tenant (the "RESPONDING PARTY") shall at anytime upon
not less than ten (10) days' prior written notice from the other party hereto or
from the Lender (the "REQUESTING PARTY") execute, acknowledge and deliver to the
Requesting Party a statement in writing (a) certifying, as applicable, that this
Lease is unmodified and in full force and effect (or, if modified, stating the
nature of such modification and certifying that this Lease, as so modified, is
in full force and effect) and the date to which any payments due hereunder are
paid in advance, if any, and (b) acknowledging that there are not, to the
Responding Party's knowledge, any uncured defaults hereunder on the part of the
other party hereto, or specifying such defaults if any are claimed. Any such
statements may be conclusively relied upon by the Requesting Party and by any
prospective purchaser or lessee of, or lender proposing to take a security
interest in, the Facility, the Premises or any portion thereof or interest
therein. The failure of the Responding Party to deliver such statement within
such time shall be conclusive upon such Responding Party that (i) this Lease is
in full force and effect and has not been modified and (ii) there are no uncured
defaults in the performance of the other party hereto.
11.14 The Lender shall be an express third party beneficiary of the
covenants contained in this Lease, with rights and benefits under, and the
ability to enforce, this Lease.
ARTICLE 12 - INSURANCE
12.1 At all times during the term of this Lease, Tenant shall procure
and maintain the following policies of insurance, each of which (a) shall be
obtained from an insurance company rated at least B+ by A.M. Best Company and
(b) shall provide that it cannot be canceled or terminated without at least
thirty (30) days prior notice to Landlord:
12.1.1 Workers compensation insurance as required by Law
12.1.2 Comprehensive general liability insurance with a limit of no
less than $1,000,000, combined single limit, bodily injury and property damage,
for each occurrence; and
12.1.3 Excess public liability insurance in the form of an umbrella
policy, which umbrella policy shall afford coverage of not less than $5,000,000
per occurrence over and above the coverage provided by the policy described in
Section 12.1.2 hereof.
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12.2 Notwithstanding the foregoing, for so long as the Lender's Loan
Documents remain in effect, Tenant shall procure and maintain such policies of
insurance, in such amounts and containing such provisions, as are required under
the Lender's Loan Documents.
12.3 In the event that Tenant has not renewed or replaced any insurance
policy required under this Article 12 within ten (10) days prior to the
cancellation or termination thereof, then Landlord shall be entitled (but not
obligated) to cause such policy or policies to be renewed or replaced, and shall
be entitled to invoice Tenant for the premiums paid by Landlord in connection
with such renewal or replacement. Tenant shall reimburse Landlord for the amount
of such invoice within ten (10) days after receipt thereof, and Tenant's failure
to so reimburse Landlord within such ten (10) day period shall be a material
default hereunder.
ARTICLE 13 - CONDEMNATION
13.1 Subject to any applicable provisions of the Lender's Loan
Documents, in the event of a taking of all or any portion of the Facility Site
by eminent domain or by inverse condemnation for any public or quasi-public use
under any Law, the proceeds therefrom shall be distributed (a) first, to Tenant
to the extent of all amounts necessary to pay in full any sums outstanding under
the Financing and (b) second, to the parties hereto in accordance with their
interests as they may appear.
ARTICLE 14 - DEFAULT AND REMEDIES
14.1 Subject to the provisions of Article 11 hereof, the occurrence of
any one or more of the following events shall constitute a material default by
Tenant under this Lease:
14.1.1 The vacation or abandonment of the Premises by Tenant for a
continuous period of sixty (60) days or more, whether or not the rent is paid.
14.1.2 The failure by Tenant to make any payment of rent or any other
payment required to be made by Tenant hereunder within five (5) business days
after the same shall become due, where such failure shall continue for a period
of five (5) business days after written notice thereof from Landlord to Tenant.
14.1.3 The failure by Tenant to observe or perform any of the material
covenants, conditions or provisions of this Lease to be observed or performed by
Tenant other than those referenced in Section 14.1.2 hereof, where such failure
shall continue for a period of thirty (30) days after written notice thereof
from Landlord to Tenant; provided, however, that if the nature of Tenant's
noncompliance is such that more than thirty (30) days are reasonably required
for its cure, then Tenant shall not be deemed to be in default if Tenant
commences such cure within said thirty (30) day period and thereafter diligently
pursues such cure to completion.
14.1.4 (a) The making by Tenant of any general arrangement for the
benefit of creditors, (b) Tenant's becoming a "debtor" as defined in II U.S.C.
(Section)101, unless, in the case of a petition filed against Tenant, the same
is dismissed within sixty (60) days after filing, (c) the appointment of a
trustee or receiver to take possession of substantially all of Tenant's assets
located on the Premises or of Tenant's interest under this Lease, where
possession is not restored within sixty (60) days, or (d) the attachment,
execution or other judicial seizure of substantially all of Tenant's assets
located at the Premises or of Tenant's interest under this Lease, where such
seizure is not discharged within sixty (60) days.
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14.2 Subject to the provisions of Article 11 hereof, in the event of
any material default of this Lease by Tenant, Landlord may at any time
thereafter, with or without notice or demand and without limiting Landlord in
the exercise of any right or remedy which Landlord may have by reason of such
default, take any of the following actions:
14.2.1 Terminate Tenant's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate, and
Tenant shall, subject to Section 9.2 hereof, immediately surrender possession of
the Premises to Landlord. In such event, Landlord shall be entitled to recover
from Tenant all damages incurred by Landlord by reason of Tenant's default,
including, but not limited to: (a) the unpaid rent which had been earned at the
time of termination; (b) the amount by which the unpaid rent which would have
been earned after termination until the time of award exceeds the amount of such
rental loss that Tenant proves could have been reasonably avoided; (c) the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that Tenant proves could be
reasonably avoided; and (d) any other amount necessary to compensate Landlord
for the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease.
14.2.2 Maintain Tenant's right to possession, in which case this Lease
shall continue in effect whether or not Tenant shall have vacated or abandoned
the Premises. In such event, Landlord shall be entitled to enforce all of
Landlord's rights and remedies under this Lease, including the right to recover
the rent as it becomes due hereunder.
14.2.3 Pursue any other remedy now or hereafter available to Landlord
under the Laws of the State of California.
14.3 Landlord shall not be in default in the performance of its
obligations under this Lease unless Landlord fails to perform the obligations
required of Landlord hereunder within sixty (60) days after written notice by
Tenant to Landlord, specifying wherein Landlord has failed to perform such
obligation; provided, however, that if the nature of Landlord's obligation is
such that more than sixty (60) days are required for its performance, then
Landlord shall not be in default if Landlord commences performance within such
sixty (60) day period and thereafter diligently pursues the same to completion.
14.4 Tenant hereby acknowledges that the late payment by Tenant to
Landlord of any installment of rent or any other sum due hereunder will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of
which will be extremely difficult to ascertain. Accordingly, if any installment
of rent or any other sum due from Tenant hereunder shall not be received by
Landlord within ten (10) days after such amount shall be due, then, without any
requirement for notice to Tenant, Tenant shall pay to Landlord a late charge
equal to six percent (6%) of such overdue amount. The parties hereby agree that
such late charge represents a fair and reasonable estimate of the costs Landlord
will incur by reason of such late payment by Tenant. Acceptance of such late
charge by Landlord shall in no event constitute a waiver of Tenant's default
with respect to such overdue amount, or prevent Landlord from exercising any of
the other rights and remedies granted hereunder.
14.5 Except as expressly provided herein, any amount due to Landlord
hereunder that is not paid when due shall bear interest at the greater of (a)
ten percent (10%) per annum or (b) five percent (5%) per annum above the
discount rate established by the Federal Reserve Bank of San Francisco on
advances to member banks under Section 13 or 13(a) of the Federal Reserve Act as
in effect on the Effective Date, from the date due until fully paid. Payment of
such interest shall not excuse or cure any default by Tenant under this Lease.
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ARTICLE 15 - MISCELLANEOUS LEASE PROVISIONS
15.1 Landlord and its agents shall have the right to enter the Premises
and inspect the Facility and the operations and activities of Tenant, at any
reasonable time and from time to time. Landlord shall indemnify, defend and hold
harmless Tenant from and against any and all Damages which may be imposed upon
or incurred by Tenant or asserted against Tenant by any third Person, arising
out of or attributable to such inspection of the Facility, except to the extent
caused by the negligence or wilful acts of Tenant.
15.2 Upon Tenant's paying the rent for the Premises and observing and
performing all of the covenants, conditions and provisions on Tenant's part to
be observed and performed hereunder, Tenant shall have quiet possession of the
Premises for the entire term hereof subject to all of the provisions of this
Lease.
15.3 Tenant hereby acknowledges that Landlord shall have no obligation
whatsoever to provide guard service or other security measures for the benefit
of the Premises or the Facility. Tenant assumes all responsibility for the
protection of Tenant, its agents, invitees and their property from the acts of
third parties.
15.4 Tenant shall surrender possession of the Premises to Landlord at
the expiration or earlier termination of the term of this Lease. If Tenant fails
to surrender the Premises at the expiration or earlier termination of this
Lease, Tenant shall defend and indemnify Landlord from all liability and expense
resulting from such failure, including, without limitation, claims made by any
succeeding tenant founded on or resulting from such failure by Tenant.
15.5 If Tenant, with Landlord's consent, remains in possession of the
Premises or any part thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month upon all the provisions of this
Lease pertaining to the obligations of Tenant, except that the rent payable
shall be one hundred and twenty-five percent (125%) of the rent payable
immediately preceding the termination date of this Lease.
15.6 No waiver by Landlord of any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Tenant of
the same or any other provisions. The acceptance of rent hereunder by Landlord
shall not be deemed a waiver of any preceding breach by Tenant of any provision
hereof, other than the failure of Tenant to pay the particular rent so accepted,
regardless of Landlord's knowledge of such preceding breach at the time of
acceptance of such rent.
15.7 No remedy or election of or by Landlord hereunder shall be deemed
exclusive, but shall, wherever possible, be cumulative with all other remedies
available at Law or in equity.
15.8 All monetary obligations of Tenant to Landlord under the terms of
this Lease shall be deemed to be rent.
15.9 Landlord reserves to itself the right, from time to time, to grant
such easements, rights and dedications as Landlord deems necessary or desirable,
and to cause the recordation of final, parcel or other maps or restrictions, so
long as such easements, rights, dedications, maps and restrictions would not
reasonably be expected to have a Material Adverse Impact. Tenant shall promptly
execute any of the aforementioned documents reasonably requested by Landlord,
and its failure to do so shall constitute a material default under this Lease.
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ARTICLE 16 - RESERVED AREA
16.1 Landlord and Tenant acknowledge that Landlord may in the future
record one or more parcel or final maps (collectively, the "MAP,") subdividing
the Premises into two or more separate parcels or lots complying with the
California Subdivision Map Act (Govt. Code (section) 66410 at seq.) consisting
of: (a) the site of the Facility, which shall be the land described in Exhibit
"B" attached hereto (the "FACILITY SITE"); and (b) one or more other parcels,
which shall together or collectively consist of the remainder of the Premises
(the "RESERVED AREA").
16.2 Tenant shall, at Landlord's expense and at no cost to Tenant,
cooperate in all respects with Landlord's efforts to obtain and record the Map,
including, without limitation, by executing any and all documents and
instruments as may reasonably be required by Landlord or any applicable
Governmental Authority in connection therewith.
16.3 Landlord shall have an option (the "PARTIAL TERMINATION OPTION") to
at any time terminate this Lease as to all or any part of the Reserved Area, by
delivering written notice (the "PARTIAL TERMINATION NOTICE") to Tenant
describing the portion or portions of the Reserved Area as to which this Lease
is to terminate (such portion or portions, together, the "OPTIONED PREMISES
AREA") together with the payment to Tenant of the sum of Ten Dollars ($10.00),
which shall be the entire consideration for such termination; provided, however,
that Landlord's right to exercise the Partial Termination Option shall be
contingent upon, and the Partial Termination Notice shall not be given until
after, the approval and recordation of the Map by the County of Imperial. The
term of the Partial Termination Option shall be the same as, and shall run
concurrently with, the term of this Lease as set forth in Article 3 hereof.
16.4 At such time as (a) the Map shall have been recorded in the
Official Records and (b) Tenant shall have received the Partial Termination
Notice (along with the Ten Dollars ($10.00) consideration provided in Section
16.3 hereof), (i) Tenant shall promptly execute, acknowledge, deliver and cause
to be recorded in the Official Records a quitclaim deed satisfactory to Landlord
pursuant to which Tenant shall quitclaim to Landlord all its right, title and
interest in and to the Optioned Premises Area and (ii) Tenant shall cause the
Lender to promptly execute, acknowledge, deliver and cause to be recorded in the
Official Records a partial release of the Lender's Lien satisfactory to
Landlord, pursuant to which the Lender shall release all its right, title and
interest in and to the Optioned Premises Area; and upon the recordation of such
quitclaim deed and such partial release, Tenant shall surrender and deliver
possession of the Optioned Premises Area to Landlord. By taking a security
interest in this Lease, the Lender unconditionally and irrevocably agrees to
execute, acknowledge, deliver and cause said partial release to be recorded as
and when provided in this Section 16.4. In no event shall any such quitclaim
entitle Tenant to any reduction in or offset against any of the rents or other
payments due to Landlord hereunder.
16.5 Without limitation on Landlord's Reserved Rights, Landlord shall
have the right to designate a right of way on, over, across and through the
Facility Site for nonexclusive ingress, egress and use by Landlord for purposes
of access to any portion of the Reserved Area and/or for the construction,
installation, operation and maintenance of utility lines or pipelines in
connection with any geothermal electrical generating facility, mineral
processing facility and/or other commercial or industrial facility or
improvements hereafter constructed in, on or under the Reserved Area, so long as
such right of way would not reasonably be expected to have a Material Adverse
Impact.
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ARTICLE 17 - NOTICES
17.1 Any notices, statements, demands, correspondence or other
communications required or permitted to be given hereunder shall be in writing
and shall be given (a) personally, (b) by certified or registered mail, postage
prepaid, return receipt requested, or (c) by overnight or other courier or
delivery service, freight prepaid, to the following address, or, in the case of
notices to the Lender, as provided in the notice of the Lender's Lien delivered
to Landlord under Section 11.1 hereof.
If to Landlord:
Imperial Magma
302 South 36th Street
Suite 400
Omaha, Nebraska 68131
Attn: Office of the General Counsel
If to Tenant:
Salton Sea Power L.L.C.
302 South 36th Street
Suite 400-K
Omaha, Nebraska 68131
Attn: Office of the General Counsel
Except as otherwise provided in Article 11 hereof, (i) notices delivered by hand
shall be deemed received when delivered and (ii) notices sent by certified or
registered mail or by overnight or other courier or delivery service shall be
deemed received on the first to occur of (A) five (5) days after deposit in the
United States mail or with such overnight or other courier or delivery service,
addressed to such address or addresses, (B) written acceptance of delivery by
the recipient or (C) written rejection of delivery by the recipient. Each party
hereto may change its address for receipt of notices by sending notice hereunder
of such change to the other party hereto in the manner specified in this
Section, and the Lender may change its address for receipt of notices by sending
notice hereunder to each of the parties hereto in the manner specified in this
Section. Notwithstanding the foregoing, amounts payable to Landlord hereunder
shall be deemed paid three (3) days after a valid check for the same, addressed
to Landlord's address above, is deposited in the United States mail, first-class
postage prepaid.
ARTICLE 18 - FORCE MAJEURE
18.1 Neither Landlord nor Tenant shall be liable in damages to the other
for any act, omission or circumstance (an "EVENT OF FORCE MAJEURE") occasioned
by or in consequence of any acts or omissions of the other party hereto, acts of
God, acts of the public enemy, wars, blockades, insurrections, riots, civil
disturbances, strikes, lockouts, delays in transportation, epidemics,
landslides, lightning, earthquakes, fires, storms, floods, explosions, sabotage,
the binding order of any Governmental Authority which has been contested in good
faith, the failure of any Governmental Authority to issue any Governmental
Approval within one hundred and twenty (120) days after an application for the
same has been submitted, the effect of any Laws, or any other event or
circumstance beyond the reasonable control of such party which prevents or
hinders such party from performing its obligations hereunder, whether or not
similar to the matters and conditions
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herein enumerated. In no event, however, shall an Event of Force Majeure
relieve Tenant from the obligation to pay rents or any other payments due to
Landlord under this Lease.
ARTICLE 19 - GENERAL PROVISIONS
19.1 In addition to any other indemnities herein set forth, each party
hereto (the "INDEMNIFYING PARTY") shall indemnify, defend and hold harmless the
other party hereto (the "INDEMNIFIED PARTY") from and against any and all
Damages which may be imposed upon or incurred by the Indemnified Party or
asserted against the Indemnified Party by any third Person, arising out of or
attributable to the failure of the Indemnifying Party to perform its obligations
as provided in this Lease.
19.2 The parties hereto shall cooperate each with the other to fully
effectuate the purposes and intent of this Lease. Without limiting the
generality of the foregoing, the parties hereto covenant that they will execute,
cause to be acknowledged and deliver any documents or instruments reasonably
necessary to implement the intentions expressed or implied herein.
19.3 The parties shall execute, cause to be acknowledged and deliver a
memorandum of this Lease, which shall be recorded in the Official Records, and
shall be in the form attached hereto as Exhibit "C".
19.4 If either party hereto commences litigation for the enforcement,
termination, cancellation or rescission hereof, or for damages for the breach
hereof, the prevailing party shall be entitled to recover its reasonable
attorneys' fees and court and other costs incurred.
19.5 Each provision of this Lease performable by Tenant shall be deemed
both a covenant and a condition. As used herein, the neuter gender includes the
masculine and the feminine, and the singular number includes the plural, and
vice versa. This Lease shall be governed by the Laws of the State of California.
This Lease shall be construed equally as against the parties hereto, and shall
not be construed against the party responsible for its drafting. Time is of the
essence with respect to the obligations to be performed under this Lease. All
exhibits to which reference is made in this Lease are incorporated into this
Lease. Captions in this Lease are inserted for convenience of reference only and
do not define, describe or limit the scope or intent of this Lease or any of the
terms hereof.
19.6 This Lease contains all agreements of the parties hereto with
respect to the subject matter of this Lease, and all prior or contemporaneous
agreements, understandings, correspondence and negotiations, whether oral or
written, pertaining to the subject matter of this Lease, shall be of no further
force or effect, and are superseded hereby.
19.7 Any obligations referred to herein to be performed at any time
after the expiration or termination of this Lease, and all indemnities and hold
harmless agreements provided herein, shall survive the expiration or earlier
termination of this Lease.
19.8 No amendment or modification of this Lease or any provision hereof
shall be effective unless in writing and signed by the parties in interest at
the time of the amendment.
19.9 The invalidity of any provision of this Lease as determined by a
court of competent jurisdiction shall in no way affect the validity of any other
provision hereof.
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19.10 This Lease and the covenants contained herein shall be binding
upon and inure to the benefit of the parties hereto and their respective
grantees, assignees, successors and assigns.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the date first above written.
LANDLORD:
IMPERIAL MAGMA, a
Nevada corporation
By: /s/ Craig H. Hammet
Name: Craig H. Hammet
Title: Senior Vice President
TENANT:
SALTON SEA POWER L.L.C., a Delaware
limited liability company
By:CE Salton Sea Inc., a
Delaware corporation, its
Manager
By: /s/ Craig H. Hammet
Name: Craig H. Hammet
Title: Senior Vice President
<PAGE>
LEASE AGREEMENT
THE STATE OF TEXAS S
S
COUNTY OF HOWARD S
This Lease Agreement ("Lease") is entered into on the date last herein
written between Fina Oil and Chemical Company, a Delaware corporation, as
Lessor, and Power Resources, Inc., a Texas corporation, as Lessee, and is as
follows:
ARTICLE I
TITLE AND QUIET POSSESSION
1.01 Title and Quiet Possession. Lessor covenants that it is the fee
simple owner of the real property in Howard County, Texas, more fully described
by metes and bounds in Exhibit "A" which is attached hereto and made a part
hereof for all purposes ("Leased Premises"), free and clear of all liens and
encumbrances (except as provided in Section 16.01); that it has full power to
lease the Leased Premises and has full power and authority to enter into this
Lease; and that by paying the rent and performing its other obligations herein
contained, the Lessee shall peaceably hold and enjoy the Leased Premises during
the lease term, without interruption by the Lessor or any person claiming by,
through or under it.
1.02 Condition of Premises. Prior to construction or installation of
the cogeneration plant and related support facilities on the Leased Premises,
Lessor shall make the Leased Premises available to Lessee free of rubbish,
trash, junk, waste products, and abandoned or stored equipment and supplies, and
otherwise in a generally clean condition. Notwithstanding the foregoing
provision, Lessor shall not be required to remove the concrete slabs presently
located on the Leased Premises, although Lessee may remove or use the same at
its discretion.
ARTICLE II
LEASE TERM
2.01 Leasing Clause. Lessor hereby leases and lets the
<PAGE>
Leased Premises to Lessee for construction of improvements thereon for use in
the operation of a cogeneration plant and related support facilities to provide
power to one or more electric power companies or to Lessor.
2.02 Term. The occupancy of the Leased Premises by Lessee shall
commence on November 21, 1986 ("Commencement Date"), at which time Lessor shall
deliver to Lessee possession of the Leased Premises. This Lease shall remain in
effect for a term ("Term") of eighteen (18) years from the Commencement Date,
unless sooner terminated pursuant to the terms and provisions hereof.
2.03 Option to Renew. Provided Lessee is not then in default hereunder,
Lessor hereby grants to Lessee the right to extend this Lease for one (1)
additional period of fifteen (15) years, provided Lessee shall give notice in
writing at least ninety (90) days prior to the then current expiration date of
the Term of this Lease of its intent to exercise the renewal option. At the time
the renewal option is exercised, the cogeneration plant on the Leased Premises
must be in operation. If, ninety (90) days prior to the then current expiration
date of the Term of this Lease, the parties are negotiating an extension of
the Steam Purchase and Sale Agreement (as described in Section 2.04, below), the
renewal option shall be exercised automatically by the parties' agreement to
extend the Steam Purchase and Sale Agreement, notwithstanding that Lessee has
failed to give timely notice as required herein, and, if necessary, the current
Term shall be extended for any such period of negotiation. In the event that the
renewal option is exercised, all terms of this Lease shall remain the same.
2.04 Other Agreements. Lessor and Lessee have entered into two (2)
agreements entitled "Steam Purchase and Sale Agreement" and "Fuel Purchase and
Sale Agreement," which, among other things, address the sale of steam by Lessee
to Lessor and
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the sale of Lessor supplied fuel gas to Lessee for the operation of the
cogeneration plant to be constructed by Lessee on the Leased Premises. In the
event that either party defaults under either agreement with regard to the
performance of any of its obligations or duties thereunder, and the period to
cure such default has expired, the other party may, at its option, terminate
this Lease by delivery of notice of termination to the defaulting party,
provided that such default is material under the circumstances and a default for
which the parties have not provided exclusive remedies.
ARTICLE III
LAWFUL USE
3.01 Use of Leased Premises. Lessor agrees that Lessee may use the
Leased Premises and any improvements constructed thereon for the use specified
in Section 2.01. Lessee agrees to use the Leased Premises in an orderly fashion
and not to violate any law or ordinance on said premises.
ARTICLE IV
ASSIGNMENT AND SUBLETTING
4.01 Assignment and Subletting. Upon the prior written approval of
Lessor (which approval shall not be unreasonably withheld), Lessee shall have
the right to (i) assign or transfer this Lease and (ii) sublet all or any part
of the Leased Premises. Lessor's consent is not required for assignment or
subletting to a parent, subsidiary or affiliated corporation of Lessee.
ARTICLE V
LESSEE LIABILITY
5.01 Release of Liability Upon Assignment. The term "Lessee" is used in
this Lease, so far as covenants or obligations on the part of the Lessee are
concerned, shall be limited to mean and include only the owner or owners at the
time in question of the improvements on the Leased Premises, and in the event of
any assignment, sale or transfer by Lessee
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of its leasehold estate hereunder as approved by Lessor, the Lessee herein named
(and in case of any subsequent transfer or conveyances, the then transferor)
shall be automatically freed and relieved from and after the date of such
transfer or conveyance of all liability and obligation as respects the
performance of any covenants or obligations on the part of the Lessee contained
in this Lease thereafter to be performed; provided that any funds in the hands
of such Lessee or the then transferor at the time of such transfer, in which the
Lessor has an interest, shall be turned over to the transferee, and any amount
then due and payable to the Lessor by the Lessee or the then transferor under
any provision of this Lease shall be paid to the Lessor; and provided further
that upon any such transfer, the transferee shall assume, subject to the
limitations of this Section, all of the terms, covenants and conditions in this
Lease contained to be performed on the part of the Lessee, it being intended
that the covenants and obligations contained in this Lease on the part of the
Lessee shall, subject as aforesaid, be binding on the Lessee, its successors and
assigns, only during and in respect to their respective successive period of
ownership. In the event of any assignment or other transfer, subject as
aforesaid, by Lessee pursuant to the provision of this Section, and upon any
termination of this Lease, Lessee shall be relieved of all liabilities or
obligations under this Lease (including specifically, but without limitation,
any obligation to pay any rental, provided that all rental payments due to the
date of such assignment have been paid).
ARTICLE VI
RENT
6.01 Rent Amount. So long as this Lease remains in effect, Lessee
agrees and binds itself to keep and perform all of the covenants and agreements
stated herein, which on its part are to be kept and performed, and to pay to
Lessor an
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annual rental of $100.00 per year, in advance, on the Commencement Date and on
November 21 of each subsequent year during the Term.
6.02 Place of Payment. Rent will be paid to Lessor at P.O. Box 2159,
Dallas, Texas 75221, or at such other place as may from time to time be
designated in writing by Lessor, its successors or assigns.
ARTICLE VII
TAXES
7.01 Ad Valorem Taxes on Real Property. Lessor shall pay, or arrange
for the payment of, and Lessee shall reimburse Lessor for, when and as requested
by Lessor, all ad valorem taxes covering the Leased Premises, with such taxes to
be prorated at the beginning (based upon the year in which the Commencement Date
occurs) and at the end of this Lease for the then current year. In this
connection, Lessor shall be responsible for the tax rendition of such real
property separate from the rendition of other real property owned by Lessor, and
Lessor shall provide Lessee with copies of the actual rendition, the valuation
notice from any appraisal district and final tax receipts evidencing payment of
all taxes. The aforementioned documents shall be provided to Lessee prior to or
at the same time as Lessor requests reimbursement for taxes paid. Furthermore,
Lessee shall have the right to review Lessor's records relative to such
rendition and valuation if, in Lessee's judgment, such rendition and valuation
are of too high a dollar amount and shall have the right to jointly contest
with Lessor any such valuation by said appraisal district.
7.02 Ad valorem Taxes on Personal Property. Lessee shall be responsible
for the rendition and payment of the applicable ad valorem taxes covering any
improvements and personal property placed upon the Leased Premises by Lessee to
the extent improvements and personal property are not covered by the ad valorem
taxes referred to in Section 7.01.
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7.03 Other Taxes. Except as provided above in Sections 7.01 and 7.02,
Lessee shall pay, when due, assessments, levies, fees, water and sewer rents and
all other taxes, fees and charges, whether general or special, ordinary and
extraordinary, and whether or not the same shall have been within the express
contemplation of the parties hereto, together with any interest and penalties
thereon, which are, at any time, imposed or levied upon or assessed against the
Leased Premises or any part thereof, or which arises in respect of the
operation, possession, occupancy or use thereof; however, Lessee shall not be
required to pay any income, profits, revenue, corporate or franchise taxes of
Lessor, or severance tax. Lessor shall give Lessee prompt notice of any charges
for which Lessee is responsible pursuant to this Section 7.03. In the event
Lessor fails to promptly notify Lessee of charges otherwise unknown to Lessee,
Lessor shall pay any penalty or interest due on such charges.
ARTICLE VIII
SERVICES AND UTILITIES
8.01 Services and Utilities. Following the Commencement Date, Lessee
shall pay for all services and utilities it may require in connection with its
use and occupancy of the Leased Premises, and Lessor shall have no obligation to
furnish or pay for any such services or utilities, except to the extent agreed
to in the Steam Purchase and Sale Agreement and the Fuel Purchase and Sale
Agreement, or as otherwise needed during construction of the cogeneration plant.
ARTICLE IX
ALTERATIONS AND IMPROVEMENTS
9.01 Alterations and Improvements. Following the Commencement Date, the
Lessee shall have the right to remove or demolish, at its expense, any
improvements constructed upon the Leased Premises and shall have the right to
make such improvements to or alterations in the Leased Premises as to it
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may seem necessary for its use and enjoyment of the same, including, but not
limited to, the right to repair, alter, reconstruct, or renovate any structure
now hereon or hereafter placed thereon and to alter the topography of the land
itself. Any such major topographical alteration must be approved by Lessor prior
to the onset thereof. Upon the expiration or termination of this Lease, Lessee
shall remove all improvements, trade fixtures, equipment, furniture and other
personal property placed or located on the Leased Premises, returning the
Leased Premises to as similar a condition as they are in on the Commencement
Date, ordinary wear and tear excepted. Lessee will pay for all such work and
indemnify and hold the Lessor harmless from any costs in connection therewith.
Title to any buildings or improvements situated or erected on the Leased
Premises and the building equipment and other items installed thereon or
contained therein and any alteration, change or addition thereto shall remain
solely in Lessee even after termination of this Lease, and Lessee alone shall be
entitled to deduct all depreciation on Lessee's income tax return for any such
buildings, building equipment and/or other items, improvements, additions,
changes or alterations.
9.02 Lessor' Obligations. Following the Commencement Date, except as
provided in Section 1.02, Lessor shall not have any duty to repair or improve
the Leased Premises or any structure now located or thereafter placed thereon
either prior to the commencement of or during the Term.
ARTICLE X
INSURANCE AND INDEMNITY
10.01 Coverage and Limits of Liability - During the Term, the parties
shall each procure and maintain at its sole expense, the following types of
insurance coverage and limits of liability, provided that the required limits
may be satisfied by any combination of primary or excess insurance in
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each party's sole discretion:
Limits of Liability
Type of Coverage Insurance Policy
---------------- -------------------
(a) Worker's Compensation Insurance Statutory
(b) Employer's Liability Insurance $20,000,000 per occurrence
(c) Comprehensive General Public
Liability $20,000,000 per occurrence
Including:
Coverage for damage caused by
blasting, collapse, underground
damage or explosion; Independent
Contractors; Products, Completed
Operations; Personal Injury;
Contractual Public Liability;
Property Damage covering liability
assumed in the Lease; and Excess
Employer's Liability
(d) Comprehensive Automobile
Liability $20,000,000 per occurrence
Including:
Coverage for all owned, hired or
non-owned licensed automotive
equipment.
10.02 Proof of Coverage - Each party shall require that its insurance
carriers provide to the other party proof of insurance in the form of
certificates of insurance acceptable to the other party. Such certificates shall
provide that there will be sixty (60) days' written notice given to the other
party of any change in or cancellation of any policy.
10.03 Policies - All policies shall be written on an occurrence
basis, unless an occurrence basis policy becomes unavailable, and shall include
the party, its directors, officers, agents, servants, employees and/ or
independent contractors directly responsible to each party as additional
insureds. All policies shall contain an endorsement (if such terminology is not
in the printed form) that each party's policy shall be primary in all instances
regardless of like coverages, if any, carried by the other party.
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10.04 Release and Waiver - Each party agrees to release, and will
require its insurers (by policy endorsement) to waive their rights of
subrogation against the other party, its directors, officers, agents, servants,
employees and/or independent contractors directly responsible to such party for
loss under the policies of insurance described herein, damages to such party's
properties and/ or any other loss sustained by such party.
10.05 Right to Obtain Insurance for Other Party. If either party shall
fail to procure or pay for the required insurance and endorsements when premiums
become due, the other party shall have the right, though not be required, to
obtain such insurance and endorsements and to pay the premiums for the account
of the nonpaying party. Such amount shall be immediately due and payable from
the nonpaying party and the paying party may offset amounts otherwise due from
the paying party to the nonpaying party for amounts paid hereunder for the
account of the nonpaying party.
10.06 Indemnity. Following the Commencement Date, Lessee hereby agrees
to indemnify, save and hold harmless Lessor of and from any and all claims,
demands and causes of action on account of any loss, damage or injury to persons
or property on the Leased Premises other than such as may arise out of or result
from (i) the sole negligence or willful misconduct of Lessor or (ii) the use of
the property prior to the Commencement Date; provided that Lessee shall be
promptly notified of any such claim, demand or suits brought against Lessor and
shall be permitted to control the defense against or settlement of such claim,
demand or suit through counsel of its choice.
Lessee's indemnity shall include court costs, attorneys' fees,
administrative costs and penalties, statutory fines and penalties, and any other
direct, indirect or consequential damages incurred by Lessor.
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ARTICLE XI
CONDEMNATION
11.01 Condemnation. If all or any part of the Leased Premises or any
improvements thereon shall be taken under the exercise of the power of eminent
domain by any governmental authority, this Lease shall, at Lessee's option,
terminate as of the date of such taking provided that Lessee and Lessor receive
their respective portions of the condemnation award for such taking as provided
below. The rent shall be apportioned as of the date of such taking, and any
remaining balance of prepaid rent shall be repaid to Lessee. If the Leased
Premises or any improvements hereon are partially taken under the exercise of
the power of the eminent domain by any such governmental authority, and this
Lease is not terminated by Lessee, the rent provided for herein shall be
proportionately abated during the balance of the term remaining. Lessor shall
receive out of such award the value of the Leased Premises (less the value of
Lessee's leasehold estate and improvements) and the balance of such award
(including the value of Lessee's leasehold estate and improvements) shall belong
to Lessee. Any award for improvements constructed by Lessee on the Leased
Premises after the Commencement Date shall belong to Lessee. In the event of a
condemnation affecting the Leased Premises, Lessor agrees to lease to Lessee
additional land or an alternative site owned by Lessor in proximity to Lessor's
refinery near Big Spring in Howard County, Texas, provided the lease of such
additional land or alternative site does not interfere with the operation of
Lessor's refinery.
ARTICLE XII
ENCUMBRANCE AND DEFAULT
12.01 Leasehold Mortgages and Liens. The Lessee may at any time
mortgage its interest in the Leased Premises in favor of a lender ("Leaseholder
Mortgagee"). If any claims for labor and materials in connection with the
construction of the
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cogeneration plant on the Leased Premises result in the filing of liens against
the fee interest of Lessor in the Leased Premises, Lessee shall cause such liens
to be removed with due diligence, provided that it shall not be required to
remove any such lien so long as it is contesting the validity or propriety of
such lien in good faith through appropriate legal proceedings. Lessor shall
provide such assistance as Lessee may reasonably request in connection with such
proceedings.
12.02 Lessee's Default and Rights to Cure. If the Lessee shall default
in the payment of any installment of rent when it is due, or if it shall default
in the performance of any of its other obligations herein stated, Lessor agrees
that it will give to Lessee written notice of the existence of such default or
claimed default and the Lessee shall have a period of thirty (30) days within
which to cure same. In the event Lessor gives notice of a default which cannot
be cured solely by the payment of money and is (1) of such a nature that it
cannot be cured within such thirty day period or (2) if the curing thereof
cannot be completed within said thirty day period due to causes beyond the
control of Lessee, then such default shall not be deemed to continue so long as
Lessee, after receiving such notice, proceeds to cure the default as soon as
reasonably possible, but in no event longer than six (6) months after the date
of default and continues to take all steps necessary to complete the same within
a period of time which, under all prevailing circumstances; shall be reasonable.
In the event that any defaults of Lessee shall be cured in any manner herein
provided prior to the cancellation of this Lease, such defaults shall be deemed
never to have occurred and Lessee's rights hereunder shall continue unaffected
by such defaults. In the event that the Lessee, during the term of this Lease,
should mortgage ("Leasehold Mortgage") or otherwise encumber its leasehold
estate or interest in any improvements hereafter situated upon the Leased
Premises in accordance with the terms hereof, Lessee (or such Leasehold
Mortgagee) shall give Lessor
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written notice of the same and the name and address of any such mortgagee and/or
trustee and thereafter, while any such Leasehold Mortgage or encumbrance is in
force, Lessor shall give any such Leasehold Mortgagee or trustee a duplicate
copy of any and all notices of default or other notices in writing which Lessor
may give or serve upon Lessee pursuant to the terms of this Lease, and any such
notice shall not be effective until a duplicate copy is actually delivered to
such Leasehold Mortgagee or trustee at such addresses as such Leasehold
Mortgagee may from time to time designate. Such Leasehold Mortgagee or trustee
may change its address for notice by written notice delivered to Lessor from
time to time. Any such Leasehold Mortgagee and/or trustee may, at its option, at
any time before this Lease has been cancelled and terminated by Lessor as
provided for in this Lease, pay any of the rents or other sums of money herein
stipulated to be paid by Lessee or do any other thing required of the Lessee by
the terms of this Lease, and all payments so made and all things so done or
performed by any such Leasehold Mortgagee and/or trustee shall be as effective
to prevent a termination of the rights of Lessee hereunder as the same would
have been if done and performed by Lessee instead of by any such Leasehold
Mortgagee or trustee. It is further agreed that Lessor shall not have the right
to terminate this Lease for any non-monetary default by Lessee during such time
as the Leasehold Mortgagee in good faith and with reasonable diligence either
attempts to cure such default or commences and thereafter prosecutes with
diligence appropriate proceedings for foreclosure or other enforcement of the
liens securing such Leasehold Mortgagee loan; provided, however, that Lessor
shall have the right to terminate this Lease of a non-monetary default if said
Leasehold Mortgagee fails to complete such cure or foreclosure within six (6)
months from the date of the default. Any such Leasehold Mortgage or deed of
trust so given by Lessee may, if
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Lessee so desires, be conditioned to provide that, as between any such Leasehold
Mortgagee or trustee and Lessee, said trustee or Leasehold Mortgagee, on making
good and correcting any such default or defaults on the part of Lessee, shall be
thereby subrogated to any and all of the rights of the person or persons to whom
any payment is made by said Leasehold Mortgagee or trustee, and to all of the
rights of Lessee under the terms and provisions of this Lease, but any such
subrogation shall not impair Lessor's rights under this Lease. No such Leasehold
Mortgagee or trustee of the rights and interests of Lessee hereunder shall be or
become liable to Lessor as an assignee of this Lease until such time as said
Leasehold Mortgagee or trustee shall by foreclosure or other appropriate
proceedings in the nature thereof, or as the result of any other action or
remedy provided for by such Leasehold Mortgage or deed of trust, or by proper
conveyance from Lessee, either acquire the rights and interests of Lessee under
the terms of this Lease or actually take possession of the Leased Premises, and
upon such Leasehold Mortagee's or trustee's assigning such rights and interest
to another party or relinquishing such possession, as the case may be, such
Leasehold Mortgagee or trustee shall have no further such liability, if such
assignment be approved by Lessor as provided in Section 4.01 hereof.
Upon termination of this Lease for any reason other than expiration by
the passage of time of the Term, the Leasehold Mortgagee of first priority upon
Lessee's leasehold estate shall have the option, upon written notice delivered
to Lessor not later than sixty (60) days after receipt of written notice from
Lessor of such termination, to elect to receive, in its own name or in the name
of its nominee or assignee, from Lessor a new lease of the Leased Premises for
the unexpired balance of the Term on the same terms and conditions as in this
Lease set forth, and Lessor agrees to execute such lease provided said
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Leasehold Mortgagee shall undertake forthwith to remedy any curable default of
Lessee. Any such new lease shall have priority equal to this Lease, and notice
of such priority is hereby given.
12.03 Postponement of Lease Termination. Notwithstanding the provisions of
this Lease, it is agreed that so long as there is a first mortgage on Lessee's
interest in this Lease, the effective termination of this Lease by reason of the
occurrence of any of the actions specified herein as events of default or
reasons for Lessor to have the right to terminate this Lease shall be postponed
provided that (i) within a period of six (6) months after such event of default
the first Leasehold Mortgagee or trustee shall complete the prosecution of a
foreclosure proceeding or sale under its mortgage, (ii) all current rentals and
other monetary obligations of the Lessee under and in connection with the Lease
are timely paid in full or complied with, and (iii) title to said Leasehold
passes in due course (subject, in the case of Lessee's bankruptcy, to delay
caused by enjoinder of such foreclosure by a bankruptcy court).
12.04 Default by Lessee and Lessor's Right to Terminate Lease. If any
defaults on the part of Lessee are not cured within the time and in one of the
manners hereinabove provided, Lessor may, at its option, cancel this Lease and
retake possession of the Leased Premises, without prejudice to its rights to
recover past due rentals or damages, or Lessor may, at its option, enter upon
the Leased Premises, and, as Lessee's agent, relet the Leased Premises to any
person, firm or corporation of Lessor's selection, crediting all rents received
by it, first, to the payment of the cost and expense of reentry and
repossession, and second, to the payment of rentals contracted to be paid by the
Lessee hereunder and any deficiency shall be paid by Lessee to Lessor on demand.
In the event Lessor exercises either of the foregoing options, it
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shall be privileged to act through any agent, servant or employee of its
selection, and if possession of the Leased Premises is retaken, whether by force
or otherwise, Lessor shall not be liable to Lessee in any manner whatsoever and
Lessee expressly waives any and all claims, demands or causes of action which it
may or might have against Lessor by reason of any such reentry, except for gross
negligence or willful misconduct on the part of Lessor. Anything elsewhere
herein contained to the contrary notwithstanding, however, Lessor shall not have
the right to terminate or attempt to terminate this Lease or take any other
action against Lessee hereunder on account of any alleged default of Lessee
during the pendency of any good faith arbitration, litigation, or other legal
proceedings (including appeals therefrom) determinative of whether such default
did, in fact, occur. If it shall be finally determined that a default did occur,
Lessee shall have a period of thirty (30) days after such determination to cure
the same.
12.05 Third Party Consent to Amendment. No amendment or modification of
this Lease shall be valid without first obtaining the prior written consent of
any leasehold mortgagee or secured party of Lessee's interest in the Leased
Premises or property located thereon.
ARTICLE XIII
INTEREST
13.01 Interest. If the Lessor shall pay any sum for the account of the
Lessee under the terms and provisions of this Lease, Lessee agrees to pay to
Lessor, on demand, the amount or amounts so paid. Each such sum of money and all
delinquent rentals shall bear interest from their due date until paid at the
rate of ten percent (10%) per annum.
ARTICLE XIV
ENFORCEMENT COSTS
14.01 Enforcement Costs. The court costs and attorneys'
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fees incurred by either party in a successful prosecution or defense of any
legal or equitable proceedings to construe this Lease or enforce any right or
obligation arising from it shall become an obligation due and payable from the
other party, and each such obligation shall bear interest from the date of its
accrual at the rate of ten percent (10%) per annum.
ARTICLE XV
THIRD PARTY REQUIREMENTS
15.01 Third Party Requests for Amendment. Lessor agrees that in the event
TUEC pursuant to Article XXIII, or any mortgagee of Lessee, requires any
modification of this Lease agreement, and, in the event Lessor does not consent,
in writing, to such modification (which consent will not be unreasonably
withheld), Lessee shall have the right to terminate this Lease by giving written
notice of such termination to Lessor. In such event, termination of this Lease
be Lessee's sole remedy.
ARTICLE XVI
LEGAL OPINION
16.01 Legal Opinion. Within three (3) days after the execution hereof,
Lessor will furnish to Lessee its legal opinion that Lessor is the fee simple
owner of the Leased Premises subject to no easements, encumbrances or other
title defects (except for an easement granted to Texas Electric Service Company,
recorded in Vol. 170, Page 96, Deed Records of Howard County, Texas), that the
Leased Premises are legally subdivided, that no building permits are required
for the construction and installation of the cogeneration plant and related
support facilities, and that no zoning ordinances or restrictive covenants
affect the Leased Premises. If Lessee is required to obtain any permit or
authorization for the construction or operation of the cogeneration plant on the
Leased Premises, Lessor shall sign any application for such permit or
authorization, or take such other action or provide such cooperation, as
necessary, upon request of Lessee. Also
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within three (3) days after the execution hereof, Lessor shall furnish to Lessee
a current survey of the Leased Premises by a licensed surveyor approved by
Lessee and containing a surveyor's certificate in the form attached hereto as
Exhibit B. The survey shall show, among other things, the location of all
easements, rights of way and means of ingress to and egress from the Leased
Premises which will be available to Lessee. If Lessor is unable to furnish such
a legal opinion, or the survey discloses problems with title or the condition of
the Leased Premises, then Lessee may, at its option, (1) waive any defects in
title or in the condition of the property and proceed with this Lease agreement;
(2) require Lessor to lease to Lessee additional land or an alternative site
owned by Lessor in proximity to Lessor's refinery near Big Spring in Howard
County, Texas, provided the lease of such additional land or alternative site
does not interfere with the operation of Lessor's refinery or (3) terminate this
Lease. Also within three (3) days after the execution hereof, Lessor shall
furnish to Lessee a drawing or drawings showing completely and accurately the
nature and location of any underground installations (such as, but not limited
to, water and gas pipes, sewers, powerlines and telephone lines) on or
appurtenant to the Leased Premises that are not so shown on the survey. Lessee
shall be entitled to rely on such survey or drawings in building and operating
the cogeneration plant on the Leased Premises, and in the event that Lessee
encounters any underground installation not shown or incorrectly located on such
survey or drawings, Lessor shall defend and indemnify Lessee against and hold
Lessee harmless from any third party claims resulting from damage done to such
installation and shall also reimburse it for any extra cost incurred by it as a
result of encountering such installation. In addition to such indemnity, Lessor
agrees to lease to Lessee additional land or an alternative site owned by Lessor
in proximity to Lessor's
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refinery near Big Spring in Howard County, Texas, provided the lease of such
additional land or alternative site does not interfere with the operation of
Lessor's refinery.
ARTICLE XVII
NOTICES
17.01 Address for Notices. Any notice given to Lessor hereunder shall be
sent by certified mail, postage prepaid, addressed to the attention of: Vice
President, Refining, P.O. Box 2159, Dallas, Texas 75221, and any notice given to
Lessee hereunder shall be sent by certified mail, postage prepaid, addressed to
the attention of: President, 2200 Post Oak Blvd., Suite 509, Houston, Texas
77056. Each party may from time to time designate another place as the address
to which such notices shall be sent, such designation to be in writing and to be
sent by certified mail, postage prepaid, to the other party at the last address
so designated by such other party; and such change of address shall become
effective thirty (30) days after the mailing of such notice, properly stamped
and addressed.
17.02 Date Notice Given. Any such notice shall be deemed to have been given
three (3) days following the date of the mailing thereof in the manner above set
out, and such mailing shall constitute delivery.
ARTICLE XVIII
HOLDING OVER
18.01 Holding Over. If Lessee remains in the Leased Premises beyond the
Term of this Lease, such holding over shall be a tenancy from month to month,
subject to the terms and conditions and at the rent provided in this Lease for
the immediately preceding year.
ARTICLE XIX
COVENANTS RUN WITH LAND
19.01 Covenants Run With Land. All of the covenants, agreements and
conditions contained in this Lease shall be construed as covenants running with
the land and shall extend to and be binding upon the successors and assigns of
the parties hereto.
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ARTICLE XX
MEMORANDUM
20.01 Memorandum. A memorandum of this Lease shall be filed for record in
the Real Property Records of Howard County, Texas.
ARTICLE XXI
RIGHT OF FIRST REFUSAL
21.01 Right of First Refusal. In the event Lessor, at any time during the
Term of the Lease, receives an offer to purchase all or any portion of the
Leased Premises which Lessor is willing to accept, Lessor shall, prior to
accepting any such offer, give written notice to Lessee of such offer, including
a copy thereof, and Lessee shall have a period of sixty (60) days following
receipt of such notice to exercise a right of first refusal to purchase the
Leased Premises, on the same terms and conditions set forth in such offer. If
Lessee agrees to the terms of such offer, it shall exercise its right of first
refusal in writing, prior to the termination of such sixty (60) day period, and
shall have the right to purchase the Leased Premises on the same terms and
conditions as set forth in the offer. If Lessee fails to exercise its right of
first refusal prior to the termination of such sixty (60) day period, then the
Lessor shall be free to accept such offer and sell to the offeror making such
offer on the exact terms and conditions set forth in the offer. This obligation
to offer the Leased Premises to Lessee prior to accepting an offer from a third
party shall apply each time during the Term of the lease that Lessor, its
successors and assigns, shall receive an offer to purchase the Leased Premises
which Lessor is willing to accept. If Lessee exercises any such right of first
refusal and the sale of the Leased Premises is so consummated, this Lease shall
terminate, effective as of the date of such purchase.
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ARTICLE XXII
PRIOR USE OF PROPERTY
22.01 Prior Use of Property. Following the Commencement Date, Lessee agrees
to conduct an investigation of the soil of the Leased Premises to establish at
what level, if any, the soil contains environmental contaminants. Lessee agrees
to provide the results of the soil investigation to Lessor. At the time the soil
investigation results are provided to Lessor, Lessor and Lessee shall agree on
the suitability or nonsuitability of the surface of the Leased Premises.
Lessor agrees to indemnify Lessee against, and hold it harmless from, any
loss or damages incurred by Lessee arising from any prior use, any ongoing
contamination of the Leased Premises by Fina, or any contamination of the Leased
Premises caused by Fina during the term of the Lease, including, without
limitation, (i) the storage, transportation, processing or disposal of hazardous
waste, industrial solid or municipal solid waste as those terms are defined in
the Texas Solid Waste and Disposal Act, Art. 4477-7, Tex. Rev. Civ. Stat. Ann.
or (ii) any environmental condition that is actionable under any federal, state
or local environmental law or regulation provided that Lessor shall be promptly
notified of any claim, demand, order or suit brought against Lessee and shall be
permitted to control the defense against or settlement of such claim, demand,
order or suit through counsel of its choice and shall be allowed reasonable
access to the property to mitigate, eliminate or comply with such claim, demand,
order or suit. Lessor's indemnity shall include court costs, attorneys' fees,
administrative costs and penalties, statutory fines and penalties, costs
incurred for demolishing and rebuilding the improvements on the Leased Premises
and any other direct, indirect or consequential damages incurred by Lessee.
In the event Lessee discovers an unacceptable environmental condition
affecting the surface of the Leased Premises at the
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time the soil investigation is completed, Lessor agrees to lease to Lessee
additional land or an alternative site owned by Lessor in proximity to Lessor's
refinery near Big Spring in Howard County, Texas, provided the lease of such
additional land or alternative site does not interfere with the operation of
Lessor's refinery. Such lease of additional land or alternative site shall be in
addition to, and not in lieu of, Lessor's indemnity of Lessee hereunder.
ARTICLE XXIII
CONTINGENCIES
23.01 Contingencies. Lessee's parent company and Texas Utilities Electric
Company ("TUEC") have entered into that certain agreement entitled "Agreement
Between Falcon Seaboard Oil Company and Texas Utilities Electric Company," dated
July 30, 1986 ("TUEC Agreement"). This Lease shall not be binding upon Lessee
until TUEC has evidenced its approval of the terms hereof by executing this
Lease in the appropriate manner on the signature page hereof.
23.02 Right to Terminate Lease. Lessee may terminate this Lease in the
event it is unable to (i) obtain necessary regulatory approvals within a
reasonable period to construct and operate the cogeneration plant and related
support facilities (the "Improvements") to be constructed by Lessee on the
Leased Premises, (ii) obtain financing for the construction, ownership and
operation of the Improvements on terms acceptable to Lessee; (iii) contract for
the construction of the Improvements; or (iv) satisfactorily complete the
construction of the Improvements. Lessee also may terminate this Lease in the
event the TUEC Agreement terminates without breach thereof by Lessee.
ARTICLE XXIV
MISCELLANEOUS
24.01 Entire Agreement. This Lease, the Fuel Purchase and Sale Agreement, the
Steam Purchase and Sale Agreement and
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easements executed contemporaneously herewith are intended as a full, complete,
exclusive and final expression of the terms of the Agreement between the
parties. Such agreements constitute and expressly supersede all prior or
contemporaneous understandings, agreements, promises, representations,
warranties, terms and conditions, both oral or written, including the Letter
Agreement between the parties dated May 20, 1986.
24.02 Heading. The descriptive headings of the provisions of this Lease are
used for convenience only and shall not be deemed to affect the meaning or
construction of any such provision.
24.03 Joint Preparation. This Lease was prepared jointly by the parties
hereto and not by either party to the exclusion of the other.
24.04 Modifications. No modifications or change of the terms of this Lease
shall be enforceable unless or until such modification or change is reduced to
writing and executed by both parties and approved by TUEC and, if necessary, the
leasehold mortgagees or secured parties pursuant to Section 12.05.
24.05 Waiver. The failure of either party to insist upon strict performance
of any provision hereof shall not constitute a waiver of, or estoppel against
asserting, the right to require such performance in the future, nor shall a
waiver or estoppel in any one instance constitute a waiver or estoppel with
respect to a later breach of a similar nature or otherwise.
24.06 Texas Law Governs. This Lease and the obligations of the parties
hereunder shall be interpreted in accordance with and controlled by the laws of
the State of Texas in effect at the time of execution of this Lease.
24.07 Additional Assistance. The parties shall provide to each other such
additional assistance including the execution
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of additional documents, as is necessary to evidence or implement the intentions
of the parties as expressed herein.
EXECUTED in multiple counterparts, each of which shall have the force and
effect of an original, as of the 21st day of November, 1986.
LESSOR:
FINA OIL AND CHEMICAL COMPANY
By: /s/ Jerry G. Jenkins
----------------------------------
Name: Jerry G. Jenkins
Title: Vice President
LESSOR:
POWER RESOURCES, INC.
By: /s/ David H. Dewhurst
----------------------------------
Name: David H. Dewhurst
Title: President
APPROVED BY:
TEXAS UTILITIES ELECTRIC COMPANY
By:
----------------------------------
Name:
Title:
Exhibit A - Description of Leased Premises.
Exhibit B - Surveyor's Certificate.
THE STATE OF TEXAS:
COUNTY OF Dallas:
This instrument was acknowledged before me this 12th day of December, 1986,
by Jerry G. Jenkins, Vice President of Fina Oil and Chemical Company, a Delaware
corporation, on behalf of said corporation.
----------------------------------
Notary Public in and for
The State of Texas
My Commission Expires:
Dorothy Ann Bassett
----------------------------------
December 27, 1989 (Name - Typed or Printed)
-------------------------------
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THE STATE OF TEXAS:
COUNTY OF Dallas:
This instrument was acknowledged before me this 12th day of December, 1986,
by David H. Dewhurst, President of Power Resources, Inc., a Texas corporation,
on behalf of said corporation.
----------------------------------
Notary Public in and for
The State of Texas
My Commission Expires:
Dorothy Ann Bassett
----------------------------------
December 27, 1989 (Name - Typed or Printed)
-------------------------------
THE STATE OF TEXAS:
COUNTY OF :
This instrument was acknowledged before me this day of , 1986,
by , of Texas Utilities Electric Company,
a Texas corporation, on behalf of said corporation.
----------------------------------
Notary Public in and for
The State of Texas
My Commission Expires:
----------------------------------
(Name - Typed or Printed)
-------------------------------
73191
10-4-86
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<PAGE>
FIRST AMENDMENT TO LEASE AGREEMENT
This First Amendment to Lease Agreement between Fina Oil and Chemical
Company, as Lessor, and Power Resources, Inc., as Lessee, dated November 21,
1986, is made by and between Lessor and Lessee as follows:
Section 4.01 is amended by the addition of the following sentence:
"Any leasehold mortgagee shall be entitled to the benefits of the covenants
of Lessor to Lessee contained in this Agreement."
Except as amended herein, the Lease Agreement is hereby ratified and
confirmed in its entirety.
Executed effective December 29, 1986.
LESSOR:
FINA OIL AND CHEMICAL COMPANY
By: /s/ Jerry G. Jenkins
----------------------------------
Name: Jerry G. Jenkins
Title: Vice President
LESSOR:
POWER RESOURCES, INC.
By: /s/ David H. Dewhurst
----------------------------------
Name: David H. Dewhurst
Title: President
<PAGE>
SALTON SEA UNIT 5 EPC CONTRACT
THIS SALTON SEA UNIT 5 ENGINEERING, PROCUREMENT, AND CONSTRUCTION CONTRACT (the
"CONTRACT") is made and entered into as of this 2nd day of September 1998, by
and between Salton Sea Power L.L.C., a Delaware limited liability company
(hereinafter "OWNER"), and Stone & Webster Engineering Corporation, a
Massachusetts corporation (hereinafter "CONTRACTOR"). Each entity is sometimes
individually referred to herein as a "PARTY" and both entities are sometimes
collectively referred to herein as the "PARTIES."
RECITALS
A. Owner desires to develop, finance, construct, own, and operate the
Project to be located in or around Imperial County, California.
B. Owner desires to engage Contractor to design, engineer, procure,
construct, test and start up the Project and to provide training to the persons
who will operate and maintain the Project, all on a turnkey, fixed price, date
required, basis, and Contractor desires to provide such services, all as further
defined by the terms and conditions set forth in this Contract.
C. Contractor has:
(1) been provided and reviewed the conceptual drawings for the Project
and all other documents relating to the Project which Contractor has deemed
necessary in connection with this Contract,
(2) visually inspected the real property on which the Project shall be
constructed, and
(3) performed or reviewed such other investigations, studies, and
analyses which Contractor has determined to be necessary or prudent under the
circumstances in connection with entering into this Contract.
AGREEMENT
NOW, THEREFORE, in consideration of the sums to be paid to Contractor
by Owner and of the covenants and agreements set forth herein, the Parties
agree as follows:
1. DEFINITIONS AND RULES OF INTERPRETATION
For the purposes of this Contract, except as otherwise expressly
provided or unless the context otherwise requires, the following terms shall
have the following meanings:
1.1. AAA. The American Arbitration Association.
1.2. Actual Net Electric Energy Production. With respect to any period,
the Net Electric Energy Production (in kilowatt hours) during such period
divided by the number of hours of such period.
<PAGE>
SALTON SEA UNIT 5 EPC CONTRACT
1.3. Actual Outlet Brine Temperature. With respect to any hour, the
average brine temperature measured at the outlet to the secondary clarifier,
expressed in degrees Fahrenheit, as measured in accordance with the Performance
Test Procedures.
1.4. Actual Outlet Steam Condition. With respect to any hour, the
average output of steam, expressed in pounds per hour and pressure expressed in
inches of water pressure, corrected to the Guarantee Point Conditions, as
measured in accordance with the Performance Test Procedures.
1.5. Affiliate. With respect to any Person, another Person that is
controlled by, that controls or is under common control with, such Person; and,
for this purpose, "control" with respect to any Person shall mean the ability
to effectively control, directly or indirectly, the operations and business
decisions of such Person whether by voting of securities or partnership
interests or any other method.
1.6. Applicable Laws. The term "Applicable Laws" shall mean and
include all of the following:
(a) any applicable statute, law, rule, regulation, code,
ordinance, judgment, decree, writ, order or the like, of any national, federal,
provincial, state or local court or other Governmental Authority, and the
interpretations thereof, including, without limitation, any statute, law, rule,
regulation, code, ordinance, judgment, decree, writ, order or the like,
regulating, relating to or imposing liability or standards of conduct
concerning:
(i) Contractor, the Site or the performance of any
portion of the Work or the Work taken as a whole, and the operation of the
Project or
(ii) safety and the prevention of injury to persons
and the damage to property on, about or adjacent to the Site or any other
location where any other portion of the Work shall be performed, or
(iii) protection of human health or the environment
or emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or wastes
into the environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, Hazardous Materials or other industrial,
toxic materials or wastes, and
(b) any requirements or conditions on or with respect to the
issuance, maintenance or renewal of any Applicable Permit or any application
therefor.
1.7. Applicable Permits. Each and every national, state and local
license authorization, certification, filing, recording, permit or other
approval with or of any Governmental Authority, including, without limitation,
each and every environmental, construction, operating or occupancy permit and
any agreement, consent or approval from or with any other Person, that is
required by any Applicable Law or that is otherwise necessary for
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SALTON SEA UNIT 5 EPC CONTRACT
the performance of the Work or operation of the Project, including without
limitation, the Owner Acquired Permits and Contractor Acquired Permits.
1.8. Business Day. A Day, other than a Saturday or Sunday or holiday,
on which banks are generally open for business in Imperial Valley, California
and New York City, New York.
1.9. Buy-Down Amount. The amount to be paid by Contractor to Owner in
accordance with the provisions of SECTIONS 16.2, 16.3 and, if applicable, 16.6
and calculated in accordance with EXHIBIT "I" for the failure of the Project to
achieve the Performance Guarantees during a Capacity Test or a Reliability Test,
as applicable.
1.10. Buy-Down Criteria. The satisfaction of all of the following
within an individual run of a Capacity Test:
(a) the Actual Outlet Steam Condition during such test shall
have satisfied the requirements of the Outlet Steam
Condition Guarantee;
(b) the Actual Outlet Brine Temperature during such test shall
have satisfied the requirements of the Actual Outlet Brine
Temperature Guarantee;
(c) the Actual Net Electric Energy Production shall have equaled
or exceeded 96% of the Net Generation Guarantee;
(d) all other requirements for the successful completion of a
Capacity Test, including the requirements set forth in
EXHIBIT "J" and the Performance Test Procedures, shall have
been satisfied.
1.13. CalEnergy Safety Program. The regulations for contractors and
other requirements set forth in EXHIBIT "AD".
1.14. Cancellation Schedule. The cancellation payment schedule set
forth on EXHIBIT "D".
1.15. Capacity Test. The 24 hour capacity test described in EXHIBIT
"J".
1.16. Capacity Test Completion. Satisfaction or waiver of all of the
conditions set forth in SECTION 15.1.
1.17. Capacity Test Completion Date. The date on which Capacity Test
Completion actually occurs.
1.18. Capacity Test Completion Deadline. The date that is six hundred
ten days (610) days after the Notice to Proceed Date, as such deadline may be
extended in accordance with the terms thereof.
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SALTON SEA UNIT 5 EPC CONTRACT
1.19. Change In Law. The enactment, adoption, promulgation,
modification, or repeal after the date of this Contract of any Applicable Law
of any Governmental Authority of the United States or the modification after
the date of this Contract of any Applicable Permit issued or promulgated by any
Governmental Authority of the United States that establishes requirements that
materially and adversely affect Contractor's costs or schedule for performing
the Work; provided, however, a change in any national, federal, provincial or
any other income tax law or any other law imposing a tax, duty, levy, impost,
fee, royalty, or charge for which Contractor is responsible hereunder shall not
be a Change In Law pursuant to this Contract.
1.20. Change In Work. A change in the Work as defined in SECTION 17.1.
1.21. Change In Work Form. The form documenting Changes In Work
attached hereto as EXHIBIT "E".
1.22. Conditional Waiver of Liens. A sworn statement and waiver of
liens prepared by Contractor, Subcontractor or Vendor, as applicable, in the
form required by California Civil Code Section 3262 or any successor statute
thereto, which provides that such Person conditionally waives and releases all
mechanic's liens, stop notices and bond rights with respect to all Work for
which Contractor requested payment in the current Contractor's Invoice upon
payment of the amount of such Contractor Invoice.
1.23. Confidential Information. Information, ideas or materials now or
hereafter owned by or otherwise in the possession or control of, or otherwise
relating to, one Party and/or any of its Affiliates, including without
limitation, inventions, business or trade secrets, know-how, techniques, data,
reports, drawings, specifications, blueprints, flow sheets, designs, or
engineering, construction, environmental, operations, marketing or other
information, together with all copies, summaries, analyses, or extracts
thereof, based thereon or derived therefrom, disclosed by one Party (the
"transferor") to the other Party or any of its Affiliates or any of their
respective directors, employees or agents (the "transferee"); provided,
however, "Confidential Information" of Owner shall also mean information, ideas
or materials related to the Work, the Project obtained, developed or created by
or for Contractor in connection with the Work, or delivered or disclosed to
Owner in connection with the Work, together with all copies, reproductions,
summaries, analyses, or extracts thereof, based thereon or derived therefrom;
and provided, further, "Confidential Information" of Owner shall also mean
information, ideas or materials disclosed by Owner or any of its Affiliates, or
deduced by Contractor or any of its Affiliates or any of their respective
directors, employees or agents from information supplied by Owner or its
Affiliates or agents, or as a result of visits by Contractor or any of its
Affiliates or any of their respective directors, employees or agents to the
premises of Owner or any of its Affiliates, which relate to the Project, the
extraction of minerals from geothermal brine, the production of geothermal
energy, or the production of electricity from geothermal brine at any of the
geothermal power plants located in the Salton Sea Known Geothermal Resource
Area which are owned by Affiliates of Owner, including the Existing Plants.
1.24. Construction Manager. The permanent, on-site Construction
Manager designated by Contractor and approved by Owner in accordance with
SECTION 4.5.
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SALTON SEA UNIT 5 EPC CONTRACT
1.25. Consulting Engineer. The consulting engineer (or engineers)
selected and designated by the Financing Entities.
1.26. Contract. This Salton Sea Unit 5 Project Engineering,
Procurement, and Construction Contract, including all Exhibits hereto, as the
same may be modified, amended, or supplemented from time to time in accordance
with SECTION 37.4.
1.27. Contract Price. The fixed amount for performing the Work that is
payable to Contractor as set forth in SECTION 6.1, as the same may be modified
from time to time in accordance with the terms hereof.
1.28. Contractor. Stone & Webster Engineering Corporation, a
Massachusetts corporation.
1.29. Contractor Acquired Permits. All (1) building permits required
for the construction of the Project, (2) labor or health standard permits and
approvals reasonably related to construction of the Project, (3) business
permits reasonably related to the conduct of the operations of Contractor and
all Subcontractors in California (including all contractors' licenses and
related documents), (4) permits, approvals, consents or agreements from or with
any Person necessary for the performance by Contractor of its warranty
obligations hereunder, for the transportation or importation of Equipment or
for the transportation or importation of equipment (other than Owner Furnished
Items ), tools, machinery and other items used by Contractor in performance of
the Work, (5) permits, visas, approvals and certifications necessary for
Contractor's employees to legally perform the Work in the State of California
(including documentation of citizenship or legal residency in the United
States), or (6) excavation permits for use by Contractor of the backfill
material contemplated by EXHIBIT "AA".
1.30. Contractor Deliverables. Each of the design criteria, system
descriptions (including any Technology Licensor's), Required Manuals, Drawings
and Specifications, design calculations, quality assurance reports and all
other material documents relating to the Project to be delivered to Owner for
review and comment in accordance with the requirements of ARTICLE 12.
1.31. Cntractor Event of Default. The term "Contractor Event of
Default" shall have the meaning set forth in SECTION 20.1.
1.32. Contractor's Invoice. An invoice from Contractor to Owner in
accordance with SECTION 7.1 and in the form of EXHIBIT "F" hereto.
1.33. Critical Path Item(s). The items identified as critical path
items on the Critical Path Schedule prepared by Contractor.
1.34. Critical Path Schedule. A critical path schedule prepared by
Contractor and meeting the requirements set forth in EXHIBIT "G" describing the
time of completion of Critical Path Items for completion of the Work by
Contractor.
1.35. RESERVED.
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SALTON SEA UNIT 5 EPC CONTRACT
1.36. "Day" or "day." A calendar day, unless otherwise specified.
1.37. Defect. Unless otherwise specifically defined elsewhere herein,
the term "Defect" includes, without limitation, any designs, engineering,
materials, Equipment, tools, supplies, or installation or other Work which:
(a) do not conform to the Statement of Work or the Drawings and
Specifications that have been approved by Owner; or
(b) are of improper or inferior workmanship;
(c) are not suitable for a commercial facility of this type;
(d) are inconsistent with Industry Standards, and either:
(i) could materially and adversely affect the
mechanical, electrical or structural integrity
of the Project;
(ii) could materially and adversely affect the
continuous efficient, effective or safe
operation of the Project during the Project's
design life, assuming such operation in
accordance with the operating procedures by the
Operating Personnel working the normal shifts in
accordance with Industry Standards; or
(iii) could affect the economic value of the Owner's
investment.
1.38. Delay Liquidated Damages. Liquidated damages for delay as set
forth in SECTION 16.1.1.
1.39. Delay Notice. A notice of delay as set forth in SECTION 9.2.
1.40. Deliverables Schedule. The schedule identifying the documents to
be delivered by Contractor and Owner's period for review thereof, prepared by
Contractor and agreed to by Owner in accordance with SECTION 12.4 of this
Contract and the requirements of EXHIBIT "A".
1.41. "Dollars" or "$." All amounts in this Contract are expressed in,
and all payments required hereunder shall be paid in, the lawful currency of
the United States of America.
1.42. Drawings and Specifications. Drawings and specifications that
are part of the Statement of Work or that have been prepared by Contractor or
any Subcontractor with respect to the Work and submitted to Owner under this
Contract (including those drawings identified on EXHIBIT "B").
1.43. Electrical Energy. Electrical energy conforming to the
specifications set forth in EXHIBIT "A".
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SALTON SEA UNIT 5 EPC CONTRACT
1.44. Elmore Plant. The geothermal power production facility owned by
Elmore, L.P., commonly known as the "Elmore plant."
1.45. Equipment. All materials, supplies, apparatus, machinery,
equipment, parts, tools, components, instruments, appliances, spare parts and
appurtenances thereto that are (a) required for prudent operation of the
Project in accordance with Industry Standards, or (b) described in or required
by the Statement of Work or the Drawings and Specifications.
1.46. Exhibits. Each exhibit listed in SECTION 2.1 and attached hereto
as incorporated herein in its entirety by this reference.
1.47. Existing Plant Owners. The owners and operators of the Existing
Plants.
1.48. Existing Plant Sites. The portion of the Site that is more
particularly described on EXHIBIT "Z".
1.49. Existing Plants. The Leathers Plant, the Elmore Plant, the
Vulcan/Hoch Plants and the Salton Sea Plants.
1.50. Existing Plants Access Schedule. The schedule set forth on
EXHIBIT "Y" designating the limited time periods during which Owner will cause
Contractor to be permitted to have access, at no cost to Contractor, to each
Existing Plant Site for the performance of Contractor's obligations hereunder.
1.51. Final Completion. Satisfaction by Contractor or waiver by Owner
of all of the conditions for final completion set forth in SECTION 15.5.
1.52. Final Completion Date. The date on which Final Completion of the
Project occurs.
1.53. Final Completion Deadline. The date that is sixty (60) calendar
days after the Substantial Completion Date, as such date may be modified in
accordance with the terms hereof.
1.54. Final Contractor's Invoice. The final Contractor's Invoice
submitted in accordance with SECTION 7.6.
1.55. Final Payment. The final payment made by Owner or the Financing
Entities to Contractor in accordance with SECTION 7.6.
1.56. Financial Closing. The date on which the Financing Entities make
the first disbursement to Owner from the construction loan for the Project.
1.57. Financing Entities. The holders of, the agent(s) or trustee(s)
representing the holders of, or the financial institutions or other Person(s)
providing a letter(s) of credit or other guarantees or insurance in support of,
any debt or equity financing for the Project, but excluding Owner or members of
Owner.
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SALTON SEA UNIT 5 EPC CONTRACT
1.58. Force Majeure. Each of the following events, matters, or things:
any war, declared or not, hostilities, belligerence, blockade, revolution,
insurrection, riot, or public disorder including general labor disturbances not
specific to Contractor's or Subcontractor's personnel; expropriation,
requisition, confiscation, or nationalization; export or import restrictions by
any Governmental Authorities; closing of harbors, docks, canals, or other
assistances to or adjuncts of the shipping or navigation of or within any
place; rationing or allocation, whether imposed by law, decree, or regulation,
or by compliance of industry at the insistence of any Governmental Authorities;
fire, flood, unusually severe earthquake, volcano, tide, tidal wave, or perils
of the sea; unusually severe storms and other weather conditions (other than
high temperatures), including typhoons, lightning, and drought; accidents of
navigation or breakdown or injury of vessels, accidents to harbors, docks,
canals, or other assistances to or adjuncts of the shipping or navigation;
epidemic or quarantine; or any other event, matter, or thing, wherever
occurring; that, in each case, is not within the reasonable control and is
without the fault or negligence of the Party whose performance is affected
thereby; provided, however, that the following events, matters or things shall
not constitute Force Majeure: (i) any labor disturbance or dispute of
Contractor's personnel or those of any Subcontractors at the site, (ii)
mechanical failures of Contractor's or Subcontractor's equipment, and (iii)
Site Conditions other than Unforseen Site Conditions.
1.59. Geocrete. "Geocrete" means a material comprised of geothermal
filter cake product, which has been obtained by removing silica from geothermal
brine, and concrete.
1.60. Governmental Authorities. Applicable United States and other
national, federal, state, provincial, and local governments and all agencies,
authorities, departments, instrumentalities, courts, corporations, or other
subdivisions of each having or claiming a regulatory interest in or
jurisdiction over the Site, the Project, the Work or the Parties to this
Contract or the Parent Guarantor.
1.61. Guarantee Point Conditions. Defined physical conditions of the
atmosphere (wet bulb temperature), inlet brine (flow, enthalpy and chemistry)
and inlet steam (flow and enthalpy), all as specified in Exhibit A, on which
the Performance Guarantees are based.
1.62. Hazardous Materials. Any hazardous materials, hazardous waste,
hazardous constituents, hazardous or toxic or radioactive substances or
petroleum products (including crude oil or any fraction thereof), defined or
regulated as such under any Applicable Law.
1.63. Hydrochloric Acid. Hydrochloric acid with a concentration of
2.0% or greater.
1.64. "Industry Standards" or "Industry Grade." Those standards of
design, engineering, construction, workmanship, equipment, and components
specified in EXHIBIT "A", provided, however, if the relevant standard is not so
specified or is ambiguous therein, then "Industry Standards" or "Industry
Grade" shall mean those standards of care and diligence normally practiced by
internationally recognized engineering and construction firms in performing
services of a similar nature and in accordance with good engineering design
practices, Applicable Law, Applicable Permits, and other standards established
for such work.
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SALTON SEA UNIT 5 EPC CONTRACT
1.65. Insignificant Subcontractors. The term "Insignificant
Subcontractors" shall have the meaning set forth in Section 7.3.
1.66. Interconnection. The interconnections set forth in Attachment2
to EXHIBIT "A".
1.67. Key Personnel. The natural persons named in EXHIBIT "K".
1.68. Land Rights Agreements. Those agreements, leases and other
documents or instruments with respect to the Site described on EXHIBIT "X".
1.69. Leathers Plant. The geothermal power production facility owned
by Leathers, L.P., commonly known as the "Leathers plant."
1.70. LIBOR. The London inter-bank offered rate for six-month United
States dollar deposits, as published in The Financial Times.
1.71. License Agreement(s). The technology license and royalty
agreements described on EXHIBIT "L" and sub-licensed to Contractor in
accordance with SECTION 28.1.
1.72. Lien Indemnitees. The term "Lien Indemnitees" shall have the
meaning set forth in ARTICLE 32.
1.73. Loss(es). Any and all liabilities (including but not limited to
liabilities arising out of the application of the doctrine of strict
liability), obligations, losses, damages, penalties, claims, actions, suits,
judgments, costs, expenses and disbursements, whether any of the foregoing be
founded or unfounded (including legal fees and expenses and costs of
investigation), of whatsoever kind and nature and whether or not involving
damages to the Project or the Site.
1.74. Materials Warranty. The warranty of Contractor under SECTION
18.2.
1.75. Maximum Aggregate Damages. Twenty percent (20%) of the Contract
Price (as the Contract Price may be adjusted from time to time in accordance
with the terms hereof).
1.76. Mechanical Completion. Satisfaction of all of the conditions for
mechanical completion set forth in SECTION 13.1.
1.77. Mechanical Completion Date. The date on which Mechanical
Completion of the Project actually occurs.
1.78 Mechanical Completion Deadline. The date that is six hundred ten
(610) days after the Notice to Proceed Date, as such deadline may be modified
in accordance with the terms hereof.
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SALTON SEA UNIT 5 EPC CONTRACT
1.79. Mechanical Completion Test Procedures. The written procedures
for the Mechanical Completion Tests produced by Contractor and agreed to by
Owner in accordance with SECTION 14.1.
1.80. Mechanical Completion Tests. Those "Mechanical Completion Tests"
identified in EXHIBIT "J".
1.81. Milestone Payment(s). A discrete portion of the Contract Price
payable pursuant to the Progress Payment Schedule as a progress payment for
completion of Milestones in accordance with SECTION 7.1.
1.82. Milestone Schedule. The summary milestone schedule prepared by
Contractor and attached as EXHIBIT "M" describing the estimated time of
completion of major Milestones and for completion of the Work by Contractor.
1.83. Milestone(s). Various elements of the Work to be completed by a
certain deadline as described in the Progress Payment Schedule.
1.84. Monthly Progress Report. A written monthly progress report
prepared by Contractor in form and content generally in accordance with EXHIBIT
"N".
1.85. Net Electric Energy Production. With respect to any period, the
output of electrical energy, expressed in kilowatt-hours, produced by the
Project, exclusive of any electrical energy consumed by the Project for
operating equipment or lighting purposes and corrected to the Guarantee Point
Conditions, as measured in accordance with Exhibit J and the Performance Test
Procedures. For purposes of this calculation, Contractor shall take into
account that the electrical energy consumed by the Project for operating
equipment or lighting purposes includes a load of 1530 kilowatts which is the
auxiliary load of equipment and machinery, the procurement and installation of
which is excluded from the Work.
1.86. Net Generation Guarantee. The Actual Net Electric Energy
Production during the period of the Capacity Test will not be less than 49,000
kilowatts.
1.87. "Notice" or "notice." A written communication between the
Parties required or permitted by this Contract and conforming to the
requirements of ARTICLE 33.
1.88. Notice For Payment of Buy-Down Amount. A Notice from Owner to
Contractor specifying the Buy-Down Amount and the actual performance levels of
the Project during a Capacity Test used in calculating the Buy-Down Amount.
1.89. Notice of Final Completion. A Notice from Contractor to Owner in
accordance with SECTION 15.5(I) that the Project has satisfied the requirements
for Final Completion.
1.90. Notice of Mechanical Completion. A Notice from Contractor to
Owner in accordance with SECTION 13.2 that the Project has satisfied the
requirements for Mechanical Completion.
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SALTON SEA UNIT 5 EPC CONTRACT
1.91. Notice of Capacity Test Completion. A Notice from Contractor to
Owner in accordance with SECTION 15.2 that the Project has satisfied the
requirements for Capacity Test Completion.
1.92. Notice of Substantial Completion. A Notice from Contractor to
Owner in accordance with SECTION 15.4 that the Project has satisfied the
requirements for Substantial Completion.
1.93. Notice to Proceed. A written Notice signed by a duly authorized
officer of Owner to Contractor directing Contractor to commence and complete
all Work under this Contract.
1.94. Notice to Proceed Date. The Notice to Proceed Date set forth in
SECTION 8.1.
1.95. Operating Consumables. Operating Consumables, including
chemicals, lubricants (including lube oil and grease), filters, lamps, light
bulbs, and other consumable equipment and materials, necessary for the
operation and maintenance of the Project other than Production Inputs.
1.96. Operating Personnel. The personnel hired by Owner, or by an
entity providing operating or maintenance services for Owner, to operate and
maintain the Project (including all operators, maintenance personnel,
instrument technicians and supervisors).
1.97. Operating Tests. Those "Operating Tests" identified in EXHIBIT
"J".
1.98 Outlet Brine Temperature Guarantee. During each hour, the Actual
Outlet Brine Temperature shall be between 210(degree) F and 230(degree) F.
1.99. Outlet Steam Condition Guarantee. During each hour, the Actual
Outlet Steam Condition shall be a minimum delivery rate of 117,000 pounds per
hour at a minimum pressure of two inches of water pressure.
1.100. Owner. Salton Sea Power L.L.C., a Delaware limited liability
company.
1.101. Owner Acquired Permits. The term "Owner Acquired Permits" shall
have the meaning set forth in SECTION 3.5.
1.102. Owner Caused Delay. A material delay in Contractor's
performance of the Work to the extent actually and demonstrably caused by
Owner's failure to perform any covenant of Owner hereunder (other than as a
result of Force Majeure or by exercise of rights under this Contract, including
the exercise by Owner of the right to have defective or nonconforming Work
corrected or re-executed); provided, however, Owner Caused Delay shall exclude
any delay caused by Force Majeure.
1.103. Owner's Certificate of Final Completion. A Certificate of Owner
certifying that Final Completion has occurred.
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SALTON SEA UNIT 5 EPC CONTRACT
1.104. Owner's Certificate of Mechanical Completion. A Certificate of
Owner certifying that Mechanical Completion has occurred.
1.105. Owner's Certificate of Capacity Test Completion. A Certificate
of Owner certifying that Capacity Test Completion has occurred.
1.106. Owner's Certificate of Substantial Completion. A Certificate
from Owner certifying that Substantial Completion has occurred.
1.107. Owner's Engineer. The engineering firm or other engineer or
engineers (which may be employees of Owner) selected and designated by Owner.
1.108. Owner Event of Default. The term "Owner Event of Default" shall
have the meaning set forth in SECTION 20.4.
1.106A. Owner Furnished Items. The items identified on EXHIBIT "AA" to
be furnished by Owner.
1.109. Parent Guaranty. The Guarantee of the Parent Guarantor referred
to in SECTION 35.2 in the form set forth in EXHIBIT "O".
1.110. Parent Guarantor. Stone & Webster Inc., a Delaware corporation
traded on the New York Stock Exchange.
1.111. Parent Legal Opinion. A legal opinion of legal counsel to the
Parent Guarantor reasonably acceptable to Owner in the form set forth in
EXHIBIT "O".
1.112. Performance Guarantees. The Net Generation Guarantee, the
Outlet Brine Temperature Guarantee, the Outlet Steam Condition Guarantee, and
the Reliability Guarantee.
1.113. Performance Test Procedures. The written test and commissioning
procedures, standards, protective settings, and the testing and commissioning
program produced by Contractor and agreed to by Owner for the Performance Tests
in accordance with SECTION 14.4.
1.114. Performance Tests. Those "Performance Tests" identified on
EXHIBIT "J", including the Operating Tests, the Capacity Test and the
Reliability Test.
1.115. Person. Any individual, corporation, company, voluntary
association, partnership, incorporated organization, trust, limited liability
company, or any other entity or organization, including any Governmental
Authority.
1.116. Plan. The term "Plan" shall have the meaning set forth in
SECTION 8.4.
1.117. RESERVED.
1.118. Products. Electrical Energy, outlet steam, silica filter cake,
and outlet brine.
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SALTON SEA UNIT 5 EPC CONTRACT
1.119. Production Inputs. Geothermal brine, water (potable, service,
and fire), Hydrochloric Acid, compressed air, steam, lime, flocculant,
condensate, cooling tower chemicals, NORMs inhibitor, and start-up power, that,
in each case, satisfies the requirements set forth in EXHIBIT "P".
1.120. Progress Payment Schedule. The Progress Payment Schedule
attached as EXHIBIT "D" setting forth payments to Contractor for completion of
various Milestones of the Work.
1.121. Project. The complete project to be designed, procured,
constructed, tested and commissioned under this Contract, together with all
ancillary equipment and subsystems, all Equipment necessary to produce the
Project outputs, together with all supporting improvements and
interconnections, as generally described in, and including all items described
in, the Statement of Work.
1.122. Project Contracts. The Land Rights Agreements and the Sales
Contracts.
1.123. Project Deadlines. The Mechanical Completion Deadline, the
Capacity Test Completion Deadline, the Substantial Completion Deadline and the
Final Completion Deadline.
1.124. Project Manager. The Project Manager designated by Contractor
and approved by Owner pursuant to SECTION 4.5.
1.125. Project Representative. The Project Representative designated
by Owner pursuant to SECTION 3.1.
1.126. Project Schedules. The Milestone Schedule and the Critical Path
Schedule.
1.127. Project Warranties. The warranties of Contractor under SECTION
18.1.
1.128. Punchlist. A schedule of Punchlist Items developed pursuant to
SECTION 15.3(E), which list must be reasonably satisfactory to the Owner.
1.129. Punchlist Items. Each item of Work that (a) Owner, Financing
Entities or Contractor identifies as requiring completion or containing
Defects, (b) does not impede the ability of Owner to safely operate the Project
in accordance with Industry Standards, (c) does not affect the operability,
safety or mechanical or electrical integrity of the Project and (d) the
completion or repair of which will neither interfere with, nor adversely
affect, the performance of the Project.
1.130. Reliability Guarantee. The Actual Net Electric Energy
Production will not be less than 96% of 49,000 kilowatts, subject to SECTION
16.2.4.
1.131. Reliability Test. The 28-day reliability test described in
EXHIBIT "J".
1.132. Remedial Plan. A plan of corrective action, submitted by
Contractor pursuant to SECTION 16.2, specifying in reasonable detail the
actions Contractor proposes to undertake to
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SALTON SEA UNIT 5 EPC CONTRACT
cause the Project to satisfy the Performance Guarantees and the period
of time in which Contractor proposes to complete the corrective action, which
period of time shall not extend beyond the date that is ninety (90) days after
the Capacity Test Completion Deadline.
1.133. Required Manuals. All operating data and manuals, spare parts
manuals, integrated and coordinated operation and maintenance manuals and
instructions, and training aids reasonably necessary to safely and efficiently
commission, test, start up, operate, maintain and shut down the Project . The
information shall be incorporated into a "Facilities Manual" and an "Equipment
Maintenance Manual" in accordance with Exhibit A.
1.134. Retainage. The amount withheld from payments to Contractor
pursuant to SECTION 7.5.
1.135. Sales Contracts. Those agreements set forth on EXHIBIT "T".
1.136. Salton Sea Plants. The geothermal power production facilities
owned by Salton Sea Power Generation L.P., Salton Sea Brine Processing L.P. and
Fish Lake Power Company, commonly known as the "Salton Sea Units 1, 2, 3 and
4."
1.137. Site. Those areas designated by Owner in EXHIBIT "A" for the
performance of Work, including the Existing Plant Sites and any additional
areas as may, from time to time, be designated in writing by Owner for
Contractor's use hereunder.
1.138. Site Conditions. The term "Site Conditions" shall have the
meaning set forth in SUBSECTION 5.1.5.
1.139. Spare Parts. Those Spare Parts identified on EXHIBIT "Q" or
required to be obtained by Contractor pursuant to Section 4.31 hereof.
1.140. Statement of Work. The requirements regarding the Work set
forth in this Contract or in EXHIBIT "A".
1.141. Subcontractor. Any Person other than Contractor performing any
portion of the Work (including any subcontractor of any tier) in furtherance of
Contractor's obligations under this Contract. For the avoidance of doubt, each
Vendor is a Subcontractor.
1.142. Substantial Completion. Satisfaction or waiver of all of the
conditions set forth in SECTION 15.3.
1.143. Substantial Completion Date. The date on which Substantial
Completion of the Project actually occurs.
1.144. Substantial Completion Deadline. Six hundred thirty-eight (638)
days after the Notice to Proceed Date, as such deadline may be modified in
accordance with the terms hereof.
1.145. Supplier. Any Person who will supply Production Inputs to the
Project, including the Imperial Irrigation District.
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1.146. RESERVED
1.147. Technology Licenses. Each of the licenses under the License
Agreements.
1.148. Technology Licensors. Each of the licensors under the License
Agreements.
1.149. Transporter. Any Person that will transport Production Inputs
to the Project or Products or other outputs or materials from the Project.
1.150. Unconditional Waiver of Liens. A sworn statement and waiver of
liens prepared by Contractor, Subcontractor or Vendor, as applicable, in the
form required by California Civil Code Section 3262 or any successor statute
thereto, which provides that such Person unconditionally waives and releases
all mechanic's liens, stop notices and bond rights with respect to all Work for
which Contractor requested payment in a previous Contractor's Invoice and for
which Contractor has received payment.
1.151. Unforseen Site Conditions. Unforseen Site Conditions shall have
the meaning ascribed to it as set forth in Section 5.1.5
1.152. U.S. Customary System. The primary system of weights and
measures (other than the metric system) used in the U.S. today inherited from,
but now different from, the British Imperial System of weights and measures.
1.153. Vendor(s). Persons that supply machinery, equipment, or
materials to Contractor or any Subcontractor in connection with the performance
of the Work and the construction of the Project.
1.154. Vulcan/Hoch Plants. The geothermal power production facilities
owned by Vulcan/BN Geothermal Power Company and Del Ranch, L.P., commonly known
as the "Vulcan plant" and the "Hoch (Del Ranch) plant," respectively.
1.155. Warranty Period. The greater of the eighteen (18) month period
from delivery of Equipment to the Site (it being understood that, for any
specific item of Equipment, such 18-month period shall commence on the delivery
of such item of Equipment to the Site) or the twelve (12) month period
commencing on the Substantial Completion Date and as deemed extended with
respect to any given item of Equipment, material, or device as specified in
SECTION 18.3.
1.156. Warranty Procedures. Those warranty procedures set forth on
EXHIBIT "S".
1.157. Work. All obligations, duties, and responsibilities assigned to
or undertaken by Contractor under this Contract with respect to the Project,
workshops, and warehouses, including all engineering and design, procurement,
manufacturing, construction and erection, installation, Equipment, training,
start-up (including calibration, inspection, and start-up operation), and
testing. Where this Contract describes a portion of the Work in general, but
not in complete detail, the Parties acknowledge agree that the Work includes
any incidental work that within
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SALTON SEA UNIT 5 EPC CONTRACT
the engineering industry and the construction industry is customarily included
in projects of the type contemplated by this Contract.
1.158. Zinc Contractor. The contractor pursuant to that certain Zinc
Recovery Project Engineering, Procurement, and Construction Contract entered
into between such contractor and CalEnergy Minerals LLC. with respect to the
construction of the Zinc Recovery Facility.
1.159. Zinc Recovery Facility. The zinc recovery facility, together
with all ancillary and related equipment, to be constructed adjacent to the Site
and at other sites near the Existing Plants concurrently with the Project
pursuant to that certain Zinc Recovery Project Engineering, Procurement, and
Construction Contract entered into between the Zinc Contractor and CalEnergy
Minerals LLC.
2. AGREEMENT, EXHIBITS, CONFLICTS
2.1. Exhibits. This Contract includes the Exhibits annexed hereto, and
any reference in this Contract to a "EXHIBIT" by letter designation or title
shall mean one of items listed in the Table of Exhibits below:
TABLE OF EXHIBITS
A Statement of Work
B Drawings
C Owner Acquired Permits
D Progress Payment Schedule
E Change In Work Form
F Form of Contractor's Invoice
G Critical Path Schedule Requirements
H RESERVED
I Determination of Buy-Down Amount
J Testing Required for Completion
K Key Personnel
L Owner Provided License and Royalty Agreements
M Summary Milestone Schedule
N Form of Monthly Progress Report
O Form of Parent Guaranty and Legal Opinion
P Production Inputs
Q Spare Parts to be Provided by Contractor
R Unit Rates
S Warranty Procedures
T Sale Contracts
U Form of Assignment Clause for Subcontracts
V-1 Contractor Acquired Insurance
V-2 Owner Acquired Insurance
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V-3 General Insurance Provisions
W Site Drawings
X Owner's Land Rights Agreements
Y Existing Plants Access Schedule
AA Owner Furnished Items
AB Reserved
AC Reserved
AD CalEnergy Safety Program
2.2. Terms; References. Terms defined in a given number, tense, or form
shall have the corresponding meaning when used in this Contract with initial
capitals in another number, tense, or form. Except as otherwise expressly noted,
reference to specific Sections, Subsections, and Exhibits are references to such
provisions of or attachments to this Contract. References containing terms such
as "hereof," "herein," "hereto," "hereinafter," and other terms of like import
are not limited in applicability to the specific provision within which such
references are set forth but instead refer to this Contract taken as a whole.
"Includes" or "including" shall not be deemed limited by the specific
enumeration of items, but shall be deemed without limitation.
2.3. Conflicts in Documentation. If there is an express conflict
between the provisions of this Contract and any Exhibit hereto, the terms of
this Contract shall take precedence over the conflicting provisions of the
Exhibit.
2.4. Documentation Format. This Contract and all documentation to be
supplied hereunder shall be in the English language. All dimensions shall be
specified in U.S. Customary System dimensions.
3. RESPONSIBILITIES OF OWNER
Owner shall, at Owner's cost and expense:
3.1. Project Representative. Designate (by a Notice delivered to
Contractor) a Project Representative, who shall act as a single point of contact
for Contractor with respect to the prosecution of the Work (but who shall not be
authorized to execute or make any amendments to, or provide waivers under, this
Contract), the Owner's Engineer it has selected for itself and the Consulting
Engineer selected by the Financing Entities.
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3.2. Operating Personnel. Commencing three (3) months prior to the
anticipated Mechanical Completion Date (as determined based on mutual agreement
on the circumstances existing at the time of determination), provide a
reasonably sufficient number of Operating Personnel from the operating
personnel working at the Existing Plants for training by Contractor as provided
pursuant to SECTION 4.21 and for testing, start-up, operation, commissioning,
and maintenance of the Project; provided, however, that Contractor shall remain
solely responsible for performing the Work in accordance with this Contract,
including Contractor's obligation to achieve Mechanical Test Completion,
Substantial Completion, Capacity Test Completion, and Final Completion on or
before the applicable Project Deadline, regardless of any failure,
non-achievement, or non-performance of the Operating Personnel, with the
exception of their willful misconduct.
3.3. Ministerial Assistance. Execute applications as Contractor may
reasonably request in connection with obtaining any of Contractor Acquired
Permits. Contractor shall indemnify, defend, and hold harmless Owner from and
against any and all claims, damages, losses, and expenses (including attorney's
fees and expenses) that Owner may incur as a result of executing any such
applications at Contractor's request.
3.4. Production Inputs and Products. Provide Production Inputs to
Contractor and ensure the ability to receive the Products as reasonably
necessary for the commissioning and testing of the Project.
3.5. Owner Acquired Permits. Obtain, with Contractor's reasonable
assistance (to be provided at no cost to Owner), and pay for all Applicable
Permits, other than Contractor Acquired Permits, including, without limitation,
those Applicable Permits set forth on EXHIBIT "C" (collectively, the "OWNER
ACQUIRED PERMITS").
3.6. Access to Site. Subject to SECTION 4.19, the Land Rights
Agreements and the Existing Plants Access Schedule, Owner shall make the Site
reasonably available to Contractor and assure reasonable rights of ingress and
egress to and from the Site for Contractor for performance of the Work;
provided, however, that Contractor shall coordinate with Owner regarding initial
entry onto the Site or any part thereof and contact with the persons identified
to Contractor who own property on or near, or have granted license or easement
rights in and to, the Site.
3.7. Owner Furnished Items. Supply certain materials, equipment, and
other items listed in EXHIBIT "AA" (which shall be installed by Contractor at
Contractor's expense) for the Project.
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4. RESPONSIBILITIES OF CONTRACTOR
In order for Contractor to complete the Work, Contractor shall:
4.1. Cost of Work. Except as delineated in Article 3.7, furnish, be
responsible for, and pay the cost of all of the Work, on a turnkey basis,
including labor, materials, Equipment and supervision necessary to engineer,
deliver, receive, off-load, store, construct, inspect, start-up, commission and
test the Project in accordance with the provisions of this Contract, including
all site work, levees, footings, foundations (including deep foundations),
pilings, drilled piers, construction materials, construction equipment, and
auxiliaries.
4.2. Performance of Work. Except as delineated in Article 3.7, perform
and complete the Work, without any Defects, in accordance with the terms of the
Contract and in compliance with Industry Standards, Applicable Laws, Applicable
Permits and the Project Contracts. In addition , Contractor shall perform and
complete all of the Work such that the Work will not have a material adverse
effect on the operations of the Existing Plants.
4.3. Facilities. Provide all communication facilities, construction
water, construction electricity and sanitary facilities to be used by Contractor
and Subcontractors through Substantial Completion.
4.4. Organization. Maintain a qualified and competent organization at
the Site with adequate capacity and numbers of construction and start-up
personnel, Equipment, and facilities to execute the Work in a safe, efficient,
environmentally sound, and professional manner at a rate of progress in
accordance with the Milestone Schedule and the Critical Path Schedule.
4.5. Project Manager/Staff. Designate a Project Manager acceptable to
Owner who will have full responsibility for the prosecution of the Work and will
act as a single point of contact in all matters on behalf of Contractor. Provide
staff to supervise and coordinate the Work of Contractor, Subcontractors and
Vendors on the Site. The Key Personnel shall at all times hold the positions and
be dedicated to the performance of the duties described in EXHIBIT "K". Any
replacement of the Key Personnel shall be subject to the prior written consent
of Owner. If Owner fails to respond to a request for consent within ten (10)
Business Days after Contractor's request, Owner shall be deemed to have
consented to the proposed individual.
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4.6. Contractor Acquired Permits. Obtain all Contractor Acquired
Permits and provide copies to Owner at Owner's request upon Substantial
Completion.
4.7. Inspection. Perform all inspection, expediting, quality
surveillance, and other like services required for performance of the Work,
including inspecting all materials and Equipment that comprise the Project or
that are to be used in the performance of the Work.
4.8. Maintenance of Site. Maintain the Site clear of debris, waste
material, and rubbish.
4.9. Price Allocation Schedule. Provide a price allocation schedule
for the Work and other information reasonably necessary for Owner to maintain
segregated accounts for its tax records and fixed asset records. (Owner will
establish its code of accounts within thirty (30) days of contract execution
and deliver the same to Contractor).
4.10. Claims. In the event of a claim under this Contract involving an
amount greater than $10,000, grant audit rights to Owner with respect to all
relevant documentation pertaining to such claim.
4.11. Safeguards. Comply with the requirements of EXHIBIT "A" and
EXHIBIT "AD" and provide all necessary and reasonably appropriate safeguards at
the Site for the protection of the Work, the Project, and all persons and other
property related thereto, including lights and barriers, guard service,
controlled access, and other measures developed pursuant to a safety assurance
program reasonably acceptable to Owner, or otherwise reasonably required to
prevent vandalism, theft, and danger to the Project and personnel. Within
thirty (30) days after the Notice to Proceed Date, Contractor shall provide a
Notice to Owner describing such safety assurance program to be used by
Contractor in the performance of the Work. Owner shall have the right to
promptly review and comment on such program as described in Contractor's Notice
hereunder; provided, however, that Contractor shall remain solely responsible
for performing the Work in accordance with this Contract. If Owner provides any
comments with respect to such safety program to Contractor, then Contractor
shall incorporate changes into such safety program addressing such comments,
and resubmit the same to Owner. Such incorporation of changes to address
Owner's comments shall not be considered a Change In Work. If Owner fails to
comment within twenty (20) Business Days after receipt of such Notice, Owner
shall be deemed to have accepted such safety program. To the extent the Work is
conducted at the Existing Plant Sites, Contractor shall at all times, at a
minimum, meet the requirements of the CalEnergy Safety Program (REFERENCE
EXHIBIT "AD").
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4.12. Equipment. Arrange for complete handling of all Equipment, and
construction equipment, including inspection, expediting, shipping, loading,
unloading, customs clearance, receiving, storage, and claims.
4.13. Temporary Materials. Provide all temporary construction
materials, equipment, supplies, construction utilities and facilities, special
tools, and commissioning supplies reasonably necessary or appropriate for, and
replace any Spare Parts used during, the construction, start-up, testing,
commissioning, and operation and maintenance of the Project until achievement
of Substantial Completion. By delivery of a Notice to Owner prior to the
disposition of any surplus construction materials, Spare Parts, or supplies
remaining on the Site on the Substantial Completion Date (other than materials
and supplies necessary to achieve Final Completion), Contractor shall give
Owner the option to purchase such items at a price not exceeding Contractor's
cost therefor. Owner shall exercise such right, if it so elects, within thirty
(30) days after receipt of such Notice.
4.14. Operating Consumables. Provide all Operating Consumables
necessary or appropriate for the start-up, testing, commissioning, operation
and maintenance of the Project until achievement of Substantial Completion,
which shall be for Owner's account except for lube oils and grease which shall
be for Contractors' account.
4.15. Applicable Laws/Permits. Provide all technical support and
information, and other reasonably requested information, to enable Owner to
apply for and obtain Owner Acquired Permits. Comply in all respects with all
Applicable Laws and Applicable Permits relating to the Project, the Site, and
the performance of the Work, and perform the Work so that, upon Substantial
Completion, the Project meets, and will be capable of being operated in
compliance with all requirements of, Applicable Laws and Applicable Permits and
using methods and Equipment that satisfy Industry Standards; provided that
Contractor shall be entitled to a Change In Work in accordance with ARTICLE 17
if any Owner Acquired Permit identified on EXHIBIT "C" which is not in final
form on the date hereof and is issued with material modifications from the
conditions, obligations, and/or requirements identified in the permit
application or draft permit previously provided to Contractor. Contractor shall
be responsible for all damages, fines, and penalties that may arise (including
those that Owner pays or becomes liable to pay) because of non-compliance with
such requirements to the extent due to acts or omissions of Contractor or any
Subcontractor or Vendor, other than any damages, fines, and penalties to the
extent due to the acts or omissions of Owner, Owner's employees and agents, or
other third parties under the control of Owner, and shall assume responsibility
for any costs and liabilities arising from any environmental damage or adverse
health impacts that may be caused by Contractor's negligence or willful
misconduct in constructing or failing to construct the Project or performing or
failing to perform the Work.
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4.16. Replacement at Owner's Request. Within ten (10) days after
request by Owner, remove from the Site and performance of the Work, and cause
any Subcontractor or Vendor to remove from the Site and performance of the
Work, and as soon as reasonably practicable, replace, any individual performing
the Work (including any of the Key Personnel) whom Owner believes to be
creating a safety hazard or a material risk of either (i) non-achievement of
Final Completion or (ii) material non-performance by Contractor in accordance
with this Contract.
4.17. Quality Assurance Programs. Use effective quality assurance
programs, acceptable to Owner and consistent with the requirements of EXHIBIT
"A" and EXHIBIT "AC", in performing the Work. Within thirty (30) days after the
Notice to Proceed Date, Contractor shall provide a Notice to Owner describing
such quality assurance programs to be used by Contractor in the performance of
the Work. Owner shall have the right to promptly review and comment on such
programs as described in Contractor's Notice hereunder; provided, however, that
Contractor shall remain solely responsible for performing the Work in
accordance with this Contract. If Owner provides any comments with respect to
such quality assurance programs to Contractor, then Contractor shall
incorporate changes into such quality assurance programs addressing such
comments, and resubmit the same to Owner. Such incorporation of changes to
address Owner's comments shall not be considered a Change In Work. If Owner
fails to comment within fifteen (15) Business Days after receipt of such
Notice, Owner shall be deemed to have accepted such programs.
4.18. Access
4.19. Generally. Use only the entrance(s) to the Site specified by
Owner for ingress and egress of all personnel, equipment, vehicles, and
materials. Contractor shall perform the Work consistent and in accordance with
the Land Rights Agreements, and the Existing Plants Access Schedule, in and to
the Site.
4.20. Access to Existing Plant Sites. Contractor shall undertake any
Work that will or reasonably might be expected to interfere with or disrupt the
operations of any Existing Plant only during the times and in the manner set
forth in the Existing Plants Access Schedule. Contractor shall neither disrupt
nor interfere with the operations of any Existing Plant during any other
period. The Parties expressly understand that the Existing Plants Access
Schedule has been developed so as to minimize the lost revenues that the
Existing Plant Owners would suffer as a result of Contractor's performance of
the Work while providing Contractor with sufficient access to perform the Work,
and any deviation by Contractor from such Existing Plants Access Schedule
likely would have a material adverse effect on the operations and revenues of
the Existing Plants. If Contractor requires access to an Existing Plant to
undertake any Work that will or reasonably might be expected to interfere with
or disrupt the operations of any Existing Plant other than as set forth in the
Existing Plants Access Schedule, then Contractor shall promptly provide Notice
thereof to Owner. Contractor and Owner shall endeavor to reach a reasonable
accommodation with regard to such access that would minimize any interruption
or disruption to the operations of any Existing Plant, but failure
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SALTON SEA UNIT 5 EPC CONTRACT
to reach such accommodation shall not relieve the Contractor from any of its
obligations under this Contract.
4.21. Other Assistance. Until Final Completion, (i) to the extent
reasonably requested by Owner, Contractor will assist Owner in dealing with
Suppliers, Customers, Transporters, Governmental Authorities, and the Financing
Entities in any and all matters relating to the Work (including any
Interconnection facilities) and (ii) cooperate to the extent reasonably
necessary to enable Owner to perform its obligations under Owner's agreements
with the Financing Entities.
4.22. Data; Drawings. Provide all operating data and preliminary and
final as-built drawings necessary to safely and efficiently start up, test,
operate, shut down, and maintain the Project (including those set forth in
EXHIBIT "A").
4.23. Training of Operating Personnel
4.24. Commencement of Training. Commencing on the date that is three
(3) months prior to the anticipated Mechanical Completion Date (as determined
by Owner based on the circumstances existing at the time of determination),
train the designated Operating Personnel in the requirements for the start-up,
shut-down, operation and maintenance of, and safety, general process
understanding and emergency procedures for, the Project and all of its
sub-systems. Until Substantial Completion, the Operating Personnel provided by
Owner pursuant to SECTION 3.2 shall work under the management, supervision, and
direction of Contractor; provided, however, that such Operating Personnel shall
not be deemed employees or Subcontractors of Contractor; provided, further,
that Contractor shall remain solely responsible for performing the Work in
accordance with this Contract, including Contractor's obligation to achieve
Mechanical Test Completion, Capacity Test Completion, Substantial Completion
and Final Completion by the applicable Project Deadline, regardless of any
failure, non-achievement, or non-performance of the Operating Personnel, with
the exception of their willful misconduct.
4.25. Design and Review of Training Program. Contractor will design
the training program (in accordance with the provisions of EXHIBIT "A") and
submit it to Owner by no later than the date that is seven (7) months prior to
the anticipated Mechanical Completion Date. Owner will review, comment on, and
approve or disapprove such program in writing within forty-five (45) days after
such submission by Contractor. If Owner conditions its approval on reasonable
changes in the program submitted by Contractor, Contractor will effect such
changes at no additional cost to Owner and resubmit the program to Owner within
ten (10) days after Contractor receives Owner's conditional approval. Owner
will
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SALTON SEA UNIT 5 EPC CONTRACT
have ten (10) days after such resubmission to review, comment on, and approve
or disapprove the program resubmitted by Contractor. Such procedure shall
continue with the same ten (10) day time periods until a program is approved by
Owner; provided, however, that if the Parties cannot reach agreement after the
third submittal by Contractor, the differences of the Parties shall be resolved
in accordance with the expedited payment dispute procedures provided in Article
36. If Owner fails to respond within any of the applicable periods specified
above, Owner shall be deemed to have approved the last such program submitted
by Contractor.
4.26. Announcements; Publications. Coordinate with Owner with respect
to, and provide advance copies to Owner for review of, the text of, any
proposed announcement or publication that includes any non-public information
concerning the Work prior to the dissemination thereof to the public or to any
Person other than Subcontractors, Vendors, the Financing Entities, or advisors
of Contractor, in each case, who agree to keep such information confidential.
If Owner delivers written notice to Contractor rejecting any such proposed
announcement or publication within two (2) Business Days after receiving such
advance copies, the Contractor shall not make such public announcement or
publication; provided, however, that Contractor may disseminate or release such
information in response to requirements of Governmental Authorities.
4.27. Intentionally Deleted
4.28. Documents Requested by Financing Entities. Provide such data,
reports, certifications, opinions of counsel, and other documents, up to a
maximum of ten (10) copies each, or assistance related to the Work or this
Contract as may be reasonably requested by the Financing Entities with respect
to the financing of the Project; provided, however, that the provision of this
information shall not in any manner modify Contractor's rights or obligations
under any other provision of this Contract.
4.29. Critical Path Schedule. Within sixty (60) days after the Notice
to Proceed Date, Contractor shall provide Owner with a Critical Path Schedule
that satisfies the requirements set forth in EXHIBIT "G" and is consistent with
the Milestone Schedule. This schedule shall become the baseline schedule that
all updates shall be compared against, and may only be revised with Owner's
written concurrence. Thereafter, Contractor shall advise Owner of any proposed
Critical Path Schedule changes of more than thirty (30) days and promptly
provide Owner with any revisions thereto and reasons therefor. In connection
therewith, Contractor shall employ a project management system able to provide
schedule monitoring and analysis which shall include a comparison of the
Critical Path Schedule with the actual progress for each time period with all
variances noted. Schedule analysis shall include a determination of the impact
of such variance, if material, on the Critical Path Schedule and any action
necessary to correct the variance. Utilizing the critical path method,
Contractor shall continually be aware of factors that are delaying or that
could delay the Milestone Schedule and shall take remedial actions reasonably
within its control to eliminate or minimize schedule delays including, without
limitation, over-time for the employees of Contractor and Subcontractors and
the assignment of additional personnel and/or other resources.
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During construction, the Contractor will update its Critical Path Schedule to
reflect the current status of the Work. At a minimum, the updates will be
performed and provided to the Owner on a monthly basis as part of the Monthly
Progress Report.
4.30. Monthly Progress Report. Following the Notice to Proceed,
Contractor shall prepare a Monthly Progress Report in the form of EXHIBIT "N"
and submit it to Owner within ten (10) days after the end of each calendar
month and as part of the Contractor's Invoice submitted pursuant to SECTION
7.1. In addition, Contractor shall keep, and furnish to Owner at Owner's
request, such information as Owner, Consulting Engineer or any of the Financing
Entities may reasonably require to determine that the Work is progressing
according to the Milestone Schedule and the Critical Path Schedule and for the
purpose of confirming that Milestone Payments are due hereunder. Contractor
also shall keep daily logs at the Site and shall provide to Owner copies of
weekly reports of actual construction progress as compared with scheduled
progress.
4.31. Accident Reports. Provide Owner with written accident reports
for accidents that occur at the Site, prepared in accordance with the safety
assurance program approved by Owner pursuant to SECTION 4.11. Provide Owner
with copies of all written communications with Governmental Authorities and
insurance companies (including any notices) with respect to accidents that
occur at the Site, and thereafter provide such written reports relating thereto
as Owner may reasonably request.
4.32. Punchlist. On a bi-weekly basis after Substantial Completion,
revise and update the Punchlist and schedule and budget therefor as initially
prepared in accordance with SECTION 15.3(E).
4.33. Measurements. Exclusively use the U.S. Customary System units of
measurement in the design process and in all specifications, drawings, and
other documents except for foreign supply sources on lists of approved
Subcontractors pursuant to SECTION 10.1.
4.34. Meetings. Schedule and conduct periodic meetings with Owner in
accordance with the requirements of EXHIBIT "A", before mobilization, at
Contractor's office, the Zinc Contractor's office, or such other location as
the Parties may agree, and after mobilization, at the Site, the Zinc
Contractor's office, or such other location as the Parties may agree, for the
purpose of reviewing the progress of the Work and adherence to the Milestone
Schedule and the Critical Path Schedule. The frequency of such meetings shall
be established and modified, from time to time, by mutual agreement of Owner
and Contractor; provided, however, Owner shall be entitled to require that
meetings occur as frequently as weekly. However, Owner shall not request
meetings more frequently than monthly at locations other than Contractor's
facilities or the Site. If Owner requests that Contractor cause a
representative of any Subcontractor (having a subcontract value
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in excess of $250,000) to attend any such meeting, then Contractor shall cause
a representative of such Subcontractor to attend such meeting.
4.35. Spare Parts. Deliver the Spare Parts listed in EXHIBIT "Q" so
that they arrive at the Site at least three (3) months prior to the anticipated
Substantial Completion Date (as such date is then reasonably estimated by Owner
based on the circumstances existing at the time of the determination). No later
than fifteen (15) days prior to the purchase of any Equipment, Contractor shall
provide Owner with (1) a list of available Spare Parts associated with such
Equipment, (2) those of such Spare Parts that the applicable Vendor recommends
that Owner obtain for the Project and (3) those of such Spare Parts that
Contractor reasonably suggests that Owner obtain for the Project. If Owner
prior to the expiration of such fifteen (15) day period requests Contractor to
purchase any such Spare Parts for the Project then Contractor shall purchase
such parts for Owner's account and shall cause such Spare Parts to be delivered
to the Site no later than three (3) months prior to the anticipated Substantial
Completion Date.
4.36. Hazardous Materials. Contractor shall not and shall not permit
any of its Subcontractors, directly or indirectly to, permit the manufacture,
storage, transmission or presence of any Hazardous Materials on the Site except
in accordance with Applicable Laws. Contractor shall not and shall not permit
any of its Subcontractors to release, discharge or otherwise dispose of any
Hazardous Materials on the Site. Owner shall conduct and complete all
investigations, studies, sampling and testing of the Site in connection with
the potential presence of Hazardous Materials at the Site to the extent
required in connection with the Work under any Applicable Laws and Contractor
shall promptly comply with all lawful orders and directives of all Governmental
Authorities regarding Applicable Laws except to the extent any such orders or
directives are being contested in good faith by appropriate proceedings in
connection with the Work. If Contractor discovers, encounters or is notified of
the existence of any contaminated materials or Hazardous Materials at the Site,
then Contractor shall (i) promptly notify Owner thereof and cordon off the area
containing such contaminated materials or Hazardous Materials; (ii) if
Contractor or any Subcontractor is responsible for the placement of or
discharge of such contaminated materials or Hazardous Materials, remove such
contaminated materials or Hazardous Materials from the Site and remediate the
Site at Contractor's sole cost and expense; and (iii) if Contractor or any
Subcontractor is responsible for the placement of or discharge of such
contaminated materials or Hazardous Materials, not be entitled to any extension
of time or additional compensation hereunder for any delay or costs incurred by
Contractor as a result of the existence of such contaminated materials or
Hazardous Materials. If Contractor or any Subcontractor is not responsible for
the placement or discharge of such contaminated materials or Hazardous
Materials, Contractor and Owner may agree on an appropriate Change in Work
which provides for Contractor to remediate the Site. Such a Change in Work will
entitle Contractor to additional time and money to perform the remediation
effort as well as an extension of time or additional compensation hereunder for
delay or costs incurred by Contractor as a result of the original scope of Work
being delayed or made more difficult by the existence of such contaminated
materials or Hazardous Materials. Contractor however will not be obligated to
remediate the Site and may, even if it does not perform such activity, be
entitled to an adjustment to the Contract Price, the Substantial Completion
Deadline or any other Project
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Deadline as if such an event constituted an Owner request for Change in Work or
Owner Caused Delay in accordance with Article 17. Owner shall furnish Owner
Furnished Items free and clear of all Hazardous Materials. Contractor shall
treat Geocrete in accordance with Section 5.1.5.
4.37. Design of Project. Contractor shall design the Project so that
it is capable of operation, at the design levels specified in the Statement of
Work, in compliance with Industry Standards, Applicable Law and Applicable
Permits in effect at the time of Substantial Completion. In addition,
Contractor shall design the Project such that the Work and the Project will not
have a material adverse effect on the operations of the Existing Plants.
4.38. Coordination With Zinc Contractor. Contractor shall cooperate
and coordinate with Owner and with the Zinc Contractor who will construct the
Zinc Recovery Facility to avoid any disruption in the progress of the Work or
the progress of the work to be performed by the Zinc Contractor. Contractor
shall afford the Zinc Contractor reasonable opportunity for the introduction
and storage of its materials and equipment and performance of its activities
and shall connect and coordinate Contractor's construction and operations with
the Zinc Contractor's construction and operations. Notwithstanding any other
provision of this Contract, Contractor understands that the Zinc Contractor
will be constructing certain improvements on various locations adjacent to the
Site and near the Existing Plants, and Contractor shall not claim Force Majeure
or Owner Caused Delay or request a Change In Work as a result of any act or
omission of the Zinc Contractor. The foregoing release however shall not
relieve Owner of its obligations for timely delivery of Production Inputs or
for ensuring its ability to receive the Products produced by the Project.
4.39. Coordination With Existing Plant Owners. While performing work
on Existing Plant Sites, Contractor shall cooperate and coordinate with Owner
and with the Existing Plant Owners to avoid any disruption or interference with
the operations of any Existing Plant. Contractor understands that the Existing
Plant Owners will be performing certain operation and maintenance activities at
the Existing Plant Sites and various other locations at or near the Existing
Plants, and, to the extent the Existing Plant Owners are performing such
activities in accordance with their standard operating and maintenance
procedures, Contractor will not claim Force Majeure or Owner Caused Delay or
request a Change In Work as a result of any act or omission of the Existing
Plant Owners.
5. COVENANTS, WARRANTIES AND REPRESENTATIONS
5.1. Of Contractor. Contractor covenants, represents, and warrants to
Owner that:
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5.1.1. Organization, Standing and Qualification. Contractor is a
corporation, duly organized, validly existing, and in good standing under the
laws of Massachusetts, and has, or will have by the Notice to Proceed Date,
full power to engage in the business it presently conducts and contemplates
conducting, and is and will be duly licensed or qualified and in good standing
under the laws of California and in each other jurisdiction wherein the nature
of the business transacted by it makes such licensing or qualification
necessary and where the failure to be licensed or qualified would have a
material adverse effect on its ability to perform its obligations hereunder.
5.1.2. Professional Skills. Contractor has all the required authority,
ability, skills, experience and capacity necessary to perform and shall
diligently perform the Work in a timely and professional manner, utilizing
sound engineering principles, project management procedures, construction
procedures and supervisory procedures, all in accordance with Industry
Standards. Contractor has the experience and skills necessary to determine, and
Contractor has reasonably determined, that Contractor can perform the Work for
the Contract Price.
5.1.3. Enforceable Contract. This Contract has been duly authorized,
executed, and delivered by Contractor and constitutes the legal, valid, and
binding obligation of Contractor, enforceable against Contractor in accordance
with its terms.
5.1.4. Due Authorization. The execution, delivery, and performance by
Contractor of this Contract will not violate or conflict with (i) any
Applicable Laws, (ii) any covenant, agreement, or understanding to which it is
a party or by which it or any of its properties or assets is bound or affected,
or (iii) its organizational documents; and will not subject the Project or any
component part thereof or the Site or any portion thereof to any lien other
than as contemplated or permitted by this Contract.
5.1.5. Site Conditions. Contractor and Owner have both conducted
investigations regarding the Site. As a result the Parties agree to the
following apportionment of risks related to the Site Conditions.
5.1.5.1. Contractor's Risks. Contractor has investigated the Site and
each other location where any portion of the Work shall be performed and
surrounding locations, including both surface and subsurface conditions, to the
extent Contractor deems necessary for Contractor's purposes and is familiar with
and has satisfied itself with respect to the nature and location of the Work and
the general and local conditions in and around the Site with respect to the
environment, transportation, access, waste disposal, handling and storage of
materials, availability and quality of electric power, availability and quality
of water, availability and quality of roads, climatic conditions and seasons,
physical conditions at the Site and the surrounding area as a whole, topography
and ground surface conditions, sound attenuation conditions, subsurface geology
and conditions, nature and quantity of surface and subsurface materials to be
encountered (excluding Hazardous Materials) but including equipment and
facilities needed before and during performance of all
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Contractor's obligations under this Contract. (the foregoing, collectively, the
"Site Conditions"). Contractor also acknowledges that the Site and surrounding
area is subject to high temperatures and hot weather during summer months which
may interfere with Contractor's ability to perform the Work. Contractor
specifically acknowledges and accepts the foregoing Site Conditions and agrees
that neither the Substantial Completion Deadline nor any other Project Deadline
shall be extended, the Contract Price shall not be modified, and Contractor
shall not be entitled to, request or be granted any Change in Work, as a result
of any such Site Conditions. Should the Site Conditions be at variance with the
condition of the Site indicated by this Contract, or should unknown physical
conditions below the surface of the ground or water or should physical or
unknown conditions in an existing structure of an unusual nature, differing in
any way from those ordinarily encountered and generally recognized as inherent
in work of the character provided for in this Contract, be encountered neither
the Contract Price nor the Substantial Completion Deadline nor any other
Project Deadline shall be adjusted, and Contractor shall complete the Work for
the Contract Price, absorbing all unexpected expenses.
5.1.5.2. Owner's Risks. Owner accepts the risks that any manmade
subsurface structures encountered in any location where the Work is to be
performed (which are found in any location(s) (other than those which have been
previously identified to Contractor and included in (i) as-built drawings for
Salton Sea Units 3 and 4 (which Owner shall make available to Contractor on
request), (ii) Exhibit A or (iii) Exhibit A, Part 4, along with any
archeological finds (each an "Unforeseen Site Conditions") may be the basis for
adjustment to the Contract Price, the Substantial Completion Deadline or any
other Project Deadline as if such event constituted an Owner request for Change
In Work or Owner Caused Delay in accordance with Article 17.
5.1.5.3. Geocrete. To the extent that Contractor encounters Geocrete
in the quantities and locations specified in the Exhibit W Contractor shall
excavate the Site and remove the Geocrete to a location on Site designated by
Owner for temporary storage disposal of this material into containers provided
by Owner. Contractor hereby waives any right to claim any delay or increase
costs as a result of Contractor encountering this Geocrete in quantities
specified in the Exhibit W. Owner agrees to assume responsibility for the
ultimate disposal of this material in containers in accordance with Applicable
Laws and hereby agrees to defend and indemnify Contractor from any and all
claims arising from the ultimate disposal of this material.
5.1.6. Government Approvals. No authorization, approval, exemption, or
consent by any Governmental Authority (other than the Applicable Permits) is
required in connection with the authorization, execution, delivery, and
performance of this Contract by Contractor. The Contractor Acquired Permits
either have been obtained by Contractor and are in full force and effect on the
date hereof or will be obtained by Contractor and will be in full force and
effect on or prior to the date on which they are required, under Applicable
Law, to be in full force and effect, so as to permit Contractor to commence and
prosecute the Work to completion in accordance with the Project Schedules.
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5.1.7. No Suits, Proceedings. There are no actions, suits,
proceedings, patent or license infringements, or investigations pending or, to
Contractor's knowledge, threatened against it at law or in equity before any
court (United States or otherwise) or before any Governmental Authority
(whether or not covered by insurance) that individually or in the aggregate
could result in any materially adverse effect on the business, properties, or
assets or the condition, financial or otherwise, of Contractor or in any
impairment of its ability to perform its obligations under this Contract.
Contractor has no knowledge of any violation or default with respect to any
order, writ, injunction, or decree of any court or any Governmental Authority
that may result in any such materially adverse effect or such impairment.
5.1.8. Patents. Other than those patents, trademarks, service marks,
tradenames, copyrights, licenses, franchises and permits included in the
License Agreements and the Owner Acquired Permits, Contractor owns or has the
right to use all patents, trademarks, service marks, tradenames, copyrights,
licenses, franchises, and permits necessary to perform the Work without
conflict with the rights of others.
5.1.9. Legal Requirements. The Project shall be built in conformity
with Applicable Laws and Applicable Permits as of the Substantial Completion
Date.
5.1.10. Business Practices. Contractor and its representatives have
not made any payment or given anything of value, and Contractor will not, and
Contractor will direct its employees, agents, and Subcontractors directly
contracting with Contractor, and their employees or agents to not, make any
payment or give anything of value, in either case to any government official
(including any officer or employee of any Governmental Authority) to influence
his, her, or its decision or to gain any other advantage for Owner or
Contractor in connection with the Work to be performed hereunder. None of
Contractor, its Subcontractors or Vendors, or any of their employees or agents
shall take any action that in any way violates the United States Foreign
Corrupt Practices Act or any similar Applicable Law. Contractor shall
immediately notify Owner of any violation of this covenant (or of the direction
described in the immediately preceding sentence) and shall indemnify and hold
Owner harmless for all losses, expenses, damages, and liabilities arising out
of such violation.
5.1.11. Turnkey Project. Contractor acknowledges that this Contract
constitutes a fixed price obligation to engineer, design, procure, construct,
test and start up through Substantial Completion a turnkey Project (including
the training of Owner's operating staff), complete in every detail, within the
time and for the purpose designated herein by Owner. References to the
obligations of Contractor under this Contract as being "TURNKEY" and performing
the Work on a "TURNKEY BASIS" means that Contractor is obligated to supply all
of the Equipment (except Owner Furnished Items ), labor and design services and
to supply and perform all of the Work, in each case as may reasonably be
required, necessary, or appropriate (whether or not specifically set forth in
this Contract) to
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complete the Work such that the Project satisfies the applicable terms and
conditions set forth in this Contract, all for the Contract Price.
5.1.12. Owner-Provided Information. Owner may provide or may have
provided Contractor with copies of certain studies, reports or other
information (including oral statements) and Contractor acknowledges that all
such documents or information have been or will be provided as background
information and as an accommodation to Contractor. Except as provided in Owner
Furnished Items in EXHIBIT "AA", Contractor further acknowledges that Owner
makes no representations or warranties with respect to the accuracy of such
documents or the information (including oral statements) or opinions therein
contained or expressed. Contractor further represents and warrants that it is
not relying on Owner for any information, data, inferences, conclusions, or
other information with respect to Site Conditions, including the surface and
sub-surface conditions of the Site and the surrounding areas.
5.1.13. Legal Requirements. Contractor has knowledge of all of the
legal requirements and business practices that must be followed in performing
the Work and Contractor's warranty obligations herein. The Work and
Contractor's warranty obligations herein will be performed in conformity with
such requirements and practices and in compliance with all Applicable Laws.
5.1.14. Financial Condition. Contractor is financially solvent, able
to pay its debts as they mature, and possessed of sufficient working capital to
complete its obligations under this Contract. Contractor is able to furnish the
Equipment, labor, and design services needed for the Project, is experienced in
and competent to perform the Work, both construction and design, contemplated
by this Contract, and is qualified to do the Work.
5.1.15. Licenses. All Persons who will perform any portion of the Work
have and will have all business and professional certifications required by
Applicable Law to perform the services under this Contract.
5.1.16. Building Codes. The Project can and shall be built in
conformity with applicable California building codes, construction related
regulations and construction related directives of all Governmental
Authorities.
5.2. Of Owner. Owner covenants, represents, and warrants to Contractor
that:
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5.2.1. Organization, Standing and Qualification. Owner is a limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware, has full power to engage in the business
Owner presently conducts and contemplates conducting, and is and will be duly
licensed or qualified and in good standing in each jurisdiction wherein the
nature of the business transacted by it makes such licensing or qualification
necessary and where the failure to be licensed or qualified would have a
material adverse effect on its ability to perform its obligations hereunder.
5.2.2. Enforceable Contract. This Contract has been duly authorized,
executed, and delivered by Owner and constitutes the legal, valid, and binding
obligation of Owner, enforceable against Owner in accordance with its terms.
5.2.3. Due Authorization. The execution, delivery, and performance by
Owner of this Contract will not conflict with (i) any Applicable Laws, (ii) any
covenant, agreement, or understanding to which it is a party or by which it or
any of its properties or assets is bound or affected, or (iii) its certificate
of incorporation or by-laws.
5.2.4. Governmental Approvals. No authorization, approval, exemption,
or consent by any Governmental Authority (other than the Applicable Permits) is
required in connection with the execution, delivery, and performance of this
Contract by Owner. The Owner Acquired Permits either have been obtained by
Owner and are in full force and effect on the date hereof or will be obtained
by Owner and will be in full force and effect, so as to permit Contractor to
commence and prosecute the Work to completion in accordance with the Project
Schedules.
5.2.5. No Suits, Proceedings. There are no material actions, suits,
proceedings, or investigations pending or, to its knowledge, threatened against
it at law or in equity before any court (United States or otherwise) or before
any Governmental Authority (whether or not covered by insurance) that
individually or in the aggregate could result in any materially adverse effect
on the business, properties, or assets or the condition, financial or
otherwise, of Owner or in any impairment of its ability to perform its
obligations under this Contract. Owner has no knowledge of any violation or
default with respect to any order, writ, injunction, or any decree of any court
or any Governmental Authority that may result in any such materially adverse
effect or such impairment.
5.2.6. Business Practices. Owner will not, and Owner will direct its
employees, agents, and subcontractors, and their employees and agents to not,
make any payment or give anything of value to any government official
(including any officer or employee of any Government Authority) to influence
his, her, or its decision or to gain any other advantage for Owner or
Contractor in connection with the Work to be performed hereunder. Neither Owner
nor any of its employees or agents shall take any action that violates the
United States Foreign Corrupt Practices Act or any similar Applicable
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Law. Owner shall immediately notify Contractor of any violation of this
covenant (or of the direction described in the immediately preceding sentence)
and shall indemnify and hold Contractor harmless for all losses, expenses,
damages, and liabilities arising out of such violation.
6. COST OF WORK
6.1. Contract Price. As full compensation for the Work, Owner shall
pay to Contractor a fixed price amount of U.S. $91,787,000 (the "CONTRACT
PRICE"). The Contract Price shall be changed only by Changes in Work approved
in accordance with ARTICLE 17. The Contract Price shall be paid in accordance
with ARTICLE 7.
6.2. All Items of Work Included. The Contract Price includes payment
for (i) all costs of Equipment, temporary equipment, materials, labor,
transportation, engineering, design and other services relating to Contractor's
performance of its obligations under this Contract and the Work (including any
intellectual property rights licensed under this Contract, expressly or by
implication) provided by Contractor or such Subcontractors or Vendors, (ii) all
United States federal, state, regional, and local taxes, effective or enacted
as of the date of execution of this Contract or thereafter , each as imposed on
Contractor or its Subcontractors or Vendors or the Work, (iii) all other taxes,
duties, levies, imposts, fees, or charges of any kind (whether in the United
States or elsewhere and including, without limitation, any of the foregoing
related to the importation of any items into the United States) arising out of
Contractor's or any such Subcontractor's or Vendor's performance of the Work,
and (iv) any duties, levies, imposts, fees, charges, and royalties (and
including, without limitation, any of the foregoing related to the importation
of any items into the United States) imposed on Contractor or its
Subcontractors or Vendors with respect to any Equipment, materials, labor, or
services provided under this Contract. The taxes covered hereby include
occupational, excise, unemployment, ownership, value-added, gross receipts, and
income taxes and any and all other taxes and duties on any item or service that
is part of the Work, whether such tax is normally included in the price of such
item or service or is normally stated separately, all of which shall be for the
account of Contractor. The Contract Price shall not be increased with respect
to any of the foregoing or with respect to any withholdings in respect of any
of the foregoing items that Owner may be required to make. Notwithstanding the
foregoing, Contractor shall not be liable for, and the Contract Price shall not
include any real estate taxes or ownership taxes on the Site.
7. TERMS OF PAYMENT
Payments to Contractor shall be made as follows:
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7.1. Milestones; Contractor's Invoices. Within two (2) Business Days
after the Notice to Proceed Date, Owner shall pay Contractor the amount shown
on the Progress Payment Schedule as the first Milestone Payment. Thereafter, on
or about the tenth (10th) day of each month after receipt of the Notice to
Proceed, Contractor shall submit a Contractor's Invoice in the form of EXHIBIT
"F" to Owner for the Work performed thereunder in the then immediately
preceding month. Contractor specifically agrees that it shall not request in
any Contractor's Invoice the payment of any sum attributable to Work which has
been rejected by Owner or Contractor or which otherwise constitutes or relates
to a Subcontractor's application for payment, billings or invoices which
Contractor disputes or for any other reason does not intend to pay in
accordance with the terms of Contractor's agreements with its Subcontractors.
Subject to the provisions of this ARTICLE 7, Owner shall pay Contractor each
Milestone Payment described on the Progress Payment Schedule upon Contractor's
completion of the corresponding Milestone.
7.2. Certification by Contractor. Each Contractor's Invoice: (a) shall
describe (i) the completion of the Milestones as described in the Progress
Payment Schedule, (ii) the related Milestone Payments set forth on the Progress
Payment Schedule that are then due as of the end of the immediately preceding
month, and (iii) any other amounts then payable by Owner to Contractor under
ARTICLE 17 or any other provision hereof and, without limiting Owner's right to
dispute any amounts requested for payment; and
(b) shall include documentary evidence of the completion of each
Milestone described in such Contractor's Invoice sufficient for Owner to verify
that such Milestone has been completed;
(c) shall include the following certification:
"there are no known mechanic's or materialmen's liens outstanding at
the date of this Contractor's Invoice, all due and payable bills with respect
to the Work have been paid to date or are included in the amount requested in
the current application, and, except for such bills not paid but so included,
there is no known basis for the filing of any mechanic's or materialmen's liens
on the Project or the Work except as described below, and sufficient releases
from Subcontractors have been obtained so as to cover all amounts requested
(save amounts owing to Insignificant Subcontractors) in such form as to
constitute an effective release of lien (corresponding to payments received by
them) under the laws of the State of California. Contractor, or a
Subcontractor, has actually performed and Contractor has not been paid for the
Work covered by this Contractor's Invoice.";
(d) shall include an Unconditional Waiver of Liens and a Conditional
Waiver of Liens from Contractor and from each Subcontractor and Vendor
contracting directly with Contractor other than Insignificant Subcontractors;
and
(e) shall include a schedule listing all Insignificant Subcontractors
and the amount that each Insignificant Subcontractor is or will be entitled to
be paid in respect of Work or any related activities, including fabrication of
equipment or other materials to be incorporated
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into the Project, performed (but not necessarily completed) by such
Subcontractors or Vendors, or anyone performing work under them including
sub-subcontractors or employees, on or before the date of such Contractor's
Invoice and documentary evidence sufficient for Owner to verify the facts set
forth in such schedule;
it being understood and agreed by Contractor that any Contractor's Invoice that
is inaccurate or incomplete or that lacks detail, specificity, or supporting
documentation required by this ARTICLE 7 shall not, to the extent of such
deficiency, constitute a valid request for payment. Each Milestone Payment shall
be due and payable only to the extent it is supported by the completion of the
corresponding individual Milestones, it being acknowledged and understood that
no Milestone Payment shall be made for any partially or improperly completed
individual Milestones or for Work that remains subject to Owner's review in
accordance with SECTION 12.5. Notwithstanding the foregoing, in no event shall
the cumulative amount paid for any month exceed the cumulative amounts of the
Milestone Payments payable for such month pursuant to the "Expenditure Schedule"
set forth on the Progress Payment Schedule.
7.3. Insignificant Subcontractors. Contractor shall not be required to
include with any Contractor's Invoice (other than the Final Contractor's
Invoice) any Unconditional Waiver of Lien or Conditional Waiver of Lien from
any Insignificant Subcontractor properly designated as such by Contractor in
such Contractor's Invoice. "Insignificant Subcontractors" shall mean
Subcontractors or Vendors designated as such by Contractor in the applicable
Contractor's Invoice who are or will be entitled to be paid in the aggregate
for all such designated Subcontractors or Vendors less than One Million Dollars
($1,000,000) in respect of Work or any related activities, including
fabrication of equipment or other materials to be incorporated into the
Project, performed (but not necessarily completed) by such Subcontractors or
Vendors or anyone performing work under them, including sub-contractors or
employees, on or before the date of such Contractor's Invoice.
7.4. Owner Review; Payments. Without limiting Owner's rights of review
under SECTION 10.1 and ARTICLE 12, within ten (10) days after receipt by Owner
of a Contractor's Invoice and all accompanying documentation required by
SUBSECTION 7.2(B), Owner and the Financing Entities shall, in consultation with
their respective Consulting Engineers, (i) determine whether the Work covered
thereby has been done as described by Contractor; (ii) determine whether the
Work performed conforms with the requirements of this Contract; (iii) determine
whether the Contractor's Invoice has been properly submitted; and (iv)
determine and notify Contractor concerning any invoiced amount that is in
dispute and the basis for such dispute. Owner shall use its best efforts to pay
Contractor, within twenty (20) days after receipt by Owner of Contractor's
Invoice (but in no event later than 30 days), all Milestone Payments and other
amounts then payable and not in dispute; provided, however, that Owner may
offset against such payment any amount then due from Contractor to Owner
pursuant to SECTION 16.1, 16.2 OR 16.3 or any other provision of this Contract.
Failure by Owner to pay any amount in dispute and identified pursuant to clause
(iv) above until resolution of such dispute pursuant to SECTION 7.7 shall not
alleviate, diminish, or modify in any respect Contractor's obligations to
perform hereunder, including Contractor's obligation to meet the Project
Deadlines. Upon receipt of payment from Owner, Contractor shall promptly pay
each
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Subcontractor and Vendor directly contracting with Contractor the amount
to which said Subcontractor or Vendor is entitled under its agreement with
Contractor with respect to the Work covered by such payment by Owner in
accordance with the terms of its subcontract. Contractor shall, by an
appropriate agreement with each Subcontractor and Vendor directly contracting
with Contractor where the applicable subcontract price or purchase order value
exceeds Two Hundred Fifty Thousand Dollars ($250,000), contractually require
each such Subcontractor and Vendor to make payments to its Subcontractors and
Vendors in a similar manner.
7.5. Retainage. Owner shall retain and withhold payment of ten percent
(10%) of all payments made to Contractor pursuant to SECTION 7.4 (the
"RETAINAGE") other than the Final Payment. Such amount shall be held by Owner
and any interest thereon shall accrue for the account of Owner and not
Contractor. In lieu of the above, Contractor may, at its option, post a letter
of credit issued by a financial institution and in such form and graduated
amount, in each case as are acceptable to Owner in its good faith discretion to
secure an equivalent hold back position for Owner.
7.6. Final Payment. Upon the delivery of Owner's Certificate of Final
Completion in accordance with SECTION 15.5(J), Contractor shall submit a final
Contractor's Invoice (the "FINAL CONTRACTOR'S INVOICE") which shall set forth
all amounts due to Contractor that remain unpaid (including amounts relating to
the Punchlist Items), and upon approval thereof by Owner, Owner or the
Financing Entities shall pay to Contractor the amount due under such Final
Contractor's Invoice ("FINAL PAYMENT"). Subject to achievement of Final
Completion pursuant to SECTION 15.5 AND TO ARTICLE 16, Final Payment shall
include release of the Retainage. Owner shall have no obligation to make Final
Payment until Contractor shall have delivered the following items to Owner:
(a) with respect to each Subcontractor and Vendor contracting directly
with Contractor, either:
(i) (x) a certification from such Subcontractor or Vendor to
the effect that such Subcontractor or Vendor has been paid all amounts
that are owing or may become owing to such Subcontractor or Vendor
with respect to the Project and the performance of the Work (other
than retainage in an amount not to exceed ten percent (10%) of such
amounts), and
(y) an Unconditional Waiver of Liens, and
(z) a Conditional Waiver of Liens; or
(ii) a bond in form and substance acceptable to Owner to
indemnify Owner against any claim by such Subcontractor or Vendor with
respect to its right to be paid in connection with the Project or the
performance of the Work; and
(b) with respect to Contractor,
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(i) a certification to the effect that:
(x) Contractor has been paid all amounts owing or
that may become owing to Contractor with respect to the
Project and the performance of the Work except for amounts
requested in the Final Contractor's Invoice, and
(y) Contractor has paid all amounts that Contractor
will be required to pay in connection with the performance of
the Work, including all amounts to be paid to any
Subcontractor or Vendor with respect to the Project and the
performance of the Work, except for amounts that in the
aggregate shall be less than the Final Payment; and
(ii) an Unconditional Waiver of Liens and a Conditional
Waiver of Liens.
Owner shall pay the Final Payment within twenty five (25) days after proper
receipt of the Final Contractor's Invoice and the certifications and waivers of
liens, or the bonds required by SUBSECTIONS 7.6(A) AND (B) above.
7.7. Disputes. Contractor's acceptance of any payment shall not be
deemed to constitute a waiver of amounts that are then in dispute. Contractor
and Owner shall use their reasonable efforts to resolve all disputed amounts as
expeditiously as possible in accordance with the provisions of ARTICLE 36.
7.8. Method of Payment. All payments to be made to Contractor under
this Contract shall be paid in United States Dollars and shall be wire
transferred in immediately available funds on the date due or, if such date is
not a banking day in the United States, on the immediately succeeding banking
day to the following account (or such other account as may be designated by
Contractor from time to time by Notice to Owner in accordance with ARTICLE 33):
Bank Boston Account Number: 521-51437
ABA Number: 011-000-390
7.9. Holdbacks. Any provision hereof to the contrary notwithstanding,
upon the occurrence and continuance of any of the following events, Owner, upon
Notice to Contractor, may, but shall have no obligation to withhold, or retain
such portion (including all) of any payment due to Contractor under this
Contract as reasonably necessary to insure the performance of the Work or to
protect fully Owner's rights hereunder:
(a) A Contractor Event of Default shall have occurred hereunder as
defined in SECTION 20.1 below;
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(b) Contractor shall have improperly failed to make prompt payments to
its Subcontractors for material or labor used in the Work for which Owner has
paid Contractor;
(c) Owner in good faith shall have determined that Contractor cannot
with prompt and reasonable acceleration of the Work achieve Substantial
Completion before the Substantial Completion Deadline; provided, however, the
amount withheld or retained on account of this SECTION 7.9(D) shall not exceed
the amount of Delay Liquidated Damages which would be payable under SECTION
16.1 on account of the then estimated delay in Substantial Completion;
(d) Contractor shall have failed to deliver a Plan acceptable to Owner
as set forth in SECTION 8.4,
(e) Contractor shall have failed to deliver any Contractor Deliverable
(prepared by Contractor in good faith) to Owner on or before the date set forth
on the Deliverables Schedule for the delivery of such Contractor Deliverable.
No payment made hereunder shall be construed to be acceptance or approval of
4that part of the Work to which such payment relates or to relieve Contractor of
any of its obligations hereunder. Should any dispute arise with respect to
Owner's exercise of its rights under this SECTION 7.9, such dispute shall be
subject to resolution in accordance with the expedited payment dispute
procedures provided in ARTICLE 36. Notwithstanding the provisions of SECTIONS
20.5 AND 36.3, Contractor shall not have any rights of termination or
suspension under SECTION 20.5 as a result of Owner's exercise or attempted
exercise of its rights under this SECTION 7.9.
7.10. Application of Monies. Contractor shall use the sums paid to it
pursuant to this ARTICLE 7 for the purpose of performing the Work and
designing, furnishing, equipping, testing and commissioning the Project in
accordance with the Statement of Work and this Contract. No provision hereof
shall be construed, however, to require Owner or any Financing Entity to see to
the proper disposition or application of the monies so paid to Contractor.
7.11. Release of Payment Liability. Acceptance by Contractor of the
Final Payment shall constitute a release by Contractor of Owner and every
officer and agent thereof from all liens (whether statutory or otherwise and
including mechanics' or suppliers' liens), hereunder with respect to any Work
performed or furnished in connection with this Contract, or for any act or
omission of Owner or of any person relating to or affecting Owner's payment
obligations under this Contract, except claims not known to Contractor at the
time of Final Payment or claims for which Contractor has delivered a dispute
Notice to Owner. Such release by Contractor shall not constitute a waiver of
any of Contractor's defenses under this Contract. No payment by Owner shall be
deemed a waiver by Owner of any obligation of Contractor under this Contract.
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8. COMMENCEMENT AND PROSECUTION OF THE WORK
8.1. Notice to Proceed. The date on which Owner provides Contractor
with a Notice to Proceed shall be the Notice to Proceed Date. If the Notice to
Proceed is not received by Contractor on or before October 31, 1998,
Contractor's schedule and cost will be subject to adjustment. Any activities
undertaken prior to receipt of a Notice to Proceed will be compensated for as
set forth in a separate written agreement between the parties. On the Notice to
Proceed Date, Contractor shall commence and shall thereafter diligently pursue
the Work assigning to it a priority that should reasonably permit the
attainment of Mechanical Completion on or before the Mechanical Completion
Deadline, Capacity Test Completion on or before the Capacity Test Completion
Deadline, and Substantial Completion on or before the Substantial Completion
Deadline, and Final Completion on or before the Final Completion Deadline.
Contractor shall proceed with the performance of the Work in accordance with
the Project Schedules.
8.2. Right to Terminate. If a Notice to Proceed has not been issued by
December 31, 1998, either Party shall have the right to terminate this Contract
upon Notice to the other Party (which right shall terminate upon the issuance of
the Notice to Proceed). If this Contract is terminated pursuant to this SECTION
8.2, then neither Party shall have any further rights or obligations hereunder
(other than such rights and obligations that by their express terms survive the
expiration or earlier termination of this Contract).
8.3. Prosecution of Work. Contractor shall prosecute the Work in
accordance with the Project Schedules. Contractor shall cause Mechanical
Completion, Capacity Test Completion, Substantial Completion and Final
Completion to occur on or before the applicable Project Deadline (as such dates
may be extended pursuant to ARTICLES 17 OR 22 or any other provision hereof).
8.4. Plan. If (a) Contractor fails, other than by reasons not
attributable to Contractor, to stay within forty five (45) days of the schedule
(as determined using the Critical Path Schedule) for achieving Mechanical
Completion and Substantial Completion on or before the applicable Project
Deadline, or (b) Contractor fails to complete any of the items set forth in the
Milestone Schedule within sixty (60) days after the date set forth on the
Milestone Schedule for completion of such item, then Contractor shall, within
ten (10) days after Contractor becomes aware of such delay, submit for approval
by Owner and the Consulting Engineer, a written plan (the "PLAN") to complete
all necessary Work to achieve Mechanical Completion or Substantial Completion
not later than sixty (60) days after the applicable Project Deadline, including
revised Project Schedules. Within ten (10) days after receipt of the Plan,
Owner and the Consulting Engineer shall deliver written approval or disapproval
of the Plan to Contractor, the approval thereof not to be unreasonably
withheld. Approval by Owner and the Consulting Engineer of a Plan shall not be
deemed in any way to have relieved Contractor of its obligations under this
Contract relating to the failure to achieve Mechanical Completion, Substantial
Completion or Final Completion by
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the applicable Project Deadline, be a basis for an increase in the Contract
Price, or limit the rights of Owner under SECTION 16.1.
8.5. Performance Guarantees. Subject to SECTIONS 16.2 AND 16.3,
Contractor shall perform the Work so that the Project satisfies the Performance
Guarantees. Contractor shall demonstrate that the Project satisfies the
Performance Guarantees prior to Substantial Completion by satisfactorily
running and completing the Performance Tests.
9. FORCE MAJEURE, OWNER CAUSED DELAY AND CHANGES IN LAW
9.1. Events of Force Majeure. No failure or omission to carry out or
observe any of the terms, provisions, or conditions of this Contract shall give
rise to any claim by any Party against any other Party hereto, or be deemed to
be a breach or default of this Contract if such failure or omission shall be
caused by or arise out of an event of Force Majeure. No obligations of either
Party that arose before the occurrence of an event of Force Majeure causing the
suspension of performance shall be excused as a result of such occurrence. The
obligation to pay money in a timely manner for obligations and liabilities that
matured prior to the occurrence of an event of Force Majeure shall not be
subject to the Force Majeure provisions.
9.2. Notice. If either Party's ability to perform its obligations
under this Contract is affected by an event of Force Majeure, Owner Caused
Delay or Change In Law, such Party shall promptly as reasonably possible, upon
learning of such event and ascertaining that it will delay its performance
hereunder (but in any event within forty-eight (48) hours after such Party
becomes aware of such delay), give written Notice to the other Party (a "DELAY
NOTICE") stating the nature of the event, its anticipated duration and effect
upon the performance of such Party's obligations, and any action being taken to
avoid or minimize its effect. The burden of proof shall be on the Party
claiming to be affected pursuant to this SECTION 9.2.
9.3. Scope of Suspension; Duty to Mitigate. The suspension of
performance due to an event of Force Majeure, Owner Caused Delay or Change In
Law shall be of no greater scope and no longer duration than is required to
overcome the consequence of such event. The excused Party shall use its
reasonable efforts (i) to mitigate the duration of, and costs arising from, any
suspension or delay in the performance, (ii) to continue to perform its
obligations hereunder, and (iii) to remedy its inability to perform. When the
affected Party is able to resume performance of its obligation under this
Contract, such affected Party shall give the other Party written Notice to that
effect.
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9.4. Removal of Force Majeure. If, within a reasonable time after an
event of Force Majeure that has caused Contractor to suspend or delay
performance of the Work, action to be undertaken at the expense of Owner has
been identified and recommended by Owner to Contractor, and Contractor has
failed within five (5) days after receipt of Notice thereof from Owner to take
such action as Contractor could lawfully and reasonably initiate to remove or
relieve either the Force Majeure occurrence or its direct or indirect effects,
Owner may, in its sole discretion and after written Notice to Contractor,
initiate such reasonable measures as will be designed to remove or relieve such
Force Majeure occurrence or its direct or indirect effects and thereafter
require Contractor to resume full or partial performance of the Work. To the
extent Contractor's failure to take such measures results in expense in
addition to what Owner would have paid to Contractor (whether as part of the
original Contract Price or as additional compensation to the extent the
requested measures constituted a Change In Work altering the scope of the Work)
had Contractor taken such measures, such additional expense shall be for
Contractor's account.
9.5. Responsibility of Contractor. Damages or injuries to persons or
properties resulting from an event of Force Majeure during the performance of
the obligations provided for in the Contract shall not relieve the Contractor
of the responsibility to bear the cost of the damage or injuries caused by
Contractor's negligence or misconduct to the extent such costs are not covered
by the insurance described in ARTICLE 23.
9.6. Contractor's Remedies. Contractor's sole remedies for the
occurrence of an event of Force Majeure, Owner Caused Delay or Change In Law
shall be pursuant to ARTICLE 17.
10. SUBCONTRACTORS
10.1. Use of Subcontractors and Vendors; Owner's Right to Object.
Within thirty (30) days after the date hereof, Contractor shall provide Owner
with a list of potential Subcontractors and Vendors that would be directly
contracting with Contractor for all components and services in connection with
the Work, broken down by component and service in excess of $ $100,000. Within
thirty (30) Business Days after receipt of such list, Owner shall have the
right to advise Contractor of any such potential Subcontractors or Vendors to
which it objects, together with the reasons for objection. Contractor shall
remove from the list any potential Subcontractor or Vendor to which Owner
objects. If Owner fails to respond within such thirty (30) Business Day period,
Owner shall be deemed not to have objected to any potential Subcontractor or
Vendor on the list. Notwithstanding the foregoing, each Subcontractor or Vendor
listed in Attachment 4 to EXHIBIT "A" shall be deemed accepted by Owner for the
portion of the Work described for such Subcontractor or Vendor in Attachment 4
to Exhibit A. Contractor shall have the right to add potential Subcontractors
and Vendors to the list subject to the procedures set forth above; provided,
however, that the review period for Owner shall be reduced to fifteen (15)
Business Days after physical construction of the Project has commenced. No
Subcontractor or Vendor for any material component or service in
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connection with the Work covered by this SECTION 10.1 shall be engaged by
Contractor prior to Owner acceptance or completion of the review process set
forth in this SECTION 10.1. Contractor shall provide as part of its Monthly
Progress Report a list of all Subcontractors currently working on the Project.
10.2. No Approvals; Contractor Responsible for Work. The review by
Owner of any Subcontractor or Vendor under this ARTICLE 10 shall not (i)
constitute any approval of the Work undertaken by any such Person, (ii) cause
Owner to have any responsibility for the actions, the Work, or payment of such
Person or to be deemed to be in an employer-employee relationship with any such
Subcontractor or Vendor, or (iii) in any way relieve Contractor of its
responsibilities and obligations under this Contract. Notwithstanding anything
in ARTICLE 7 to the contrary, in no event shall Contractor submit or Owner be
obligated to review any Contractor's Invoice with respect to work performed by
any Subcontractor or Vendor prior to the expiration of the review period
provided in SECTION 10.1.
10.3. Assignment. No subcontract or purchase order shall bind or
purport to bind Owner, but each subcontract and purchase order entered into by
Contractor with respect to the Work where the applicable subcontract price or
purchase order value exceeds One Hundred Thousand Dollars ($100,000) shall
contain a provision in the form of EXHIBIT "U" permitting its assignment to
Owner or the Financing Entities, upon Owner's written request, following
default by Contractor or termination or expiration of this Contract.
10.4. Information; Access. Contractor shall furnish such information
and access relative to its Subcontractors and Vendors as Owner may reasonably
request.
11. LABOR RELATIONS
11.1. General Management of Employees. Subject to SECTION 4.16, and
notwithstanding the provisions of SECTION 11.2, Contractor shall preserve its
rights to exercise and shall exercise its management rights in performing the
Work. Such management rights shall include the rights to hire, discharge,
promote, and transfer employees; to select and remove foremen or other persons
at other levels of supervision; to establish and enforce reasonable standards
of production; to introduce, to the extent feasible, labor saving Equipment and
materials; to determine the number of craftsmen necessary to perform a task,
job, or project; and to establish, maintain, and enforce rules and regulations
conducive to efficient and productive operations.
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11.2. Labor Disputes. Contractor shall use reasonable efforts to
minimize the risk of labor related delays or disruption of the progress of the
Work. Contractor shall promptly take any and all reasonable steps that may be
available in connection with the resolution of violations of collective
bargaining agreements or labor jurisdictional disputes, including the filing of
appropriate processes with any court or administrative agency having
jurisdiction to settle, enjoin, or award damages resulting from violations of
collective bargaining agreements or labor jurisdictional disputes. Contractor
shall advise Owner promptly, in writing, of any actual or threatened labor
dispute of which Contractor has knowledge that might materially affect the
performance of the Work by Contractor or by any of its Subcontractors.
Notwithstanding the foregoing, the settlement of strikes, walkouts, lockouts or
other labor disputes shall be at the discretion of the Party having the
difficulty, but no strike, walkout, lockout or other labor dispute of
Contractor's personnel or any Subcontractor's personnel shall be the basis for
a claim for delay or Force Majeure by Contractor.
11.3. Personnel Documents. Contractor shall ensure that all its
personnel and personnel of any Subcontractors performing the Work are, and at
all times shall be, in possession of all such documents (including, without
limitation, visas, driver's licenses and work permits) as may be required by all
any and all Applicable Laws.
11.4. Social Benefits. Contractor shall contract for the provision of
such social benefits for its employees and those of its Subcontractors as may
from time to time be required in the United States.
12. INSPECTION; EFFECT OF REVIEW AND COMMENT
12.1. Inspection. Owner shall have the right to inspect any item of
Equipment or material, design, engineering, service, or workmanship to be
provided hereunder, and Contractor shall make available for review by Owner,
and provide to Owner if requested by Owner, all design criteria, system
descriptions, Drawings and Specifications, design calculations, quality
assurance reports, design drawings, shop drawings, Required Manuals and other
documents relating to the Work as required by this Contract, and, to the extent
reasonably feasible, arrange for inspection of Equipment or material at the
point of fabrication if requested by Owner. Owner shall be responsible for the
costs of its personnel and their transportation with respect to such
inspections.
12.2. Right to Reject Work. Regardless of whether payment has been
made therefor, Owner shall have the right to reject any portion of the Work
that contains any Defect. Upon such rejection, Contractor shall promptly
remedy, at its sole cost and expense, any Defect that is identified by Owner as
giving rise to such rejection.
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12.3. Third Party Inspection. Contractor understands that Owner and
the Financing Entities and their respective representatives have the right to
observe and inspect the Work, any item of Equipment (including Equipment under
fabrication), material, design, engineering, service, or workmanship to be
provided hereunder and to observe all tests of the Work and the Project
(including factory or other tests performed at a location other than the Site).
Upon reasonable Notice to Contractor by Owner, Contractor shall allow Owner,
and the Financing Entities and their respective representatives (including
Consulting Engineer) reasonable access to the Work (including Equipment under
fabrication) and the Project. Owner and the Financing Entities (including
Consulting Engineer) also shall be entitled to inspect and review all
Contractor's Drawings and Specifications or technical details pertaining
thereto as reasonably requested by either Owner, or the Financing Entities, or
their respective representatives (including Consulting Engineer). Contractor
shall incorporate such inspection rights in all Equipment purchase orders and
subcontracts. To facilitate such observations and inspections, Contractor shall
maintain at the Site a complete set of all Drawings and Specifications and
current Project Schedules.
12.4. Deliverables Schedule. Within thirty (30) days after the Notice
to Proceed Date, Contractor shall provide a Notice to Owner attaching a
schedule identifying all Contractor Deliverables to be delivered to Owner, the
deadline for delivery thereof, and Owner's time period for review and comment
with respect thereto. Owner shall have the right to promptly review and comment
on such Deliverables Schedule. If Owner provides any comments with respect to
the Deliverables Schedule to Contractor, then Contractor shall incorporate
changes into such Deliverables Schedule addressing such comments, and resubmit
the same to Owner. Such incorporation of changes to address Owner's reasonable
comments shall not be considered a Change In Work. If Owner fails to comment
within ten (10) days after receipt of such Notice, Owner shall be deemed to
have accepted such Deliverables Schedule.
12.5. Owner Review of Documents. Contractor shall submit for review to
Owner (which shall have the right to make them available to the Financing
Entities and the Consulting Engineer) hard (printed) copies and soft copies (in
a format agreed to by Owner) of all Contractor Deliverables in accordance with
the requirements of EXHIBIT "A" and the Deliverables Schedule. Contractor shall
ensure that all such items undergo a comprehensive independent in-house review
and approval process before submission of such items to Owner. Within fifteen
(15) days from receipt of any Contractor Deliverable, Owner shall have the
right to describe any Defects in the design identified in such Contractor
Deliverable. Owner's failure to respond within the specified time will be
deemed to waive such right to describe Defects in such design. Notwithstanding
anything in ARTICLE 7 to the contrary, in no event shall Contractor submit any
Contractor's Invoice with respect to Work performed pursuant to any such
Contractor Deliverables prior to the expiration of the review period set forth
in this SECTION 12.5. Issuance by Contractor of any purchase orders prior to
Owner completing its review shall be at Contractor's own risk.
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12.6. Remedy of Defects. If Owner identifies any Defects in the design
with respect to any Contractor Deliverables submitted for review, then
Contractor shall incorporate changes into such Contractor Deliverables
addressing and remedying the Defects and resubmit the same to Owner, and such
incorporation of changes to address Owner's comments shall not be considered a
Change In Work. No Contractor Deliverable subject to this SECTION 12.6 shall be
released for use in connection with the Work prior to completion of the review
process set forth in SECTION 12.5.
12.7. Limitation on Owner's Obligations. Inspection, review,
acceptance or comment by Owner with respect to any subcontract or purchase
order or any Drawings and Specifications, samples, and other documents, or any
other work or services performed by Contractor or any Subcontractor or Vendor,
is solely at the discretion of Owner and shall not in any way affect or reduce
Contractor's obligations to complete the Work in accordance with the provisions
of this Contract or be deemed to be a warranty or acceptance by Owner with
respect to such Work.
13. MECHANICAL COMPLETION OF THE WORK
13.1. Mechanical Completion. The following are conditions precedent to
Mechanical Completion:
(a) the Project is mechanically, electrically, and structurally
constructed in accordance with the requirements of this Contract, the Statement
of Work and Industry Standards, including completion of the Mechanical
Completion Tests;
(b) the Project may be operated without damage to the Project and any
sub-system or any other property on or off the Site, and without injury to any
Person;
(c) the Project and each sub-system of the Project is mechanically and
functionally complete, and ready for initial operation, adjustment and testing;
and
(d) Contractor has complied with all provisions of this Contract
relating to the installation of all necessary components and sub-systems of the
Project except for Punchlist Items.
13.2. Notice of Mechanical Completion. When Contractor believes that
it has satisfied the provisions of SECTION 13.1(A) THROUGH (D), Contractor
shall deliver to Owner and the Consulting Engineer a Notice of Mechanical
Completion. Such Notice of Mechanical Completion shall contain a report of
results of the Mechanical Completion Tests and the Work completed with
sufficient detail to enable Owner and the Consulting Engineer to determine
whether Mechanical Completion has been achieved. The Mechanical Completion Date
shall be the date on which the conditions of SECTION 13.1 were satisfied or, in
the sole discretion of Owner, waived. Promptly after Mechanical Completion has
been achieved as provided in SECTIONS 13.1 AND 13.2 (including any correction
of Defects
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pursuant to SECTION 13.3), Owner shall issue an Owner's Certificate of
Mechanical Completion dated to reflect the Mechanical Completion Date. Owner
shall be deemed to have given such Owner's Certificate of Mechanical Completion
unless Owner has identified in writing any additional or remaining Defects
within the applicable period set forth in SECTION 13.3. Contractor shall not
begin operation of the Project until Contractor has achieved Mechanical
Completion and provided notice that Contractor intends to commence start-up to
Owner and those manufacturer's representatives required to be given notice in
accordance with the terms of their subcontracts to maintain the validity of the
manufacturer's warranty.
13.3. Correction of Defects. Within fifteen (15) days after receipt of
any Notice of Mechanical Completion pursuant to SECTION 13.2, Owner shall have
the right to advise Contractor in writing of any Defects. Contractor shall then
perform, at Contractor's sole cost and expense, corrective measures to remove
such Defects and shall again notify Owner, in accordance with SECTION 13.2,
when Mechanical Completion of the Work has occurred. Within five (5) days after
receipt of each subsequent notification, Owner shall have the right to advise
Contractor, in writing, of any additional or remaining Defects that must be
corrected by Contractor as a condition to Mechanical Completion of such Work.
Any disputes regarding the existence or correction of any such alleged Defects
shall be resolved pursuant to SECTION 14.5.
13.4. Early Operation. Subject to Contractor's right to conduct Work
necessary to achieve Substantial Completion, from Mechanical Completion through
Substantial Completion of the Project, Contractor shall operate the Project on
Owner's behalf to convert Production Inputs provided by Owner into the
Products.
(a) The Project shall be operated by the Operating Personnel under the
supervision of Contractor after training in accordance with SECTIONS 3.2 and
4.21 until Substantial Completion of the Project;
(b) Owner shall provide those Production Inputs reasonably necessary
to operate the Project at no cost to Contractor;
(c) Owner and Contractor shall work together to schedule deliveries of
Production Inputs necessary for operation of the Project; and
(d) Owner and Contractor shall work together to schedule the hours of
operation of the Project and deliveries of the Products to maximize net
revenues.
14. MECHANICAL COMPLETION AND PERFORMANCE TESTS
14.1. Mechanical Completion Test Procedures. Contractor shall provide
for Owner's review and approval detailed Mechanical Completion Test Procedures
in accordance with the requirements of EXHIBIT "J" not less than ninety (90)
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days prior to the start of testing, which Mechanical Completion Test Procedures
must be agreed upon by Contractor and Owner at least sixty (60) days prior to
the commencement of testing, with the Mechanical Completion Test Procedures
clearly indicating when in the testing schedule the Contractor will require
Interconnection and any Production Inputs
14.2. Conduct of Tests. Contractor shall perform all Work necessary
for the conduct of the tests required hereunder, shall conduct the tests, and
shall satisfy all of its other obligations under this Contract to ensure that
the Project has been completed and that all components have been properly
adjusted and tested. The representatives of Owner, Owner's Engineer, any
Financing Entity and Consulting Engineer shall have the right, but not the
obligation, to be present during any tests performed by Contractor under this
ARTICLE 14.
14.3. Test Schedules. Contractor and Owner shall agree on test
schedules with the Financing Entities and Consulting Engineer. Contractor shall
give Owner and the Financing Entities and Consulting Engineer written Notice at
least thirty (30) days before it anticipates conducting each of the Performance
Tests. When Contractor establishes the scheduled dates(s) for the Performance
Tests required pursuant to this Contract, it shall give Owner at least ten (10)
days' prior Notice thereof. Contractor shall keep the Project Representative
continuously apprised of the specified schedule, and changes therein, for the
commencement and performance of Performance Tests, and shall give the Project
Representative at least two (2) days prior Notice of the re-performance of any
Performance Tests, except those tests that will be recommenced within two (2)
days and for which Contractor is able to give notice of re-performance within
twelve (12) hours of the previous test. A Performance Test conducted without
the required Notice to Owner and the Financing Entities and Consulting Engineer
shall not be valid for the purposes of this Contract.
14.4. Performance Test Procedures. Contractor shall perform all
Performance Tests of the Project in accordance with the provisions of EXHIBIT
"J". Contractor shall provide Owner for Owner's review and approval detailed
Performance Test Procedures to be followed by Contractor not less than ninety
(90) days prior to the date on which Contractor anticipates the commencement of
the Performance Tests. Contractor and Owner shall cooperate reasonably to reach
agreement on the Performance Test Procedures to be followed by Contractor not
less than sixty (60) days prior to the date on which Contractor anticipates
commencing the Performance Tests.
14.5. Non-Conforming Work. At any time during and promptly after
completion (whether or not successful) of the Performance Tests under SECTION
14.2 (or any re-performance of any Performance Test under this SECTION 14.5),
Owner shall advise Contractor and Contractor shall advise Owner in writing of
any Defect that was discovered during a Performance Test. If Contractor is
notified of or discovers any such Defect, Contractor shall, at Contractor's
sole cost and expense, correct such Defect and promptly provide Notice to Owner
in writing that such corrective measures have been
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completed. Any dispute regarding the existence or correction of any such Defect
shall be resolved pursuant to SECTION 14.6.
14.6. Certificate of Completion of a Performance Test. Upon completion
of any Performance Tests, Contractor and Owner shall jointly issue a
certificate that testing has been done on the Project and that the Performance
Test Procedures have been followed. If there is a difference of opinion about
any test results or the existence or correction of any Defects claimed by Owner
pursuant to SECTIONS 13.3 OR 14.5 that cannot be resolved by the Parties,
either Party shall have the right to avail itself of its rights under ARTICLE
36.
14.7. Revenues. Any revenues generated by the Project during the
performance of any Mechanical Completion Test or Performance Tests or otherwise
shall be paid to and for the benefit of Owner.
15. CAPACITY TEST COMPLETION, SUBSTANTIAL COMPLETION AND FINAL COMPLETION
OF THE PROJECT
15.1. Capacity Test Completion. The following are conditions precedent
to Capacity Test Completion:
(a) Contractor has completed the Capacity Test; and
(b) the Project shall have achieved One Hundred Percent (100%) of the
following Performance Guarantees: Outlet Steam Condition Guarantee and the
Outlet Brine Temperature Guarantee; and
(c) Either (i) the Project shall have achieved One Hundred Percent
(100%) of the Net Generation Guarantee during the Capacity Test or (ii) all
Buy-Down Amounts due pursuant to SECTION 16.2 shall have been paid and all of
the other requirements set forth in SECTION 16.2 shall have been satisfied, as
applicable;
(d) Owner has received copies of all Contractor Acquired Permits,
described in clauses (1) and (4) of the definition of Contractor Acquired
Permits required for operation of the Project;
(e) Owner has received copies of those Contractor Deliverables
including ten (10) copies of all Required Manuals that are reasonably necessary
to operate the Project in a safe, reliable and efficient manner through
Substantial Completion;
(f) Contractor has certified by Notice to Owner that all training of
Operating Personnel is complete; and
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(g)all other requirements for the successful completion of a Capacity
Test, including the requirements set forth in EXHIBIT "J" and the Performance
Test Procedures, have been satisfied.
15.2. Notice of Capacity Test Completion. When Contractor believes that
it has satisfied the provisions of SECTION 15.1, Contractor shall deliver to
Owner and the Consulting Engineer a Notice of Capacity Test Completion. Such
Notice of Capacity Test Completion shall contain a report of results of the
Capacity Test and the Work completed with sufficient detail to enable Owner and
the Consulting Engineer to determine whether Capacity Test Completion has been
achieved. The Capacity Test Completion Date shall be the date on which the
conditions of SECTION 15.1 were satisfied or, in the sole discretion of Owner,
waived. Promptly after Capacity Test Completion has been achieved as provided
above, Owner shall issue an Owner's Certificate of Capacity Test Completion
dated to reflect the Capacity Test Completion Date. Contractor shall not
commence the Reliability Test unless and until Contractor shall have achieved
Capacity Test Completion; provided that upon Capacity Test Completion, the
Reliability Test may, at Contractor's option, be deemed to have commenced as of
the commencement of the Capacity Test that resulted in Capacity Test Completion.
15.3. Substantial Completion. The following are conditions precedent
to Substantial Completion:
(a) Contractor shall have paid all Delay Liquidated Damages due
pursuant to SECTION 16.1;
(b) [Reserved]
(c) Owner has received all Contractor Deliverables in accordance with
the provisions of EXHIBIT "A" and the Deliverables Schedule, including all ten
(10) copies of all Required Manuals necessary to operate the Project in a safe,
efficient, and reliable manner, and has received five (5) original copies of
preliminary as-built drawings of the Project, one (1) Mylar reproducible copy
thereof, and one (1) electronically prepared computer drawing file as prepared
by Contractor for a software program acceptable to Owner; provided, however, if
Owner determines by written notice to Contractor in the exercise of Owner's
good faith discretion that a prudent owner would not require all such
Contractor Deliverables by such date for the safe, efficient or reliable
operation of the Project then (i) such Contractor Deliverables as Owner
determines would not then be required shall not be required by such date and
(ii) Contractor shall deliver such Contractor Deliverables to Owner by later
date as shall be designated in writing by Owner ;
(d) [Reserved]
(e) The Punchlist and a schedule and budget for completion of each
Punchlist Item, in each case reasonably satisfactory to Owner and the
Consulting Engineer, have been
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developed by Contractor and delivered to Owner, and all Work other than those
Punchlist Items shown on the Punchlist shall have been completed;
(f) All Spare Parts described on EXHIBIT "Q" or required to be
purchased and delivered to the Site by Contractor pursuant to Section 4.3.1
have been received by Owner at the Site; provided however, if Owner determines
by written notice to Contractor in the exercise of Owner's good faith
discretion that a prudent owner would not require all such Spare Parts by such
date for the safe, efficient or reliable operation of the Project, then such
Spare Parts as Owner determines would not be then required shall not be a
condition to Substantial Completion.
(g) Contractor has achieved Capacity Test Completion, completed the
Reliability Test and paid all Buy-Down Amounts as required under SECTIONS 16.2
AND 16.3.
(h) Mechanical Completion has been achieved pursuant to the terms of
ARTICLE 13.
15.4. Notice of Substantial Completion. When Contractor believes that
it has satisfied the provisions of SECTION 15.3(A) THROUGH (H), Contractor shall
deliver to Owner and the Consulting Engineer a Notice of Substantial Completion.
Such Notice of Substantial Completion shall contain a report of results of the
Reliability Test and the Work completed with sufficient detail to enable Owner
and the Consulting Engineer to determine whether Substantial Completion has been
achieved. The Substantial Completion Date shall be the date on which the
conditions of SECTION 15.3 were satisfied or, in the sole discretion of Owner,
waived. Promptly after Substantial Completion has been achieved as provided
above, Owner shall issue an Owner's Certificate of Substantial Completion dated
to reflect the Substantial Completion Date.
15.5. Final Completion. Final Completion of the Work shall be deemed
to have occurred only if all of the following have occurred:
(a) Substantial Completion;
(b) Owner has received all Drawings and Specifications (including five
(5) copies of final as-built drawings of the Work, one (1) Mylar reproducible
copy thereof, and one (1) electronically prepared computer drawing file as
prepared by Contractor for a software program acceptable to Owner),
calculations, test data, performance data, Equipment descriptions, Required
Manuals, training aids, Spare Parts lists, and other technical information each
as required hereunder for Owner to start up, operate, commission, and maintain
the Project;
(c) All tools and Spare Parts purchased by Contractor to replace those
used by Contractor during start-up have been purchased for delivery to Owner
free and clear of liens;
(d) All Contractor's and Subcontractors' personnel, supplies, tools,
equipment, machinery, surplus materials, waste materials, rubbish, and
temporary facilities to which Owner does not hold title have been removed from
the Site, and any permanent facilities
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used by Contractor and the Site have been restored to like new condition. All
cleanup and disposal shall be conducted in accordance with all Applicable Laws;
(e) Owner has received from Contractor all information requested by
Owner and required for Owner's final fixed asset records with respect to the
Project in accordance with SECTION 4.9;
(f) Contractor has delivered to Owner a certification identifying all
outstanding claims of Contractor under this Contract with documentation
sufficient to support such claims;
(g) Contractor has assigned to Owner or provided Owner with all
warranties or guarantees that Contractor received from Subcontractors or
Vendors to the extent Contractor is obligated to do so pursuant to SECTION
18.6;
(h) Contractor has delivered the certifications, Conditional Waivers
of Liens and Unconditional Waivers of Lien, or the bonds, in accordance with
SECTION 7.6 and has delivered such other documents and certificates as Owner
has reasonably requested to ensure compliance with all applicable labor laws
and regulations of United States;
(i) Contractor has delivered to Owner a Notice of Final Completion
stating that Contractor believes it has satisfied the provisions of SECTIONS
15.5(A) THROUGH (H); and
(j) Owner has delivered an Owner's Certificate of Final Completion to
Contractor evidencing that, to the best of Owner's knowledge, the Punchlist
Items have been completed to the reasonable satisfaction of Owner and all of
Contractor's other construction obligations ( but not warranty, indemnification
or other post-Final Completion obligations) under this Contract have been
satisfied in full, which Owner's Certificate of Final Completion Owner shall
deliver as soon as possible, and in no event more than ten (10) days after
satisfaction in full by Contractor of all of its obligations under the
provisions of SECTIONS 15.5(A) THROUGH (I). If Owner fails to notify Contractor
of any alleged nonsatisfaction of Contractor's obligations under SECTIONS
15.5(A) THROUGH (I) within ten (10) days after the date Contractor gives Notice
of Final Completion to Owner, Contractor shall be deemed to have satisfied such
obligations; provided, however, that failure to so notify Contractor shall not
void the Plant Warranties or Materials Warranty.
15.6. RESERVED.
15.7. Contractor's Access After Substantial Completion. Following
Substantial Completion, Owner shall provide Contractor with reasonable and
timely access to complete Punchlist Items and to satisfy the other requirements
for Final Completion. The Parties expect that Contractor will accomplish any
necessary modifications or repairs with minimal interference with commercial
operation of the Project and that reductions in and shut-downs of Project
operations will be required only when necessary, taking into consideration (i)
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the length of the proposed reduction or shut-down, (ii) the improvement in
performance that is likely to be achieved by adjustment, repair, replacement or
modification and (iii) Owner's obligations and liabilities with respect to any
Transporters, Suppliers and Customer(s).
16. DELAY DAMAGES AND BUY-DOWN AMOUNTS
16.1. Delay Liquidated Damages and Early Completion Bonus.
16.1.1. Liquidated Damages for Delay. Contractor understands that if
the Capacity Test Completion Date does not occur on or before the Capacity Test
Completion Deadline, Owner will suffer substantial damages, including additional
interest and financing charges on funds obtained by Owner to finance the Work,
reduction of the return on Owner's equity investment in the Project, and other
operating and construction costs and charges. Therefore, Contractor agrees that
if Capacity Test Completion is not achieved by the Capacity Test Completion
Deadline, Contractor shall pay liquidated damages ("DELAY LIQUIDATED DAMAGES")
to Owner in the amount of Fifteen Thousand Four Hundred Dollars ($15,400) per
day for each day by which the Capacity Test Completion Date is delayed beyond
the Capacity Test Completion Deadline for the first thirty (30) days of such
delay and Twenty-Three Thousand Two Hundred Dollars ($23,200) per day for each
day of delay beyond such thirty (30) day period but prior to the sixtieth (60th)
day after the Capacity Test Completion Deadline and Thirty-Two Thousand Seven
Hundred Fifty Dollars ($32,750) per day for each day of delay thereafter. Any
amount Contractor is obligated to pay to Owner under this SECTION 16.1.1 shall
be due and payable two (2) days after receipt of a request therefor from Owner.
If, pursuant to Section 23.1.2 hereof, (1) Owner obtains Marine Delay in Start
Up or Delay in Start Up insurance coverage that is payable without deduction
for Delay Liquidated Damages payable under this Contract; (2) Owner receives
proceeds of such Marine Delay in Start Up insurance or such Delay in Start Up
insurance to reimburse Owner for Losses arising out of delays in completion of
the Project; (3) such proceeds are both (x) paid without deduction for Delay
Liquidated Damages and (y) attributable to an event or circumstance which has
delayed Contractor in achieving a Project Deadline; and (4) Contractor has paid
all Delay Liquidated Damages to Owner hereunder for such delay, then Owner
shall refund to Contractor the lesser of (i) the Delay Liquidated Damages paid
by Contractor for the portion of such period of delay that is directly caused
by the event or circumstance for which Owner receives such proceeds or (ii) the
amount by which such insurance proceeds attributable such portion of such
period of delay are greater than those that would have been payable had Owner
obtained a Marine Delay in Start Up or Delay in Start Up insurance policy, as
applicable, that is payable with deduction for Delay Liquidated Damages payable
under this Contract; provided, however, if Owner receives Marine Delay in Start
Up or Delay in Start Up insurance proceeds arising from an event or
circumstance which permits Contractor to obtain an adjustment of the Project
Deadlines or Milestone Schedule pursuant to Article 17 hereof, then no such
refund shall be required in connection with such proceeds.
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16.1.2. Early Completion Bonus. Owner understands that if the
Substantial Completion Date occurs before the Substantial Completion Deadline,
Owner will accrue a Benefit, including reduced interest and financing charges
on funds obtained by Owner to finance the Work, increase of the return on
Owner's equity investment in the Project, and other reductions of operating and
construction costs and charges. Therefore, Owner agrees that if Substantial
Completion is achieved before the Substantial Completion Deadline, Owner shall
pay a Bonus ("Early Completion Bonus") to Contractor in the amount of Twenty
Two Thousand Five Hundred Dollars ($22,500) per day for each of the first
sixteen (16) days by which the Substantial Completion Date is prior to the
Substantial Completion Deadline, and Fifteen Thousand Four Hundred Dollars
($15,400) per day for each day in excess of sixteen (16) days by which the
Substantial Completion Date is prior to the Substantial Completion Deadline up
to a total of ninety (90) days. Any amount Owner is obligated to pay to
Contractor under this Section 16.1.2 shall be due and payable thirty (30) days
after receipt of a request therefor from Contractor.
16.2. Buy-Down for Capacity Test. If Contractor has completed a
Capacity Test on or before the date that is ninety (90) days after the Capacity
Test Completion Deadline and Contractor has successfully satisfied the
Performance Guarantees (other than the Reliability Guarantee) during such
Capacity Test then the remaining provisions of this SECTION 16.2 shall no
longer apply.
16.2.1. Where Contractor Satisfies Buy-Down Criteria, But Fails to
Meet the Capacity Guarantee. If on, or before ninety (90) days after, the
Capacity Test Completion Deadline,
(a) Contractor has achieved Mechanical Completion;
(b) Contractor has run a Capacity Test;
(c) Contractor's most recent Capacity Test shall have satisfied the
Buy-Down Criteria; and
(d) Contractor shall have delivered Notice to Owner certifying that
the requirements described in clause (a) through clause (c) above have been
satisfied;
then Contractor, at its option, shall complete either of the following courses
of conduct:
(x) pay Owner the Buy-Down Amount based on the results of
Contractor's most recently completed Capacity Test, in which case
Owner shall calculate the Buy-Down Amount and deliver a Notice For
Payment of Buy-Down Amount to Contractor, or
(y) continue to attempt to satisfy the Performance Guarantees
during a Capacity Test.
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Contractor shall exercise the foregoing option by delivery of Notice to Owner
not later than five (5) days after the later of the Capacity Test Completion
Deadline or the date when Contractor shall have satisfied the requirements set
forth in clauses (a) through (c) above. If Contractor shall have failed to
achieve 100% of the Performance Guarantees during a Capacity Test prior to the
end of the ninety-day period following the Capacity Test Completion Deadline,
or if, at any time prior thereto, Contractor so requests, then Owner shall
calculate the Buy-Down Amount based on Contractor's most recently attempted
Capacity Test and shall send a Notice for Payment of Buy-Down Amount to
Contractor. Thereafter, Contractor shall commence the Reliability Test.
16.2.2. Where Contractor Fails to Satisfy Buy-Down Criteria. If on, or
within ninety (90) days after, the Capacity Test Completion Deadline,
(a) Contractor has achieved Mechanical Completion; and
(b) Contractor shall have failed to satisfy the Buy-Down Criteria;
then Contractor shall, within ten (10) days after the later of the Capacity
Test Completion Deadline or the date when Contractor shall have completed its
initial attempted Capacity Test, submit a Remedial Plan to Owner; and Owner
shall, at Owner's option exercised in Owner's sole discretion, direct
Contractor to undertake either of the following sources of action:
(x) to pay Owner the Buy-Down Amount based on Contractor's
most recent attempted Capacity Test, in which case Owner shall
calculate the Buy-Down Amount and deliver a Notice For Payment of
Buy-Down Amount to Contractor; or
(y) to continue to attempt to satisfy the Performance
Guarantees and to pay Delay Liquidated Damages under SECTION 16.1.1
for a period of up to ninety (90) days beyond the Capacity Test
Completion Deadline; provided that Contractor shall:
(i) continuously and diligently pursue completion of
the Remedial Plan at Contractor's sole cost; and
(ii) make substantial and demonstrable progress
toward completing the Remedial Plan.
Owner shall exercise the foregoing option in Owner's sole and absolute
discretion without being limited by doctrines of good faith or commercial
reasonableness by delivering a Notice to Contractor within five (5) days after
the earlier of the date Owner receives Contractor's Remedial Plan or the date
Owner receives Notice from Contractor that Contractor will not submit a
Remedial Plan. If during the ninety (90) day period beginning on the Capacity
Test Completion Deadline, Contractor satisfies the Buy- Down Criteria, then the
provisions of SUBSECTION 16.2.1 shall apply. If at the end of such ninety (90)
day period, Contractor has failed to achieve the Performance Guarantees, then
Owner shall calculate the Buy-Down Amount based on Contractor's most recently
attempted Capacity Test and shall send a Notice For Payment of Buy-Down Amount
to Contractor.
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16.2.3. Failure to Run Capacity Test. In the event that Contractor has
not run a Capacity Test by the date that is ninety (90) days after the Capacity
Test Completion Deadline, then the Buy-Down Amount shall be deemed to equal the
Maximum Aggregate Damages, and Contractor shall have no right to conduct the
Reliability Test.
16.2.4. Payment of Buy-Down. Within five (5) days after Owner delivers
a Notice For Payment of Buy-Down Amount to Contractor, Contractor shall pay the
Buy-Down Amount based on the Performance Test to Owner. If Contractor shall
have run a Capacity Test that satisfied the Buy-Down Criteria, then upon
receipt by Owner of the full Buy-Down Amount, whether by direct payment by
Contractor, by offset, or both, the Performance Guarantees shall be deemed
amended to reflect the actual performance levels of the Project used in
calculation of the Buy-Down Amount for the Capacity Test and Contractor shall
thereafter commence the Reliability Test.
16.3. Buy-Down Following Reliability Test. If either (a) Contractor
shall have completed the Reliability Test on or before the date that is ninety
(90) days after the Substantial Completion Deadline, but Contractor shall have
failed to satisfy any of the Performance Guarantees during such Reliability
Test, or (b) Contractor shall have failed to complete the Reliability Test on
or before such date, then Owner shall deliver a Notice For Payment of Buy-Down
Amount to Contractor. Contractor shall pay a Buy-Down Amount based on the most
recently completed Reliability Test. In the event that Contractor has not run a
Reliability Test by the date that is ninety (90) days after the Substantial
Completion Deadline, then the Buy-Down Amount shall be calculated as if the
output of the Reliability Test were zero. Within five (5) days after Owner
delivers such Notice For Payment of Buy-Down Amount to Contractor, Contractor
shall pay the Buy-Down Amount, if any, based on the Reliability
Test to Owner.
16.4. Offset. If Contractor is obligated to pay any amount to Owner
pursuant to SECTION 16.1.1, 16.2 OR 16.3 and such amount is not paid within the
time period referred to in such Section, then Owner shall have the right to
offset any such amount against any amount then or thereafter due from Owner to
Contractor under this Contract and to exercise its rights against any security
provided by or for the benefit of Contractor in such order as Owner may elect
in its sole discretion.
16.5. Sole Remedy. The amounts payable under SECTIONS 16.1.1, 16.2,
16.3, 16.4 AND 16.6, as limited by ARTICLE 35, shall be Owner's sole remedies
for delays in achieving Capacity Test Completion and Substantial Completion by
Contractor and for failure of the Project to meet the Performance Guarantees
during the Performance Tests. Contractor and Owner agree that Owner's actual
damages in the event of such delays and failures would be extremely difficult
or impracticable to determine and that, after negotiation, Owner and Contractor
have agreed that the Delay
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Liquidated Damages or Buy-Down Amounts set forth in SECTIONS 16.1.1, 16.2, 16.3
AND 16.6 are a reasonable estimate of the damages that Owner would incur as a
result of such delays or failures.
16.6. Additional Opportunity to Run Performance Tests. Within twenty
(20) days after paying any Buy-Down Amounts for the Performance Tests to Owner
(the "First Buy-Down Amount"), Contractor may elect to continue to attempt to
meet the Performance Guarantees by submitting a Remedial Plan to Owner setting
forth Contractor's proposed schedule and plan for satisfaction of the
Performance Guarantees. In the event that Contractor so elects to proceed, then
within twenty (20) days after Owner receives Contractor's Remedial Plan, Owner,
in its sole discretion, may grant to Contractor an opportunity to attempt to
meet the Performance Guarantees during a re-run of one or all of the
Performance Tests in accordance with a Remedial Plan approved by Owner (such
opportunity and re-test(s), the "Post Buy-Down Performance Tests"). When
determining whether to grant Contractor an opportunity to perform any Post
Buy-Down Performance Tests, Owner may take into consideration (a) the length
and amount of potential reductions in the Project's electric output, (b) the
improvement in the Project's performance that is likely to be achieved by the
proposed adjustments, repairs, replacements, or modifications set forth in
Contractor's Remedial Plan, (c) Owner's obligations and potential liabilities
with respect to any customers, potential customers, Financing Entities or
Governmental Authorities, (d) the liquidated damages that Contractor is
required to pay hereunder, (e) the type of assurances, indemnities and
protections that Contractor proposes to provide against damage to the Project,
injury to third parties, and acts of Contractor, any Subcontractor, their
respective employees and Owner or the Operating Personnel acting under
Contractor's direction during the Post Buy-Down Performance Tests, and (f) the
type of security that Contractor proposes to provide as security for its
obligations and liabilities under this Section 16.6. Notwithstanding any other
provision hereof, Contractor shall only have one such opportunity to request to
continue to attempt to meet the Performance Guarantees.
In the event Contractor shall have received Notice from Owner granting
to Contractor an opportunity to perform any Post Buy-Down Performance Tests,
Contractor shall undertake corrective measures set forth in the Remedial Plan,
Owner shall provide Contractor with reasonable access to perform such
corrective measures; provided that Owner shall be under no obligation (other
than as may be set forth in the approved Remedial Plan) to interrupt
operations, including the overhaul, to accommodate such corrective measures
undertaken by Contractor. Owner shall run all of the Post Buy-Down Performance
Tests as reasonably directed by Contractor and as provided in the approved
Remedial Plan. Notwithstanding the fact that Owner shall run all of the Post
Buy-Down Performance Tests of the Project, Contractor shall remain solely
responsible for performing the Post Buy-Down Performance Tests and satisfying
the Performance Guarantees, regardless of any failure, non-achievement, or
non-performance of Owner or the Operating Personnel. If, by (i) 11:59 p.m.
(California time) the second day following the end of such Post Buy-Down
Capacity Test, or (ii) 11:59 p.m. (California time) the thirtieth day following
the end of such Post Buy-Down Reliability Test (each such deadline, a
"Re-testing Deadline"), each of the Post Buy-Down Performance Tests has been
run but Contractor has failed to meet the Performance Guarantees, then Owner
shall re-calculate the Buy-Down Amount for each Post Buy-Down Performance Test
(the " Second Buy-Down Amount") based on the most recently attempted Capacity
Test or Reliability Test, as applicable.
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In the event that all of the Post Buy-Down Performance Tests have not been
completed by the Re-testing Deadline, then the Actual Net Electrical Energy
Production (in kW) of the Project shall be deemed to equal zero for the
purposes of calculating the Second Buy-Down Amount.
(1) If the difference between the Second Buy-Down Amount minus the First
Buy-Down Amount is greater than zero, Contractor shall, if called for in the
Remedial Plan approved by Owner, reinstate the Project to the condition
existing prior to any such remedial work by Contractor, and Contractor shall
perform the reinstatement at its sole expense;
(2) If the difference between the First Buy-Down Amount minus the Second
Buy-Down Amount is greater than zero, Owner shall refund such difference to
Contractor within fifteen (15) days; provided, however, that Owner shall be
paid or the refund shall be adjusted by an amount necessary to compensate Owner
for:
(A) any excess costs, lost revenues, consequential damages or other
Losses, if any, incurred by Owner that result from (x) granting Contractor such
Post Buy-Down Performance Test, or (y) any acts of Contractor, Subcontractors
or their respective employees while performing such corrective measures or
during such Post Buy-Down Performance Test; and
(B) any amounts that would have been due and owing to Owner but were
not paid to Owner due to the limitations on Contractor's liability set forth in
Section 35.3 hereof.
In addition, if the Second Buy-Down Amount is less than the First Buy-Down
Amount, then Contractor shall compensate Owner for any revenues that Owner
would have obtained had the Project generated and sold Electrical Energy at the
levels established in the Post Buy-Down Performance Test rather than at the
levels at which the Project actually operated during the period from the date
the Performance Test (upon which the First Buy-Down Amount was based) was
completed until date upon which the Post Buy-Down Performance Tests of the
Project were completed, as measured by the Project's meters.
Notwithstanding any other provision to the contrary, Contractor's liability
under this Section 16.6 shall not be subject to any of the limitations on
Contractor's liability set forth in Section 35.1 or Section 35.3.
17. CHANGES IN THE WORK
17.1. Change In Work. A Change In Work may result only from any of the
following:
(a) Changes in the Work required by Owner in writing, including an
acceleration of Work, in accordance with SECTION 17.2;
(b) The occurrence of an event of Force Majeure;
(c) The occurrence of an Owner Caused Delay;
(d) A Change In Law;
(e) Unforeseen Site Conditions as allowed by Article 5.1.6
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17.2. By Owner. Owner shall have the right to make changes in the
Work, within the general scope thereof, whether such changes are modifications,
accelerations, alterations, additions, or deletions. All such changes shall be
made in accordance with this ARTICLE 17 and shall be considered, for all
purposes of this Contract, as part of the Work. Notwithstanding the foregoing,
unless Contractor and Owner shall have agreed upon a Change In Work Form in
accordance with the provisions of SECTION 17.6, Contractor shall have no
obligation to perform or comply with any modification, acceleration,
alteration, addition, or deletion by Owner to the Work after execution of this
Contract that (i) conflicts with this Contract, (ii) accelerates the Critical
Path Schedule or Milestone Schedule, (iii) may affect the performance of the
Project under the Performance Guarantees, or (iv) may increase the costs of the
Contractor.
17.3. By Contractor. Upon the occurrence of a Change In Law, an Owner
Caused Delay, an event of Force Majeure, or Unforeseen Site Conditions, if
Contractor shall be actually, demonstrably delayed in the performance of the
Work, then Contractor may request a Change In Work under which (i) the Project
Schedules (and each Project Deadline referenced therein) shall be extended by
the period of time Contractor is so actually and demonstrably delayed and as
set forth in the Change In Work Form accepted by Owner, (ii) the Contract Price
shall be changed to reflect the amount of the increased or decreased costs in
accordance with requirements set forth in SECTION 17.4, calculated as set forth
in the Change In Work Form so accepted by Owner, and (iii) the Work shall be
modified to reflect additions, deletions, or substitutions to the Work
previously approved by Owner, as set forth in the Change In Work Form so
accepted by Owner.
17.4. Adjustments to Contract Price.
17.4.1. Owner Caused Delay and Unforeseen Site Conditions. If
as a result of an Owner Caused Delay or Unforeseen Site Conditions, Contractor
is entitled to request a Change In Work pursuant to SECTION 17.3 or if Owner
requests a Change In Work, then, in the corresponding Change In Work Form, the
Milestone Schedule and Project Deadlines shall be adjusted, and the Contract
Price shall be increased by either, at Owner's sole discretion (1) an agreed to
fixed price, time and materials, compensation, or unit rates as the Parties may
agree, or (2) compensation in accordance with EXHIBIT R.
17.4.2. Change in Law. If Contractor is entitled to request a
Change In Work pursuant to SECTION 17.3 as a result of a Change In Law, then in
the corresponding Change In Work Form, the Milestone Schedule and Project
Deadlines shall be adjusted, and the Contract Price shall be increased by
either , at Owner's sole discretion (1) an agreed to fixed price, time and
materials, compensation or unit rates as the Parties may agree, or (2)
compensation in accordance with EXHIBIT R.
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17.4.3. Force Majeure. If Contractor is entitled to request a
Change In Work pursuant to SECTION 17.3 as a result of Force Majeure, then the
Changes In Work Form, the Milestone Schedule and Project Deadlines shall be
adjusted.
17.4.4. Reduction In Cost. If a Change In Work involves a
reduction in the cost to perform the Work including a reduction in the use of
less labor resulting in reduced labor costs, there shall be a lump-sum
deduction from the Contract Price, which deduction will be based on the amount
that Contractor has in its budget for the Work involved, inclusive of direct
and indirect costs, overhead, margins, contingencies and fees.
17.4.5. Adjustments. If necessary and specified on the Change
In Work Form accepted by Owner or as decided by the arbitrators in accordance
with SECTION 17.5, Owner shall promptly adjust the Contract Price and the
Project Schedules, the Progress Payment Schedule and any other Exhibits and
schedules requiring adjustment to reflect the accepted Change In Work.
17.5. Disputes. If there is a dispute between the Parties about a
request for a Change In Work by either Party under this ARTICLE 17, such
dispute shall be resolved in accordance with the expedited dispute resolution
procedures set forth in ARTICLE 36 for payment disputes, and, notwithstanding
any provision of this ARTICLE 17 to the contrary, the arbitrators shall decide
the appropriate Contract Price change, schedule change, and related matters, if
any, such decision shall be treated as a Change In Work, and this Contract
shall be deemed to have been amended to reflect such terms.
17.6. Procedures.
17.7. Contractor's Estimate. If Contractor is notified of or becomes
aware of a Change In Work permitted pursuant to SECTIONS 17.2 OR 17.3,
Contractor shall, as soon as practicable after notification or becoming aware
of such an event, prepare a detailed estimate of the increase, if any, in the
cost and time required to complete the Work on the Change In Work Form,
together with an explanation of the basis therefor, and shall inform Owner
whether and to what extent, in Contractor's opinion, there should be a change
in the Work, the Contract Price, the Project Schedules, or the Progress Payment
Schedule. Contractor shall not charge Owner for the costs of preparing the
Change In Work Form unless the Change In Work Form is not implemented.
17.8. Execution of Change In Work Form. If Contractor and Owner reach
agreement on the matters listed in the Change In Work Form submitted by
Contractor, Contractor shall execute such Change In Work Form in accordance
with SECTION 37.4, and Owner shall sign "Accepted by Owner" on such Change In
Work Form
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and execute such Change In Work Form (indicating any amendments necessary to
reflect the agreement of the Parties) in accordance with SECTION 37.4.
17.9. No Obligation or Payment Without Executed Change In Work Form.
IN NO EVENT SHALL CONTRACTOR BE ENTITLED TO UNDERTAKE OR BE OBLIGATED TO
UNDERTAKE A CHANGE IN WORK UNTIL CONTRACTOR HAS RECEIVED A CHANGE IN WORK FORM
SUBMITTED BY CONTRACTOR AND ACCEPTED BY OWNER OR DECIDED BY THE ARBITRATORS,
AND, IN THE ABSENCE OF SUCH SIGNED CHANGE IN WORK FORM, IF CONTRACTOR
UNDERTAKES ANY CHANGES IN THE WORK, CONTRACTOR SHALL MAKE ANY SUCH CHANGES AT
CONTRACTORS SOLE RISK AND EXPENSE AND SHALL NOT BE ENTITLED TO ANY PAYMENT
HEREUNDER FOR UNDERTAKING SUCH CHANGES.
17.10. No Suspension. Contractor shall not suspend the Work pending
resolution of any proposed Change In Work unless directed by Owner in writing
in accordance with ARTICLE 22.
18. WARRANTIES CONCERNING THE WORK
18.1. Project Warranties. Contractor warrants and guarantees with
respect to the Project (the "PROJECT WARRANTIES") as follows:
(a) that all Work (other than Work covered by the Materials
Warranty), including the construction and design of the Project and the
installation of the Equipment shall be (i) Industry Grade, (ii) free from
Defects and other defects of manufacture, construction or design, (iii) shall
conform to all applicable requirements of any Applicable Law and the Applicable
Permits and (iv) shall be fit for Owner's use as a geothermal power production
facility;
(b) that all the Equipment furnished or installed in the
construction of the Project shall be furnished (except Owner Furnished Items)
or installed in a professional manner in accordance with manufacturers'
requirements and Industry Standards, and that such furnishment or installation
shall conform in all respects with the Statement of Work, all Applicable Laws
and Applicable Permits and the requirements of this Contract and be free of any
Defects.
18.2. Materials Warranty. Contractor further warrants that all
Equipment and other items furnished by Contractor (except Owner Furnished
Items) and any Subcontractors and Vendors hereunder shall be new and of good
and suitable quality when installed, shall conform to the requirements of the
Statement of Work, shall be free from any charge, lien, security interest or
other encumbrance and shall be free
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of any Defects including Defects in design, materials or fabrication (the
"MATERIALS WARRANTY"). If requested by Owner, Contractor shall provide Owner
with satisfactory evidence that any item(s) of Equipment satisfy the Materials
Warranty.
18.3. Warranty Period. Contractor shall have no liability under
SECTION 18.1 OR 18.2 from and after the end of the Warranty Period (as such
period may be extended in accordance with the terms hereof); provided, however,
that the Warranty Period for any item or part required to be repaired,
corrected or replaced following discovery of a Defect during the original
Warranty Period shall be extended from the time of such repair, correction or
replacement for a period of twelve (12) months, (it being understood that if
the original Warranty Period would extend longer than such 12-month period, the
original Warranty Period will still apply to such item or part) not to exceed
in aggregate a duration of twenty-four (24) months from Substantial Completion.
Notwithstanding the foregoing if (a) Owner fails to observe any Defect during
the Warranty Period and (b) such Defect would not have been revealed to Owner
during the Warranty Period despite Owner's operation of the Project in
accordance with commercially acceptable practices, then the Warranty Period
(and the corresponding rights and obligations of the Parties under this ARTICLE
18) shall be extended to effect repair of such Defect provided that Owner
delivers written Notice of such Defect to Contractor within twelve (12) months
from the end of the Warranty Period. Contractor's Project Warranties and its
Materials Warranty (including re-warranties under this SECTION 18.3) shall be
assignable to the Financing Entities without additional approval by Contractor.
18.4. Enforcement After Expiration. Commencing on the expiration of
each of the respective Project Warranties and Materials Warranty, or such later
date as is provided in SECTION 18.3, Owner shall be responsible for enforcing
all representations, warranties, and guarantees from Subcontractors and
Vendors, and Contractor shall provide reasonable assistance to Owner, on a
reimbursable basis, in enforcing such representations, warranties, and
guarantees, when and as reasonably requested by Owner. In addition, prior to
the expiration of each of the respective Project Warranties and Materials
Warranty, or such later date as is provided in SECTION 18.3 with respect to
Work required to be re-performed, Owner, at its option and upon prior written
Notice to Contractor, may enforce any such warranty against any Subcontractor
or Vendor if (i) Owner determines that Contractor has not enforced such
warranty against the Subcontractor or Vendor in a timely and diligent manner or
performed the warranty work itself, or (ii) a Contractor Event of Default
exists.
18.5. Exclusions. The Project Warranties and Materials Warranty set
forth in SECTIONS 18.1 AND 18.2 shall not apply to:
(a) Damage to any Equipment to the extent such damage is caused by:
(i) Owner's failure to operate and maintain such Equipment in
accordance with the recommendations set forth in the Required Manuals;
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(ii) Owner's operation of such Equipment in excess of
operating specifications for such Equipment as set forth in the
Required Manuals;
(iii) The use of spare parts and normal consumables in the
repair or maintenance of such Equipment that are not in accordance
with specifications and recommendations set forth in the Required
Manuals;
(iv) Any event of Force Majeure (which excludes warranty
failure hereunder).
Notwithstanding the foregoing and without limiting the applicability of
insurances placed pursuant to EXHIBIT "V", damage caused by Operating Personnel
while under the direction of Contractor shall be the responsibility of
Contractor.
(b) Normal Operating Consumables or items that require
replacement due to normal wear and tear or casualty loss (other than as a
result of a warranty failure).
18.6. Subcontractor and Vendor Warranties. All representations,
warranties, guarantees, and obligations of such Subcontractors and Vendors
shall, at the request and direction of Owner, and without recourse to
Contractor, be assigned ,in accordance with the provisions of EXHIBIT "U", to
Owner or any Financing Entity upon default by Contractor or termination or
expiration of this Contract; provided, however, that, notwithstanding such
assignment, Contractor shall be entitled to enforce each such representation,
warranty, guarantee, and obligation through the end of the warranty periods.
Contractor shall deliver to Owner promptly following execution thereof duly
executed copies of all contracts containing such representations, warranties,
guarantees, and obligations.
18.7. Correction of Defects.
(a) Owner shall promptly notify Contractor in writing upon discovery
of any failure of any of the Work to satisfy the Project Warranties or the
Materials Warranty during the applicable Warranty Periods (including
Subcontractor and Vender warranty period). In the event of any such failure
under circumstances in which there is an immediate need as defined in EXHIBIT
"S", then Owner shall perform such warranty work for Contractor's account in
accordance with the Warranty Procedures; provided, however, that the failure to
comply with such Warranty Procedures shall not void the Project Warranties or
the Materials Warranty. In all other cases, Contractor shall, at its own cost
and expense (except to the extent of insurance proceeds actually received),
re-perform any necessary engineering and purchasing relating to such Equipment,
material, labor, and shipping, as well as the cost of removing any Defect and
the cost of replacement thereof, including any damage to the surrounding Work,
as shall be necessary to cause the Work and the Project to conform to the
Project Warranties or Materials Warranty. Within five (5) days after receipt by
Contractor of a Notice from Owner specifying a failure of any of the Work to
satisfy Contractor's Project Warranties or the Materials Warranty and
requesting Contractor to correct the violation, Contractor and Owner shall
mutually agree when and how Contractor shall remedy said violation. If
Contractor does not use its best efforts to
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proceed to complete said remedy within the time agreed to, or should Contractor
and Owner fail to reach such an agreement within such five (5) day period,
Owner shall have the right to perform the necessary remedy, or have third
parties perform the necessary remedy, in accordance with the Warranty
Procedures; provided, however, that the failure to comply with such Warranty
Procedures shall not void the Project Warranties or the Materials Warranty, and
the costs as established pursuant to the Warranty Procedures shall be borne by
Contractor.
(b) Notwithstanding the foregoing, Contractor shall have the
right to request Owner to perform all or any portion of Contractor's
obligations with respect to any warranty claim, and, if Owner determines that
it has the capability and expertise to perform such obligations, Owner shall
perform such obligations for Contractor's account in accordance with the
Warranty Procedures; provided, however, that the failure to comply with such
Warranty Procedures shall not void the Project Warranties or the Materials
Warranty.
18.8. Operating Consumables. After Substantial Completion, in
connection with the performance by Contractor of any warranty work, Owner shall
supply all normal Operating Consumables (other than as specified herein or in
EXHIBIT "A"). In addition, Owner shall, to the extent the same would not
materially interfere with the operations of the Project not affected by the
warranty work, allow Contractor the use of any special rigging, cranes, heavy
equipment, the workshop and workshop tools, and equipment located at the Site.
18.9. Limitations On Warranties. EXCEPT FOR THE EXPRESS WARRANTIES AND
REPRESENTATIONS SET FORTH IN THIS CONTRACT (INCLUDING IN ANY EXHIBIT HERETO),
CONTRACTOR DOES NOT MAKE ANY OTHER EXPRESS WARRANTIES OR REPRESENTATIONS, OR
ANY IMPLIED WARRANTIES OR REPRESENTATIONS, OF ANY KIND WHATEVER RELATING TO
THIS CONTRACT, THE WORK, OR DESIGN, EQUIPMENT, OR MATERIALS TO BE SUPPLIED BY
CONTRACTOR UNDER THIS CONTRACT OR TO THE PROJECT, INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY.
19. EQUIPMENT IMPORTATION; TITLE
19.1. Importation of Equipment. Contractor, at its own cost and
expense, but with the benefit of insurances supplied to the project through
EXHIBIT "V", shall make all arrangements, including the processing of all
documentation, necessary to import into the United States Equipment to be
incorporated into the Project (except Owner Furnished Items) and any other
equipment and other items necessary to perform the Work and shall coordinate
with the applicable Governmental Authorities in achievingclearance of United
States customs for all such Equipment and other items and, to the extent
available under United States law but without limiting Contractor's liability
for any and all import duties, taxes and levies as specified in SECTION 6.2,
achieving such importation duty- and
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tax-free. In no event shall Owner be responsible for any delays in customs
clearance or any resulting delays in performance of the Work.
19.2. Title.
19.2.1. Contractor warrants good title, free and clear of all
liens, claims, charges, security interests, and encumbrances whatsoever, to all
Equipment and other items furnished by it or any of its Subcontractors or
Vendors that become part of the Project or that are to be used for the
operation, maintenance, or repair thereof.
19.2.2. Title to all Equipment and other items shall pass to
Owner, free and clear of all liens, claims, charges, security interests, and
encumbrances whatsoever, upon the earlier of payment in full therefor or
incorporation into the Project.
19.2.3. The transfer of title shall in no way affect Owner's
rights as set forth in any other provision of this Contract. Contractor shall
have care, custody, and control of all Equipment and other items (including
Equipment and other items imported into the United States) and exercise due
care with respect thereto until the earlier of the Substantial Completion Date
and the termination of this Contract.
19.3. Protection. For the purpose of protecting Owner's interest in
all Equipment and other items with respect to which title has passed to Owner
pursuant to SECTION 19.2 but that remain in possession of another party,
Contractor shall take or cause to be taken all steps necessary under the laws
of the appropriate jurisdiction(s) to protect Owner's title and to protect
Owner against claims by other parties with respect thereto.
19.4. Owner's Possession. On the Substantial Completion Date, Owner
shall take complete possession and control of the Project and assume
responsibility for the daily operation and maintenance of the Project.
Contractor's access to and continued presence at the Site thereafter shall be
for the sole purpose of achieving Final Completion pursuant to SECTION 15.5 and
completing its obligations under ARTICLE 15.
20. DEFAULT
20.1. Contractor Events of Default. Contractor shall be immediately in
default of its obligations pursuant to this Contract upon the occurrence of any
one or more events of default below (each, a "CONTRACTOR EVENT OF DEFAULT"):
(a) Contractor becomes insolvent, generally does not pay its debts as
they become due, admits in writing its inability to pay its debts, or makes an
assignment for the
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benefit of creditors, or insolvency, receivership, reorganization, or
bankruptcy proceedings are commenced by Contractor;
(b) Insolvency, receivership, reorganization, or bankruptcy
proceedings are commenced against Contractor and such proceeding shall remain
undismissed or unstayed for a period of thirty (30) days;
(c) Any representation or warranty made by Contractor herein was false
or materially misleading when made and Contractor fails to remedy such false or
misleading representation or warranty, and to make Owner whole for any
consequences thereof, within thirty (30) days after Contractor receives a
Notice from Owner with respect thereto;
(d) Contractor assigns or transfers this Contract or any right or
interest herein, except as expressly permitted under ARTICLE 30;
(e) Contractor fails to maintain any insurance coverages required of
it in accordance with ARTICLE 23;
(f) Contractor fails to perform or observe in any respect any
provision of this Contract providing for the payment of money to Owner or any
other material provision of this Contract not otherwise addressed in this
SECTION 20.1, and such failure continues for five (5) days in the case of such
a payment obligation and thirty (30) days in the case of any other obligation,
in each case after Contractor receives a Notice from Owner with respect
thereto;
(g) Following approval of a Plan pursuant to SECTION 8.4, Contractor
fails, other than for Owner Caused Delay, to meet the schedule set forth in the
Plan (as determined from the revised Critical Path Schedule established by the
Plan);
(h) RESERVED
(i) The Capacity Test Completion Date has not occurred on or before
the date that is ninety (90) days after the Capacity Test Completion Deadline,
as such deadline may be extended pursuant to the provisions hereof;
(j) The Substantial Completion Date has not occurred on or before the
date that is ninety (90) days after the Substantial Completion Deadline, as
such deadline may be extended pursuant to the provisions hereof;
(k) The Final Completion Date has not occurred on or before the date
that is thirty (30) days after the Final Completion Deadline, as such deadline
may be extended pursuant to the provisions hereof; or
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(l) Contractor suspends or abandons the Work. "SUSPENSION" for the
purposes of this SECTION 20.1(L) shall mean that Contractor has not
accomplished any progress toward any of the Milestones for a period of sixty
(60) or more days. "Abandonment" for the purposes of this SECTION 20.1(L) shall
mean that Contractor has substantially reduced personnel at the Site or removed
further required equipment from the Site such that, in the opinion of an
experienced construction manager, Contractor would not be capable of
maintaining progress in accordance with the Critical Path Schedule.
20.2. Owner's Rights and Remedies. In the event of a Contractor Event
of Default, Owner or its assignee shall have the following rights and remedies,
in addition to any other rights and remedies that may be available to Owner or
its assignee under this Contract, and Contractor shall have the following
obligations:
(a) Owner, without prejudice to any of its other rights or
remedies, may terminate this Contract as provided in SECTION 21.2.
(b) Owner may, without prejudice to any of its other rights or
remedies, seek performance by any guarantor of Contractor's obligations
hereunder;
(c) If requested by Owner, Contractor shall withdraw from the
Site, shall assign to Owner (without recourse to Contractor) such of
Contractor's subcontracts as Owner may request, and shall deliver and make
available to Owner all information, patents, and licenses of Contractor related
to the Work reasonably necessary to permit Owner to complete or cause the
completion of the Work, and in connection therewith Contractor authorizes Owner
and its agents to use such information in completing the Work, shall remove
such materials, equipment, tools, and instruments used by and any debris or
waste materials generated by Contractor in the performance of the Work as Owner
may direct, and Owner may take possession of any or all Drawings and
Specifications, Required Manuals, and Site facilities of Contractor related to
the Work necessary for completion of the Work (whether or not such Drawings and
Specifications, Required Manuals, and Site facilities are complete);
(d) Owner, without incurring any liability to Contractor, shall
have the right (either with or without the use of Contractor's equipment) to
have the Work finished whether by enforcing any security given by or for the
benefit of Contractor for its performance under this Contract or otherwise, in
which case Owner shall have the right to take possession of and use all
equipment of Contractor necessary for completion of the Work, and Contractor
shall have no right to remove such items from the Site until such completion;
(e) Owner may seek equitable relief to cause Contractor to take
action or to refrain from taking action pursuant to this Contract, or to make
restitution of amounts improperly received under this Contract;
(f) Owner may, but is not obligated to, make such payments or
perform such obligations as are required to cure Contractor's Event of Default
and offset the cost of such payment or performance against payments otherwise
due to Contractor under this Contract; and
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(g) Owner may seek damages as provided in SECTION 20.3, including
proceeding against any bond, guarantee, letter of credit, or other security
given by or for the benefit of Contractor for its performance under this
Contract.
20.3. Damages for Contractor Default. In the event of a Contractor
Event of Default, but in such case subject to the limitations of ARTICLE 35,
Contractor shall be liable to Owner for any and all actual damages to Owner as
a result of such Contractor Event of Default, it being understood that, to the
extent that the actual costs of completing the Work, including compensation for
obtaining a replacement contractor or for obtaining additional professional
services required as a consequence of Contractor's Event of Default, exceed
those costs that would have been payable to Contractor but for Contractor's
Event of Default, Contractor shall be obligated to pay the difference to Owner.
In addition, in the event of a Contractor Event of Default, Owner shall be
entitled to withhold further payments to Contractor for the Work performed
prior to termination of this Contract until Owner determines the liability of
Contractor, if any, under this SECTION 20.3. Upon determination of the total
cost of the Work, Owner shall notify Contractor in writing of the amount, if
any, that Contractor shall pay Owner or Owner shall pay Contractor. If, in the
event of a Contractor Event of Default set forth in clauses (h) (i) or (j) of
SECTION 20.1, Owner elects to terminate this Contract pursuant to SECTION
20.2(A) above, then Contractor shall immediately pay to Owner the lesser of:
(a) the Maximum Aggregate Damages or (b) the Delay Liquidated Damages and
Buy-Down Amounts due and payable under ARTICLE 16 (provided that clause (b)
shall not apply unless Contractor has performed a Capacity Test and a
Reliability Test before such termination); as liquidated damages for such
Contractor Event of Default and for Contractor's failure to proceed with or
make adequate progress towards the completion of the Work as required by this
Contract. Owner and Contractor agree that Owner's actual damages in the event
of any Contractor Event of Default set forth in clauses (i) or (j) of SECTION
20.1 would be extremely difficult or impracticable to determine and that, after
negotiation, Owner and Contractor have agreed that the Delay Liquidated
Damages, Buy-Down Amounts and/or Maximum Aggregate Damages required to be paid
hereunder are a reasonable estimate of the damages that Owner would incur as a
result of such a Contractor Event of Default.
20.4. Owner Event of Default. Owner shall be immediately in default of
its obligations pursuant to this Contract upon the occurrence of any one or
more events of default below (each, an "OWNER EVENT OF DEFAULT"):
(a) Any representation or warranty made by Owner herein was false
or materially misleading when made and Owner fails to remedy such false or
misleading representation or warranty, and to make Contractor whole for any
consequences thereof, within thirty (30) days after Owner receives a Notice
from the Contractor with respect thereto;
(b) Owner assigns or transfers this Contract or any right or
interest herein, except as expressly permitted under ARTICLE 29 ; or
(c) Owner fails to perform or observe in any respect any
provision of this Contract providing for the payment of money to Contractor or
any other material provision of this Contract not otherwise addressed in this
SECTION 20.4, and such failure continues for ten (10)
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days in the case of such a payment obligation and thirty (30) days in the case
of any other obligation, in each case after Owner receives a Notice from
Contractor with respect thereto.
20.5. Contractor's Remedies. In the event of an Owner Event of
Default, and subject to ARTICLE 35, Contractor shall have all rights and
remedies that may be available under law against Owner with respect to this
Contract, including the right to suspend performance of the Work or to
terminate this Contract (and including the right to immediately stop work upon
an Owner Event Of Default for non-payment).
21. EARLY TERMINATION
21.1. General. Owner may in its sole discretion terminate the Work
with or without cause at any time by giving Notice of termination to
Contractor, to be effective upon the receipt of such Notice by Contractor or
upon such other termination date specifically identified by Owner therein;
provided, however, that Owner may not terminate the Work for the sole purpose
of substituting a new contractor willing to finish the Work for a price lower
than the remaining unpaid portion of the Contract Price. If Owner terminates
the Work without cause or for any cause other than a Contractor Event of
Default specified in SECTION 20.1, then Owner and Contractor shall have the
following rights, obligations and duties:
21.1.1. Prior to Notice to Proceed. If the Contract is terminated
by Owner pursuant to SECTION 21.1 prior to the issuance of the Notice to
Proceed, then Contractor shall receive payment only for any Work performed
after the date hereof pursuant to a specific written agreement between the
Parties.
21.1.2. After Notice to Proceed. Contractor shall receive as
compensation for the Work performed through the effective date of termination:
(a) the sum, without duplication, of (i) the aggregate amount set
forth on the Project Payment Schedule for completion of items of Work that have
been properly completed by Contractor, (ii) for each item of Work properly
commenced but not yet completed by Contractor, a percentage of the aggregate
amount set forth on the Project Payment Schedule for completion of such item
based on the percentage of completion of such item, and (iii) reasonable
demobilization costs; minus
(b) any amounts previously paid to Contractor under this Contract.
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21.1.3. Adjustment for Defects. Notwithstanding the foregoing, the
amount owed pursuant to SUBSECTIONS 21.1.1 OR 21.1.2 shall be subject to
adjustment to the extent any Work contains Defects and provided, further, that
Contractor shall use its reasonable efforts to minimize costs that arise
between the date of its receipt of a Notice of termination and the effective
date thereof, including, without limitation, by promptly notifying its
Subcontractors of such termination.
21.1.4. Assumption of Contractor Contracts. Owner shall have the
right, at its sole option, to assume and become liable for any reasonable
obligations that Contractor may have in good faith incurred for its Site
personnel and for any reasonable written obligations and commitments that
Contractor may have in good faith undertaken with third parties in connection
with the Work to be performed at the Site, which obligations and commitments
shall not have been covered by the payments made to Contractor under SUBSECTION
21.1.1 or 21.1.2. If Owner elects to assume any obligation of Contractor as
described in this SUBSECTION 21.1.4, then, as a condition precedent to Owner's
compliance with any subsection of this ARTICLE 21, Contractor shall execute all
papers and take all other reasonable steps requested by Owner which may be
required to vest in Owner all rights, set-offs, benefits and titles necessary
to such assumption by Owner of such obligations described in this ARTICLE 21
Owner shall simultaneously provide to Contractor indemnities against
liabilities thereafter arising under the assumed obligations or commitments.
21.2. Claims for Payment. All claims for payment by Contractor under
this ARTICLE 21 must be made within forty-five (45) days after the effective
date of a termination hereunder. Owner shall make payments under this ARTICLE
21 in accordance with ARTICLE 7.
21.3. Termination Payments. The payments described in SECTIONS 21.1.1
AND 21.1.2 include payment for (i) all costs of Equipment, temporary equipment,
materials, labor, transportation, engineering, design and other services
relating to Contractor's performance of its obligations under this Contract and
said Owner-requested Work (including any intellectual property rights licensed
under this Contract, expressly or by implication) provided by Contractor or
such Subcontractors or Vendors, (ii) all national, state, regional and local
taxes, and other sales taxes effective or enacted as of the date of execution
of this Contract or thereafter, each as imposed on Contractor or its
Subcontractors or Vendors or said Owner-requested Work, (iii) all other taxes,
duties, levies, imposts, fees, or charges of any kind (whether in the United
States or elsewhere) arising out of Contractor's or any such Subcontractor's or
Vendor's performance of said Owner-requested Work, including any increases
thereof that may occur during the term of this Contract, and (iv) any duties,
levies, imposts, fees, charges, and royalties imposed on Contractor or its
Subcontractors or Vendors with respect to any such Equipment, materials, labor,
or services provided under this Contract. The taxes covered hereby include
occupational, excise, unemployment, ownership, value-added, gross receipts, and
income taxes and any and all other taxes and duties on any item or service that
is part of said Owner-requested Work, whether such tax is normally included in
the price of such item or service or is normally stated separately, all of
which shall be for the account of Contractor. The above-described payments
shall not be increased with respect to any of the
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foregoing or with respect to any withholdings in respect of any of the
foregoing items that Owner may be required to make.
22. SUSPENSION
22.1. General. If at any time (i) Owner, in its sole discretion,
elects to suspend performance of the Work for reasons related to the safe and
proper conduct of the Project and the construction thereof, or (ii) the
Financing Entities shall have ceased to disburse funds or shall have given
notice of their intent to do so, Owner may suspend performance of the Work by
giving Notice to Contractor. Such suspension shall continue for the period
specified in the suspension Notice. The Contract Price shall be adjusted as
provided in clauses (a), (b), (c) and (d) of SECTION 22.2 to reflect any
additional increased costs of Contractor resulting from any such suspension, as
demonstrated by Contractor to Owner's reasonable satisfaction. No adjustment
shall be made to the extent that performance is suspended, delayed, or
interrupted for any cause due to Contractor's negligence, willful misconduct,
or noncompliance with the terms of this Contract. At any time after the
effective date of the suspension, Owner may require Contractor to resume
performance of the Work on five (5) days' Notice.
22.2. Contractor's Termination and Compensation Rights If, at the end
of the specified suspension period, Owner has not requested a resumption of the
Work or has not notified Contractor of any extension of the suspension period
(but in no event beyond 365 days in the aggregate for all such suspensions,
other than suspensions for any reason due to Contractor's negligence, willful
misconduct, or noncompliance with the terms of this Contract) at Contractor's
option the Work shall be deemed terminated as of the commencement date of the
suspension period, and Owner shall promptly pay Contractor for the Work
performed pursuant to SUBSECTION 21.1.2. In addition, in the event of any such
suspension, Owner shall pay Contractor within thirty (30) days after receipt of
Contractor's monthly invoice for those costs incurred during the suspension
period that are documented by Contractor to the reasonable satisfaction of
Owner, to the extent attributable to the suspension, and that are:
(a) For the purpose of safeguarding and/or storing the Work and
the materials and equipment at the point of fabrication, in transit, or at the
Site;
(b) For personnel, Subcontractors, Vendors, or rented equipment,
the payments for which, with Owner's prior written concurrence, are continued
during the suspension period;
(c) For reasonable costs of demobilization and remobilization; or
(d) For rescheduling the Work (including penalties or additional
payments to Subcontractors and Vendors for the same).
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22.3. Extension of Time. In the case of any suspension under this
ARTICLE 22, other than from a cause due to Contractor's negligence, willful
misconduct, or noncompliance with the terms of this Contract, the Project
Deadlines shall be extended by a period equal to the suspension period, plus a
reasonable period for demobilization and remobilization approved by Owner, and
the Project Schedules, and the Progress Payment Schedule shall be adjusted to
account for same.
22.4. Claims for Payment. All claims by Contractor for compensation or
extension of time under this ARTICLE 22 must be made within sixty (60) days
after the suspension period has ended and the Work has been either terminated
or resumed. Failure of Contractor to make such claim within said period shall
be deemed a waiver by Contractor of any such claims.
23. INSURANCE
23.1. General.
23.1.1. Contractor's Insurance. Contractor, at its own expense,
shall procure or cause to be procured and maintain or cause to be maintained in
full force and effect at all times commencing no later than upon commencement
of the Work at the Site and until the expiration of the Warranty Periods, all
insurance coverages specified in EXHIBIT "V-1". All insurance coverage shall be
in accordance with the terms of this ARTICLE 23 and EXHIBIT "V-1", using
companies, to the extent required by Applicable Law, authorized to do business
in California.
23.1.2. Owner's Insurance. Owner, at its own expense, shall
procure or cause to be procured and maintain or cause to be maintained in full
force and effect at all times during the period commencing on the Notice to
Proceed Date through the expiration of the Warranty Periods, all insurance
coverages specified in EXHIBIT "V-2". All insurance coverages shall be in
accordance with this ARTICLE 23 and EXHIBIT "V-2", using companies, to the
extent required by Applicable Law, authorized to do business in California.
Owner agrees to request a quote from Owner's Contractor's All Risks insurer,
for Delay in Start Up insurance coverage, and Owner's Marine Delay in Start Up
insurer, for Marine Delay in Start Up insurance coverage, to provide that such
coverage is payable without deduction for Delay Liquidated Damages payable
under this Contract and to notify Contractor of the amount by which the premium
for such coverage is greater than would be the case had such policy provided
that the amount of the Delay Liquidated Damages payable under this Contract
would be deducted from the insurance proceeds that are payable under such
policy. In the event that any such greater coverage is available on reasonable
terms, without otherwise affecting coverage, Contractor may elect to have Owner
obtain the policy with such greater coverage and Contractor agrees to promptly
reimburse Owner for the amount by which the premium for such policy is greater
than the premium that would have applied had such insurance
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provided that the amount of Delay Liquidated Damages payable under this
Contract would be deducted from the insurance proceeds that would be payable
under such coverage.
23.1.3. Non-Violation. Contractor shall not knowingly violate nor
knowingly permit to be violated any conditions of the policies provided by
Owner under the terms of this Contract and shall at all times satisfy the
requirements of the insurance companies issuing them. All requirements imposed
by such policies and to be performed by Contractor shall likewise be imposed
upon and assumed by each Subcontractor.
23.2. Subrogation Waivers. All policies shall provide for a waiver of
subrogation rights against Owner, Contractor, Subcontractors and the Financing
Entities, and their assigns, subsidiaries, Affiliates, employees, insurers, and
underwriters, and of any right of the insurers to any set-off or counterclaim
or any other deduction, whether by attachment or otherwise, in respect of any
liability of any such person insured under any such policy. Contractor
releases, assigns, and waives any and all rights of recovery against Owner, the
Financing Entities, and all their Affiliates, subsidiaries, employees,
successors, permitted assigns, insurers, and underwriters that Contractor may
otherwise have or acquire in or from or in any way connected with any loss
covered by policies of insurance maintained or required to be maintained by
Contractor pursuant to this Contract or because of deductible clauses in or
inadequacy of limits of any such policies of insurance. A full and complete
waiver of subrogation in favor of Contractor and Subcontractors under Owner's
permanent or operational policies shall survive the expiration of this
Contract.
23.3. Evidence of Insurance. Evidence of insurance required hereunder,
in the form required to be delivered by Owner pursuant to the Financing
Entities' loan documentation, but in any event in the form of certificates of
insurance and copies of the forms of policies and endorsements certified by
such Party's insurance brokers, shall be furnished by each when required to be
delivered no later than the date on which coverage is required to be in effect
pursuant to EXHIBITS "V-1", "V-2" and "V-3" as applicable. If requested by
Owner, copies of the actual insurance policies shall be provided to Owner
within the time required by the Financing Entities after the coverage date,
excluding any claims history or premium information. Such insurance policies
shall be subject to review and approval by the other Party, which approval
shall not be unreasonably withheld, and shall, at a minimum, provide a
severability of interests or cross-liability clause; provided, however, that
the insurance shall be primary and not excess to or contributing with any
insurance or self-insurance maintained by Owner, Contractor, and the Financing
Entities and contain a provision that the policies may not be canceled or
changed except (i) as provided in EXHIBITS "V-1", "V-2" and "V-3" as
applicable, or (ii) if not therein provided, without thirty (30) days' or, in
the case of nonpayment of premium, ten (10) days' prior written Notice given by
certified mail to Owner, Contractor, and the Financing Entities. Not later than
the one-year anniversary of the date of delivery of the policies of insurance
hereunder or the expiration date of the policy if for a term of more than one
year, and not later than each one-year anniversary or policy renewal date
thereafter, each Party shall deliver copies of the renewal insurance policies
certified as aforesaid.
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23.4. Insurance Coverages. All amounts of insurance coverage under
this Contract specified in EXHIBITS "V-1", "V-2" and "V-3" are required
minimums. Owner and Contractor shall each be solely responsible for determining
the appropriate amount of insurance, if any, in excess thereof. The required
minimum amounts of insurance shall not operate as limits on recoveries
available under this Contract.
23.5. Failure to Maintain Insurance. If at any time the insurance to be
provided by Owner or Contractor hereunder shall be reduced or cease to be
maintained, then (without limiting the rights of the other Party hereunder in
respect of any default that arises as a result of such failure) the other Party
may at its option maintain the insurance required hereby, but subject to SECTION
23.6, and, in such event (a) Owner may withhold the cost of insurance premiums
expended for such replacement insurance from any payments to Contractor, or (b)
Owner shall reimburse Contractor for the premium of any such replacement
insurance, as applicable.
23.6. Scope of Coverage. Contractor shall require such liability
insurance of Subcontractors who perform services at the Site as shall be
reasonable and in accordance with Industry Standards in relation to the Work or
other items being provided by each such Subcontractor.
24. RISK OF LOSS OR DAMAGE
24.1. Contractor Assumption of Risk. Until the Substantial Completion
Date, Contractor assumes risk of loss and full responsibility for the cost of
replacing or repairing the damage to the Project and all materials, Equipment,
supplies and maintenance equipment (including temporary materials, equipment
and supplies) which are purchased by Contractor or Owner for permanent
installation in or for use during construction of the Project regardless of
whether Owner has title thereto under this Contract, unless such loss or damage
is a result of the negligence or intentional misconduct of Owner or Owner's
agents during such time as such agents are acting under Owner's control, in
which case Owner shall be responsible for the amount of any deductible amounts
under applicable policies as identified in EXHIBIT "V-2". Owner shall bear this
risk and responsibility after the Substantial Completion Date.
24.2. Loss or Damage; Limitations. If any portion of the Work is lost
or damaged, then Contractor shall replace or repair any such loss or damage and
complete the Work in accordance with this Contract; provided, however, that
Contractor shall not be obligated to replace or repair any such loss or damage
unless Owner has properly carried and maintained the insurance which Owner is
required to maintain pursuant to Article 4.23 and Contractor has received
reasonable assurances from Owner or the Financing
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Entities that Owner will prosecute such claim in a commercially reasonable
manner and Contractor will receive the insurance proceeds, if any, paid under
such Owner maintained insurance coverages in accordance with the disbursement
provisions of this Contract. Should a loss be sustained under a third party
liability policy, Contractor shall assume all responsibilities of an insured
under the terms of said insurance.
25. INDEMNIFICATION
25.1. By Owner. Except for matters expressly made Contractor's
responsibility hereunder or otherwise expressly limited as set forth in this
Contract, Owner shall defend, indemnify, and hold harmless Contractor, its
Subcontractors and Vendors, and all their respective employees, Affiliates,
agents, officers, partners, and directors from and against all third party
claims, or Losses for bodily injury or property damage, that arise out of or
result from, but only to the extent of, the negligent, reckless, or tortious
acts or omissions (including strict liability) of Owner or anyone directly or
indirectly employed by Owner (other than Contractor, any Affiliate of
Contractor, or any Subcontractor or Vendor).
25.2. By Contractor. Except for matters expressly made Owner's
responsibility hereunder or otherwise expressly limited as set forth in this
Contract, Contractor shall defend, indemnify, and hold harmless Owner, the
Existing Plant Owners and the Financing Entities and any Person acting for or
on behalf of Owner and their respective employees, agents, partners,
Affiliates, shareholders, directors, officers, and assigns, from and against:
(a) All third party claims, or all Losses for bodily injury or property
damage, that directly or indirectly arise out of or result from, but only to the
extent of, any negligent, reckless, or otherwise tortious act or omission
(including strict liability) during the performance of the Work, or any curative
action under any warranty following performance of the Work, of Contractor or
any Affiliate thereof, any Subcontractor or Vendor, or anyone directly or
indirectly employed by any of them, or anyone for whose acts such Person may be
liable; or
(b) All Losses incurred by Owner, the Existing Plant Owners, or any of
the Financing Entities or such employee, agent, partner, Affiliate,
shareholder, director, officer, that result in either any liens filed by
Contractor, Subcontractors, Vendors or any other Person performing any Work or
any employer's liability or worker's compensation claims filed by any employees
of Contractor or any of its Subcontractors or Vendors;
(c) All Losses that directly or indirectly arise out of or result from
the failure of Contractor to comply with Applicable Laws or the conditions or
provisions of Applicable Permits; or
(d) All Losses that directly or indirectly arise out of any insurance
policy procured under ARTICLE 23 being vitiated as a result of Contractor's
failure to comply with any of
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the requirements set forth in such policy or any other act by Contractor or any
Subcontractor or Vendor.
25.3. Actions by Government Authorities. Contractor shall defend,
indemnify, and hold Owner and the Financing Entities and their respective
employees, agents, partners, Affiliates, shareholders, directors, officers, and
assigns harmless from and against all claims by any Governmental Authority
claiming taxes based on gross receipts or on income of Contractor, any of its
Subcontractors or Vendors, or any of their respective agents or employees with
respect to any payment for the Work made to or earned by Contractor, any of its
Subcontractors or Vendors, or any of their respective agents or employees under
this Contract.
25.4. Limitations. Except as described in SECTION 25.2(C), nothing
contained in this Contract shall obligate either Party to indemnify or hold
harmless the other Party or any of their respective employees, agents,
partners, Affiliates, shareholders, directors, officers, and assigns from any
claims to the extent of the negligent, reckless, or otherwise tortious conduct
(including strict liability) of the Party seeking indemnification. The Parties
intend that, where negligence is determined to have been contributory,
principles of comparative negligence will apply, and each Party shall bear the
proportionate cost of any loss, damage, expense, and liability attributable to
that Party's negligence.
25.5. Notice; Defense; Settlement. An indemnitee under this ARTICLE 25
or any other indemnification provision set forth in the Contract shall, within
ten (10) Business Days after the receipt of notice of the commencement of any
legal action or of any claims against such indemnitee in respect of which
indemnification will be sought, notify the indemnitor with a Notice thereof.
Failure of the indemnitee to give such Notice will reduce the liability of the
indemnitor by the amount of damages attributable to the failure of the
indemnitee to give such Notice to the indemnitor, but the failure so to notify
shall not relieve the indemnitor from any liability that it may have to such
indemnitee otherwise than under the indemnity agreements contained in this
ARTICLE 25. In case any such claim or legal action shall be made or brought
against an indemnitee and such indemnitee shall notify the indemnitor thereof,
the indemnitor may, or if so requested by such indemnitee shall, assume the
defense thereof, without any reservation of rights. After notice from the
indemnitor to such indemnitee of an election to assume the defense thereof and
approval by the indemnitee of counsel selected by the indemnitor, the
indemnitor will not be liable to such indemnitee under this ARTICLE 25 for any
legal fees or expenses subsequently incurred by such indemnitee in connection
with the defense thereof so long as the indemnitor continues to provide such
defense. No indemnitee shall settle any indemnified claim over which the
indemnitor has not been afforded the opportunity to assume the defense without
the indemnitor's approval. The indemnitor shall control the settlement of all
claims over which it has assumed the defense; provided, however, that the
indemnitor shall not conclude any settlement that requires any action or
forbearance from action by the indemnitee or any of its Affiliates without the
prior approval of
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the indemnitee. The indemnitee shall provide reasonable assistance to the
indemnitor, at the indemnitor's expense, in connection with such legal action
or claim. If the indemnitor assumes the defense of any such claim or legal
action, any indemnitee shall have the right to employ separate counsel in such
claim or legal action and participate therein, and the reasonable fees and
expenses of such counsel shall be at the expense of such indemnitee, except
that such fees and expenses shall be for the account of the indemnitor if (i)
the employment of such counsel has been specifically authorized by the
indemnitor, or (ii) the named parties to such action (including any impleaded
parties) include both such indemnitee and the indemnitor and representation of
such indemnitee and the indemnitor by the same counsel would, in the reasonable
opinion of the indemnitee, be inappropriate under applicable standards of
professional conduct due to actual or potential conflicting interests between
them. Notwithstanding anything to the contrary in this SECTION 25.5, the
indemnitee shall have the right, at its expense, to retain counsel to monitor
and consult with indemnitor's counsel in connection with any such legal action
or claim.
26. PATENT INFRINGEMENT AND OTHER INDEMNIFICATION RIGHTS
26.1. Indemnity by Contractor. Contractor shall defend, indemnify, and
hold harmless Owner, the Existing Plant Owners and the Financing Entities and
their respective employees, partners, directors, officers and assigns against
all Losses arising from any claim or legal action for unauthorized disclosure
or use of any trade secrets, or of patent, copyright, or trademark infringement
arising from Contractor's performance (or that of its Affiliates,
Subcontractors, or Vendors) under this Contract or otherwise asserted against
Owner that either (a) concerns any Equipment, materials, supplies, or other
items provided by Contractor, any of its Affiliates, or any Subcontractor or
Vendor under this Contract; (b) is based upon or arises out of the performance
of the Work by Contractor, any of its Affiliates, or any Subcontractor or
Vendor, including the use of any tools or other implements of construction by
Contractor, any of its Affiliates, or any Subcontractor or Vendor; or (c) is
based upon or arises out of the design or construction of any item by
Contractor under this Contract or the operation of any item according to
directions embodied in Contractor's final process design, or any revision
thereof, prepared or approved by Contractor.
26.2. Lawsuits. If such claim or legal action for such infringement
results in a suit against Owner, the provisions of SECTION 25.5 shall apply.
26.3. Injunction. If Owner is enjoined from completion of the Project
or any part thereof, or from the use, operation, or enjoyment of the Project or
any part thereof, as a result of such claim or legal action or any litigation
based thereon, Contractor shall promptly use its best efforts to have such
injunction removed at no cost to Owner.
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26.4. Effect of Owner's Actions. Owner's acceptance of the Contractor
Deliverables or proposed or supplied materials and Equipment shall not be
construed to relieve Contractor of any obligation hereunder.
26.4.1. Indemnity by Owner. Owner shall defend, indemnify, and hold
harmless the Contractor and its respective employees, partners, directors and
officers against all Losses arising from any claim or legal action for
unauthorized use of any proprietary processes, or of patent, copyright, or
trademark infringement arising from Contractor's performance (or that of its
Affiliates, Subcontractors, or Vendors) when implementing specific contract
requirements to provide Owner specified processes for control or removal of
silica from the geothermal brine, including the process of NORMS and acid
addition to control silica deposition and the reactor/crystalizer design for
silica control of the geothermal brine.
27. TREATMENT OF CONFIDENTIAL INFORMATION
27.1. Confidential Information.
27.1.1. Any Confidential Information is disclosed in confidence, and
the transferee shall restrict its use of such information solely to uses
related to the Project or performance of this Contract. Neither the transferee
nor any consultant or other person to whom any confidential or proprietary
information is provided in connection with the Project or performance of this
Contract shall publish or otherwise disclose such information to others or use
such information for any purpose except as expressly provided above without the
written approval of the transferor; provided, however, that nothing herein
shall limit (i) the right of Owner to provide any information regarding
Contractor, any Subcontractor, any Vendor, this Contract, or the Work to any
Financing Entity (or advisors retained on their behalf) or their successors and
assigns, (ii) the right of either Party to supply such information to any
Governmental Authority asserting a right to such information, or as may be
required by Applicable Law, or (iii) the right of Owner to reproduce and/or use
as many copies of any Drawings and Specifications or other documents provided
to Owner as Owner in its sole discretion considers useful or necessary for the
furtherance of the Work, regardless of any notices, legends, or disclaimers on
such specifications, drawings, or other documents.
27.1.2. Notwithstanding the designation of any information as
proprietary by a transferor, such information shall not be deemed proprietary
or confidential if it (i) was furnished by such Party prior to the execution of
this Contract without restrictions, (ii) becomes knowledge available within the
public domain, (iii) is received by either Party from a third party without
restriction and without breach of this Contract, or (iv) is or becomes
generally available to, or is independently known to or has been or is
developed by, either Party or any of its Affiliates other than solely as a
result of any disclosure of proprietary information by the transferor to the
transferee.
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Title to the Confidential Information shall remain with the
transferor, except that and subject to Owner's payment obligations under this
Contract, all Confidential Information obtained, developed or created by or for
Contractor exclusively for the Project, including copies thereof, is the
exclusive property of Owner whether delivered to Owner or not. Contractor shall
deliver such Confidential Information, including all copies thereof, to Owner
upon request, except that Contractor shall be entitled to retain one copy for
its files.
28. INVENTIONS AND LICENSES
28.1. Sublicenses. To the extent that any License Agreement authorizes
Owner to do so, Owner hereby grants to Contractor a non-exclusive,
non-transferable, non-assignable and royalty-free sublicense pursuant to
Owner's rights under such License Agreement to use the technology described in
such License Agreement in Contractor's design, construction, testing and
operation of the Project. As between Owner and Contractor, all improvements to
any technology made by Contractor, Owner or any other Person during the design,
development, construction, start-up, testing and operation of the Project shall
be the property of Owner.)
28.2. Invention License. Should Contractor or any employee or agent of
Contractor make any invention or discovery in connection, in whole or part,
with performing the Work, such invention or discovery shall be deemed to be the
sole and exclusive property of Owner, and Contractor hereby assigns (and shall
cause the assignment of) all right and title to, and interest in, any such
invention or discovery to Owner. Contractor shall promptly notify Owner of any
such invention or discovery. Contractor shall, at Owner's expense and request,
cooperate in pursuing and effecting the transfer to Owner of all right and
title to and interest in any such invention or discovery, including, without
limitation, executing or causing the execution of assignments and applications,
and assign with prosecution and enforcement of rights with respect to any such
invention or discovery, including, without limitation, executing patent
applications and powers of attorney with respect thereto. Notwithstanding the
above, in the event Owner is granted the rights on a patent on which Contractor
or any of its employees or agents is a named inventor, Owner shall pay
Contractor (in addition to the amounts otherwise required to be paid hereunder)
a reasonable sum not to exceed of $500 for such patent (for this purpose, a
U.S. patent and any foreign counterparts thereof shall be deemed a single
patent).
28.3. Patents and Proprietary Licenses. Contractor further agrees to
grant and hereby grants to Owner an irrevocable, non-exclusive, royalty-free
license under all patents and other proprietary information of Contractor
related to the Work now or hereafter owned or controlled by Contractor to the
extent reasonably necessary for the operation, maintenance, repair, or
alteration of the Project or any subsystem or component thereof designed,
specified, or constructed by Contractor under this Contract. No other license
in such patents and proprietary information is granted pursuant to this
Contract.
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28.4. Owner's Intellectual Property. Owner hereby grants Contractor
the right to use, solely in the performance of the Work, any intellectual
property related to the Work that is owned by Owner or its Affiliates, without
charge.
29. ASSIGNMENT BY OWNER
29.1. Assignment of Contract. Without the prior consent of Contractor
Owner may, upon reasonable advance written notice, assign all or part of its
right, title, and interest in this Contract to any Financing Entity. Any
Financing Entity may, in connection with any default under any financing
document related to the Project, assign any rights assigned to it hereunder to
any Person. In addition, Owner may assign all or part of its right, title, and
interest in this Contract to any other Person with the prior written approval
of Contractor, which approval shall not be unreasonably withheld. Contractor
agrees that, upon receipt of written notice of such assignment, it shall
deliver all documents, data, Notices, and other communications required to be
delivered to Owner hereunder to the Financing Entities or other permitted
assignee at such address as they shall designate to Contractor in writing.
29.2. Transfer of Work; Third-Party Beneficiaries. Without the prior
consent of Contractor, Owner may, upon reasonable advance written notice,
assign, convey or transfer all or part of its right, title, and interest in the
Work to any Affiliate of Owner (whether or not such Affiliate provides
consideration to Owner for such assignment, conveyance or transfer). Each such
Affiliate-assignee shall be deemed to be a third-party beneficiary of the
following provisions of this Contract, with the power to enforce such provisions
against Contractor: ARTICLE 18 (Warranties Concerning the Work), but only to the
extent any portion of the Work is assigned, conveyed or transferred to such
Affiliate-assignee; ARTICLE 25 (Indemnification); ARTICLE 26 (Patent
Infringement and Other Indemnification Rights), but only to the extent any
portion of the Work is assigned, conveyed or transferred to such
Affiliate-assignee; and ARTICLE 32 (Non-Payment Claims). Owner shall have the
right to enforce any provisions of this Contract with respect to any Work
assigned, conveyed or transferred to an Affiliate (including any warranties,
indemnities or rights to receive liquidated damages with respect to such Work)
and such assignment, conveyance or transfer shall not affect Owner's rights or
obligations (including payment) hereunder with respect to any Work.
30. ASSIGNMENT BY CONTRACTOR
Contractor understands that this Contract is personal to Contractor.
Contractor shall have no right, power, or authority to assign or delegate this
Contract or any portion thereof either voluntarily or involuntarily, or by
operation of law. Contractor's attempted assignment or delegation of any of its
Work hereunder shall be null and void and shall be ineffective to relieve
contractor of its responsibility for the Work assigned or delegated.
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31. INDEPENDENT CONTRACTOR
31.1. General. Contractor is an independent contractor, and nothing
contained herein shall be construed as constituting any relationship with Owner
other than that of owner and independent contractor, or as creating any
relationship whatsoever between Owner and Contractor's employees. Neither
Contractor nor any of its employees is or shall be deemed to be an employee of
Owner.
31.2. Employees. Subject to SECTIONS 4.5, 4.16 and 10.1, Contractor
has sole authority and responsibility to employ, discharge, and otherwise
control its employees, Subcontractors, and Vendors.
32. NON-PAYMENT CLAIMS
Contractor shall indemnify and hold harmless Owner, the Existing Plant Owners
and the Financing Entities (collectively, the "Lien Indemnitees") and defend
each of them from and against any and all Loss arising out of any and all
claims for payment, whether or not reduced to a lien or mechanics lien, filed
by Contractor or any Subcontractors, Vendors, or other Persons performing any
portion of the Work for which Contractor has received full payment under this
Contract, including reasonable attorneys' fees and expenses incurred by any
Lien Indemnitee in discharging any such liens or similar encumbrances. If
Contractor shall fail to discharge promptly any such lien or claim filed
against the Project or any interest therein, upon any materials, equipment, or
structures encompassed therein, or upon the premises upon which they are
located, any Lien Indemnitee may so notify Contractor in writing, and
Contractor shall then (a) satisfy all such liens and claims or (b) defend Lien
Indemnitees against all such liens or claims and provide assurances of payment
as described in the last sentence of this Article 32. If Contractor does not
promptly satisfy such liens or claims, give such Lien Indemnitee reasons in
writing that are satisfactory to such Lien Indemnitee for not causing the
release of such liens or paying such claims, or contest such liens or claims in
accordance with the provisions of the last sentence of this Article 32, any
Lien Indemnitee shall have the right, at its option, after written notification
to Contractor, to cause the release of, pay, or settle such liens or claims,
and Owner at its sole option may (i) require Contractor to pay, within five (5)
days after request by Owner, or (ii) offset against any Retainage or other
amounts due or to become due to Contractor (in which case Owner shall, if it is
not the applicable Lien Indemnitee, pay such amounts directly to the Lien
Indemnitee causing the release, payment, or settlement of such liens or claims)
all costs and expenses incurred by the Lien Indemnitee in causing the release
of, paying, or settling such liens or claims, including administrative costs,
attorneys' fees, and other expenses. Contractor shall have the right to contest
any such lien, provided it first provides to Owner a bond or other assurances
of payment reasonably satisfactory to Owner in the amount of such lien and in
form and substance reasonably satisfactory to Owner.
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33. NOTICES AND COMMUNICATIONS
33.1. Requirements. Any Notice pursuant to the terms and conditions of
this Contract shall be in writing and (i) delivered personally, (ii) sent by
certified mail, return receipt requested, (iii) sent by a recognized overnight
mail or courier service, with delivery receipt requested, or (iv) sent by
confirmed facsimile transmission with telephonic confirmation, to the following
addresses:
If to Contractor: Stone & Webster Engineering Corporation
7677 East Berry Avenue
Englewood, CO 80111-2137
Attn: Carl Harrell
Project Manager
Salton Sea Unit 5 Project
Telephone: (303) 741-7266
Facsimile: (303) 741-7071
If to Owner: Salton Sea Power L.L.C.
c/o CalEnergy Company, Inc.
302 South 36th Street
Suite 400-K
Omaha, NE 68131
Attn: Vice President, Construction
Facsimile: (402) 231-1678
And with a copy of any Attn: General Counsel
notices relating to a Facsimile: 1-402-231-1658
a dispute to:
33.2. Effective Time. Notices shall be effective when received by the
other Party.
33.3. Representatives. Any technical or other communications
pertaining to the Work shall be with the Parties' designated representative.
Each Party shall notify the other in writing of the name of such
representatives. The Project Manager shall be satisfactory to Owner, the
Project Representative shall be satisfactory to Contractor, and each shall have
knowledge of the Work and be available at all reasonable times for
consultation. Each Party's representative shall be authorized on behalf of such
Party to administer this Contract, agree upon procedures for coordinating the
efforts of Owner and Contractor, and, when appropriate, to furnish information
to or receive information from the other Party in matters concerning the Work.
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34. CONDITIONS PRECEDENT
All rights, obligations, and liabilities of the Parties hereunder
(other than those set forth in Sections 3.1, 4.15, 4.19, 4.24 and 4.35 and
Articles 25, 27, 34, 35, 36 and 37) shall be subject to the execution and
delivery of construction loan documentation reasonably satisfactory to Owner,
with all conditions to Financial Closing satisfied other than those the
non-satisfaction of which has been consented to or waived by Owner in its sole
discretion. Owner agrees that its issuance of the Notice to Proceed certifies
that Financial Closing has occurred.
35. LIMITATIONS OF LIABILITY AND REMEDIES
35.1. Limitations on Damages. Except for the damages and obligations
specified under SECTIONS 16.1.1, 16.2, 16.3, and 16.6 and notwithstanding
anything else in this Contract to the contrary, neither Party shall be liable
to the other for any consequential or special damages (including lost profits,
lost revenue, or loss of use of the Project) arising from a failure to perform
any obligation under this Contract, whether such liability arises in contract,
tort (including negligence or strict liability), or otherwise.
35.2. Parent Guaranty. All of Contractor's obligations under this
Contract shall be secured by the Parent Guaranty. Contractor shall deliver the
Parent Guaranty (duly executed by the party thereto) and the Parent Legal
Opinion to Owner contemporaneously with Contractor's execution of this
Contract.
35.3. Limitations on Contractor's Liability.
35.3.1. In no event shall Contractor's liability pursuant to this
Contract, whether arising in contract, warranty, default or otherwise, be
greater in the aggregate than an amount equal to one hundred percent (100%) of
the Contract Price (as the same may increase from time to time in accordance
with the terms of this Contract); provided, however, that nothing contained in
this SECTION 35.3 or in any other provision of this Contract shall be construed
to limit Contractor's liability or obligations (i) to achieve Mechanical
Completion, (ii) with respect to vitiation of any insurance policy as set forth
in SECTION 25.2(D) of the Contract, (iii) any willful misconduct of Contractor,
or (iv) with respect to Section 16.6 hereof.
35.3.2. In no event shall Contractor's aggregate liability under
SECTION 16.1.1 for Delay Liquidated Damages and under SECTIONS 16.2 AND 16.3
for the Buy-Down Amount exceed the Maximum Aggregate Damages.
35.3.3. Notwithstanding anything herein to the contrary, amounts
paid by Contractor to or on behalf of Owner in respect of third party claims
arising out of the negligence or willful misconduct of Contractor (other than
claims of Owner's Affiliates or the Financing Entities) shall not be included
in Contractor's aggregate liability for purposes of determining the limit on
Contractor's liability pursuant to this Contract. The cost of warranty work
performed by
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any Subcontractor at such Subcontractor's expense and the cost of any warranty
work paid for by any Subcontractor or recovered by Contractor from any
Subcontractor shall be included in Contractor's aggregate liability for the
purpose of determining the limit of Contractor's liability pursuant to this
Contract. Contractor liabilities pursuant to this Contract shall include those
covered by proceeds of insurance for purposes of determining the limit on
Contractor's liability pursuant to this Contract.
35.4. Limitation on Owner's Liability. Contractor's sole recourse for
any damages or liabilities due to Contractor by Owner pursuant to this Contract
shall be limited to the assets of Owner (which include the Project) without
recourse individually or collectively to the assets of the members or the
Affiliates of Owner or the officers, directors, employees or agents of Owner,
its members or their Affiliates.
35.5. Releases, Indemnities and Limitations. Releases, indemnities, or
limitations on liability expressed in this Contract shall apply in accordance
with the terms of this Contract, notwithstanding other legal bases of
responsibility such as negligence, strict liability, fault, or breach of
contract of the Party indemnified or whose liability is released or limited.
36. DISPUTES
36.1. Negotiations. Any disputes arising pursuant to this Contract
that cannot be resolved between Owner's Project Representative and Contractor's
Project Manager within fourteen (14) days or, in the case of payment disputes,
three (3) days after receipt by each thereof of Notice of such dispute
(specifically referencing this SECTION 36.1) shall be referred, by Notice
signed by Owner's Project Representative and Contractor's Project Manager, to
the executive officers of the Parties designated in SECTION 37.4 as their
designated representatives (which shall not be the Owner's Project
Representative or the Contractor's Project Manager) for resolution. If the
Parties, negotiating in good faith, fail to reach an agreement within a
reasonable period of time, not exceeding twenty (20) days or, in the case of
payment disputes, ten (10) days after such referral, then Owner and Contractor
shall enter into binding arbitration as set forth in SECTION 36.2.
36.2. Arbitration.
36.2.1. Scope. All disputes arising pursuant to this Contract that are
not settled pursuant to SECTION 36.1 shall be decided by binding arbitration in
accordance with the Construction Industry Arbitration Rules of the AAA then
pertaining, unless the Parties mutually agree otherwise. If there is a conflict
between the provisions of this Contract and the provisions of the Construction
Industry
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SALTON SEA UNIT 5 EPC CONTRACT
Arbitration Rules of the AAA, the provisions of this Contract shall prevail. The
Parties hereto agree that, notwithstanding such rules of the AAA, the
arbitrators in any such arbitration shall apply the governing law specified in
SECTION 37.2 of this Contract. This agreement to arbitrate shall be specifically
enforceable. Any award rendered by the arbitrators shall be final, and judgment
may be entered upon it in accordance with applicable law in any court having
jurisdiction.
36.2.2. Demands for Arbitration. Notice of the demand for
arbitration shall be filed with the other Party and with the AAA. Any demand
for arbitration shall be made within the time beyond which legal or equitable
proceedings based on such claim, dispute, or controversy would be barred by the
applicable statute of limitations.
36.2.3. Designation of Arbitrators. Each Party shall have the
right to designate an arbitrator of its choice, who need not be from the AAA's
panel of arbitrators but who (i) shall be an expert in the construction and
industrial processes field and (ii) shall not be employed by or otherwise
affiliated with such Party. Such designation shall be made by Notice to the
other Party and to the AAA within ten (10) Business Days or, in the case of
payment disputes, five (5) Business Days following the giving of Notice of the
demand for arbitration. The arbitrators designated by the Parties shall
designate a third arbitrator, who shall have a background in legal and judicial
matters, within ten (10) Business Days or, in the case of payment disputes,
five (5) Business Days after the date of the designation of the last of the
arbitrators to be designated by the Parties, and the arbitration shall be
decided by the three arbitrators. If the two arbitrators cannot or do not
select a third independent arbitrator within such period, either Party may
apply to the AAA for the purpose of appointing any person listed with the AAA
as the third independent arbitrator.
36.2.4. Miscellaneous. The Parties shall proceed with the
arbitration expeditiously and shall conclude all proceedings thereunder,
including any hearing, in order that a decision may be rendered within 120 days
or, in the case of a payment dispute, forty-five (45) days after the filing of
the demand for arbitration by the filing Party. Unless the Parties agree
otherwise, the arbitration of all disputes shall be held in San Diego,
California and shall be conducted solely in the English language. In any
arbitration proceeding, the Parties shall have the discovery rights established
under Section 1283.05 of Title 9 (Arbitration) of the California Code of Civil
Procedure.
36.3. Work to Continue. Unless otherwise agreed in writing, Contractor
shall diligently carry on the Work during the pendency of any disputes or
arbitration proceedings so long as all undisputed amounts payable to Contractor
hereunder have been paid. If it shall be determined, either by agreement of the
Parties or through arbitration, that any payment of the Contract Price or any
other amount payable to Contractor hereunder shall have been unduly paid by
Owner to Contractor, Contractor shall promptly refund the amount of such excess
payment together with interest thereon at the lesser of LIBOR in effect from
time to time plus three percent (3%) per annum and the highest rate
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SALTON SEA UNIT 5 EPC CONTRACT
permitted by Applicable Law, from the day following the date of such payment
until the date of full refund to Owner. If it shall be determined, either by
agreement of the Parties or through arbitration, that any payment of the
Contract Price or other amount payable to Contractor hereunder shall have been
unduly withheld by Owner, Owner shall pay or cause to be paid to Contractor
within thirty (30) days after the final arbitration decision is made such
withheld amount together with interest thereon at the lesser of the LIBOR in
effect from time to time plus three percent (3%) per annum and the highest rate
permitted by Applicable Law, from the day following the date on which such
payment is determined to have been unduly withheld (as so determined) until the
date of payment in full to Contractor.
37. MISCELLANEOUS
37.1. Severability. The invalidity or unenforceability of any portion
or provision of this Contract shall in no way affect the validity or
enforceability of any other portion or provision hereof. Any invalid or
unenforceable portion or provision shall be deemed severed from this Contract
and the balance of the Contract shall be construed and enforced as if the
Contract did not contain such invalid or unenforceable portion or provision. If
any such provision of this Contract is so declared invalid, the Parties shall
promptly negotiate in good faith new provisions to eliminate such invalidity
and to restore this Contract as near as possible to its original intent and
effect.
37.2. Governing Law. This Contract shall be governed by the internal
laws of the State of California, United States of America.
37.3. Survival of Termination. The provisions of ARTICLES 18, 19, 25,
26, 27, 28, 32, 35, 36 and 37 and SECTION 23.2 shall survive the termination
(whether by completion of the Work or otherwise) of this Contract.
37.4. No Oral Modification. No oral or written amendment or
modification of this Contract (including a Change In Work Form accepted under
ARTICLE 17) by any officer, agent, or employee of Contractor or Owner, either
before or after execution of this Contract, shall be of any force or effect
unless such amendment or modification is in writing and is signed by any
President, any Vice President or the Chief Executive Officer of the Party (or
of the managing member of the Party on behalf of the Party) to be bound
thereby.
37.5. No Waiver. Either Party's waiver of any breach or failure to
enforce any of the terms, covenants, conditions, or other provisions of this
Contract at any time shall not in any way affect, limit, modify, or waive that
Party's right thereafter to enforce or compel strict compliance with every
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SALTON SEA UNIT 5 EPC CONTRACT
term, covenant, condition, or other provision hereof, any course of dealing or
custom of the trade notwithstanding. All waivers must be in writing and signed
on behalf of Owner and Contractor by the individuals identified in SECTION
37.4.
37.6. Time of Essence. Except as otherwise expressly provided herein,
time is of the essence of each provision of this Contract.
37.7. Contract Interest Rate. Overdue payment obligations of the Owner
and the Contractor hereunder shall bear interest from the date due until the
date paid at a rate per annum equal to the lesser of (i) LIBOR in effect from
time to time plus three percent (3%), and (ii) the highest rate permitted by
Applicable Law.
37.8. Headings for Convenience Only. The headings contained herein are
not part of this Contract and are included solely for the convenience of the
Parties.
37.9. Third Party Beneficiaries. The provisions of this Contract are
intended for the sole benefit of Owner and Contractor and there are no third
party beneficiaries hereof, except the Financing Entities where expressly
provided, other than assignees contemplated by the terms herein (including
SECTION 29.2).
37.10. Language. The language of this Contract is the English
language, which shall be the ruling language in which the Contract shall be
construed and interpreted. All correspondence, Drawings and Specifications,
test reports, Notices, certificates, Required Manuals and other information
shall be entirely in the English language.
37.11. Financing Matters.
37.11.1. Contractor Cooperation. Owner contemplates obtaining
financing for the Project consisting of one or more construction or permanent
loans, to be secured by all or a portion of the Project and its rights under
this Contract. In connection therewith and the assignment to the Financing
Entities contemplated by ARTICLE 29, Contractor shall agree to and execute any
amendments and modifications hereto reasonably requested by the Financing
Entities, and shall also promptly execute or consent to other documents to the
extent reasonably required by the Financing Entities, and shall cause to be
delivered customary legal opinions of counsel to Contractor. Without limiting
the foregoing, Contractor shall enter into such arrangements as Owner or the
Financing Entities may reasonably request to ensure the continued availability
of the Contractor's equipment at the Site and the right
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SALTON SEA UNIT 5 EPC CONTRACT
to use such Equipment (whether by Contractor, Owner, or Owner's nominees) in
the prosecution of the Work as contemplated by this Contract until the Work is
completed, including the granting of security interests in such equipment or
entering into lease/leaseback or similar arrangements, and shall keep such
equipment free and clear of any liens or encumbrances that could materially
affect Contractor's, Owner's, or Owner's nominee's rights with respect to such
equipment. Contractor shall respond promptly to requests for information
regarding the qualifications, experience, past performance and financial
condition of Contractor and other matters pertaining to Contractor's
obligations hereunder.
37.12. Joint and Several Liability. The obligations of each entity
constituting Contractor under this Contract shall be joint and several.
37.13. Further Assurances. Owner and Contractor will each use its best
efforts to implement the provisions of this Contract, and for such purpose
each, at the request of the other, will, without further consideration,
promptly execute and deliver or cause to be executed and delivered to the other
such assistance, or assignments, consents or other instruments in addition to
those required by this Contract, in form and substance satisfactory to the
other, as the other may reasonably deem necessary or desirable to implement any
provision of this Contract.
37.14. Record Retention. Contractor agrees to retain for a period of
seven (7) years from the Final Completion Date all records relating to its
performance of the Work or Contractor's warranty obligations herein, and to
cause all Subcontractors and Vendors engaged in connection with the Work or the
performance by Contractor of its warranty obligations herein to retain for the
same period all their records relating to the Work.
37.15. Binding on Successors, Etc. Subject to ARTICLES 29 AND 30, this
Contract shall be binding on the Parties hereto and on their respective
successors, heirs and assigns.
37.16. Merger of Prior Contracts. This Contract supersedes any other
agreement, whether written or oral, that may have been made or entered into
between Owner and Contractor or by any officer or officers of such Parties
relating to the Project or the Work. This Contract and Exhibits hereto
constitute the entire agreement between the Parties with respect to the
Project, and there are no other agreements or commitments with respect to the
Project except as set forth herein.
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SALTON SEA UNIT 5 EPC CONTRACT
37.17. Construction of Terms. Unless the context clearly intends to
the contrary, words singular or plural in number shall be deemed to include the
other and pronouns having a masculine or feminine gender shall be deemed to
include the other.
37.18. Counterpart Execution. This Contract may be executed by the
Parties hereto in any number of counterparts (and by each of the Parties hereto
on 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.
37.19. Opinions of Contractor's Counsel. Concurrently herewith, and at
the request of any Financing Entity in connection with any financing,
Contractor shall deliver to Owner and any such Financing Entity, an opinion of
counsel to Contractor opining as to the matters set forth in SUBSECTIONS 5.1.1,
5.1.3, 5.1.4 AND 5.1.7.
37.20. Set-Off. Either Party may at any time, but shall be under no
obligation to, set off any and all sums due from the other Party against sums
due to such Party hereunder.
37.21. Attorneys' Fees. In the event any action by arbitration or
other legal proceeding shall be instituted between Owner and Contractor in
connection with this Contract, the Party prevailing in such action shall be
entitled to recover from the other Party all of its reasonable costs and
expenses incurred in connection with such action by arbitration or other legal
proceeding, including reasonable attorneys' fees.
37.22. Contractor's License Information. Contractor's California
Contractor's State License Number is 005012. Contractors are required by law to
be licensed and regulated by the Contractors' State License Board which has
jurisdiction to investigate complaints against contractors if a complaint
regarding a patent act or omission is filed within four (four) years of the
date of the alleged violation. A complaint regarding a latent act or omission
pertaining to structural defects must be filed within ten (10) years of the
date of the alleged violation. Any questions concerning a contractor may be
referred to the Register, Contractors' State License Board, P.O. Box 26000,
Sacramento, California 95826. The Parties agree that this Section 37.22 is not
intended to extend the Warranty Period hereunder.
[SIGNATURE PAGE FOLLOWS]
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SALTON SEA UNIT 5 EPC CONTRACT
IN WITNESS WHEREOF, the Parties hereto have caused this Construction
Contract to be executed as of the date and the year first above written.
OWNER:
Salton Sea Power L.L.C.,
a Delaware limited liability company
By: CE Salton Sea Inc.,
Its: Manager
By: /s/ Vincent R. Fesmire
---------------------------------
Its: Vice President
--------------------------------
CONTRACTOR:
Stone & Webster Engineering Corporation
a Massachusetts corporation
By: /s/ Illegible
---------------------------------
Its:
--------------------------------
2
<PAGE>
SALTON SEA UNIT 5 EPC CONTRACT
TABLE OF EXHIBITS
"A" STATEMENT OF WORK
"B" DRAWINGS AND SPECIFICATIONS
"C" OWNER ACQUIRED PERMITS
"D" PROGRESS PAYMENT SCHEDULE
"E" CHANGE IN WORK FORM
"F" FORM OF CONTRACTOR'S INVOICE
"G" CRITICAL PATH SCHEDULE REQUIREMENTS
"H" RESERVED
"I" DETERMINATION OF BUY-DOWN AMOUNTS
"J" TESTING REQUIRED FOR COMPLETION
"K" KEY PERSONNEL
"L" OWNER PROVIDED LICENSE AND ROYALTY AGREEMENTS
"M" SUMMARY MILESTONE SCHEDULE
"N" FORM OF MONTHLY PROGRESS REPORT
"O" FORM OF PARENT GUARANTEE AND LEGAL OPINION
"P" PRODUCTION INPUTS
"Q" SPARE PARTS TO BE PROVIDED BY CONTRACTOR
"R" SUPPLY CONTRACTS
"S" WARRANTY PROCEDURES
"T" SALE CONTRACTS
"U" FORM OF ASSIGNMENT CLAUSE FOR SUBCONTRACTS
"V-1" OWNER ACQUIRED INSURANCE
"V-2" CONTRACTOR ACQUIRED INSURANCE
"V-3" GENERAL INSURANCE PROVISIONS
"W" SITE DRAWINGS
"X" OWNER'S LAND RIGHTS AGREEMENTS
"Y EXISTING PLANTS ACCESS SCHEDULE
"Z" RESERVED
"AA" REQUIRED MANUALS
"AB" SAFETY ASSURANCE PROGRAM
"AC" QUALITY ASSURANCE PROGRAMS
"AD" CALENERGY SAFETY PROGRAM
<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
EXHIBIT "A"
STATEMENT OF WORK
1. INTRODUCTION
1.1 GENERAL
This Statement of Work consists of a project description, design criteria, basic
design data and a description of the work required by the Contractor to design,
construct, and start-up the Project and related facilities. If it becomes
apparent to either Owner or Contractor that this Statement of Work is incomplete
or ambiguous, Owner and Contractor will reach mutual agreement based on the
Value Engineering Report dated July 20, 1998, (summary of results contained in
Attachment 7). Contractor's Proposal dated May 19, 1998 and Owner's Request for
Proposal dated March 23, 1998, with addenda (the RFP) in that order of
precedence. A list of technical documents, based on the Owner's geothermal
operating experience, is provided in Attachment 6, to be used in the
Contractor's design. The Contractor's Proposal and the Owner's Request for
Proposal are NOT incorporated into this Contract by reference.
Capitalized terms used in this EXHIBIT A and not otherwise defined have the
meanings given thereto in the Contract, of which this EXHIBIT A is a part. In
the event of any conflict between Exhibit A and the main body of the Contract,
the main body of the Contract shall prevail.
1.2 SCOPE OVERVIEW
The Statement of Work is to engineer, design, procure, construct, startup, and
test the Project known as Salton Sea Unit No. 5, a 49 MW net geothermal
bottoming cycle power plant with a silica control system. The Project will be
connected to Region 1 geothermal power generation facilities, Salton Sea Units
1-4, located in the Imperial Valley of Southern California. In addition to power
generation, the Project is intended to reduce the temperature, of the geothermal
brine presently exiting the Region 1 Facilities. This brine conditioning is
required by the associated Zinc Recovery Project which is being implemented by
the Owner, under separate contract with others, and in parallel with the Unit
No. 5 Project.
The Project is a complete unit capable of producing 49 MW (net) and includes:
steam generation (from geothermal brine) and conditioning equipment, a single
geothermal turbine and generator; a steam condensing system including shell and
tube condenser, cooling tower and circulating water pumps; a non-condensable gas
removal system; an electrical distribution system with major electrical
equipment housed in a prefabricated enclosure; a Distributed Control System
(DCS) including upgrades for control integration with the existing Salton Sea
Units 1 - 4control systems; an overhead gantry crane for maintenance of the
turbine and generator; and utilities including service water, potable water,
fire water, and compressed air distribution. The silica control system includes
hydrochloric acid and NORMS addition; primary and secondary
reactor/crystallizers; a lime addition system; primary and secondary
clarification with flocculant addition; and a silica dewatering system with
filter press and solids handling equipment.
The Project will receive steam and brine from existing Units 3 and 4 steam
production equipment. Additional steam will be produced from the brine by the
Project for generation of electric power. The remaining brine will be flashed to
near atmospheric pressure generating at least 117,000 lbs/hr of steam. Both the
steam and cooled brine will be delivered to a new Zinc Recovery Facility (ZRF)
that is to be constructed concurrently with the Project. The Project is being
designed to have a net capacity of less than 50 MW at Guarantee Point
Conditions.
A-1
<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
2. SITE DESCRIPTION
2.1 LOCATION
The Project is located at 6922 Crummer Road, Calipatria, California, near the
south east corner of the Salton Sea in the Salton Sea Known Geothermal Resource
Area in the Imperial Valley of Southern California. The Project site is located
8 miles north of the town of Westmoreland, California immediately south of the
Salton Sea Units 3 and 4 project area. The project location is shown on the area
maps and site plans included as Exhibits W and X
2.2 ACCESS
Vehicle access to the site is via Crummer Road or Kuns Road. There is no rail
access to the site.
2.3 TOPOGRAPHY
The Site is level agricultural land. With the exception of Salton Sea Units 3
and 4 located just north of the Site the surrounding land is also level
agricultural land. Elevation of the site is approximately 230 ft below mean sea
level. The site is approximately 4 ft below the level of the Salton Sea. The
southeast shore of Salton Sea is approximately 1 mile west of the project site.
Obsidian Butte and the Salton Sea National Wildlife Refuge are located
approximately 1 mile northeast of the Site.
2.4 CLIMATOLOGY
California's Imperial Valley is an arid area with low annual precipitation. The
area experiences high summertime temperatures and moderate winter temperatures.
The irrigated agricultural lands contribute to elevated humidity in the Valley.
Hydrogen sulfide, salt spray, agricultural organics and blowing dust are also
present in the atmosphere. The following weather data from El Centro is
representative of the Project site.
Annual Average High Dry Bulb Temperature 88.4(Degree)F
Annual Average Low Dry Bulb Temperature 55.6(Degree)F
Annual Average Mean Dry Bulb Temperature 72.0(Degree)F
Average Summer High Dry Bulb Temperature 105.7(Degree)F
Average Winter Low Dry Bulb Temperature 40.5(Degree)F
Extreme High Dry Bulb Temperature 120(Degree)F
Extreme Low Dry Bulb Temperature 20(Degree)F
Annual Average Precipitation 2.7 inches
One-Day maximum Precipitation 3 inches
A-2
<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
3. INTERCONNECTIONS
3.1 GENERAL
The Project requires numerous interconnections with the existing Salton Sea
Units 3 and 4, a Zinc Recovery Facility that will be constructed concurrently
with the Project, and the Imperial Irrigation District (IID) 92 kV transmission
system. The Contractor is required to design, plan, coordinate, install, and
test the Contractor's Work for all interconnections to the Project. The
Contractor shall work with the Owner, the Owner's other contractors, IID, and
any and all others designated by the Owner. Where the interconnection is with
the Zinc Recovery Facility, the contractor of the facility actually using the
interconnected utility or raw material will complete the interconnection.
3.2 PIPING, ELECTRICAL AND INSTRUMENTATION INTERFACES
Attachment 2 provides descriptions, details and a drawing of the interties with
the Project. The Contractor is responsible for engineering, detail design and
installation for the interties. The ZRF Contractor will make the final intertie
connections. The Contractor shall coordinate completion of design, installation,
and testing of the interties with the Owner, other Contractors, or other
affected Parties to minimize operational outages of existing systems and to not
delay completion of the Project and other concurrent projects.
3.3 BRINE BY-PASS
Contractor shall provide space on the newly installed pipeway for Owner to
furnish and install a brine by-pass line around the silica control system (ref.
Article 13.). The brine by-pass will consist of 2 ea. 24-inch cement lined
pipes. Owner will provide to the Contractor four (4) 24-inch stainless steel
isolation valves for installation at the brine by-pass tie points. 1.
4. GEOTECHNICAL INFORMATION
Reference Exhibit AA for Geotechnical Reports.
Kuns Road is known to contain Geocrete. Contractor's Work includes excavation
and disposal in Owner supplied bins of up to 300 tons of Geocrete from Kuns
Road. If Contractor requires disposal by Owner of additional Geocrete from Kuns
Road excavations, Contractor will be charged $180/ton.
The Contractor shall assume subsurface tile drains exist throughout the proposed
Project Site. The Work should be based on taking all lines out of service that
are located between the dirt retention basin and the concrete ditch. (Owner has
previously taken out of service the lines located between Kuns Road and the dirt
retention pond.) The remaining tile drains located south of the concrete ditch
are to remain in service and drain to the existing sump (SS-16) located in the
Northwest corner of this section. The lines are typically constructed of
corrugated plastic pipe.
A-3
<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
5. BRINE AND STEAM SPECIFICATIONS
The Project is a bottoming cycle facility and uses geothermal brine and steam
from existing Units 3 and 4. Geothermal brine is delivered from the geothermal
resource to Units 3 and 4 where High Pressure (HP) steam and Standard Pressure
(SP) steam are produced in cascading flash vessels. The SP brine is then
delivered to the Project where the pressure is reduced further to produce Low
Pressure (LP) steam and Very Low Pressure (VLP) steam. SP steam is also
delivered from Unit 3 to the Project to supplement the LP and VLP steam produced
by the Project. For process condition definitions, refer to Table 5-1.
The amount of steam that is produced at each pressure level is proportional to
brine flow. Due to resource production limitations, the amount of SP steam that
is available for the Project is limited. Varying the amount of SP steam
delivered to the Project results in changing the amount of brine that is
delivered to the Project for the production of LP and VLP steam. Table 5-1
provides the minimum and maximum values for SP steam flow along with the
corresponding values for LP and VLP steam that will be produced from the
available brine flow. Two sets of values are given for VLP steam, each at a
different pressure. The Contractor's design may select the optimum pressure for
VLP steam within the limits given in the table. VLP steam flow at pressures
between those given in the table may be determined by interpolation. The
Contractor shall design the Project to operate with steam and brine flows that
are within the bounds of flows given in Table 5-1.
A-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
UNIT 5 EPC CONTRACT - EXHIBIT A
TABLE 5-1
STEAM AND BRINE CONDITIONS AT SEPARATORS
----------------------------------------
At Minimum At Maximum
Brine Flow Brine Flow
Standard Pressure (SP) Conditions into Unit 5
---------------------------------------------
Brine Flow KLb/Hr 10,757 11,472
Brine Enthalpy Btu/Lb 250 250
Brine TDS Wt% 26.45 26.45
Steam Pressure Psig 118 118
Steam Enthalpy Btu/Lb 1,203 1,203
Maximum Available Steam Flow KLb/Hr 0 140
Low Pressure (LP) Separator Outlet Conditions
---------------------------------------------
Brine Flow KLb/Hr 10,232 10,913
Brine Enthalpy Btu/Lb 200 200
Brine TDS Wt% 27.81 27.81
Steam Pressure Psig 42.5 42.5
Steam Enthalpy Btu/Lb 1,185 1,185
Steam Flow KLb/Hr 535.6 571.1
Very Low Pressure (VLP) Separator Outlet Conditions at 6.5 Psig Separator Pressure
----------------------------------------------------------------------------------
Brine Flow KLb/Hr 9,776 10,426
Brine Enthalpy Btu/Lb 154 154
Brine TDS Wt% 29.10 29.10
Steam Pressure Psig 6.5 6.5
Steam Enthalpy Btu/Lb 1,163 1,163
Steam Flow KLb/Hr 472.1 503.5
Very Low Pressure (VLP) Separator Outlet Conditions at 10 Psig Separator Pressure
---------------------------------------------------------------------------------
Brine Flow KLb/Hr 9,840 10,494
Brine Enthalpy Btu/Lb 160 160
Brine TDS Wt% 28.92 28.92
Steam Pressure Psig 10 10
Steam Enthalpy Btu/Lb 1,167 1,167
Steam Flow KLb/Hr 408.9 436
</TABLE>
Note: Small differences in mass balances are due to Hydrochloric Acid injection
upstream of separators and LP Scrubber drains to the VLP Separators.
A-5
<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
The following tables give the expected analysis of the brine, SP steam, and
non-condensable gas that is delivered to the Project
TABLE 5-2
PROJECT INLET BRINE ANALYSIS
Analysis Concentration, mg/l
-------- -------------------
Ag 0.47
Al ND less than .94
As 8.5
Ba 432
Ca 218
Cu 14
Fe 897
K 17,302
Li 224
Mn 1,051
Na 75,093
Pb 98
Sb ND less than .6
Zn 377
TDS,ppm 286,850
SO4-2 29
F- 1
Cl- 195,384
Br 41
I- less than 6
TSS 1,201
NH3 487
HCO3-2 97
CO3- 0
NO3- less than 14
H2S-S 14
SiO2 678
A-6
<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
TABLE 5-3
PROJECT SP STEAM ANALYSIS
Analysis Concentration, mg/l
-------- -------------------
pH 6.7
B 16
Fe 0.06
K 1.2
Na 4.6
SO4 6
Cl, ppm 13
TDS, ppm 43
TSS, ppm 6
NH3 350
HCO- 1200
CO2- ND
H2S 102
TABLE 5-3
PROJECT SP STEAM ANALYSIS
Analysis Mole %
-------- ------
CO2 97.7
CH4 and C2H6 0.9
H2S 1.4
N2 0.66
N2 0.15
A-7
<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
6. WATER SOURCES
6.1 FIRE WATER
Fire protection water for the Project shall be provided from the existing Unit 3
Fire Protection System. The Contractor shall install a perimeter fire main
around the Project site. The Contractor shall connect this main to the existing
Unit 3 fire main in two places to permit supplying the Project fire protection
system from two separate directions. The fire main shall be designed and
installed in accordance with NFPA 24. The fire main shall include stub-ups for
the Project fire protection services as well as two stub-ups for the Region 1
ZRF IX facility.
6.2 POTABLE WATER
The Contractor shall provide potable water to the Project from Unit 3 for use in
emergency shower and eyewash stations. System design for the emergency showers
and eyewashes must account for solar heating and the high local ambient
temperature. Safety shower and eyewash water temperature must not exceed OSHA
limits at the extreme environmental conditions.
6.3 SERVICE WATER
The Contractor shall provide Service water at appropriate locations around the
Project for maintenance and equipment washdown. Service water shall be provided
from the Region 1 ZRF IX facility.
7. EMISSIONS
Emissions limits for the Project have been established in filings with the State
of California and Imperial County. The Contractor shall design and construct the
Project such that emissions from the Project do not exceed those permitted by
the State or County or other Applicable Laws, unless noted below. Permitted
emissions limits for the Project are contained in the following permit
documents.
o Petition for Expedited Clearance and Jurisdictional Determination for
Desert Valley/Salton Sea the Project filed with the California Energy
Commission January 9, 1997
o Application for Modification and Conditional Use Permits including
Environmental Information filed with Imperial County, December 1997
o Application for Authority to Construct Permit filed with Imperial
County, December 1997
o Application for silica control modifications to the Project.
o Permits issued for the above applications
7.1 AIR EMISSIONS
7.1.1 HYDROGEN SULFIDE
The dissolved non-condensable gasses in the geothermal fluids delivered to the
Project contain very small amounts of hydrogen sulfide. The non-condensable
gases collect in the main condenser and are extracted and compressed by the gas
removal system for release to the atmosphere with the cooling tower plume. Based
on current gas analyses and permitting commitments Hydrogen Sulfide abatement is
not required.
A-8
<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
7.1.2 PARTICULATE
The only particulate emissions currently expected from the process are solids
contained in the cooling tower drift. The Contractor's design shall limit
cooling tower drift as specified herein.
7.1.3 VISIBLE PLUMES
Steam generated in the 1st stage reactor crystallizer, up to 150,000 lb/hr, if
not consumed by the ZRF will be vented directly to atmosphere. LP and VLP steam
will be vented directly to atmosphere during Unit 5 startup and at part load
operation. Design in all other areas shall be such that visible plumes will be
kept to a minimum.
7.2 LIQUID EMISSIONS
7.2.1 STORM WATER
Storm water shall be collected from the entire site and pumped to the existing
Unit 3 brine pond see Attachment 2 for more information on the intertie.
7.2.2 PROCESS EFFLUENT
The Owner's design returns all liquid effluent from the process to the
geothermal resource. Project permits are based on this condition. The
Contractor's design shall not generate any liquid effluent from the Project.
7.2.3 WASTE LIQUIDS
Normal operation of the Owner's design does not generate any liquid waste.
Project permits are based on this condition. The Contractor's design shall not
generate any liquid waste.
7.3 NOISE EMISSIONS
The Project shall be designed and constructed to operate with the least
practicable noise emissions. Contractor shall guarantee that the noise levels at
3 feet from any surface of any operating Project item including valves or
acoustic enclosures shall not exceed an A-weighted sound pressure level of
85dBA.
When the noise contains a distinct tone and/or other distinctive audible
character, the above limits shall be reduced by 5dBA.
Contractor will demonstrate compliance with noise requirements specified above
during the Performance Testing.
7.4 SOLIDS EMISSIONS
7.4.1.1 PROCESS EFFLUENT
Except for sludge from the silica control system, the Owner's design does not
generate any solid effluent from the process. Project permits are based on this
condition. The Contractor's design shall not generate any solid effluent from
the process, except for silica sludge.
A-9
<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
7.4.2 WASTE SOLIDS
Normal operation of the Owner's design does not generate any solid waste.
Project permits are based on this condition. The Contractor's design shall not
generate any solid waste
8. DESIGN CRITERIA
Refer to Attachment 1 to this Exhibit A
9. CIVIL/STRUCTURAL/ARCHITECTURAL
9.1 GENERAL
Civil, structural and architectural engineering shall be performed under the
direction of engineers licensed in the State of California with experience in
the requirements for this highly seismic area.
Copies of calculations and drawings submitted to obtain local building permits
shall be provided to Owner.
9.2 CIVIL WORK CRITERIA
The Site is currently under agricultural use and, as such, requires no clearing
or grubbing. Excavating, backfilling, compaction, and grading shall be performed
in accordance with the geotechnical report. The Contractor shall be responsible
for rough grading of the complete Site, including the area for the Region 1 ZRC
IX facility. Final grading of the Site will also be the responsibility of the
Contractor. The battery limits for this work are shown on Exhibit W.
The Site shall be graded to control runoff both during and after construction
The Contractor shall determine the grades required including ditches or other
diversion methods to channel the runoff. The drainage system shall be designed
for a 100 year, 24 hour storm. The agricultural sumps at the Northwest corner of
the Site shall be protected.
Access to structures and equipment as shown on the plot plan shall be paved. The
surfacing material for specific exterior areas shall be as follows:
A-10
<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
----------------------------------------------------------------------------
Roads Bituminous Asphalt Concrete
----------------------------------------------------------------------------
Parking Areas Bituminous Asphalt Concrete
----------------------------------------------------------------------------
Steam Turbine Area Concrete
----------------------------------------------------------------------------
Cooling Tower Apron Concrete
----------------------------------------------------------------------------
Separator Area Crushed Rock
----------------------------------------------------------------------------
Steam Treatment Area (Scrubbers, etc.) Crushed Rock
----------------------------------------------------------------------------
Aprons Around Power Distribution Center Area Crushed Rock
----------------------------------------------------------------------------
Process Equipment Containment Pads Concrete
(as shown on Site Plan)
----------------------------------------------------------------------------
Switchyard Crushed Rock
----------------------------------------------------------------------------
Drainage Swales Crushed Rock
----------------------------------------------------------------------------
Other Crushed Rock
----------------------------------------------------------------------------
The Contractor shall conduct such additional geotechnical investigation and
exploration as necessary for the purposes of his final foundation design and
construction.
A berm for flood control is to be constructed near the East, West and South
boundaries of the site. The top shall be [224 ft.] below mean sea level, be 10
ft. in width across the top, approximately [2 ft.] high and the side slope shall
be 3:1. Materials for erecting the berm shall be transported from off-site.
Materials have been identified on land which is located on the adjacent property
just South of the Unit 5 jobsite. The Owner has acquired this land and will make
backfill materials available to the Contractor. Crummer Road shall also be
properly graded by the Contractor to intersect with the berm at the northwest
corner of the project site while maintaining the grade of the road within the
requirements of the County. Roads shall be designed in accordance with the
requirements specified in the Geotechnical Design Criteria. The battery limits
for the Contractor's responsibility for the berm are shown on the drawings. The
eastern most segment of the berm shall be blended into Kuns Road which borders
the jobsite on the North. Owner will conduct a flood study as required by the
Conditional Use Permit.
Should structural backfill materials for foundations be required, a source must
be identified.
9.2.1 ROADS AND PARKING
Roads shall be provided for access to the site for personnel, delivery of goods
and equipment and fire fighting vehicles. A minimum of two (2) access points to
the Site shall be provided.
9.2.2 FENCING
Fencing shall be provided for plant security during and after construction.
Permanent fencing shall be placed on the plant boundary lines to enclose all
equipment. Fencing shall be electrically grounded. Materials shall be galvanized
steel with posts set in concrete. Fence fabric shall be galvanized chain link
six feet high with tension wires at top and bottom.
A-11
<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
Manually operated double swinging gates shall be provided at both plant
entrances. The main gate opening shall be sufficiently wide to accommodate wide
loads such as dirt haulers and truck mounted heavy cranes.
9.3 STRUCTURAL WORK CRITERIA
Design for buildings and structures shall conform with minimum design live loads
shown in the Uniform Building Code for a Zone 4 seismic area.
9.4 ENCLOSURES
The Power Distribution Center which houses the electrical distribution equipment
will consist of prefabricated building modules. Details on the requirements for
these structures are given in the Specification for Power Distribution Center,
listed in Attachment 6, document 17.6.
9.5 ARCHITECTURAL WORK CRITERIA
The architectural design will be based on aesthetics, function and space
relationships, and code requirements. The Project will be unmanned under normal
operating conditions. Therefore, only functional amenities are required. There
will be no locker space, toilet facilities, or washing facilities except those
required for safety requirements such as eyewash and emergency showers in the
areas of chemical handling such as the hydrochloric acid handling facilities.
10. MECHANICAL SYSTEMS
10.1 GENERAL
The Project is a bottoming cycle flash steam geothermal power plant. Standard
Pressure (SP) steam is delivered to the Project from the Unit 3 SP steam system.
Brine is delivered to the Project from the Unit 3 separators. Low Pressure (LP)
and Very Low Pressure (VLP) steam will be produced from the brine in cascading
separators that are part of the Project. Following the very low pressure flash
the brine is cooled further by flashing at near atmospheric pressure and
processed to remove silica for delivery to a minerals recovery process. The
power cycle uses steam at all three pressures..
10.2 TURBINE GENERATOR
The turbine generator shall be a three pressure entry, condensing design in
accordance with Technical Requirements for Geothermal Steam Turbine Generator
included as Attachment 6, document 10.2.1. The selected turbine generator
manufacturer shall have substantial proven experience with geothermal
applications.
10.3 PIPING
Brine handling and steam production piping shall be designed, fabricated,
installed, and tested in accordance with ANSI B31.3 Process Piping. All other
piping shall be designed, fabricated, installed, and tested in accordance with
ANSI B31.1, Power Piping.
A-12
<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
V-5212 /5213/5214/5215 alloy brine and steam pipe to the LP and VLP scrubbers
shall be ANSI B-31.3. Alloy pipe from SP steam to SP scrubber shall be B-31.3.
Steam and drain pipe from the scrubbers to the power plant shall be B-31.1.
Carbon steel drains from the LP and VLP separators shall be B-31.1. Brine lines
shall be B-31.3. All inspection will be to the more stringent of B-31.1 or
B-31.3 for NDE inspection and project quality control measures.
Materials for piping systems shall be as shown on the Station Materials Diagram
included in Attachment 6, document 8.1.1. All piping shall be in accordance with
the Piping Material Specifications included in Attachment 6.
10.4 STEAM SUPPLY SYSTEMS
The Project includes three steam supply systems to be designed and constructed
by the Contractor. Standard Pressure (SP) steam is supplied to the Project from
the existing Unit 3 SP steam header. Low Pressure (LP) steam and Very Low
Pressure (VLP) steam are produced from geothermal brine that has passed through
the Units 3 and 4 steam separators.
The SP steam system will deliver steam from the intertie with Unit 3 to the
Project turbine generator. A steam scrubber shall be installed in the SP steam
system on the Unit 3 site, as close to the Unit 3 intertie as possible. Purge
water will be added to the steam before it enters the scrubber to wash chlorides
and other compounds from the steam. The scrubber will remove the purge water and
contaminants from the steam. The steam will exit the scrubber and will be piped
to a demister for a final step of moisture removal prior to delivery to the
Project turbine generator. Refer to Attachment 2 for more information on the
interties with existing systems.
Low Pressure (LP) steam will be produced in steam separators provided and
installed by the Contractor on the Project site. Purge water will be added to
the steam before it enters a scrubber to wash chlorides and other compounds from
the steam. The scrubber removes the purge water and contaminants from the steam.
The steam exits the scrubber and is piped to the Project turbine generator.
Very Low Pressure (VLP) steam will be produced in steam separators provided and
installed by the Contractor on the Project site. Purge water will be added to
the steam before it enters a scrubber to wash chlorides and other compounds from
the steam. The scrubber will remove the purge water and contaminants from the
steam. The steam will exit the scrubber and will be piped to the Project turbine
generator.
The steam systems shall be designed to limit the chloride concentration of the
steam entering the turbine to no more than 1 ppm with the SP steam and brine
analysis as specified in Section 5. Steam purity shall be tested as part of the
performance tests detailed in Section 10.24 to confirm Chloride concentration of
the steam entering the turbine.
The SP, LP, and VLP steam systems shall each include a water wash system that is
designed to spray water at up to 3% of the design steam flow into the steam
system piping upstream of the steam strainers for on-line water washing of the
turbine steam path. Wash water shall be supplied from the main condenser.
A-13
<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
The SP, LP, and VLP steam systems shall each include an annubar flow element for
performance testing of the Unit. Annubar differential pressure taps shall be
installed so that accumulation of geothermal gas or solids can not affect
readings. Upstream temperature shall be measured at two different points close
together.
10.4.1 SP, LP AND VLP STEAM SCRUBBERS
The SP, LP and VLP steam scrubbers shall be EGS Systems, formerly Porta-Test
Systems Inc. separators. Detail design and fabrication requirements for the
scrubbers are provided in Attachment 6, document 10.4-1, in the form of the
specification for the existing Unit 4 steam scrubber. The SP, LP, and VLP steam
scrubbers for the Project shall be designed, fabricated, tested, and installed
in accordance with the technical requirements presented in Attachment 6,
document 10.4.1.
The SP, LP and VLP steam scrubbers shall be designed fabricated, installed, and
tested in accordance with Section VIII of the ASME Boiler and Pressure Vessel
Code.
10.4.2 SP, DEMISTER
The SP demister shall be as manufactured by Peerless Mfg. Co. Detail design
requirements for the demister are provided in Attachment 6, document 10.4-2, in
the form of the specification and drawing for the existing Unit 4 demister. The
SP demister for the Project shall be designed, fabricated, tested, and installed
in accordance with the technical requirements presented in Attachment 6,
document 10.4.2.
The SP demister shall be designed fabricated, installed, and tested in
accordance with Section VIII of the ASME Boiler and Pressure Vessel Code.
10.4.3 LP STEAM TO UNITS 3 AND 4
the Project shall be designed to permit the flow of LP steam to Units 3 and 4
when the Project is out of service. The steam shall flow to Units 3 and 4
through the SP steam line that connects Unit 3 and the Project and then exiting
the SP steam line through a line that interties to the existing Region 1 LP
steam system. See Section 3.0 and Attachment 2 for more information on the
intertie. The system shall include appropriate piping, isolation valves, and
controls.
10.5 AUXILIARY STEAM SYSTEMS
Auxiliary steam is supplied from the SP steam header to the Noncondensable Gas
Removal system and from the LP steam system to the Silica Control System and the
ZRF. Auxiliary Steam System pressure to the gas removal system shall be
controlled to 20 psi less than the SP steam pressure. Auxiliary steam used to
supply the jets shall be metered.
The material of construction shall be 2205 stainless steel downstream of the
auxiliary steam strainer. The tie-point of the Aux. steam system to the SP steam
system shall be isolated with a 316L SS two-piece ball valve. (with PEEK seats).
Flanges on the Aux. steam line can be 316L SS raised face slip on as long as
they are welded with Alloy 625 electrodes to dilute the combination alloy up.
A-14
<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
10.6 GAS REMOVAL SYSTEM
The noncondensable Gas Removal System shall be a two (2) stage system employing
three (3) parallel trains of 35%, 40% and 65% of the design conditions as
specified in Table 10.6-1, that is capable of flexible and efficient operation
over the entire range of expected noncondensable gas content in the steam. The
system shall have maximum efficiency at the specified design conditions. The
system shall be designed to operate reliably and efficiently at any gas content
from the minimum conditions up to, and including, the maximum conditions as
shown in Table 10.6-1.
Table 10.6-1
GAS REMOVAL SYSTEM
<TABLE>
<CAPTION>
Design Minimum Maximum
Conditions Conditions Conditions
<S> <C> <C> <C>
Noncondensable Gas, lb/hr 1262 442 1767
Saturation vapor, lb/hr by Contractor by Contractor by Contractor
Suction Pressure, in HgA by Contractor by Contractor by Contractor
Discharge Pressure, psig 0.5 0.5 0.5
Atmospheric Pressure, psia 14.82 14.82 14.82
Motive Steam
Pressure, psia see Sec. 10.5 see Sec. 10.5 see Sec. 10.5
Temperature, F Saturated Saturated Saturated
NCG in motive steam, %wt. 0.2 0.1 0.5
</TABLE>
Geothermal gas in the total flow to the Project shall be measured in the gas
removal system.
The system shall employ steam jet ejector(s) to compress the gas. Steam jet
ejectors shall exhaust to a single direct contact intercondenser or
aftercondenser. Multiple steam jet ejector elements, intercondensers, and
aftercondensers shall be provided to permit continuous operation at design
capacity with one ejector element out of service. Valves shall be installed to
permit maintenance disassembly of an ejector element with the system operating
at design capacity.
Materials of construction and fabrication of the gas removal equipment shall be
in accordance with the Station Materials Diagram and as specified in Attachment
6, document 10.6-1, Technical Requirements for Gas Removal Equipment.
Steam jet ejectors shall be designed and tested in accordance with Heat
Exchanger Institute (HEI) Standards for Steam Jet Ejectors.
Intercondensers (and aftercondensers) shall be designed in accordance with HEI
Standards.
A-15
<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
Additional design and fabrication requirements are included in Reference 10.6.1
of Attachment 6.
10.7 CONDENSATE SYSTEM
The Condensate System shall pump condensed geothermal steam from the condenser
hotwell to the circulating water system and purge water system. The system shall
consist of two 100% capacity vertical can type condensate pumps, piping, valves,
controls, and instrumentation. Condensate flow shall be controlled to maintain
proper level in the condenser. The primary flow path for the condensate shall be
to the circulating water system. The system shall also supply purge water to the
steam and brine handling systems and excess condensate to the Region 1 ZRF IX
facility. The system shall be constructed from the materials shown on the
Station Materials Diagram.
10.7.1 CONDENSATE PUMPS
The designs offered shall be no less than utility grade, suitable for continuous
operation at the design conditions or any other load between minimum continuous
safe flow and 110% of the design capacity. Each pump shall be performance tested
at the factory.
The pump design offered shall be vertical shaft pump set in a suction can or
barrel.
The physical design and construction of the pump, motor and other accessories
shall be rated for continuous duty with no cyclic limitations and no hydraulic
limitations from minimum continuous flow to 110% of design capacity.
As a minimum the guidelines of ASME VIII, Div. 1 shall be addressed in the
design of pressure retaining parts of the assembly to ensure long term
operability.
The suction barrel or can shall be a fabrication designed to provide a stable
suction flow to the pump. It shall be capable of a working pressure range of
0-20 psia. It shall be fitted with a vent connection at the highest point to be
piped back to the condenser.
The complete pump assembly of pump, thrust bearing and motor shall be protected
from damage from reverse rotation by an anti-reverse rotation ratchet or design
for a maximum reverse speed of 115% of design with the motor de-energized.
All wetted metallic parts of the pump shall be 316L construction or compatible.
Internally wetted parts shall not utilize coatings.
The soleplate and above head/bend parts of the thrust bearing assembly, motor
stand/support and all fasteners required for the assembly may be coated
non-corrosion resistant materials such as carbon steel or other alternates.
The Contractor shall provide the following documentation for the Condensate
Pumps:
A-16
<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
Performance Curves
Outline, Detail, Erection and Maintenance Drawings
Operation and Maintenance Manuals
Vendor shop test and inspection reports
Performance tolerances shall be per HIS.
Purge water system shall provide non-oxygenated condensate for the following
systems:
o LP Separator steam wash, primary and secondary wash (continuous full
cone and hollow cone nozzles)
o VLP Separator steam wash (continuous full cone and hollow cone
nozzles)
o SP Scrubber steam wash (intermittent full cone nozzle)
o Brine pump seal flush water
o LP Scrubber steam wash (intermittent service)
o VLP Scrubber steam wash (intermittent service)
The system may be fabricated from either Type 316L stainless steel or FRP.
A 20,000 gal storage FRP Storage tank shall be provided to store hotwell
condensate.
Pump system shall consist of a low pressure purge pump system and a high
pressure purge pump system. Two 100% pumps shall be provided for each system.
High pressure purge pumps may be supplied with suction pressure by the low
pressure pump system.
Purge pumps shall be designed for 40 gpm supply water per separator and 15 gpm
of SP turbine wash. Design pressure shall be 180 psig. Additional rates for pump
seal flush system shall be additive to these rates.
Purge water to LP and VLP steam systems shall be designed for up to 5% of the
steam rate, with normal operating conditions of 2.5%. The nozzle system shall be
designed to remove contaminants from the steam, and to keep the walls of the
pipe wet to prevent build up or concentration of HCl on the pipe walls. This
shall be done using a full cone spray pattern to clean and de-superheat the
steam, followed by a hollow cone spray pattern to keep the steam pipe walls wet.
The first nozzle shall be located directly on the steam out nozzle of the
horizontal separator, the second nozzle shall be on the first horizontal run of
pipe.
A-17
<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
Seal flush pumps shall be designed for 3 gpm per pump seal, with all pumps
operating, including standby pumps. Design max rate per seal is 5 gpm.
Provisions to supply the seals with pH 3.0 condensate shall be made. These
provisions can be breakout valves and flanges to supply the seal flush system
with a constant flow of 2% HCl solution for future use.
Scrubber steam wash water does not require a special nozzle, but must enter the
pipe through a 2" branch connection on the steam line. This will be an SE pipe
spec, consisting of an isolation valve, check valve, local flow indicator, flow
control valve controlled by a hand station near the nozzle area, and a
downstream isolation valve. These nozzles should be located such that mixing of
the water and the steam is maximized. Nominal flow rate is 30 gpm per station,
on a non-concurrent basis of operation.
The SP steam system shall require a Demister wash station. Nozzles for stations
shall be BETE Model TF Spiral style, with 1200 deg. full cone and a 1200 deg.
hollow cone. The full cone shall be placed very near to the outlet of the
vessel, on the first horizontal pipe run, and the hollow cone will be place 20
ft downstream of the full cone spray. The nozzles will be made of alloy 625 or
Hastelloy C.
10.8 CONDENSER AND AUXILIARIES
The condenser shall be designed and manufactured to HEI Standards for Steam
Surface Condensers. The condenser shall dissipate the total exhaust heat from
the turbine at maximum rated capacity. The condenser shall be designed to
minimize the dissolved gas content in the condensate in the condenser hotwell.
The condenser shall be a one or two pass surface type unit. The condenser may be
designed for multi-pressure operation.
The condenser shall be complete with steam condensing zone, noncondensable gas
collection and cooling section (internal or external), hotwell, transition
pieces and ductwork from the turbine exhaust connections, expansion joints,
baffles, vacuum breaker connection, manholes (minimum 24 in. diameter), drain
connections, instrumentation and control connections, condensate pump
recirculation connections, sample connections and test connections.
The condenser shall be complete with all required internal distribution systems
and baffles to admit without damage the steam and drains flows as specified. The
condenser shall be designed to prevent local overheating from any of the
specified flows.
Waterboxes shall be larger than the tube hole pattern on the tubesheet.
Waterboxes shall be provided with suitably sized vents and drains. Waterboxes
shall be provided with lifting lugs. Each waterbox, the hotwell, and the steam
dome shall be provided with at least two manholes of a minimum 24 inch diameter.
Manholes shall have hinged covers.
A-18
<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
Internals shall be free draining and self cleaning and shall avoid fouling and
clogging from foreign material or deposit build up. Any internals such as
nozzles or diffusers that are required to be removed for maintenance shall,
along with any associated tools, be capable of fitting through the access
manholes.
All steam and condensate wetted parts shall be 316L, or 2205 stainless steel.
Alloy 825 and Alloy 625 may be substituted for 2205.
The shell shall be designed to accommodate thermal expansion without damage. The
hotwell shall include separate connections for two 110% capacity condensate
pumps. The hotwell shall be provided with a dirt dam and screens to retain
solids in the condenser hotwell. The screens shall have openings sized to
protect the condensate pumps.
The exhaust ductwork shall include expansion joints at the connections to the
turbine exhaust casing. The expansion joint(s) shall be rubber or shall use 2205
stainless steel bellows. The exhaust ductwork shall be designed so as to not
impose unacceptable stress on the turbine casing or condenser shell.
The condenser shall include a noncondensable gas (NCG) cooling section. The NCG
cooling section may be either internal or a separate external vessel. If an
external NCG cooling section design is selected, it may have its own cooling
water inlet connection.
Tube-to-tubesheet joints shall be tested in accordance with HEI Standards. No
leakage shall be permitted.
The condenser shell and exhaust necks shall be subjected to a water fill test to
verify shell integrity. The complete condenser shall be filled with water up to
the turbine exhaust connection and examined for leaks. No leakage is acceptable.
The Contractor will provide the following documentation for the Condenser:
Performance Curves
Outline, Detail, Erection and Maintenance Drawings
Operation and Maintenance Manuals
Material certifications for tubes, tubesheets, and shell
10.9 COOLING TOWER
The Cooling tower shall be a counterflow wet mechanical draft design employing
splash fill. Film fill will not be acceptable. Balcke-Durr Trickle Bloc fill is
an acceptable alternative to splash fill.
The cooling tower shall comprise a number of cells modularized such that one
complete cell can be taken out of service for cleaning or maintenance while the
balance of the cells remain in operation. The cooling tower shall be designed
and tested in accordance with the Cooling Tower Institute (CTI) standards.
A-19
<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
The tower structure shall be ACC pressure treated Douglas fir or Redwood
suitable for the 30 year design life of the project. Alternate structural
materials may be offered. All structures, components, piping and valves shall be
designed for full Project life.
The tower shall be equipped with heavy gauge, clog-resistant splash fill, high
efficiency mist and splash eliminators which hold drift losses to less than
0.002 percent of the inlet water flow. The air path shall be designed to
minimize air pressure drop, water drift, and splash.
All fasteners and hardware shall be ANSI 316 stainless steel.
All non-metallic cooling tower components and equipment shall be resistant to
deterioration from ultra-violet light. All non-metallic components shall have a
flame spread rating of 25 or less per ASTM E-84.
The fill shall be splash type, not film. The fill material shall be stainless
steel or fire retardant plastic, with a minimum thickness of 0.9 mm. It shall
have a maximum temperature limit that is compatible with all operating
conditions of the Project, including dry shut down and subject to solar heat
gain. Timber or asbestos fill packs shall not be acceptable.
Galvanized material shall not be used on the cooling tower deck , basin, or
immediate structure. All metal components shall be epoxy coated to prevent
corrosion. Cable trays and conduit on the structure shall be FRP, or epoxy
coated steel, or other corrosion resistant material approved by the Owner.
Ladders and an access walkway suitable for inspection and cleaning of the upper
level tower fill/mist eliminators in a counter flow tower shall be provided.
These shall be made of non-corrosive material. Galvanized or painted steel, and
wood shall not be permissible. FRP material is preferred.
Nozzles shall be threaded to permit easy removal for cleaning of the nozzles and
the distribution pipe work. Cleanout provisions shall be made at the end of all
headers and distribution pipe work.
The cooling tower shall be capable of operating with 125% of the design water
flow without damage. The design of the water distribution system shall allow for
90% of the plan area of the cell to receive a water flow within 5% of the
average flow. The water flow to no portion of the plan area shall deviate by
more than 10% from the average.
Lockable flow regulators shall be provided to equalize water flow between
individual tower cells.
Non-condensable gas that is removed from the condenser shall be piped to the
cooling tower for release to the atmosphere with the cooling tower plume. Piping
and valves shall be installed on the tower fan deck to distribute
non-condensable gas to and into two adjacent fan cylinders.
A-20
<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
The noncondensable gas distribution system shall be designed to permit isolation
of one cell from the distribution system with the remainder of the system
capable of distributing the design flow of non-condensable gas to the other
cell. Each branch line to a fan cylinder shall include a 316 SS butterfly valve
followed by a spectacle blind flange. The system shall be designed to accept and
distribute the maximum expected flow of non-condensable gas.
The non-condensable gas discharge system shall be fabricated with FRP or other
approved piping material. Any metallic components shall be fabricated from 316L
Stainless Steel.
A tower wet-down system shall be provided to keep the tower structure wet during
periods when the tower is out of service. The wet-down system shall be designed
for a coverage of at least 0.02 gpm per sq. ft.
A stairway and a caged 316 stainless steel or FRP fire escape ladder shall be
provided at opposite ends of the cooling tower for access to the fan deck,
including handrails and toe boards on the stairway and fan deck.
Fan cylinders shall have easily removable external hatches of sufficient size to
permit removal of all mechanical equipment and components. An access catwalk
shall be provided.
The fan deck shall be capable of supporting fan components, driving motor,
gearing and shafting during overhaul. Means shall be provided of lowering such
components to ground level.
All doors shall be easily opened from inside the tower.
Counterflow towers shall include internal platforms for maintenance access.
Fans shall be balanced, multi blade, adjustable pitch (with indexing),
manufactured from corrosion resistant material with airfoil profile. Fan tip
speed and air velocity shall be such as to ensure operation within the allowable
noise limits.
Motor drives shall include vibration switches to trip and alarm on abnormal
condition. Fan, gear, drive shaft and motor shall be mounted on a unitized base
designed and constructed to prevent misalignment of the drive train and fan
within the stack under all operating conditions. The base and any associated
structural members shall be ANSI 316L stainless steel or epoxy coated carbon
steel. The drive shaft shall be composite or ANSI 316L stainless steel and shall
be provided with flexible couplings. Support and attached structures shall be
designed to avoid blade passing frequency harmonic excitation.
Belt drives shall not be used.
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UNIT 5 EPC CONTRACT - EXHIBIT A
Gear boxes shall have an oil level sight glass, fill line, vent line, drain
line, a low level switch and grease fittings connections all located outside the
fan stack for convenient maintenance access. External oil pumps will not be
acceptable. Gear boxes shall have a minimum AGMA service factor of 2.0 and be
designed for the life of the Project; bearings shall be designed for a minimum
L10 life of 100,000 hours. Adequate lubrication shall be automatically provided
for windmilling.
End walls and louvers shall be fire retardant. Each cell shall be separated from
adjacent cells by a 1/2 hour rated fire wall extending from the minimum water
level to the fan deck. The fan deck shall have a weather resistant fire
retardant coating.
Water risers and distribution pipe work shall be manufactured from fiber
reinforced plastic, HDPE, ANSI 316L stainless steel or equivalent.
Valves shall be appropriate for the pressures and temperatures of each specific
application. Gate valves shall not be used for throttling in any critical
service.
The depth of the cooling tower basin shall include 1 ft for sludge accumulation.
The basin shall be designed to allow sufficient freeboard above the High-High
operating level to contain the water contained in the distribution system and
fill without overflowing. A concrete mat shall extend 12 ft beyond the edge of
the basin wall in all directions. The mat shall be sloped to drain to a sump.
The sump shall drain to the storm water system.
The water distribution system shall be subjected to a water fill leak test, or
appropriate hydrostatic test, to the top of the inlet overflow pipe. No leakage
will be permitted.
The Contractor will provide the following documentation:
Completed Equipment Data Sheets
Performance Curves
Outline and Detail Drawings
Seismic Analysis Report
Operation and Maintenance Manuals
10.10 MAIN COOLING WATER SYSTEM
The Circulating Water System pumps cooling water from the cooling tower basin
to, and through, the main condenser and returns the water to the cooling tower
distribution system. The system is comprised of circulating water pumps, piping,
valves, specialties, controls, and instrumentation.
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UNIT 5 EPC CONTRACT - EXHIBIT A
10.10.1 CIRCULATING WATER PUMPS
The circulating water pumps shall be motor driven vertical wet pit pumps. The
pumps shall be installed in a concrete structure that is an extension of the
cooling tower basin. Each pump shall be performance tested at the factory.
The designs offered shall be no less than utility grade, suitable for continuous
operation at the design conditions or any other load between minimum continuous
safe flow and 110% of the design capacity.
The physical design and construction of the pump, motor and other accessories
shall be rated for continuous duty, no cyclic limitations and no hydraulic
limitations from minimum continuous flow to 110% of design capacity.
The complete pump assembly of pump, thrust bearing and motor shall be protected
from damage from reverse rotation by an anti-reverse rotation ratchet or design
for a maximum reverse speed of 115% of design with the motor de-energized.
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UNIT 5 EPC CONTRACT - EXHIBIT A
The pump casing shall be epoxy coated ductile iron. All other wetted metallic
parts of the pump shall be 316L construction or compatible. Internally wetted
parts shall not be coated.
The soleplate and above head/bend parts of the thrust bearing assembly, motor
stand/support and all fasteners required for the assembly may be coated
non-corrosion resistant materials such as carbon steel or other alternates.
The Contractor will provide the following documentation for the Circulating
Water Pumps:
Performance Curves
Outline, Detail, Erection and Maintenance Drawings
Operation and Maintenance Manuals
Vendor inspection and pump test reports
Performance tolerances shall be per HI Standards. Vibration acceptance criteria
shall be in accordance with half of the field allowable levels in HEI Standards.
10.10.2 PUMP INTAKE STRUCTURE
The pump intake structure shall accommodate the circulating water pumps and the
auxiliary cooling water pumps. The circulating water pumps shall be segregated
from the auxiliary cooling water pumps to permit de-watering of the circulating
water pump intake while the auxiliary cooling water pumps remain in service.
The pump intake structure shall be designed in accordance with HI Standards. The
intake structure shall be designed to prevent the formation of vortexes in the
water flowing to the pumps.
Removable stationary screens shall be provided. The screens shall have 3/8 inch
square openings and shall be fabricated from Type 316L stainless steel. The
intake structure shall include two sets of slots for the installation of a
screen or stop logs. One spare screen and a complete set of stop logs shall be
provided. All necessary structure and lifting apparatus for the screens and stop
logs shall be provided. A concrete pad shall be installed adjacent to the screen
well to allow laydown and cleaning of the screens. The lifting apparatus shall
allow moving the screens between the screen well and the laydown pad.
10.10.3 PIPING
The system shall be constructed of fiber reinforced plastic (FRP).
Buried pipe work shall be FRP. This buried pipe work shall be laid, bedded in,
and back filled with clean sand of a depth recommended by the manufacturer but
not less than 18 inches. Special care shall be taken with the sub-base beneath
trenches for FRP pipe work to ensure that the piping is installed in cut
material. Where this is not possible, all materials used shall be structural
fill compacted to ensure that differential settlement causing potentially
damaging shear forces on the buried pipe work is avoided. Great care shall be
taken when back filling to ensure that stones and other sharp objects are
excluded from the back fill material and that compaction equipment is not
allowed to impact on the pipe. Where above ground pipe work is FRP material, it
shall be suitably supported in accordance with manufacturer's
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UNIT 5 EPC CONTRACT - EXHIBIT A
requirements and protected from damage from impact or other accidental causes.
Pipe joints shall be made only by suitably qualified and experienced tradesmen
to an approved procedure.
Joining and repair procedures for FRP piping shall be developed by the
Contractor and included in the documentation delivered to the Owner. Special
tools for the repair of the piping during the life of the Project shall be
provided.
Transitions between stainless steel and FRP shall be accessible and above grade.
Manway access shall be provided to all cooling water piping 24 inch diameter and
greater. The manway shall be installed with suitable backing plates to reduce
the impact on hydraulic losses in the piping system.
10.11 AUXILIARY COOLING WATER SYSTEM
The auxiliary cooling water system shall pump water from the cooling tower basin
to, and through coolers for plant auxiliary equipment and return the water to
the cooling tower distribution system. The auxiliary cooling water system shall
serve the gas removal system intercondensers, aftercondensers, the turbine lube
oil coolers, generator air coolers, the waste heat exchanger, and other services
as required. The system shall be comprised of two 100% capacity auxiliary
cooling water pumps, heat exchangers, piping, valves, specialties, controls, and
instrumentation.
10.11.1 AUXILIARY COOLING WATER PUMPS
The auxiliary cooling water pumps shall be motor driven vertical wet pit pumps.
The pumps shall be installed in a concrete structure that is an extension of the
cooling tower basin. Each pump shall be performance tested at the factory.
The designs offered shall be no less than utility grade, suitable for continuous
operation at the design conditions or any other load between minimum continuous
safe flow and the 120% of the design capacity.
The pump design offered shall be a vertical shaft pump.
The equipment will be located in a seismically active area. Mechanical integrity
is to be maintained during an event.
The physical design and construction of the pump, motor and other accessories
shall be rated for continuous duty, no cyclic limitations and no hydraulic
limitations from minimum continuous flow to 120% of design capacity.
The complete pump assembly of pump, thrust bearing and motor shall be protected
from damage from reverse rotation by an anti-reverse rotation ratchet or design
for a maximum reverse speed of 115% of design with the motor de-energized.
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UNIT 5 EPC CONTRACT - EXHIBIT A
The pump casing shall be epoxy coated ductile iron. All other wetted metallic
parts of the pump shall be 316L construction or compatible. Internally wetted
parts shall not use coatings.
The soleplate and above head/bend parts of the thrust bearing assembly, motor
stand/support and all fasteners required for the assembly may be coated
non-corrosion resistant materials such as carbon steel or other alternates.
The Contractor shall provide the following documentation for the Auxiliary
Cooling Water Pumps:
Performance Curves
Outline, Detail, Erection and Maintenance Drawings
Operation and Maintenance Manuals
Vendor inspection and pump test reports
10.11.2 PIPING
The system shall be constructed of fiber reinforced plastic (FRP) or Type 316L
stainless steel pipe.
10.12 BRINE HANDLING AND INJECTION SYSTEMS
The brine handling and injection systems for Units 3 and 4 will be modified by
the Contractor as part of this Project. Brine from Units 3 and 4 will be
redirected to the Project for additional steam production and cooling. The brine
will then be delivered to the Region 1 Zinc Recovery Facility. From there the
brine will be pumped to the injection wells for return to the geothermal
resource.
The modifications to the brine handling and injection systems must be planned
and coordinated with the Owner in accordance with Section 4.18 of the Contract,
to minimize operational outages at Units 3 and 4. The Contractor shall, to the
maximum extent possible, schedule the intertie work on the brine handling and
injection systems to occur during planned system outages. Refer to the attached
Intertie Document Attachment 2 for additional information on the interties with
existing systems and facilities as well as concurrent new construction by
Others.
Brine from the existing brine injection booster pumps will be rerouted to, and
through, two 60% capacity Low Pressure (LP) steam separators installed in
parallel, two 60% capacity Very Low Pressure (VLP) steam separators installed in
parallel. The brine will then be piped to the silica control system. Brine from
the silica control system will be pumped by one of two new 100% minerals
recovery feed pumps to the Region 1 ZRF IX facility within a guaranteed
temperature range. The brine exiting the ZRF will be delivered to three new 60%
capacity brine injection booster pumps and then to the three existing, but
relocated, 60% capacity brine injection pumps. New discharge piping from the
brine injection pumps will connect with the existing brine injection system
piping.
10.12.1 BRINE INJECTION BOOSTER PUMPS (EXISTING P-3210A/B/C)
It is intended to use the three existing brine injection booster pumps as-is and
in their current location. However the Contractor must evaluate the required
hydraulic performance for the pumps. Any required changes to the pump and/or
driver to accommodate the revised operating conditions shall be completed
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UNIT 5 EPC CONTRACT - EXHIBIT A
by the Contractor. Design details of the existing pumps are included in
Attachment 6, document 10.12-3. Refer to the Intertie Document included in
Attachment 2 for more information on the interties with existing equipment and
systems.
10.12.2 LOW PRESSURE AND VERY LOW PRESSURE STEAM SEPARATORS
Two 60% capacity LP steam separators and two 60% capacity VLP steam separators
shall be provided by the Contractor. Technical requirements for the LP and VLP
steam separators are included in Attachment 6, document 10.12-1, in the form of
the specification for the existing Unit 4 steam separator. The LP, and VLP steam
separators for the Project shall be designed, fabricated, tested, and installed
in accordance with the technical requirements presented in Attachment 6 and
shall be similar to the Unit 4 SP steam separator shown on the drawings included
as Attachment 6.
The separator design including the internal vortex clusters shall be designed by
EGS Systems, formerly Porta-Test Systems, Inc., Houston Texas. The internals
shall be designed to be fully removable, and shall be constructed of Alloy 625,
or Hastelloy C-276. Minimum required thickness shall not be less than 1/8" thick
for the tubes. The vessel OD, seam to seam and, vessel support spacing shall be
the same as the Unit 4 vessels. VLP vessel height above grade shall be
sufficient to drain to the 1st Stage Reactor vessel (V-5216) without cavitation.
The LP and VLP steam separators shall be designed fabricated, installed, and
tested in accordance with Section VIII of the ASME Boiler and Pressure Vessel
Code. Over-pressure protection shall be designed and installed in accordance
with Section 8 and ANSI B31.3.
10.12.3 ZINC RECOVERY FEED PUMPS
Two 100% capacity motor driven zinc recovery feed pumps shall be provided to
deliver cooled brine from the silica control system outlet, through the ZRF to
the suction of the new brine injection booster pumps. Each pump shall be
performance tested (including an NPSH test) at the factory.
Pumps shall be capable of operating continuously over their full operating range
without overheating, cavitating, excessive noise or vibration, surging or
instability when operating in single or in parallel with other pumps. Pumps
shall be selected for maximum efficiency at the design condition and shall have
a head/flow curve that rises steadily from rated flow to shut off.
The new zinc recovery feed pumps shall meet the technical requirements in the
specification for the existing brine injection pumps and brine injection booster
pumps. The specification for the existing brine injection pumps and brine
injection booster pumps is included in Attachment 6 document 10.12-3.
The Contractor will provide the following documentation for the Zinc Recovery
Feed Pumps:
Performance Curves
Outline, Detail, Erection and Maintenance Drawings
Operation and Maintenance Manuals
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UNIT 5 EPC CONTRACT - EXHIBIT A
Vendor shop test and inspection reports
10.12.4 BRINE INJECTION BOOSTER PUMPS (NEW)
Three 60% capacity motor driven injection booster pumps are required to receive
the brine exiting the ZRF and increase the fluid pressure to meet the NPSH
requirements of the existing P-3211A, B, and C brine injection pumps and limit
the power consumption of the brine injection pumps to approximately 85% of the
rated power at the injection pump rated capacity. Each pump shall be performance
tested at the factory.
Pumps shall be capable of operating continuously over their full operating range
without overheating, cavitating, excessive noise or vibration, surging or
instability when operating in single or in parallel with other pumps. Pumps
shall be selected for maximum efficiency at the design condition and shall have
a head/flow curve that rises steadily from rated flow to shut off.
The new brine injection booster pumps shall meet the technical requirements in
the specification for the existing brine injection booster pumps and brine
injection booster pumps. The specification for the existing brine injection
pumps and brine injection booster pumps is included in Attachment 6, document
10.12-3.
The Contractor will provide the following documentation for the Brine Injection
Booster Pumps:
Performance Curves
Outline, Detail, Erection and Maintenance Drawings
Operation and Maintenance Manuals
Vendor shop test and inspection reports
10.12.5 BRINE INJECTION PUMPS (EXISTING P-3211A, P-3211B, AND P-3211C)
The three 60% capacity horizontal split case brine injection pumps currently
installed in the Units 3 and 4 brine injection system are to be relocated as
part of this project. These pumps are motor driven with variable frequency
drives (VFD) to control pump output. Power and control feeds for these pumps
shall remain from Unit 3, unless changed by Owner in a Change in Work under
Section 17.2 of the Contract. The VFD equipment will remain in its present
location.
The current pump installation includes vibration monitoring equipment. This
equipment is not required at the new location. This equipment shall be
dismantled and disposed of by the Contractor.
Design details and pump performance curves of the existing pumps are included in
as Attachment 6, document 10.12-3. Recommendations from Flowserve for the new
pumps are also included in Attachment 6 document 10.12.3. Refer to Intertie
Document, Attachment 2, for more information on the interties with existing
equipment and systems.
10.12.6 PRESSURE RELIEF AND BRINE DUMP SYSTEM
Two Atmospheric Flash Tanks (AFT) will serve as steam relief for the brine
handling system. These shall be similar in design to the Unit 3 AFTs TK-301 and
TK-302. Drawings of the Unit 3 AFTs are
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UNIT 5 EPC CONTRACT - EXHIBIT A
included as Attachment 6, document 10.12-4. Inlet nozzles shall be provided for
the rupture disc steam relief system. These tanks will drain either to a site
drainage sump or vessel T-5203. The nozzle configuration shall be from top to
bottom as:
1. Low pressure vessel steam relief
2. Very low pressure brine relief
Design conditions shall be for 225 (Degree)F and 1 psig positive pressure.
Vessel drain shall be a 24" diameter nozzle of alloy 625 or Hastelloy C grade
material. This drain nozzle shall project 24 inches from the bottom of the cone,
and shall be flush on the inside of the cone. The nozzle flange may be either a
Van-Stone type or a 150 lb. 316L Raised Face Slip On welded with an electrode of
equal alloy to the nozzle material. Vessel cone shall be roll clad with 0.08"
nominal thickness Type 2205 stainless steel. Vessel body shall be of SA 516
Grade. 70, vessel draft tube and stack shall be of SA 516 Grade 70. The
brine/steam inlet nozzle box shall be SA 516 Grade 70.
Vessel design shall be meet API standards for tanks, and ASME Section VIII for
vessel weld design and inspection standards where applicable.
The carbon steel vessel body of the AFT can be made of3/4" SA 516 grade. 70.
A-36 will not be allowed for any component of the AFT.
10.12.7 BRINE PIPING
Brine transport piping shall be cement lined piping designed, fabricated, and
installed in accordance with the Owner's specification for cement lined piping
included as Attachment 6, document 10.12-5. The proposed and preferred
arrangement for the brine piping at the steam separators is shown in Attachment
6, document 10.12-6
10.12.8 BRINE SERVICE TANK EFFLUENT PUMPS (RELOCATED P-323A, P-323B)
The brine service tank effluent pumps shall take suction from the brine service
tank. Two pumps shall be installed in parallel. The pumps shall be the existing
P-323A and P-323B currently installed at Unit 3. The pumps shall be relocated to
the Project area by the Contractor.
Details of the existing pumps are included in Attachment 6, document 10.12-7.
10.13 FIRE PROTECTION SYSTEMS
The fire protection systems for the Project shall include an underground fire
main, yard hydrants and hose houses, monitors around the perimeter of the
cooling tower, automatic sprinklers for the turbine generator and auxiliary
equipment, risers for automatic sprinklers in the ZRF, automatic spray system
for the main step-up transformer, and a complete fire detection and alarm
system.
The fire protection system shall be designed, installed, and tested in
accordance with the NFPA Codes. The systems shall include the features specified
herein as a minimum. The Contractor shall obtain approval from the local
Authority having jurisdiction for the complete fire protection system design and
installation. Documentation of test results and approval by the Authority having
jurisdiction shall be submitted to the Owner.
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UNIT 5 EPC CONTRACT - EXHIBIT A
<PAGE>
The Project fire protection system shall be an extension of the existing Unit 3
system. The Unit 3 system will deliver 2500 gpm at 110 psig at the two
connections with the Project fire protection system. The Contractor shall design
the Project fire protection system to provide a minimum pressure of 95 psig at
the stubups for the Region 1 ZRF and 90 psig anywhere else in the system while
the system is delivering the design flow.
10.13.1 UNDERGROUND MAIN
An underground main shall be installed around the perimeter of the Site in
accordance with NFPA 24. The main shall be an extension of the existing fire
water main surrounding Unit 3. The Project fire main shall connect to the
existing system at two independent locations. The Contractor shall coordinate
the time for completing the interties with the Owner to schedule and minimize
system down time. Refer to the Intertie Document included as Attachment 2, for
more information on the interties.
Buried and sub-surface carbon steel pipe shall be wrapped and coated externally
for corrosion resistance. Non-metallic pipe is permitted, but design
consideration must take into account surface loads on the above ground area, and
settlement potential of the pipe.
Fire hydrants and hose houses shall be located at suitable locations around the
site. Hydrant locations shall permit full coverage of the protected areas with
75 ft long hoses. Threaded connections shall conform to the local standards.
Monitor stations shall be installed around the cooling tower that provide
complete coverage of the cooling tower.
10.13.2 FIRE PROTECTION SYSTEMS
The turbine generator lube oil system, including the turbine and generator
bearings shall be protected with an automatic sprinklers and/or water spray
systems designed and installed in accordance with NFPA 13 and NFPA 15.
The main step-up transformer shall be protected with an automatic water spray
system designed and installed in accordance with NFPA 15.
Two independent stub-ups shall be provided for fire protection in the ZRF. The
ZRF fire protection systems will be designed and installed by others.
Electrical equipment buildings shall be monitored with a smoke detection system.
A central fire protection control panel shall be provided and installed in the
Unit 3 control room with relevant alarms indicated on the DCS. The fire
protection control panel shall monitor and alarm the complete the Project fire
protection system. The fire detection and monitoring systems shall be designed
and installed in accordance with NFPA 72D and 72E.
10.14 POTABLE AND SERVICE WATER SYSTEMS
Potable water for the Project shall be delivered from an Intertie with Unit 3.
Service water for the Project shall be supplied from the Region 1 ZRF. Refer to
the Intertie Document in Attachment 2for additional information on the
interties.
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UNIT 5 EPC CONTRACT - EXHIBIT A
Potable water shall be delivered to safety showers and eyewash stations at all
locations in the Project where acid or other hazardous chemicals are used. The
potable water system shall also provide water to the Region 1 ZRF for an
emergency shower and eyewash station.
The Unit 3 potable water supply has insufficient capacity to support operation
of a safety shower. The Contractor's design shall include sufficient water
storage and pump capacity to support simultaneous operation of two emergency
showers. The Contractor's design for the water supply to the safety showers and
eyewashes shall account for the very high ambient temperatures at the site.
Safety shower and eyewash water temperature must not exceed OSHA limits at the
extreme environmental conditions.
Service water hose stations shall be provided at locations around the plant site
for maintenance, cleaning, and washdown. Along with locations for general
maintenance service water shall be available at the following locations:
o Gas removal equipment area
o Turbine crane lift bay grade level
o Condensate pumps
o Cooling tower stationary screen cleaning area
o Steam separators
o Silica control system
o Acid storage and distribution areas
o Acid injection locations
o Supply to ZRF (see attached Intertie document)
10.15 COMPRESSED AIR SYSTEM
10.15.1 SYSTEM REQUIREMENTS
The Project shall receive compressed air from the Region 1 ZRF. Refer to the
Intertie Document included as Attachment 2 for more information on the
interties.
450 SCFM of oil-free air at 100 psig air will be supplied from Region 1 ZRF. The
Contractor shall provide air filtered to 10 microns, and dried to -40(Degree)F
dew point for instrument and control services within the Project,
Materials of construction for the air distribution system shall be either
galvanized pipe or 304L stainless steel.
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UNIT 5 EPC CONTRACT - EXHIBIT A
Service air shall be supplied to the Project from the ZRF compressed air system.
The service air system shall be automatically isolated from the compressed air
system to maintain a minimum pressure of 90 psig in the instrument air system.
Service air shall be available at various locations around the Project
including, but not limited to:
o Turbine deck
o Gas removal equipment area
o Turbine crane lift bay grade level
o Condensate pumps
o Stationary screen cleaning area
o Brine and Steam separators
o Filter press area
o Brine injection pumps
o Acid injection locations
o Primary and secondary clarifiers
10.16 COOLING TOWER BLOWDOWN
10.16.1 SYSTEM REQUIREMENTS
The cooling tower blowdown system pumps water from the cooling tower basin to
the existing injection system. The system maintains a set level in the cooling
tower basin. It is intended to limit the cooling water system to 20 cycles of
concentration by controlling makeup to the cooling tower.
The cooling tower blowdown system shall consist of piping from the circulating
water system to the existing Unit 3 injection system, valves, controls, and
instrumentation. Refer to the attached Intertie Document included as Attachment
2 for more information on the intertie with the existing injection system.
10.17 HEATING, VENTILATION, AND AIR CONDITIONING
Heating, ventilation and air conditioning shall be provided for the electrical
equipment buildings. The system shall be sized to maintain design conditions
within the electrical equipment building with the ambient conditions described
in Section 4.4.
A programmable control system shall be installed for the control of the
HVAC in a stable and automatic manner. The control system installed shall
have a temperature fault alarm on the site DCS system
A system graphic shall be provided for the HVAC system. The HVAC system shall be
stand alone with no water use from the plant system.
The HVAC control system shall be operated locally from the PDC.
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UNIT 5 EPC CONTRACT - EXHIBIT A
Electrical control IC cards shall not be mounted on any ductwork or any other
piece of equipment directly attached to rotating equipment.
10.17.1 TEMPERATURE CONTROL
Provide an air conditioning package to ensure the room temperature outside any
electrical cabinets does not exceed 95(Degree)F under all operating conditions.
Heating is not required in power distribution center.
10.17.2 PARTICULATE FILTRATION
5 micron filters shall be provided on air supplies to all rooms requiring air
conditioning.
10.17.3 PRESSURIZATION
All electrical rooms shall be rendered free of air leakage and be pressurized
with the equivalent of two air changes per hour minimum of filtered and purified
air. Air lock doors shall be provided on all equipment rooms.
10.18 EQUIPMENT AND FLOOR DRAINS
Equipment and floor drains shall be installed to collect normal leakage,
maintenance drain and cleaning flows, and other liquids. The equipment drain
system shall direct all drain flows to an oil-water separator(s) for processing.
Out flow from the oil-water separator(s) shall de directed to Unit 3 brine pond.
Oily liquids will be periodically pumped from the oil-water separator(s) for
disposal off site.
All surface drains for brine and other process fluids will be of corrosion
resistant material. Drains in the brine process area will be a minimum of 8" in
width and have removable covers for washdown and clean out.
A storm water system shall be installed to collect, detain and dispose of water
from a 100 year storm. A 100 year storm is 3 inches of rain in one hour, and 3
inches of rain in 24 hours. The storm water system shall also receive storm
drains from the Region 1 ZRF. Storm water shall be directed to the North-West
corner of the site for detention and shall be pumped to the Unit 3 brine pond.
10.19 WATER TREATMENT SYSTEMS AND WATER MAKEUP
10.19.1 COOLING TOWER WATER TREATMENT SYSTEM
The Contractor shall provide a concrete pad with spill containment, 110 v,
single phase power, and a safety shower for a cooling tower water treatment
system. The system shall be designed by Nalco. The system shall be designed to
meet the requirements presented in Attachment 6, document 10.20-1.
10.19.2 COOLING TOWER MAKEUP WATER
Cooling tower makeup water for the Project will originate from the condensate
system (primary) and from the service water intertie with the Region 1 Zinc
Recovery Facility (secondary). Refer to the Intertie Document included as 2 for
more information on the interties.
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UNIT 5 EPC CONTRACT - EXHIBIT A
10.20 CHEMICAL FEED SYSTEMS
Reliable operation of the chemical feed system is critical to the "pH Mod"
process. The chemical feed systems shall be designed with 100% installed spare
capacity and automatic transfer to spare equipment upon the failure of any
active component in the system. The automatic transfer capability shall be
verified during Mechanical Completion Tests (Chemical dosing system)
10.20.1 NORMS INJECTION SYSTEM
The NORMS injection system shall be designed to receive, store, transport,
dilute, and inject NORMS solution (Nalco 1387 scale inhibitor) into the brine.
Refer to Attachment 6, document 10.21-1 for MSDS information on the NORMS
solution
The system shall consist of a storage tank with liquid tanker unloading station,
tank fill pump, two 100% capacity feed pumps, inline water dilution and mixing
equipment, surge tank, two NORMS metering pumps for injection into the LP brine,
three 100% capacity NORMS metering pumps for injection into the VLP brine,
piping, valves, and specialties. The metering pumps shall be arranged with one
pump for injection into the LP brine, one pump for injection into the VLP brine,
and one common spare pump.
Injection devices (quills designed by the Owner) for NORMS shall be located just
upstream from the LP separator LCV and the VLP separator LCV. A spool piece with
provisions for a future injection nozzle shall also be installed downstream from
the VLP separator for future use including an isolation valve and a pipe cap.
Detail drawings of the Owner's injection device are included as Attachment 6,
document 10.21-2.
The system shall include provisions for pump calibration and flow rate
verification down stream of the NORMS metering pumps. Flow measurement data and
alarms shall be sent to the DCS.
The NORMS storage tank shall be FRP or other suitable material.
10.21 HYDROCHLORIC ACID INJECTION SYSTEM
The "pH Mod" process employed for Units 3 and 4 requires the addition of
hydrochloric acid to the brine to prevent the formation of silica scale. The
existing system shall be modified and expanded to store, dilute, deliver, meter,
and inject hydrochloric acid into the brine handling system at Units 3, 4, and
5.
Reliable operation of the chemical feed system is critical to the "pH Mod"
process. Failure of the chemical injection system will result in significant
scale formation in the brine handling system. Damage to the injection wells will
result if the HCl addition is not performing to specified requirement for
correct HCl dosage and reliable operation. NO LAPSE IN SYSTEM OPERATION CAN BE
TOLERATED. THIS SYSTEM MUST WORK AT 100% RELIABILITY. POWER SHALL BE ON A DIESEL
GENERATOR BACK-UP BUS.
The chemical feed systems shall be designed with 100% installed spare capacity
and automatic transfer to spare equipment upon the failure of any active
component in the system. The automatic transfer
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UNIT 5 EPC CONTRACT - EXHIBIT A
capability shall be verified during pre-operational testing of the chemical feed
system. The Contractor's design shall include space for future redundant acid
piping.
Modifications to the existing system include the addition of two new 32% HCl
storage tanks, two 100% capacity 32% HCl supply pumps, dilution equipment, one
dilute (2%) HCl storage tank with 90,000 gallon storage capacity, two dilute HCl
standard pressure pumps, and two 100% capacity dilute HCl high pressure pumps.
The total HCl storage capacity (32% plus dilute) shall be sufficient for 3 days
of normal operation.
The hydrochloric acid injection system requires modification of the existing
hydrochloric acid injection systems at Units 3 and 4 for the injection of
suitable amounts of dilute hydrochloric acid in lieu of the 32% acid currently
used. The Contractor may use any existing acid system components or piping in
the new system provided the existing components do not impair the operability or
reliability of the system.
The system shall include flow measurement and pressure monitoring at each
injection point. Flow measurement data and pressure alarms shall be sent to the
DCS.
The Owner has developed a hydrochloric acid injection device that has proven
successful at Units 3 and 4. The Project brine handling system shall use
injection devices of the same design. The hydrochloric acid injection devices
for the brine handling system will be provided by the Owner for installation by
the Contractor. Detail drawings of the Owner's hydrochloric acid injection
device are included as Attachment 6, document 10.22-1.
10.22 INSULATION
Contractor shall insulate all brine, steam and other hot and cold piping,
equipment piping and vessels provided as required for thermal energy
conservation and/or personnel protection. Insulation design shall make adequate
provision for differential expansion between the piping and the insulation
jacketing.
Standard insulation thickness for steam and brine pipe for thermal heat loss
protection shall be 2". All removable spool pieces, pipe below 6 ft in
elevation, and pipe with in personnel access where it is likely to get stepped
on or walked on will be calcium silicate. Fiberglass tank wrap style is
acceptable for carbon steel steam lines which are not removable. All alloy steam
and brine pipe shall be considered removable.
Calcium silicate shall be used on all insulated piping within personnel access
which is likely to be stepped on or walked on. Calcium silicate shall be used on
all alloy piping. Asbestos insulation is not acceptable anywhere within the
Project. Fiberglass insulation may be used on carbon steel steam piping.
Insulation fitted to stainless steel shall be chloride free.
Insulation for personnel protection shall meet requirements for maximum exterior
casing temperatures and shall be applicable for all equipment within personnel
access and not insulated for energy conservation. In general, no surface that
can be touched as part of normal operating or maintenance activities shall
exceed 150(Degree)F. Insulation for cool piping shall be provided to prevent
"sweating" and for energy conservation.
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All insulation shall be covered with aluminum jacketing strapped with stainless
steel strapping. Aluminum cladding is used over piping insulation, minimum
cladding thickness shall be 0.020 in for piping 10" diameter and less and 0.025
in for piping greater than 10" diameter. Banding shall be on 12" centers with
3/4" 316L painted SS bands. Paint shall match existing Region I color scheme.
All elbow gores shall be fastened with stainless fasteners, and sealed with high
temperature silicon. Cut-outs for nozzles, pipe shoes, etc., will also be sealed
and fastened as required to prevent liquid intrusion. 18" of clearance is
required on each side of a flanged connection to allow for air equipment to be
used without damaging the insulation. These areas will be insulated with 1"
nominal thickness removable soft insulation jacketing of the type currently in
use at Region I.
The Contractor shall coordinate with the Owner and shall provide at locations as
instructed plugs in the insulation to allow subsequent implementation by the
Owner of an NDE inspection program incorporating ultrasonic thickness testing of
pipe wall thickness. The plugs shall allow ready removal to enable inspection
and shall ensure that moisture does not enter the insulation when closed.
The following shall not be insulated if in areas not accessible to personnel
during normal operation:
o Valves, flanges and in-line instruments with surface temperatures below
220(Degree)F
o Intermittently used plant drains
o Steam trap discharge piping
o Pipe, ducts and vessels engaged in the conveyance of hot fluids and gases
to waste (indoor: intermittent use, outdoor : intermittent or continuos use)
o Lifting lugs, clips and hangers shall be left free of the lagging and
cladding
o The upper part of valve gland packing shall not be insulated
Cladding for valves and flanges shall be in two halves to facilitate maintenance
without disturbing adjacent insulation and cladding. Outdoor clad flat
horizontal surfaces shall be cambered to shed water. Cladding shall be designed
to prevent ingress of water and dirt. Removable insulation blankets are
preferred for flanges, valves, strainers and in-line instruments for indoor or
covered applications.
11. ELECTRICAL SYSTEMS
11.1 GENERAL
11.1.1 SYSTEM SUMMARY
The Generator and electrical systems for this plant shall produce electrical
power for use within the Project, for the Owner's Zinc Recovery Facility just
south of the Power Generating Facility, and 49MW for delivery to third parties
via transmission by the Imperial Irrigation District (IID) which includes power
for the Owner's mineral processing facilities near the Hoch and Vulcan plants.
Electrical power will be produced by an electrical generator driven by a
geothermal steam turbine at 3600
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UNIT 5 EPC CONTRACT - EXHIBIT A
rpm. Its power will be delivered to the nearby 92 kV switchyard by way of a
step-up transformer and a series of circuit breakers and switches as shown on
the one-line diagram.
Power to start the Project will be fed through a tie to the13.8 kV bus of Unit 3
which can receive its power from either Unit 3 or Unit 4. The Project will also
be connected such that it can be started via back-feed from the IID 92 kV
system.
The Contractor shall furnish and install a new 13.8 kV circuit breaker on Unit 3
13.8 kV Bus ESC SWGR-301 to tie the Project to Unit 3. This will include
extending the existing bus and installing a metal-clad cubicle complete with a
1200 amp circuit breaker, instruments, relays, controls and other accessories,
as required.
The Project will be synchronized to the IID system as follows:
1. Circuit Breakers 52-12, 52-13, 52-14, 52-15 and 52-21 (see
One-Line Diagram will be closed. Breakers 52-10 and 52-11 will be
open.
2. Auxiliary equipment for the Project will be started and put into
operation using power fed from the Unit 3-4 13.8kV bus.
3. When the auxiliary equipment is running and stable, the Project
Turbine will be brought to speed, the Generator excitation system
energized and the Project will be synchronized to the 13.8 kV bus
across Circuit Breaker 52-11. Circuit Breaker 52-11 will then be
closed.
4. Auxiliary power will then be picked up on the Project T-G and Circuit
Breaker 52-14 will be opened.
5. When stable operation has been achieved, the Project will be
synchronized to the IID System across Circuit Breaker 52-10.
Circuit Breaker 52-10 will then be closed.
6. Breaker 52-10 will be designed to open, and breaker 52-14 will be
designed to close, in the event of a turbine trip.
Power for internal plant usage shall be taken from the generator output at 13.8
kV through four unit auxiliary transformers to a single 4.16 kV bus and three
480 V buses. Transformers will be sized to carry the plant running load. In
general, distribution equipment for the Project including 13.8kV switchgear,
4.16kV switchgear, Motor Control Centers, UPS System, DC System and the DCS I/O
and logic cabinets will be housed in an atmospherically controlled modular Power
Distribution Center (PDC) located adjacent to the Turbine Building.
No electric mimic panel will be installed for the Project. The following
equipment shall be controlled from the DCS:
o All 13.8 kV breakers
o 92 kV transformer tap changer
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UNIT 5 EPC CONTRACT - EXHIBIT A
o Generator voltage regulator
o Generator synchronization
o Substation and switchgear metering
The Zinc Recovery Facility will be powered from the Project 13.8 kV bus. Breaker
52-15 shall be furnished and installed to meet this requirement, and the feeder
shall be able to carry approximately 2,400 kVA the Project.
A UPS system will be furnished for critical plant loads. The station battery
shall provide DC power to emergency lube oil pump, switchgear control and other
emergency loads.
Vital power will be fed at 4,160 volts from a diesel-generator connected to the
4,160 V bus of the Project, through the 4,16 kV-480V transformer XF-04 to
MCC-03. Vital power supplied from the Project Bus MCC-03 is required for such
loads as selected acid, norms and silica control equipment the UPS and DC system
battery chargers, and other critical loads.
Some loads such as the acid system pumps and valves will be connected directly
to the Unit 3 vital bus, ESE-MCC306. The Contractor shall be responsible for
installing the necessary feeder breakers and contactors to the existing MCC306
and shall install cables to the loads from Unit 3. The Contractor shall
cooperate with the Owner to schedule the Unit 3 work at a time when Unit 3 is
out of operation for scheduled maintenance.
Motors larger than 200 hp will be fed from the 4.16 kV bus. Motors and other
loads larger than 0.5 hp (or 500 watts) but no larger than 200 hp will be fed
from the 480 volt system. Small loads less than 0.5 hp will be fed from the
120/208 V system.
11.1.2 MATERIAL AND EQUIPMENT
All material and equipment shall be designed, manufactured, tested, installed
and operated in accordance with the latest issues of accepted and applicable
American Codes and Standards listed in Section 8 of this document and California
Codes. Certain equipment and devices may be manufactured outside the United
States. These shall conform to U.S. Codes to the greatest extent possible but
shall, as a minimum, comply to all Applicable Laws and the latest issues of the
International Electrotechnical Commission (IEC) Codes provided that the IEC
standard is equal to or more stringent than the American or California
equivalent.
All equipment, devices and materials provided for the electrical work shall be
new, standard products of manufacturers regularly engaged in the production of
such items, and shall be the manufacturer's latest proven standard design that
is applicable to the installation. Attachment 4 included with this document
lists the acceptable and preferred suppliers of many of these devices and
materials.
Electrical equipment, devices and materials shall, as much as practical, conform
to the requirements of
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UNIT 5 EPC CONTRACT - EXHIBIT A
Underwriters Laboratories (UL) or Factory Mutual (FM) and be listed and labeled
by those organizations for the intended application.
11.1.3 STUDIES
As a minimum, the Contractor will perform the following studies:
Fault Study
Load Study - Each Bus
Voltage Drop Study
Grounding Study
Cathodic Protection Study
Motor Starting
Coordination Study
Stability Study
Emergency Power Study
11.2 GENERATOR SYSTEM
The generator system shall consist of the generator complete with brushless
excitation system, regulation, synchronizing, control, and neutral grounding
system. The generator will be air/water cooled, rated at approximately 62.5 MVA,
13.8 kV, 0.90 lagging and 0.90 leading power factor. Final ratings will be
established by the Contractor's turbine - generator supplier in compliance with
the Contract guarantees and other requirements
The generator shall be connected to the 13.8 kV generator breaker by
non-segregated phase bus. The generator manufacturer shall provide a neutral
grounding cubicle complete with distribution transformer, secondary resistor and
applicable relaying.
Components in the generator output power system shall be sized and rated for the
maximum nameplate rating of the generator.
11.3 GENERATOR BREAKER AND GSU SUPPLY BREAKER
A generator breaker will be provided between the generator and the 13.8 kV bus.
The breaker will serve as the primary generator disconnect device in the
protection system and as the point for synchronizing the generator to the 13.8
kV bus during startup.
A 13.8 kV GSU supply breaker of similar rating will be the primary disconnect
device to separate the Project from the utility system, shall be connected to
the Generator Step-up transformer by 15 kV non-segregated phase bus or cable
bus, and shall be the point of synchronizing the Project to the external power
system.
The breakers shall be standard metal-clad draw-out design rated for the
application. They shall be furnished with vacuum interrupting systems and
current transformers for relaying. Metal-clad switchgear
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UNIT 5 EPC CONTRACT - EXHIBIT A
assemblies shall conform to the requirements of ANSI C37.20 and NPDCA SG5.
Circuit breakers shall have preferred ratings per ANSI C37.06 and conform to
ANSI C37.04 rating structure. Protective relays shall conform to ANSI C37.90 and
indicating instruments to ANSI C39.1.
These breakers shall have a full load continuous rating of 3000 amperes at rated
voltage of 15 kV and a frequency of 60 Hz. The BIL shall not be less than 150
kV; the symmetrical short circuit or interrupting capability shall be equal to
or exceed * kA. The units will be housed in the nearby Power Distribution Center
(PDC).
*- by Contractor after fault study.
11.4 GENERATOR STEP-UP TRANSFORMER
The Generator Step - Up Transformer shall take Power at a nominal 13.8 kV and
raise it to the switchyard voltage of 92 kV. The transformer shall be designed,
constructed and tested to the applicable standards of ANSI and NEMA. It shall be
rated to take the power from the generator during any normal mode of operation
at the FA rating of the OA/FA/FOA rated transformer.
In addition to the factory test and inspection requirements defined in the
specification, field inspection tests shall be performed after the assembly of
the unit. These shall include visual checks, oil and gas analyses, power factor,
insulation and bushing tests, CT polarity and ratio checks, fan and pump control
system operation checks and others as appropriate.
All transformers shall be provided with oil spill containment. Oil tight
concrete sumps, gravel filled, and with a free volume sufficient to contain
twice the volume of the oil in the transformer shall be provided.
PCB free certification shall be provided.
11.5 GENERATOR BUS
Non-segregated phase bus shall be provided to convey power from the generator to
the 13.8 kV switchgear lineup located in the PDC. Taps will be provided for
excitation systems, potential transformers and surge arrestors. It shall be of
the outdoor self-ventilated type designed for a maximum of 65O C rise. The bus
shall have a minimum rating of 3000 amps rms at 14.4 kV nominal in an ungrounded
delta configuration. Taps shall have a minimum rating of 1200 amps.
Non-segregated phase bus with a similar rating will connect the 13.8 kV
switchgear to the Generator Step-up Transformer. Terminal enclosures shall be
provided to connect the bus to generators and transformers. Two sets of flexible
shunts shall be installed every 100 ft of busbar.
Galvanized steel shall be used in the construction of the bus enclosure and
other enclosures at the generator transformers and switchgear and all surfaces
exposed to the ambient air shall be protected from the corrosive effects of the
geothermal atmosphere with protective paint or coating. Bus conductors shall
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UNIT 5 EPC CONTRACT - EXHIBIT A
be copper bar suitably sized for the duty. Access shall be provided to the
interior of the bus enclosure for cleaning and maintenance.
11.6 UNIT AUXILIARY TRANSFORMERS
Three unit auxiliary transformers shall be provided to take power from the 13.8
kV bus and lower it to the plant utilization voltages. One transformer shall
provide plant power at 4.16 kV and the other two at 480 volts.
An additional unit auxiliary transformer shall step power down from 4.16 kV to
480 V for MCC03.
The transformers shall be designed, constructed and tested to the applicable
standards of ANSI and NEMA. They shall be rated to supply power to the plant
loads during any normal mode of operation at the OA rating of the OA/FA rated
transformers. The forced cooling rating shall be reserved for temporary
overloads.
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UNIT 5 EPC CONTRACT - EXHIBIT A
In addition to the factory test and inspection requirements defined in the
specification, field inspection tests shall be performed after assembly of the
transformer. These shall include visual checks, oil and gas analyses, power
factor, insulation and bushing tests, CT polarity and ratio checks, fan control
system operation checks and others as appropriate.
All transformers shall be provided with oil spill containment. Oil tight
concrete sumps, gravel filled, and with a free volume sufficient to contain
twice the volume of the oil in the transformer shall be provided.
PCB free certification shall be provided.
11.7 MEDIUM VOLTAGE DISTRIBUTION SWITCHGEAR AND MOTOR CONTROL
Primary distribution for plant equipment shall be at 13.8 kV. This voltage shall
supply transformers for lower voltage distribution. The 13.8 kV switchgear
lineup shall be housed in the PDC and shall have circuit breakers for connection
to the generator, step-up transformer, unit auxiliary transformers, a feed to
the zinc process, and for a tie to the 13.8 kV bus at existing Unit 3. Fault
interruption capability shall be determined from fault calculations performed by
the Contractor during detailed design. Enclosures shall be NEMA 1 gasketed for
indoor installation.
Switchgear shall be connected to the generator and the step-up transformer via
non-segregated phase bus. Shielded 15 kV cable shall connect the switchgear to
the other transformers and loads. Switchgear shall contain the necessary
instrument transformers, relays, meters and other accessory equipment to protect
the equipment and provide synchronization during start-up.
The 4.16 kV switchgear and motor control lineup shall be located in the PDC and
shall receive its power from the 13.8 - 4.16 kV auxiliary transformer. The
lineup shall include one metal-clad breaker unit for incoming power, one
metal-clad breaker unit for connection to a 1500 kVA diesel generator unit and a
minimum of 12 medium voltage fused contactors for motor control. The exact
requirements shall be determined by the Contractor during detailed design. The
switchgear in addition shall contain cable entrance and bus transition sections,
as well as bus potential transformers, relays and metering equipment as
required.
4.16 kV motor starters shall be NEMA Class E-2 with vacuum insulated contactors,
overload protection and fuses for fault protection. Where practical, units shall
be provided in two-high cubicles. Each starter will be equipped with a Multilin
469 relay.
11.8 LOW VOLTAGE SWITCHGEAR
Load centers will not be used, in general, unless the Contractor finds this to
be a more practical approach. Load center class circuit breakers will be used to
feed motor control centers. The load center air type circuit breakers will be
provided with dc control power supplied from batteries of the 125V dc power
system.
Load center air-magnetic circuit breakers for MCC feeders will be manually
operated at the MCC.
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UNIT 5 EPC CONTRACT - EXHIBIT A
Tripping and closing positions of the main 480V circuit breakers will be
indicated at the switchgear, and tripping will be alarmed in the control room
through the DCS.
11.9 LOW VOLTAGE MOTOR CONTROL CENTERS
The low voltage system shall take power from the 480 V unit auxiliary
transformers and distribute it to motor control centers. The motor Control
Centers shall be located in the PDC. 480 V motor starters will supply motors up
to, and including, 200 hp. Connections shall be as shown on the one-line
diagrams.
Additional combination motor starters and load feeders may be required as design
develops. The Contractor shall allow for these and other load growth
requirements.
MCC bus shall be copper and insulated with non-aging, non-cracking epoxy
insulation. A ground bus shall be provided for the length of the lineup and in
each vertical section. Bus bracing and fault ratings are estimated to be 42 kA
but the final value shall be determined from fault calculations by the
Contractor.
The enclosures shall be Type1 - General Purpose-Indoor in accordance with NPDCA
ICS 6. All vertical sections shall be mounted on continuous front and back iron
channels, and bolted firmly together to form a rigid, freestanding, dead-front,
completely enclosed, front line assembly. The motor control center assembly
shall be constructed to prevent entry of rodents.
A combination motor control unit shall consist of a molded-case circuit breaker
and a magnetic starter in accordance with NPDCA ICS 2. They shall be any of the
following types: (a) full voltage, non-reversing, (b) full voltage reversing.
Types of combination motor starters are indicated on the one-line diagrams.
NPDCA Size1 or larger starters shall be used.
Feeder tap units shall be used principally for non-motor loads and to feed
Variable Speed Drive Units. They will consist of molded-case circuit breakers,
shown on the one-line diagrams. Feeder tap units shall have an interrupting or
short-circuit rating which equals or exceeds the 42,000 amps (symmetrical)
available short-circuit current at the horizontal main bus.
Molded-case circuit breakers shall comply with requirements of NPDCA AB-1.
Circuit breakers, shall be rated for 480 volts, 60 Hz, 42,000 amps interrupting.
Minimum frame size shall be 100 amps. Circuit breakers of the same frame size
shall be physically interchangeable.
11.10 DISTRIBUTION TRANSFORMERS
Low voltage distribution transformers shall be furnished for 277/480 volt and
120/208 volt power applications. Transformers shall be dry type, two winding,
self-cooled, general purpose types with ratings as determined by the Contractor
during detailed design. Transformers shall bear the label of Underwriters
Laboratory. They shall be designed for continuous operation at rated kVA for 24
hours per day, 365 days a year with normal life expectancy as defined in ANSI
C57.96.
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UNIT 5 EPC CONTRACT - EXHIBIT A
Transformers shall be provided with four (4) no-load taps, two 2.5% above and
two 2.5% below nominal voltage ratings.
11.11 PROTECTIVE RELAYING AND METERING
Devices shall be provided to protect power systems and equipment from damage due
to faults or deviations from normal operating conditions. Electrical parameters
shall be monitored to provide information for plant operations and
administration purposes.
The basic protection system shall include the following as a minimum:
11.11.1 GENERATOR PROTECTION
Differential Protection
Primary Ground Protection
Backup Ground Protection
Field and Exciter Protection
Loss-of-Excitation Protection
Negative Sequence Protection
Phase Fault Backup Protection
Anti-motoring Protection
Blown Fuse Protection
Frequency Protection
Overexcitation Protection
11.11.2 GENERATOR METERING
The Owner will have electrical generation metering separate from Imperial
Irrigation District's revenue metering. It will also have its own potential and
current sources.
These meters will be redundant to the revenue metering and will be used to
verify calibration but will not be used for re-calibration. They will be located
on the 92KV system.
The 92kV meters for the Owner's use will provide the operator with accurate
visual indication as to the electrical characteristics of the net output of the
plant. This indication shall be located in the PDC. This will include the
following:
a. Phase Current
b. Watts
c. Vars
d. Voltage
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In addition electrical meters located in the PDC shall be provided to maintain
an accurate account of the net electrical output of the plant over extended
periods of time as follows:
e. Watt hours in
f. Watt hours out
g. Var hours in
h. Var hours out
The main generator will be provided with the necessary metering to provide the
operator in the control room with accurate visual indication as to the
electrical characteristics of the machine. These meters shall be located on the
13.8 kV system. This will include the following:
a. Generator Phase Current
b. Generator Watts
c. Generator Vars
d. Generator Voltage
e. Generator Frequency
f. Generator Power Factor
A meter shall be furnished and installed on the 13.8 kV system to measure the
power supplied to the Region 1 ZRC System. In addition, electrical meters will
be provided to maintain accurate account of the electrical output of the machine
over extended periods of time as follows:
g. Generator Watt hours
h. Generator Var-hours
Test switches will be provided to remove portions of the metering circuits from
service without rendering all instrumentation inoperative.
A Var transducer and a Watt transducer from both the 92kV and 13.8kV meters
shall be provided with inputs to the DCS.
11.11.3 GENERATOR STEP-UP TRANSFORMER PROTECTION
Differential Protection
Overcurrent Protection
Sudden Pressure
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UNIT 5 EPC CONTRACT - EXHIBIT A
All alarms and meters listed above shall be recorded on the DCS.
11.12 VITAL POWER SYSTEM
The Vital Power System shall provide power to various process and critical loads
upon loss of normal power to these loads. MCC-03 shall serve as the vital power
service bus and shall receive its power from Transformer XF-04 which is in turn
fed from the station 4.16 kV bus. Vital Loads to be served from this MCC include
the following:
o Critical Motor Operated Valves (if any)
o Selected exterior lights
o Lighting transformers supplying lighting in critical areas
o PDC lighting and air conditioning
o Station Battery Chargers and UPS
o Air Compressor
o Fire Alarm Systems
o Gantry Crane
o 480 V Power Outlets
o UPS
o Station Battery Chargers
o Turbine AC oil pumps
o Clarifier rakes and turbines
o Clarifier seed (underflow) pumps
o Silica reactor vessel mixer
o Caustic addition system
The diesel generator which will supply power for vital services will be
furnished by the Owner for installation by the Contractor. This generator is
currently in the Owner's inventory and has the following characteristics:
Manufacturer Marathon Electric - Wausau, Wisconsin
Model No. 743FSM2384AR-000 W
Serial No. UN3554737
Type FSM
Voltage 4.16kV
kVA 1500
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UNIT 5 EPC CONTRACT - EXHIBIT A
Regulator PM100
PMG Hz 300
PMG Volts 180
Field Volts 55
The diesel generator shall be designed to start automatically and close to the
bus in the event of a power failure. The diesel generator shall have the
capability to drop to an energized bus when required.
The Contractor shall furnish and install a 5,000 gallon storage tank, pumps,
piping, valves, tank level indication, and oil pressure and flow indication for
supplying fuel to the unit. The Contractor shall also furnish a starting system,
including batteries and chargers, capable of starting the unit and placing it on
line within one minute of loss of normal power. Monitoring of all significant
operating parameters shall be connected to the DCS system. It is assumed that
the unit requires no restoration before being placed in service.
The Contractor shall furnish and install foundations and ventilated enclosures
for this equipment.
11.13 DC SYSTEM
A station battery system shall be provided to supply critical control systems
and shutdown loads. DC system cabling shall be separated or divided in the cable
tray. The following loads shall be placed on the station battery system:
o Turbine emergency lube oil pump
o Turbine trip controls
o 13.8 kV and 4.16 kV breaker control circuits
o Protective relay system
o Condenser Vacuum Breaker
o DC Lighting
o Other critical safety systems or equipment which have no other backup
power
The system shall consist of a 60 cell, 125 volt, ungrounded battery sized to
carry the emergency load for two hours. Batteries shall be lead acid types
suitable for the intended service. The charger for the batteries shall be
capable of carrying the non-emergency loads while simultaneously recharging the
batteries to full capacity from 1.75 volts per cell in 24 hours. Distribution
panels shall be supplied as required. Both battery and charger shall be
connected to the DC bus by a molded case circuit breaker.
11.14 UPS SYSTEM
The UPS shall be located in the PDC and shall supply power to the DCS and other
controls that must be active during a short power outage. Power loads and
non-essential loads shall not be connected to the UPS system.
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The UPS System shall consist of dual rectifier-inverter units with input
isolation transformers, feeds from a dedicated battery, main distribution panels
and subpanels as required. The UPS shall be able to provide full load through
either rectifier-inverter unit.
The two rectifier-inverter units shall be identical. They shall be industrial
type suitable for installation and normal operation in the air-conditioned
environment of the PDC but also capable of operation without air conditioning
with ambient temperatures up to 40 C. Each will be provided with static and
maintenance transfer switches, diagnostic systems and status and alarm outputs
compatible with the DCS System. The output of the inverters shall be 120volts.
The battery shall be connected to the rectifier through a fused disconnect
switch.
An isolation transformer shall be placed in the normal circuit serving each
rectifier-inverter. Bypass circuits shall not require transformers. Normal
Circuits shall come from MCC-03.
The following loads will be served from the UPS System:
o Critical Lighting
o Critical Instrumentation Power (including magnetometers)
o Distributed Control System
o Emergency Power Receptacles
o Television Surveillance System
11.15 EMERGENCY POWER SYSTEM
See Vital Power System Section 11.12 above
11.16 ELECTRIC MOTORS
Motors below 1/3 hp shall be single phase suitable for 115 V service. Motors 1/2
hp through 200 hp shall be three phase induction type suitable for 460 V
service. Motors above 200 hp shall be three phase suitable for 4,000 V service.
Deviations will be considered on a specific case basis. Motors shall be NEMA
rated and, where practical, of the high efficiency type.
The ambient atmosphere is that normally found at a geothermal facility with
corrosive H2S gas and its byproducts present. In addition the desert site is
subject to severe wind conditions and blowing dust. Many of the motors at
outdoor locations remote from the main facilities. Motors that will be located
in clean dry interior areas that are dust-free shall be standard duty open
drip-proof types. Motors located in other than clean dust-free areas shall be
severe duty TEFC or TENV types with materials of construction suitable for the
dusty geothermal environment. Motors used for mixing and transferring of
chemicals shall be of the type guaranteed for use in the application. This will
be especially true of the equipment associated with the handling of HCl.
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Medium voltage motors shall be provided with enclosures that prevent ambient air
from entering the interior of the motors and guards bearings against the
atmospheric dust.
Insofar as practical, motors shall have NEMA B low starting current
characteristics. Motors for variable speed service shall be constructed
specifically for that service.
Medium voltage motors will be furnished with the additional following features:
Bearing RTDs (3 wire, 100 ohm grounded platinum) one per bearing
Winding RTDs (3 wire, 100 ohm grounded platinum) two per winding
Space heaters for all outdoor motors
Separate termination cabinets for power and auxiliary circuits
Power lead boxes large enough for stress cones and bolting lugs
Sealed Insulation Systems
Sleeve bearings and suitable lubricating systems on all motors 1000 hp
and above
Routine commercial tests per IEEE.
11.17 LIGHTING AND MISCELLANEOUS POWER
Convenience Outlets and devices for illumination shall be provided throughout
the Project. Power for these systems shall be obtained from lighting
transformers and distribution panels located in the PDC.
11.18 WELDING RECEPTACLES
Welding receptacles shall be placed throughout the plant as noted below as power
sources for portable and temporary equipment . Each shall be provided with a 3
phase, 60 amp safety switch in the power feeder nippled to the outlet. Welding
outlets shall be 480 V, three phase, 4-wire, 60 amp devices with a ground.
Receptacles shall be mounted in angle headed boxes and have screw caps or equal.
Outlet boxes shall be watertight and dust-proof and shall be enclosed in plastic
or ferrous housings.
Outlets will be served from circuit breakers in motor control centers in the
following locations:
One at each end of the turbine building
One at the LP Separators
One at the VLP Separators
One at the IX Feed pumps
One at each end of the Cooling Tower
One at the PDC
One in the Switchyard
One at the main injection pumps
Two for the silica control system
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UNIT 5 EPC CONTRACT - EXHIBIT A
11.19 TELEPHONE SYSTEM
No telephone system will be required
A-50
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UNIT 5 EPC CONTRACT - EXHIBIT A
11.20 PLANT PAGING SYSTEM
No plant paging system will be required
11.21 CATHODIC PROTECTION STUDY AND EQUIPMENT
The Contractor shall perform a study to determine whether there is a need for
cathodic protection to protect underground metallic pipes and structures from
corrosion based on his design..
11.22 GROUNDING AND LIGHTNING PROTECTION
The grounding system shall provide protection for personnel and equipment from
electrical faults and from lightning. A grounding system composed of bare copper
wire and ground rods shall be provided throughout the plant to obtain a
resistance to earth of less than one ohm.
Conductors shall be sized for the maximum fault currents but shall not be less
than No. 4/0 AWG copper. Risers to equipment shall also be sized for maximum
fault current and be a minimum of No. 4/0AWG to power transformer neutrals,
switchgear and MCC buses. Connections to buildings and other structures, large
motors, and other major equipment and tanks shall also be No. 4/0 AWG copper in
two places. Conductors to other smaller equipment such as small motors, panels
and small transformer neutrals shall be sized to suit the application but shall
not be less than No. 6 AWG.
Lightning protection shall be provided in accordance with the codes for all
elevated structures such as the cooling tower, tanks and others, as required.
The plant grounding system shall be connected to the switchyard system in at
least four widely separated locations.
11.23 TELEVISION SURVEILLANCE SYSTEM
A television surveillance system shall be installed to provide coverage of the
entire Project area. The station will be essentially unmanned and operations and
maintenance personnel who do enter the area will be observed via television from
the main control room located at Unit 3. Cameras are to provide coverage of all
areas of the turbine structure, inside the PDC, the switchyard, and all outdoor
areas. Camera controls shall include tilt, pan and zoom.
The cameras shall be weatherproof and located to provide the coverage specified
above. The monitor shall be black and white and mounted in the common control
room at Unit 3 so as to be visible to all operator positions. Power for the
system will come from the UPS System.
11.24 PANELS AND ENCLOSURES
Enclosures shall protect equipment from mechanical and environmental damage and
personnel from contact with live electrical parts. Enclosures shall be in
accordance with general utility practice. They shall be constructed of materials
compatible with the environment. Enclosures in the acid handling areas shall be
of non-metallic materials sealed to be dust tight and constructed to prevent the
entrance of acid vapors.
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UNIT 5 EPC CONTRACT - EXHIBIT A
11.25 RACEWAY
Raceways including conduit, tray and ductbank shall be provided to protect and
contain conductors. Conduit installed below grade or in ductbank shall be
Schedule 40 PVC installed to be watertight. Minimum size will be 4 inch for 4.16
kV and higher and 2 inch for all other circuits except short local runs. Risers
to streetlights, floodlight poles and the like may be one inch.
If for any reason steel conduit is installed below ground (e.g., to provide a
ground return path), it shall be factory coated with PVC to a minimum thickness
of 40 mils including fittings. The coated conduit and fittings shall be
assembled in accordance with manufacturer's instructions and made watertight.
Holidays and nicks shall be repaired to full thickness before covering.
Risers from underground runs shall extend a minimum of 12 inches above grade in
open areas or sufficiently above floors or slabs (minimum of 2 inches) to
prevent surface or floor liquids from flowing into the conduits. PVC conduit
will transition to galvanized steel before penetrating the floor or slab.
All underground conduit groups of more than two conduits, except for short local
runs, shall be installed in concrete encased duct banks. Where ductbanks run
through areas of potential heavy traffic loads they shall be reinforced.
Spare conduit shall be provided in each ductbank run. A minimum of two 4 inch
and four 2 inch spares shall be provided. Concrete for ductbank shall have its
top surface coated red with a permanent dye.
The ductbank system will be designed without manholes insofar as possible. Where
manholes are required, they shall be precast sectional type and be a minimum of
6 ft. x 8 ft. Pulling irons, ladders, sumps and cable supports shall be
provided. Manholes shall be keyed to ductbanks for a watertight fit-up. Conduits
entering manholes shall be sealed to prevent leakage. Provisions shall be made
for pumping out water.
Above ground conduit shall be rigid galvanized steel with ferrous fittings
except that electrical metallic tubing may be used for above ground lighting and
receptacle circuits only in clean dry areas.
Flexible watertight PVC coated metal conduit shall be used to connect all motors
and instrument connections in exterior areas. Uncoated flexible conduit may be
used in clean dry areas.
Tray shall be galvanized steel ladder type. A ground wire shall be provided in
each tray. Bushings shall be provided for all drop-outs.
11.26 CABLES
Cables shall transmit power and signals for electrical circuits. Cable may be
either single or multiple conductor with an overall jacket. Cables shall consist
of stranded copper conductors, EPR insulation
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UNIT 5 EPC CONTRACT - EXHIBIT A
rated for the application voltage and Hypalon jacket. Multiple conductor cables
shall have a ground wire sized to NEC requirements. Cables shall be suitable for
wet or dry locations and for installation in tray, conduit or ductbank.
Cable for medium voltage circuits above 600V shall be shielded. Terminations
shall be made with appropriate stress cones where required and long barrel
swaged on lugs.
Cable for power lighting and control circuits operating at voltages below 600
volts shall consist of copper conductors and insulation rated for 600 volts,
90OC rise, in both wet and dry locations. Conductors for power and lighting
circuits shall be minimum No. 12 AWG, and No. 14 AWG for control circuits.
11.27 IDENTIFICATION
Electrical system equipment and devices will be given a label plate, tag or
other means of identification. Label plates shall be laminated plastic with
engraved letters. Plates shall be white faced with black core for ordinary
functions and red faced with black letters for emergency functions. They shall
be secured with stainless steel screws. Minimum letter size shall be 3/16 inch
high.
11.27.1 EQUIPMENT IDENTIFICATION
Switchgear - Bus phases shall be identified with colored tape. Internal devices
such as transformers and transducers shall be identified with name and function.
Label plates shall be provided on the face of each cubicle describing its
function.
Motor Control Centers - Each motor control center shall be identified with a
label plate having minimum 3/4 inch high letters. Bus phases shall be identified
with colored tape. Label plates shall be provided on the face of each cubicle
describing its function.
Distribution Transformer - Each distribution transformer shall be identified
with a label plate giving the transformer identification number and application.
Panel Boards - Panel boards shall be identified with name and voltage.
Individual circuits shall be numbered and a panel schedule provided. Schedules
shall be typed, placed in a plastic holder and displayed in a carrier inside the
door.
Welding Outlets - Welding Outlets shall be given a label plate giving voltage,
number of phases and current rating. Plates shall be mounted on the receptacle
or the disconnect switch.
Terminal Boxes - Terminal Boxes shall be given a label plate identifying the
system or device it services. Terminals shall be identified by permanently
attached numbers or letters. Panels shall be identified with a nameplate.
Protective Relays - Protective relays shall be identified with a standard device
number and a service
A-53
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UNIT 5 EPC CONTRACT - EXHIBIT A
designation.
Meters, Control Switches Synchronizing and Indicating Lights - These devices
shall be provided with label plates that identify function, position and system
as applicable.
Cable, Conductor, Conduit and Tray - The phases of all power conductors shall be
identified by colored insulation or tape. Cables for all 480 V and above
circuits and for all instrument and control service shall be identified with
permanently marked imprinted sleeves or embossed plastic tags at each
termination with to and from information on each end. Conduit shall be
identified with labels every 75 feet along the conduit. Tray shall be identified
with label plates every 75 feet giving tray number and voltage level.
11.28 SUBSTATION
A high voltage 92 kV substation shall be provided adjacent to the generating
station. It shall receive power from the generator and deliver power to the
local utility (IID) and to the Central Zinc Recovery Facility (NOTE: The line to
the ZRC is currently permitted as a 13.8 kV line, Owner may require a connection
to the 13.8 kV bus under Section 17.2, changes in the Work, if such line is not
changed to 92 kV.). It shall include a generator step-up transformer (GSU), a 92
kV circuit breaker, one dead-end structure, two disconnect switches, relaying,
metering and other equipment and devices required by the utility. Refer to the
One-Line Diagram.
A metering building is not desired and all substation meters shall be located
within the PDC. Utility measurement of outgoing power shall be furnished and
installed by IID. Metering transformers for the Owner's use will be located on
the outgoing lines between the Generator Step-up Transformer and the 92 kV
circuit breaker. Pulses or other signals will be provided from the metering
system for megawatts, megawatt hours and megavars, both in and out, and for
volts, power factor and frequency. These signals shall be sent to the DCS
System.
11.29 TRANSMISSION LINE TO UTILITY SYSTEM
The transmission line installation to IID beyond the high voltage terminals of
the generator step-up transformer will be the responsibility of the local
utility, IID.
Provisions for an additional feed at 92 kV shall be installed by the Contractor
in the substation for the Central ZRC Facility. This shall be independent from
the normal IID line as discussed in Section 11.28 above. The Project Contractor
shall be responsible for furnishing and installing circuit breakers, dead end
structures, disconnect switches, insulators, cabling as required, structures,
buswork (if required) metering devices and other devices required to provide a
reliable feed to the Central ZRC Facility. IID will be responsible for
transmission of this power.
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UNIT 5 EPC CONTRACT - EXHIBIT A
The Contractor shall provide an optional design and pricing for the installation
of this feeder line at 13.8 kV and fed from the Project 13.8 kV bus. The
Contractor shall be responsible for the 13.8 kV to a structure in the substation
where responsibility will transfer to IID.
12. INSTRUMENTS AND CONTROLS
12.1 GENERAL
The Plant Instrumentation and Control System shall be designed and furnished so
as to create a coordinated system that will provide a safe, reliable, efficient
and essentially automatic system for controlling the Project in all modes of
operation. The system shall:
o Maintain the plant in a safe condition at all times.
o Prevent the violation of environmental regulations concerning air,
land, and water quality requirements.
o Provide for smooth startup and shutdown of the power plant and
auxiliary systems
o Provide for efficient steady-state control of the power plant and
auxiliary systems.
o Provide reliable steady power plant operation at rated capacity and
reduced capacity
o Minimize the effects of abnormal process conditions, load upsets, and
equipment malfunctions
o Provide operator interfaces
o Minimize the number of plant forced outages and spurious trips.
o Provide for reliable, economical and optimum operation of the turbine
generator and related systems.
As a part of this contract, the Contractor shall modify the existing Unit 3&4
control room to incorporate the controls.
12.2 RELIABILITY
Electronic equipment offered shall be of a type having proven record of
reliability under geothermal power station service conditions. The DCS shall be
a microprocessor based system and shall provide highly reliable process plant
control.
The availability of the Plant Central Control System (DCS) shall be not less
than 99.97 percent as defined by the following:
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UNIT 5 EPC CONTRACT - EXHIBIT A
Availability = MTBF .
---------------
MTBF + MTTR
where MTBF = mean time between failures
MTTR = mean time to repair.
12.3 PLANT DISTRIBUTED CONTROL SYSTEM
The plant shall be provided with a commercially available Distributed Control
System (DCS). The DCS shall be of modular design, with a fault tolerant,
redundant architecture such that the failure of one section will not affect the
operation of other sections of the equipment. The reliability of each
constituent part of the system, and the system as a whole shall be such as to
meet the overall plant reliability criteria. Refer to the Instrument and
Controls design criteria for details of the DCS design requirements. There
should be no process change resulting from the failure of a controller.
12.4 INDEPENDENT CONTROL SYSTEMS
Independent control systems are those systems that can operate equipment
autonomously from the Plant Distributed Control System (DCS). These may be
provided for systems or equipment that do not require full integration into the
process controls (e.g., Fire Protection and HVAC). At a minimum, these systems
shall provide alarm signals to the DCS as required to alert operators to system
problems. Additional control interconnection to the DCS shall be as required for
system operability. Independent control systems shall be provided with local
displays, indicators and controls as required for operation and problem
diagnostics.
12.5 INTERFACES WITH THE DCS
The DCS shall interface with exiting and new control systems. Units 1, 2, 3, and
4 utilize a Rosemount RMW 9000 DCS for control. As a part of this contract, the
Project DCS shall fully interface with the existing control system by .
converting the existing DCS to a Rosemount Delta 5 based control system. The
principle element of this conversion is to replace the old RMW 9000 CCMs with
Delta 5 controllers. The balance of the existing hardware would be utilized as
much as possible without modification.
The additional DCS hardware shall include one (1) operator interface station.
Following modifications, any DCS screen shall be capable of accessing any
information within the DCS for any unit.
The DCS shall interface with a Woodward 509 Governor that will be used for
turbine/generator control. The interface shall allow full startup,
synchronization and load control via DCS control screens. In addition, the DCS
shall interface with the voltage regulator and the Bently-Nevada vibration
monitoring system installed on the turbine/generator.
12.6 INSTRUMENTATION
The instrumentation and final control elements for the plant shall be designed
and furnished to provide the necessary information and control capabilities for
efficient plant operations. Field instruments and final control elements shall
be furnished individually or with packaged systems. The level of plant
instrumentation shall be provided as required to meet the availability,
performance and warranty requirements of the Project and, as a minimum, be
supplied as shown on the P&ID's.
A-56
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UNIT 5 EPC CONTRACT - EXHIBIT A
13. SILICA CONTROL SYSTEM
13.1 GENERAL
A silica control system (SCS) will be installed downstream of the VLP Separator
and upstream of the Region 1 IX interface point. The SCS will be capable of
conditioning approximately 18,000 gpm of geothermal brine. The SCS precipitates
silica and other scaling compounds by adjusting the pH of the brine with slaked
lime, and then removing the precipitates The SCS is intended to increase brine
pH from approximately 3.5 to 5.0, reduce brine total suspended solids to less
than 20 mg/l and reduce brine soluble silica to less than 230 mg/l.
Lime is mixed with brine and the recycled primary clarifier underflow in the
Primary Reaction/Crystalizer Tank, and the brine pressure is reduced to
atmospheric conditions (2-in. to 10-in. of water column pressure), producing
approximately 150,000 lbs/hr of saturated steam. Steam is either sent to ZRF for
use in heating water or vented to atmosphere. The brine mixture proceeds through
the Secondary Reactor Tank where the silica continues to precipitate. Two Solids
Contact Reactor Clarifiers are used to remove precipitate. Clear brine overflow
is then pumped to the Region 1 ZRF IX facility. The underflow from the
clarifiers is filtered in a pressure filter with the filtrate going to a small
thickener for removal of any remaining solids before being pumped back to the
injection well. The filter cake is discharged into a bin and then conveyed to a
trailer for removal.
13.2 LIME SLURRY SYSTEM
One (1) lime slurry system consisting of the following equipment will be
provided to unload one truck load (25T) of pebble lime (3/8"x1/8") in
approximately two (2) hours:
a) Two lime slaking tanks, each 10 ft. by 10 ft, of carbon steel
construction and each with, 10 hp, mixers.
b) One FRP scrubber, 3 ft. diameter by 8 feet high with spray nozzles
and exhausting through a 1000 cfm fan to atmosphere. Scrubber
shall have 80% removal efficiency and less than 25#/day
particulate emission as dust control from 1/8 - 3/8-in. granulated
lime.
c) One lime inerts separation system with one 200 gpm pump feeding
one hydrocyclone, 8" diameter, with overflow to lime slurry tank
and underflow to ballmill
d) One 3 foot by 3 foot used ball mill for grinding lime inerts.
e) Instrumentation and control valves to be used to dilute lime
slurry to a solids concentration of 25% and to control the
temperature in the slaking tanks.
f) One (1) lime slurry tank 22'-0" dia. x 22'-0" side shell height
with 1'-0" freeboard to slurry level. The tank will be of carbon
steel (1/4" min. thickness), flat bottom, insulated and complete
with cover, nozzles and access ways. The tank will be designed to
API 650 and of A-36 steel.
g) One (1) center mounted mixer in carbon steel construction complete with
25 HP constant speed reducer drive.
h) The inside of the tank and cover will be furnished bare. The
outside of the tank, cover will be sandblasted to SSPC-SP5 white
metal blast with NACE #2 profile and will receive one (1)
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UNIT 5 EPC CONTRACT - EXHIBIT A
primer coat Carboline 193 (Gray-3 mils DFT), followed by one (1) guide
coat Carboline 193.724 followed by one (1) finish coat Carboline 193
(white 008-3 mils DFT).
i) Two (2) lime feed pumps, each rated 0-10 gpm with 2.0 HP gear
motors, progressive cavity type with variable frequency controllers).
13.3 1ST AND 2ND STAGE REACTION TANKS
The 1st Stage Reactor Mechanism will be suitable for installation in a covered
30'-0" inside diameter x 30'-6" side shell height Steel tank unit with a 5'-0"
slurry freeboard (25'-6" L.L.) with a total feed of approximately 20,500 gpm
(including 2,500 gpm recycle) at a brine inlet pH of approximately 3.5 and
outlet pH of 5.0. The following equipment is included:
a) The heavy duty mixer will be complete with draft tube type, axial
flow 132"0 impeller for complete tank and lime mixing. Wetted
components to be C-276 steel. The motor drive package will be
furnished with a constant speed motor. The motor will be 100 HP,
1,200 RPM for 3/60/480V operation. Motor to be TEFC, Mill & Chem.
duty. The motor will be controlled by purchasers' AC variable
speed controller in a NEMA 1 box located remotely in the PDC.
b) The mixer is designed for approximately 10X design flow rate
(approximately 200,000 GPM). A bottom steady bearing is supplied
in C-276.
c) The mixer will include a liquid seal fabricated of C-276.
d) The mixer will be supported by a beam type superstructure spanning
the tank diameter and complete with tank supports on the tank
wall. All structural steel and bolts, nuts, washers, will be HD
galvanized. H D galvanized cal osha handrails will be provided
over one half of the tank and superstructure and around the center
access platform. The walkway will include 1-1/2" FRP (Chemgrate or
equal), walkway grating.
e) The draft tube with supports, will be 12'-0" dia. x approx. 15'-0"
deep complete with straightening vanes and fabricated of 1/4"
C-276.
f) The tank will be of A-516-70 steel construction with carbon steel"
walls and flat floor bottom designed to API 650 with cement
lining.
Included will be:
o Two (2) 24"0 feed pipes with wall nozzles will extend from
the tank wall to the draft tube complete with supports.
They will be Hastelloy C-276, 0.25" wall minimum. Suitable
baffling will be provided to accommodate incoming feed
velocities (if needed).
o One (1), 2205 SST, 10" dia. 1/4" wall feed recycle line with
nozzle from tank wall draft tube.
o Two (2), 2205 SST, 2" dia. lime feed lines with nozzles from tank
wall to draft tube.
o One (1) A-516-70 rolled floor mounted limit ring guide.
o One (1) 36" dia. manway, carbon steel with 1/8" C-276
lining. The manway will stick inside the tank shell
approximately 3" to accommodate the concrete lining (by
others). The blind flange will be 2205 SS.
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UNIT 5 EPC CONTRACT - EXHIBIT A
o One (1) 30" dia. underflow pipe with nozzle C-276, 1/4" wall
(slightly sloped outwards from the center limit ring and mixer
shaft guide).
o One (1) 24" dia., 3/8" wall emergency overflow nozzle in mild
steel.
o One (1) 30" dia. steam return nozzle, 3/8" mild steel.
o Two (2) 1-1/2" dia. sample nozzles C-276.
o Insulation drip and tie rings.
o A steel (3/8" plate) steam mist separator and condensate
collection trough will be furnished tangentially to the tanks
wall. Four (4) 2" dia. drains will be on the bottom extending
below the liquid interface.
o A steel circular type stair will be provided with landing
extending from grade to the superstructure. It will be designed
as not to interfere with the tank insulation. The stair treads
will be FRP grating per AI-300 with handrails to match the
mechanism.
o Welder qualifications and welder procedures will be per AWS
o All plates and pipes over 3/8" thick will be "V" groove prepared.
o The outside of the tank will be furnished bare. The spiral access
stair and handrail will be HDG with FRP grating.
o The inside of the tank will be covered with 2" Precrete, G-8,
using 316SS, 103-B studs placed at 1'0" centers supporting 316
SST mesh.
g) The cover will be FRP designed for 12" W.C. and for 225(degree)F steam
vapor.
h) The first stage reaction vessel will also serve as a flash vessel for
the incoming VLP brine. The brine will be introduced in the draft tube
where the rising steam vapor will assist in promoting tank
circulation. 117,000 lbs/hr of this atmospheric steam (2-in water
column pressure) will be used as a heat source for the ZRF. The
remaining atmospheric steam may also be used for vessel padding in the
silica control system as desired and/or may be vented directly to
atmosphere.
The 2nd Stage Reactor Mechanism will be suitable for installation in a covered
30'-0" inside diameter x 25'-6" side shell height carbon steel tank unit with a
1'-0" slurry freeboard (24'-6" L.L.) with a total feed of approximately 20,500
gpm brine with pH of approximately 5.0. The following equipment is included:
a) The heavy duty mixer will be complete with turbine for complete tank
mixing. Wetted components to be type 2205 stainless steel. The motor
drive package will be furnished with a constant speed motor. The motor
will be 25 HP, 1,200 RPM for 3/60/480V operation. Motor to be TEFC,
Mill & Chem. duty.
b) The single turbine and mixing assembly will consist of one (1) lower
turbine.
c) The mixer will include a liquid seal fabricated of 2205 stainless. It
will be approximately an 18" dia. x 9" deep leg. (0.144 psi design)
d) The mixer will be supported by a beam type superstructure spanning the
tank diameter and complete with tank supports on the tank wall. All
structural steel and bolts, nuts, washers, will be H.D. galvanized.
H.D. galvanized CAL OSHA handrails will be provided over the
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UNIT 5 EPC CONTRACT - EXHIBIT A
one half the diameter of the tank and superstructure and around the
center access platform. The walkway will include 1-1/2" FRP (Chemgrate
or equal), walkway grating.
e) The tank and cover will be of A-516-70 steel construction with 1/8"
corrosion allowance except the flat tank bottom will be 5/8" plate and
all designed to API-650. The inside and outside of the tank and cover
will be furnished bare.
13.4 PRIMARY CLARIFIER
The Primary Clarifier will be designed for the following process design
parameters:
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<TABLE>
UNIT 5 EPC CONTRACT - EXHIBIT A
<CAPTION>
<S> <C>
o Design Flow...............................................................18,155 gpm
o Recycle Flow...............................................................2,300 gpm
o Maximum Hydraulic Flow (with recycle).....................................20,455 gpm
o Tank Diameter................................................................125'-0"
o Tank side water depth.........................................................22'-0"
o Tank side wall height.........................................................24'-0"
o Outer bottom slope........................................................0.75 in 12
o Inner bottom slope..........................................2"in-12" on 40'-0" dia..
o Sump Diameter.................................................................10'-0"
o Sump Depth ....................................................................4'-0"
o Minimum Reaction Zone detention...........................................18 minutes
o Minimum Tank detention time...............................................65 minutes
o Tip Speed of turbine........................................................6.0 fps
o Minimum Recirculation ...................................................162,000 gpm
o Turbine variable speed range.....................................................4:1
o Turbine Nameplate Horsepower...................................................50 Hp
o Minimum Power to Reaction Well.................................................30 Hp
o Rake Arm Tip Speed.................................................30 fpm (0.09 RPM)
o Rake Mechanism Design Torque........................................400,000 ft - lbs
o Minimum Cutout Torque...............................................400,000 ft - lbs
o Peak Drive Torque (Min)...........................................1,476,000 ft - lbs
o Connected Hp for rakes................................................10 Hp (2-5 Hp)
o Launder Type..............................................Peripheral and radial type
o Influent Size..................................................................36 in
o Effluent Size.................................................................36 in.
o Underflow Size ........................................(2) 12" dia. with 20" sleeves
</TABLE>
Underflow pipe will be 12" Sch 20 Hastelloy C-276 for all buried or below grade
piping.
One (1) Reactor-Clarifier Mechanism for installation in a 125'-0" dia. tank in
accordance with the General Design Criteria and including the following
components:
a) The rake drive mechanism provided with this clarifier will be an
Industrial-Duty design and manufacture suitable for use in heavy duty
applications, and proven for geothermal operation. The rake drive
mechanism will consist of dual 5 HP (10 HP connected) a motor
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UNIT 5 EPC CONTRACT - EXHIBIT A
and a primary speed reducers, all direct coupled or otherwise coupled
to the main gear reducers which will drive the main gear through
pinions, and an overload protection system. The rake drive motors will
each be controlled by AC variable speed controller. The 400,000 ft.
lbs. duty rated torque of the drive is the 100 percent design torque
value of the drive control, and the design torque for structural
steel. The main gear yield torque rating is defined as the minimum
torque at which a one time initial load will cause a gear tooth to
bend to a permanent set.
b) All bearings will comply with B-10 ratings of 100,000 hours. Main
support bearings will be designed to fully resist overturning moment
and for maximum rotating weight with B-10 rating of 400,000 hours.
c) A motorized lifting device with a steel driving cylinder mounted on
the main rake gear, will provide up to 12" of lift with the mechanism
rotating.
d) The turbine drive will be of the heavy-duty continuous service type,
designed for a minimum 1.5 SF based on the water horsepower required.
Design will be based on criteria of AGMA and rating will be based on
the thermal or mechanical horsepower, whichever is less. All bearings
will comply with B-10 ratings of 100,000 hours. The turbine drive
motor will be controlled by AC variable speed controller in a NEMA 1
box located remotely in the PDC.
e) Rake driving shaft, two (2) long raking arms with blades, two (2) short
raking arms with blades and a sump scraper will be provided. The long
arms will rake the tank bottom twice per revolution. The short raking
arms will rake the bottom four times per revolution and, will have a
2" / 12" slope at 40' 0" dia.. The sump scraper will scrape the sump
walls and bottom and break up large chunks of scale near the sump
bottom, and will be of sufficient strength to act as a guide for the
mechanism. All rake and drive assembly components will be rugged and
designed for services comparable to other metallurgical and geothermal
applications as opposed to waste water treatment applications. The
structural design will minimize the surface area of submerged steel.
f) One (1) large diameter radial flow turbine will be provided. This
turbine will provide required recirculation, and mixing. A seal
between the concentric rake and turbine shafts will be provided to
prevent vapor leakage.
g) Reaction Well and internal recirculation drum with baffling designed
to provide proper flow patterns within the unit will be furnished. It
will have structural supports and stiffeners to provide a stable unit.
The well will have a peripheral lower deflector to direct flow towards
the tank center to control solid contact action and to reduce sludge
bed disturbance. The reaction well will be designed to provide the
proper recirculation rate and detention times as dictated by the pilot
plant test data. The recirculation drum will have flow-straightening
vanes. The reaction well and drum will be fabricated from 3/8-in.
plate.
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UNIT 5 EPC CONTRACT - EXHIBIT A
h) Effluent collection launders will be furnished internal to the tank as
part of the tank. Pipe type radial launders will discharge to a
peripheral collector launder. The radial launders and peripheral
launders will be designed for an overflow rate not to exceed 15 gpm
per lineal foot. The sixteen (16) 14" dia. pipe type radial launders
will have overflow slots in the tope properly designed to equalize
flow from the center to the tank periphery. The radial launder will be
fabricated from A-106 carbon steel pipe material with 1/4" total
corrosion allowance(1/8" inside and 1/8" outside). The peripheral
launder will be fabricated from SA-516 grade 70 material, with 1/8"
corrosion allowance on each side of a wetted surface. Adjustable weirs
will be 1/4" FRP with suitable fasteners. The bottom of the peripheral
launder will be sloped 0.5% from a point opposite the discharge to the
discharge outlet.
i) The 36" dia. feed pipe will extend from the tank wall to the
recirculation drum and will be 2205 stainless steel, 0.25" wall
minimum.
j) One set of sampling pipes consisting of six (6) 1" dia. and three (3)
2" dia. pipe assemblies will be furnished to within 12 inches of the
tank wall, with hose bibs and wall fittings, to be used for sampling
and obtain indication of sludge depth.
k) A local panel, for mounting at the drive platform, including a start/
remote/stop push-button station will be provided for local on/off
control of turbine drive, scraper drive and lifting device. This will
be provided in a NEMA 4X enclosure on the drive mechanism.
l) A rake arm lift position transmitter will be furnished wired to a
separately mounted current transmitter transmitting a 4-20 ma., d.c.
signal to Purchaser's recorder.
m) A 1/4 Hp Lube oil cooler and 1/3 Hp oil pump will be provided for the
turbine drive. High temperature and low level switches are provided
for the rake and turbine drives.
n) Motors are 460 V 3PH 60 HZ, TEFC, Mill & Chem.
o) One (1) steel tank 125'-0" dia. x 24'-0" side wall height with 2'-0"
freeboard including the following:
o 5/8" plate dual slope bottom of butt welded steel in accordance
with the general design criteria and drawings. A 10'-0" dia. x
4'-0" discharge sump will be provided for connection to
purchasers underflow pipes.
o The tank will be designed per API 650; butt welded; Seismic Zone
IV; 70 mph wind with essential facilities factor 1.0, ground
acceleration 0.35 g; and an internal pressure of 6" water (0.217
psi). All welding for the tank steel to be per AWS D1.1 latest
standards and will be continuous. All nozzles will have machined
faces with shell nozzle reinforcement Per API -650 table 3-9,
pages 3 - 22. All flanges are to the 150 # raised face weld neck
with bolt holes straddling the center line. Two-holed flange
arrangement is required.
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UNIT 5 EPC CONTRACT - EXHIBIT A
o The shell plates will be steel designed to API 650 and will include
a 1/8" corrosion allowance per wetted surface.
o The tank and sump floor will be 5/8" SA-516 grade 70, butt welded
steel including 1/4" corrosion allowance.
o The peripheral launders will be fabricated from SA-516 grade 70
material, with 1/8" corrosion allowance on each side of a wetted
surface with FRP weirs.
o Rim angle and superstructure supports.
o Insulation rain shield and tie rings. (See separate section for
insulation.)
o The inside and outside of the tank and cover will be furnished
bare.
p) The cone (or umbrella type) cover with external beam supports will be
Steel plate will be SA-516 grade 70, with 1/8" corrosion allowance.
The cover will be designed per API 650; butt welded; Seismic Zone IV;
70 mph wind with essential facilitates factor 1.0; ground acceleration
0.35 g; and wind exposure "C"; live load of 25 psf plus dead load and
internal pressure of 6" water (0.217psi).
13.5 SECONDARY CLARIFIER
The Secondary Clarifier will be designed for the following process design
parameters:
<TABLE>
<CAPTION>
<S> <C>
o Design Flow ..............................................................18,155 gpm
o Recycle Flow...............................................................2,300 gpm
o Maximum Hydraulic Flow (with recycle).....................................20,455 gpm
o Tank Diameter................................................................105'-0"
o Tank side water depth.........................................................20'-0"
o Tank side wall height.........................................................22'-0"
o Tank bottom slope.........................................................0.75 in 12
o Sump Diameter..................................................................8'-0"
o Sump Depth ....................................................................3'-0"
o Minimum Reaction Zone detention............................................2 minutes
o Minimum Tank detention time...............................................60 minutes
o Tip Speed of turbine........................................................4.0 fps
o Turbine variable speed range.....................................................4:1
o Turbine Nameplate Horsepower...................................................30 Hp
o Minimum Power to Reaction Well.................................................19 Hp
o Rake Arm Tip Speed.................................................30 fpm (0.08 RPM)
o Rake Mechanism Design Torque........................................100,000 ft - lbs
o Minimum Cutout Torque...............................................100,000 ft - lbs
</TABLE>
A-64
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UNIT 5 EPC CONTRACT - EXHIBIT A
<TABLE>
<CAPTION>
<S> <C>
o Peak Drive Torque (Min).............................................307,000 ft - lbs
o Connected Hp for rakes........................................................5.0 Hp
o Launder Type..............................................Peripheral and radial type
o Influent Size..................................................................36 in
o Effluent Size.................................................................36 in.
o Underflow Size .........................................(2) 8" dia. with 16" sleeves
</TABLE>
Underflow pipe will be 8" Sch 20 Hastelloy C-276 for all buried or below grade
piping.
One (1) Secondary Clarifier Mechanism for installation in a 105' dia. tank in
accordance with the General Design Criteria and including the following
components:
a) A rake worm gear driving mechanism mounted on a 4 point precision
bearing fully enclosed with all gears and bearings running in an oil
bath with adjustable overload control torque load indicator, including
alarm and cutout switches driven by a 7.5 HP speed variation for 4:1
range will be by AC variable frequency controller. The mechanism will
rotate at .08 RPM approximately 30 FPM.
The rake drive will be rated at 100,000 ft-lbs.
b) A turbine mechanism with fully enclosed gears and 4-point precision
bearing in an enclosed housing, separate from and mounted directly
under the sludge rake drive. Turbine drive is driven by a 30 HP motor.
Speed variation for 4:1 range will be by AC variable frequency
controller.
c) A motorized lifting device with a steel driving cylinder mounted on
the main rake gear, will provide up to 12" of lift with the mechanism
rotating. The driving cylinder will be keyed to the shaft which will
be free to move vertically through the main gear. The lifting screws
attached to the shaft will be supported and rotated by a gear set
mounted above the driving cylinder. The gear will be driven by a
hardened steel worm and a right angle 1.5 HP gear motor.
A-65
<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
d) Rake driving shaft, two (2) long raking arms with blades and a sump
scraper will be provided. The long arms will rake the tank bottom
twice per revolution and will have a slope of 0.75" / 12". The sump
scraper will scrape the sump walls and bottom and break up large
chunks of scale near the sump bottom, and will be of sufficient
strength to act as a guide for the mechanism. All rake and drive
assembly components will be rugged and designed for services
comparable to other metallurgical and geothermal applications as
opposed to waste water treatment applications. The structural design
will minimize the surface area of submerged steel.
e) One (1) large diameter radial flow turbine will be provided. This
turbine will provide required recirculation, and mixing. A seal
between the concentric rake and turbine shafts will be provided to
prevent vapor leakage.
f) Reaction Well with baffling designed to provide proper flow patterns
within the well will be furnished. It will have structural supports
and stiffeners to provide a stable unit. The well will have a bottom
shelf to direct flow towards the tank center to control solid contact
action and to reduce sludge bed disturbance. Shelf scraper arms will
be provided.The well will be fabricated from 3/8" steel plate.
g) Effluent collection launders will be furnished internal to the tank as
part of the tank. Pipe type radial launders will discharge to a
peripheral collector launder. The sixteen (16) 14" dia. pipe type
radial launders will have overflow slots in the top properly designed
to equalize flow from the center to the tank periphery. The radial
launder will be fabricated from A-106 carbon steel pipe material with
1/4" total corrosion allowance(1/8" inside and 1/8" outside). The
peripheral launder will be fabricated from SA-516 grade 70 material,
with 1/8" corrosion allowance on each side of a wetted surface.
Adjustable weirs will be 1/4" FRP with suitable fasteners.
h) The 36" dia. feed pipe will extend from the tank wall to the
recirculation drum and will be 2205 stainless steel, 0.25" wall
minimum.
i) One set of sampling pipes consisting of six (6) 1" dia. and two (2)
2" dia. pipe assemblies will be furnished to within 12 inches of the
tank wall, with hose bibs and wall fittings, to be used for sampling
and obtain indication of sludge depth.
j) A rake drive torque overload device in a NEMA 4 enclosure will be
included as an integral part of the clarifier scraper drive. The
device will operate two switches; the alarm switch and the motor
cutout switch. These two switches will be factory adjusted to
accurately calibrate the torque value and the overload position. A
visual torque indicator will be provided and oriented so that it may
be read from the walkway.
k) A torque transmitter assembly will be furnished for the clarifier
scraper drive. The torque sensor will be integral with the drive
control assembly.
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UNIT 5 EPC CONTRACT - EXHIBIT A
l) A local panel, for mounting at the drive platform, including a start/
remote/stop push-button station will be provided for local on/off
control of turbine drive, scraper drive and lifting device.
m) Semi-automatic lifting device controls will be provided to
automatically raise the rotating mechanism with changes in torque.
Manual lowering by operator is required.
n) A rake arm lift position transmitter will be furnished .
o) A 1/4 Hp Lube oil cooler and 1/3 Hp oil pump will be provided for the
turbine drive. High temperature and low level switches are provided
for the rake and turbine drives.
Motors are 460 V 3PH 60 HZ, TEFC, Mill & Chem.
p) One (1) steel tank 105'-0" dia. x 22'-0" side wall height with 2'-0"
freeboard including the following:
o The tank will be designed per API 650; butt welded; Seismic
Zone IV; 70 mph wind with essential facilities factor 1.0, \
ground acceleration 0.35 g; and an internal pressure of 6"
water (0.217 psi).
o All welding for the tank steel to be per AWS D1.1 latest
standards and will be continuous.
o All nozzles will have machined faces with shell nozzle
reinforcement Per API -650 table 3-9, pages 3 - 22.
o Cover nozzle reinforcement will be provided on all nozzles 3"
dia. and greater. Shell reinforcement pads will have a tapered
vent hole with plastic plugs (drilled prior to installing).
o All flanges are to the 150 # raised face weld neck with bolt
holes straddling the center line. Two-holed flange arrangement
is required.
o All assemble bolting internal to the unit, but non-submerged
will be A-193 grade 7 w/2H nuts, galvanized. These studs and
nuts will then be epoxy coated for additional corrosion
resistance.
o Welder qualifications and welder procedures will be per AWS.
o 5/8" bottoM of butt welded steel in accordance with the general
design criteria and drawings. An 8'-0" dia. x 3'-0" discharge
sump will be provided .
o The shell plates will be steel designed to API 650 and will
include a 1/8" corrosion allowance per wetted surface.
o The tank and sump floor will be 5/8" SA-516 grade 70, butt
welded steel including 1/4" corrosion allowance. Foundation
design will be such that and material
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UNIT 5 EPC CONTRACT - EXHIBIT A
underneath the floor will not biologically or chemical decompose
and produce corrosion or harmful gases under long term heat
operation.
o The peripheral launders will be fabricated from SA-516 grade
70 material, with 1/8" corrosion allowance on each side of a
wetted surface with FRP weirs.
o Rim angle and superstructure supports.
o Insulation rain shield and tie rings. (See separate section for
insulation.)
o The inside and outside of the tank and cover will be furnished
bare. The access stair will be sandblasted to SSPC-SP5 white
metal blast with NACE #2 profile and will receive one (1) primer
coat Carboline 193 (Gray - 3 mils DFT), followed by one (1)
guide coat Carboline 193.724 followed by one (1) finish coat
Carboline 193 (white 008-3 mils DFT).
q) The cover will be designed per API 650; butt welded; Seismic Zone IV;
70 mph wind with essential facilitates factor 1.0; ground acceleration
0.35 g; and wind exposure "C"; live load of 25 psf plus dead load and
internal pressure of 6" water (0.217psi).
13.6 FILTRATE THICKENER SYSTEM
One (1) Thickener mechanism suitable for installation in an 8'-0" dia. x 8'-0"
side depth elevated tank with 6" freeboard and including:
a) A heavy duty industrial drive unit consisting of a cast bronze worm gear
mounted on a four point contact commercial precision ball bearing driven by
a hardened steel worm through a reducer and enclosed chain and sprockets by
a 3.0 HP motor. The duty rated torque output will be 15,000'#T.
b) A lower shaft with cone scrapers fabricated carbon steel including the
"male" portion of the liquid seal for the cover.
c) Two (2) long raking arms with blades fabricated of carbon steel.
d) A central feedwell with supports and dispersion shelf fabricated of carbon
steel.
e) A 4" dia. feed pipe of carbon steel will be provided from the tank side to
the feedwell complete with dispersion tee.
f) The tank will be of filament wound fiberglass reinforced vinylester resin
erected in place complete with flat bottom and cone top.
13.7 FLOCCULANT FEED SYSTEM
A flocculant feed system consisting of the following will be provided:
o One (1) polymer solution preparation system with system capacity = 14
lbs/hr polymer (dry basis) as a 0.5% solution with 45 min. mixage
time, requires water supply @ 30 gpm + 60 psig. System complete with:
Jetwet(R) Head Assembly
2.4 ft3 dry polymer hopper
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UNIT 5 EPC CONTRACT - EXHIBIT A
1/2 HP screw feeder
Dry polymer blower, 1.0 HP
[One (1) 24 hr.] Mix tank with mixer
[One (1) 6 hr. day tank]
o One (1) flocculant injection skid, including:
Two (2) 4.8 gpm metering pumps, 2 HP, with dilution
water flowmeter, static mixer, and associated
valves for dilution of
12 lb/hr polymer (dry basis) to 0.2 wt % solution.
Two (2) 0.3 gpm metering pumps, 120V, with dilution
water flowmeter, static mixer and associated
valved for dilution of
1.5 lb/hr wt % solution.
13.8 FILTER PRESS
One (1) model 30-C276 pressure filter made by the PNEUMAPRESS Filter
Corporation.
Operating parameters for the proposed filter are as follows:
<TABLE>
<CAPTION>
DESCRIPTION FLOW RATE TEMP PRESS (PSI) CONNECTION
----------- --------- ---- ----------- ----------
<S> <C> <C> <C> <C>
Slurry *60-300 gpm 225(degree)F 20-80 3" 150# RFF
Wash 50-250 gpm --- 40-120 3" 150# RFF
Compressed Air Supply *120 scfm Ambient 95-125 2" 150# RFF
Belt Wash Water 15 gpm Ambient 45-125 1" 150# RFF
(10 sec/cycle)
Filtrate 60-300 gpm 225(degree) F --- 8" 150# RFF
</TABLE>
Please consult PFC engineer when selecting slurry supply and compressed air
supply equipment.
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<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
Two (2) steel base mounting beams are included for purchasers foundations and
the press will be factory mounted per the enclosed drawing SK3D.
The proposed filter utilizes heavy duty construction for all major components.
Each major component is stress-relieved to eliminate distortion and engineered
(by Certified Professional Engineer) to withstand full operating stress at full
operating pressure regardless of feed deviations, upsets, or other operation
anomalies.
The filter has C276 wetted filter components with 316/316L piping and valve
components. The filter is completely automatic and utilizes re-cleanable filter
belts upon which solids are formed. Filtered solids may be efficiently washed
during the filtration cycle. Filtered and washed solids are automatically
discharged from the filter chambers onto a conveyor by the advancing filter belt
each filtration cycle. The filter belt is effectively washed as the belt
advances. The filter is supplied with a control panel including a programmable
controller and necessary peripheral equipment required for control of the
automated system. The panel will be NEMA 4X and fiberglass.
13.9 PIPING
In general, piping materials and design shall be in accordance with Section 10,
Mechanical Systems. The following piping materials will be used:
o Lime System - ---Carbon Steel
o 1st Stage Reactor to 2nd Stage Reactor---2205
o Downstream of 2nd stage Reactor----Carbon Steel
o Downstream of IX Feed Pumps----Cement Lined Carbon Steel
o Clarifier Underflow to Underflow Pumps----C-276 (underground) and 2205
(aboveground)
13.10 PUMPS
Three underflow recycle pumps will be provided. The underflow recycle pumps
shall be of low rpm design, with variable speed and manual control from the DCS
in the Main Control Room. Centrifugal, rubber lined pumps shall be used.
Construction and design shall be suitable for hot brine service (225(Degree) F).
There are four pumps associated with the lime slurry system.
Two 100% transfer pumps are provided to pump lime slurry from the surge tank
into the lime storage tank and two 100% metering pumps are provided to pump lime
from the lime storage tank to the injection point at the 1st stage reaction
tank. Each of the lime slurry transfer pumps shall be suitable for lime slurry
service
Four (4) Flocculant Injection Pumps will be provided. Two 100% pumps will be
designed to deliver flocculant at a rate of ~5 gpm to the Secondary Clarifier
and the other two 100% pumps will supply approximately 0.1 gpm to the thickener
vessel associated with the filter press.
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UNIT 5 EPC CONTRACT - EXHIBIT A
Two filter feed pumps will be provided. Filter feed pumps (P-5308 A/B) shall be
two, 100% duty pumps with suction from both the primary and secondary clarifier
underflow lines. The existing Unit 3 primary clarifier filter feed pumps P-308
A/B will be modified for this application.
Two 100% Thickener Underflow Pumps (P-5508 A/B) shall be used to take suction
from the solids thickener tank and recycle back to the filter press inlet to
remove remaining solids. The pumps shall be rated for 5 gpm and have automatic
capability to cycle on and off interfacing with the filter press PLC.
14. DOCUMENTATION AND DRAWINGS
14.1 GENERAL
Contractor shall provide for review by the Owner copies of all documents
(including but not limited to drawings, reports, specifications, schedules and
calculations) necessary to describe the Project and to provide a detailed and
comprehensive record of all aspects of the Project. The extent of the
submissions shall be sufficiently comprehensive to establish that all parts and
procedures to be used in performing the Project comply with the requirements of
the Contract.
All documents prepared by Contractor or its sub-contractors shall be in English
and shall bear a prominent reference to the Project and a full title block
containing a unique identification number, revision number, source and type of
document and descriptive title.
Contractor shall submit to Owner hard (printed) copies and soft copies of
documentation. All printed documentation provided shall be of good quality,
clear, legible and able produce further copies by photocopying. All soft copies
shall be in a format to be agreed with the Owner. As a minimum, text documents
shall be in Microsoft Word Version 6.0, spreadsheets shall be in Microsoft Excel
Version 5.0, data bases shall be in Microsoft Access Version 2.0, drawings shall
be in AutoCad Release 13 or a compatible computer aided drafting system that
will allow conversion to AutoCad Release 13 file format.
14.1.1 SUBMISSION FOR REVIEW
Documents submitted for review shall have been processed in accordance with
Contractor's QA procedures and shall be certified by Contractor as having been
fully examined by him and in compliance with the requirements of the Contract.
14.2 REQUIRED MANUALS
Contractor shall compile, index and prepare facilities manuals for the work.
Contractor shall submit ten (10) copies of the Facility Manual, and ten (10)
copies of the Equipment Maintenance Manual, to the Owner as per the Contract.
Manuals shall be hard bound and in loose leaf form.
14.2.1 FACILITY MANUALS
The Facility Manuals shall include comprehensive documentation of Contractor's
Engineering, Fabrication, and Testing, including the following items:
o Equipment data sheets
o Engineering Calculations, analyses, studies, reports, etc.
o Drawings
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UNIT 5 EPC CONTRACT - EXHIBIT A
o Vendor manual for Contractor furnished items, and vendor catalogs.
o Manufacturing and fabrication test and inspection reports. (This shall
also include logs of all destructive and non-destructive examinations).
o Manufacturing and fabrication compliance and exception reports.
o Selective pre-commissioning records.
o Certification manuals for fabrication, installation, mechanical
completion and all equipment.
o Selective start-up and operating information about each system within the
Project.
o Instructions covering normal shutdown, emergency shutdown, operating
limits, and routing operational and maintenance procedures: (e.g.
checklists, inspection schedules, lubrication schedules).
14.2.2 EQUIPMENT MAINTENANCE MANUALS
Manual sections shall be divided with laminated index tabs.
Equipment maintenance manuals shall contain the vendor-supplied information such
as:
o Plant Data Sheets.
o Special shipping, handling , and storage instructions.
o Lubrication requirements.
o Maintenance and repair instructions, including procedures, tolerances,
special tool or facility needs, etc.
o Bill of materials.
o Vendor descriptive literature.
o Parts Lists (commissioning spares, start up spares, two-year spares,
complete parts lists)
14.3 DRAWINGS
Drawings shall be produced using AUTOCAD Release 13 or a compatible computer
aided drafting system that will allow conversion to AUTOCAD Release 13 file
format.
A scale bar shall be included to permit use following photo-reduction.
Standard sizes shall be used. Drawings shall be prepared in such a way that
photo-reduction to B size shall result in a legible and useable drawing.
Particular attention shall be paid in this respect to selection of fonts. When
drawings larger than B size are submitted, a B size print shall also be
submitted.
Each drawing submitted shall clearly indicate the applicable status, e.g.
Preliminary, for Information, for Review, for Bid, for Construction, As Built.
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UNIT 5 EPC CONTRACT - EXHIBIT A
14.4 AS-BUILT DOCUMENTATION
During fabrication/construction, Contractor shall update and maintain on file
current mark-ups of all drawings and data sheets to agree with actual work
undertaken. Contractor shall prepare as-builts of the documentation.
As-builts shall be prepared on the original drawings or data sheets. Documents
shall be re-drafted as necessary to incorporate final information. Mark-up
sketch, referencing, and other field marking techniques are not acceptable.
Contractor shall submit the original drawing or data sheet to Owner as the
as-built. Sepias or photo-reproductions are not acceptable. As-builts shall be
submitted as per Section 15.5 of the Contract..
Contractor shall provide as-builts which are clear and readable in both full
size and B size reduction. Contractor shall prepare new drawings if the Owner
judges originals to be too damaged, deteriorated, or illegible.
As-builts shall be issued as the next sequential revision from previous
releases. The revision block shall state "As-Built".
All clouds, revision diamonds, and other interim control marking shall be
removed from as-builts.
Contractor shall provide computer files in AUTOCAD Release 13 file format
containing the following as-built drawings: P&ID's, plot plans, one-line
diagrams, electrical schematics, piping general arrangements, underground
piping/cabling layouts.
14.5 OPERATOR TRAINING
Contractor will conduct a two (2) week onsite training program based on the
manuals and data contained in Section 14.2 for Owner's operators and maintenance
personnel. Instruction will be provided for up to twenty five (25) of the
Owner's personnel. Such Owner Personnel will have moderate experience on similar
equipment as provided in the Project. 1.
15. CONSTRUCTION SUPPORT ACTIVITIES
15.1 SITE MEETINGS
Meetings shall be held in accordance with the Contract, , and minutes shall be
kept by Contractor. In addition, Owner may call meetings at any reasonable time
with the Contractor at mutually agreed locations to discuss the Work, schedules,
safety, reports or any other issues.
15.2 ACQUISITION AND EXPEDITING
Contractor will execute the following acquisition and expediting activities:
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UNIT 5 EPC CONTRACT - EXHIBIT A
o Develop contract documents, invitation to bid, bidder's instructions,
general terms and conditions, preparation of purchase order and
contract formats, and issue the bids to qualified bidders.
o Acquire the necessary equipment and materials.
o Maintain periodic contact with suppliers to expedite status of each
order, and provide assistance to suppliers in expediting critical
materials and equipment as required to maintain overall delivery
schedules.
o Provide assistance to suppliers of major items of equipment in the
arrangements for special transportation, handling and location of
critical items of material and equipment required to maintain
schedule.
o Arrange for all necessary or desirable special transportation,
handling and location of critical items of material and equipment
required to maintain schedule.
o Provide the necessary lead-time information required for the
development of construction and the overall project schedule.
Continual coordination with project management for changes, delays,
strikes and work stoppages, which may affect the scheduled Site
delivery requirements.
o Provide information (as available) regarding manufacturer labor
situations, including negotiation, work stoppage, and resumption of
work.
o Prepare monthly reports on the status of major items of equipment and
material giving updated delivery status, Site delivery requirement
dates, and any other pertinent information that may affect the
construction schedule.
15.3 QUALITY CONTROL AND INSPECTIONS
15.3.1 GENERAL
Contractor shall develop and implement a general QA program covering the Work
and field quality control program and field procedures in order to ensure that
the Work is performed in accordance with the Contract, the Drawings, and
Specifications and all other applicable code requirements as specified in the
Contract. Such program shall be submitted to Owner for review and approval
pursuant to the Contract.
Contractor will verify that the in-progress and final inspections and tests are
performed and documented as required.
Contractor will maintain accurate and legible records of the quality related
activities readily available for review by Owner.
Contractor shall arrange and facilitate Owner's inspections in Contractor's and
Vendor's facilities and in the field in accordance with the Contract.
15.3.2 SHOP INSPECTION
Contractor shall inspect and test purchased equipment during fabrication at the
vendor's shop based on the quality control procedures and requirements. Owner
shall have the right to inspect equipment at the Vendor's shop at any time at
Owner's expense.
Contractor will prepare reports for deviations from specification, including
equipment repairs or necessary rework. Equipment or material that does not
comply with the applicable drawings, codes, or
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UNIT 5 EPC CONTRACT - EXHIBIT A
engineering specifications will not be released for shipment from Vendor's shop
until reviewed and approved by Contractor.
15.3.3 FIELD QUALITY CONTROL
Contractor will perform on the Site the following field quality control
activities:
o Receive, inspect, and prepare reports for major equipment and materials
arriving at the Site.
o Provide for independent inspection services in the areas required by
Contractor's quality assurance documents and ensure that the Work is
performed in accordance with the quality control procedures.
o Perform field testing as defined in Contractor's quality assurance
documents and as would be deemed prudent and consistent with modern
engineering and construction practice.
o Perform the inspection and tests required by the Contract.
o Prepare reports of all tests and submit for review by Owner.
o Ensure that all construction supervisory personnel are in possession
of all current, applicable drawings related to the work in progress.
o Ensure that a file of "as-built" or field marked up drawings
representing the current status of the work is maintained current by
the Contractor's site organization, and that the Owner has access to
the file.
15.4 SAFETY AND SECURITY
15.4.1 SAFETY
o Contractor shall establish a safety program in conformance with the
Occupational Safety and Health Standards.
15.4.2 FIRST AID
Contractor shall provide First Aid facilities, of no less than that required by
Applicable Law, in easily accessible and highly visible areas throughout the
Site. Contractor shall at all times retain sufficient personnel trained in First
Aid procedures.
Contractor shall arrange for access to ground and air ambulance services.
15.4.3 SITE SECURITY
Contractor shall provide for security of the Site and the Work. The services
required are site perimeter security, gate access and traffic control.
Contractor will consult and cooperate with Owner in the development and
implementation of security practices and programs for the Project.
Contractor shall prepare and maintain accurate reports of incidents of loss,
theft or vandalism and shall furnish these reports to Owner in a timely manner.
15.5 TRANSPORTATION
Contractor shall provide the required arrangements for transportation of all
Site personnel, equipment and materials from point to point on the Site.
A-75
<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
15.6 COMMUNICATION
Contractor shall install, operate, and maintain an effective voice and fax
communications system between its main Site office and its home office.
15.7 TEMPORARY CONSTRUCTION FACILITIES AND SYSTEMS
Contractor shall provide all temporary facilities and systems required to
perform the scope as defined elsewhere in this document. These facilities
include, but are not limited to, the following:
o Office and meeting facilities
o Subcontractor locations
o Messing facilities
o First Aid
o Fire fighting facilities
o Any access roads, fencing and gates
o Parking
o All communication lines and facilities
o Bulk material and warehousing control system and facilities
o Equipment maintenance and storage facilities
o Fuel storage facilities
o Potable and non-potable water
o Sanitary facilities and removal of all waste
o Electric power for construction activities and facilities
o Workforce transportation from central parking (if required)
o Security services/shops
o Construction and Contractor facility site maintenance services
o Construction equipment and tools
Contractor shall be responsible for remediating areas which have been damaged or
disturbed through construction activities. This remediation shall include, but
not be limited to, the removal of debris, trash, chemical and fuel/oil spills,
and site grading to final design or pre-construction condition.
A-76
<PAGE>
UNIT 5 EPC CONTRACT - EXHIBIT A
ATTACHMENTS
1 Design Criteria
2 Intertie Document
3 Major Equipment List
4 Pre-Approved Suppliers
5 Guarantee Point Conditions
6 Listing of Reference Technical Documents
7 Valve Engineering Listing
A-77
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
1. INTRODUCTION..........................................................................................1
1.1 General...........................................................................................1
1.2 Scope Overview....................................................................................1
2. SITE DESCRIPTION......................................................................................2
2.1 Location..........................................................................................2
2.2 Access............................................................................................2
2.3 Topography........................................................................................2
2.4 Climatology.......................................................................................2
3. INTERCONNECTIONS......................................................................................3
3.1 General...........................................................................................3
3.2 Piping, Electrical and Instrumentation Interfaces.................................................3
3.3 Brine By-pass.....................................................................................3
4. GEOTECHNICAL INFORMATION............................................................................4-3
5. BRINE AND STEAM SPECIFICATIONS........................................................................4
6. WATER SOURCES.........................................................................................8
6.1 Fire Water........................................................................................8
6.2 Potable Water.....................................................................................8
6.3 Service Water.....................................................................................8
7. EMISSIONS.............................................................................................8
7.1 Air Emissions.....................................................................................8
7.2 Liquid Emissions..................................................................................9
7.3 Noise Emissions...................................................................................9
7.4 Solids Emissions..................................................................................9
8. DESIGN CRITERIA....................................................................................8-10
9. CIVIL/STRUCTURAL/ARCHITECTURAL.......................................................................10
9.1 General..........................................................................................10
9.2 Civil Work Criteria..............................................................................10
9.3 Structural Work Criteria.........................................................................12
9.4 Enclosures.......................................................................................12
9.5 Architectural Work Criteria......................................................................12
10.MECHANICAL SYSTEMS...................................................................................12
10.1 General.........................................................................................12
10.2 Turbine Generator...............................................................................12
10.3 Piping..........................................................................................12
10.4 Steam Supply Systems............................................................................13
10.5 Auxiliary Steam Systems.........................................................................14
10.6 Gas Removal System..............................................................................15
10.7 Condensate System...............................................................................16
10.8 Condenser and Auxiliaries.......................................................................18
10.9 Cooling Tower...................................................................................19
10.10 Main Cooling Water System......................................................................23
10.11 Auxiliary Cooling Water System.................................................................25
10.12 Brine Handling and Injection Systems...........................................................26
10.13 Fire Protection Systems........................................................................30
10.14 Potable and Service Water Systems..............................................................31
10.15 Compressed Air System..........................................................................32
10.16 Cooling Tower Blowdown.........................................................................32
10.17 Heating, Ventilation, and Air Conditioning.....................................................33
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.18 Equipment and Floor Drains.....................................................................33
10.19 Water Treatment Systems and Water Makeup.......................................................34
10.20 Chemical Feed Systems..........................................................................34
10.21 Hydrochloric Acid Injection System.............................................................35
10.22 Insulation.....................................................................................36
11.ELECTRICAL SYSTEMS...................................................................................37
11.1 General.........................................................................................37
11.2 Generator System................................................................................40
11.3 Generator Breaker and GSU Supply Breaker........................................................40
11.4 Generator Step-Up Transformer...................................................................40
11.5 Generator Bus...................................................................................41
11.6 Unit Auxiliary Transformers.....................................................................41
11.7 Medium Voltage Distribution Switchgear and Motor Control........................................42
11.8 Low Voltage Switchgear..........................................................................42
11.9 Low Voltage Motor Control Centers...............................................................43
11.10 Distribution Transformers......................................................................43
11.11 Protective Relaying and Metering...............................................................44
11.12 Vital Power System.............................................................................46
11.13 DC System......................................................................................47
11.14 UPS System.....................................................................................47
11.15 Emergency Power System.........................................................................48
11.16 Electric Motors................................................................................48
11.17 Lighting and Miscellaneous Power...............................................................49
11.18 Welding Receptacles............................................................................49
11.19 Telephone System...............................................................................50
11.20 Plant Paging System............................................................................50
11.21 Cathodic Protection Study and Equipment........................................................51
11.22 Grounding and Lightning Protection.............................................................51
11.23 Television Surveillance System.................................................................51
11.24 Panels and Enclosures..........................................................................51
11.25 Raceway........................................................................................51
11.26 Cables.........................................................................................52
11.27 Identification.................................................................................53
11.28 Substation.....................................................................................54
11.29 Transmission Line to Utility System............................................................54
12.INSTRUMENTS AND CONTROLS.............................................................................55
12.1 General.........................................................................................55
12.2 Reliability.....................................................................................55
12.3 Plant Distributed Control System................................................................56
12.4 Independent Control Systems.....................................................................56
12.5 Interfaces With the DCS.........................................................................56
12.6 Instrumentation.................................................................................56
13.SILICA CONTROL SYSTEM................................................................................57
13.1 General.........................................................................................57
13.2 Lime Slurry System..............................................................................57
13.3 1stand 2ndStage Reaction Tanks..................................................................58
13.4 Primary Clarifier...............................................................................60
13.5 Secondary Clarifier.............................................................................64
13.6 Filtrate Thickener System.......................................................................68
13.7 Flocculant Feed System..........................................................................68
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
13.8 Filter Press....................................................................................69
13.9 Piping..........................................................................................70
13.10 Pumps..........................................................................................70
14. DOCUMENTATION AND DRAWINGS..........................................................................71
14.1 General.........................................................................................71
14.2 Required Manuals................................................................................71
14.3 Drawings........................................................................................72
14.4 As-Built Documentation..........................................................................73
14.5 Operator Training...............................................................................73
15. CONSTRUCTION SUPPORT ACTIVITIES.....................................................................73
15.1 Site Meetings...................................................................................73
15.2 Acquisition and Expediting......................................................................73
15.3 Quality Control and Inspections.................................................................74
15.4 Safety and Security.............................................................................75
15.5 Transportation..................................................................................76
15.6 Communication...................................................................................76
15.7 Temporary Construction Facilities and Systems...................................................76
</TABLE>
ATTACHMENTS
1 Design Criteria
2 Intertie Document
3 Major Equipment List
4 Pre-Approved Suppliers
5 Guarantee Point Conditions
6 Listing of Reference Technical Documents
7 Value Engineering Listing
iii
<PAGE>
EXHIBIT A
STATEMENT OF WORK
for
SALTON SEA UNIT NO 5
ENGINEERING, PROCUREMENT, AND CONSTRUCTION CONTRACT
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
EXHIBIT "A"
ATTACHMENT 1 - DESIGN CRITERIA
1. GENERAL
Purpose
This document identifies the basic design criteria which govern the engineering
and design development of all systems, structures, and characteristics of the
Salton Sea Unit 5 (the Project). The fundamental purpose of this document is to
ensure the uniform application of the stated criteria by all design personnel,
contractors and suppliers so that the design, operational, and maintenance
characteristics of the facility will conform to the philosophy and specific
requirements of the Owner, while complying with all applicable laws, contracts,
permits, and licensing requirements.
1.1 SCOPE
Salton Sea Unit 5 is a single unit geothermal steam power generating station
supplied with flash steam at three pressure levels from cascading steam
separators. The process uses "pH Mod" technology to prevent silica scale
formation at the higher concentrations and lower temperatures that occur through
the heat extraction process. The plant is located in the Salton Sea KGRA,
Imperial County, California, north of Westmoreland, California. Maximum net
plant output for Unit 5 will be 49 MW at design conditions.
These criteria represent the minimum design requirements for the engineering,
procurement, and construction of Salton Sea Unit 5. The Contractor shall
incorporate these requirements into its design. The Contractor shall employ a
Quality Assurance (QA) program to ensure that the requirements of the
specifications are incorporated in the Work.
1.2 PLANT CRITERIA AND PHILOSOPHY
The Owner has developed preliminary design drawings for the Project. These
drawings shall form the basis for the Contractor's design. The Owner's
preliminary design drawings are included as Attachment 6, document 8.1-1.
A list of approved suppliers is included as Attachment 4. This list is not all
inclusive. The Contractor may propose equal or better equipment. The supplier
list contains some required suppliers. The Contractor shall not deviate from the
required suppliers without prior approval from the Owner.
The power plant shall be designed to operate reliably at Valves Wide Open (VWO)
and an annual capacity factor of 96%. The plant shall be designed to provide
maximum reliability commensurate with economic design.
Brine handling system will employ two parallel trains of equipment, each train
being sized to process 60% of design brine flow with the second train out of
service.
Equipment, structures, valves, pipe lines, instruments, and controls shall be
numbered in accordance with the Owner's numbering system. The Owner's numbering
system is defined in Attachment 6, document 8.1-3
The design of all systems shall be based upon, and use, proven design concepts
and fully demonstrated systems and components, to the maximum extent feasible.
1
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
1.3 QUALITY ASSURANCE
1.3.1 GENERAL
The quality assurance system shall include all aspects of the Project, including
design, fabrication and testing, site construction activities,
pre-commissioning, start up and performance testing.
In general the Contractor shall perform factory quality assurance inspections at
major equipment suppliers' facilities during fabrication to ensure equipment is
being built to the specifications. As a part of, or prior to, that inspection,
Contractor shall review supplier's quality assurance and quality control program
and manuals to assure their adequacy for equipment being supplied. During the
inspection, Contractor shall verify that the supplier's quality program is being
adhered to.
1.3.2 QUALITY ASSURANCE PROGRAM
Contractor shall submit for approval its proposed quality assurance program to
the Owner within 30 days of Notice to Proceed. This program shall include
procedures for quality assurance of all design, manufacturing and construction
activities. As a minimum, it shall address the following:-
o responsibilities and authorities
o document control
o design verifications
o Subcontractor assessment and control
o calibration requirements
o traceability
o non-conformance control
o inspection and test plans
o internal audits
o records
The Owner reserves the right to examine any procedures referred to in the
Quality Program and to audit the Contractor against the requirements of the
Quality Program at any time.
The Contractor shall submit for approval by the Owner the measures to be taken
for storage and maintenance of Plant and Materials prior to installation, during
installation, as well as for the period between the completion of the
installation and the time that the Works are placed in service.
The Contractor shall provide a Site Quality Control program including
requirements for Site
Quality Control inspections.
1.4 DESIGN REVIEW
The Contractor shall ensure that all designs calculations and drawings undergo a
comprehensive independent in-house review and approval process before submission
to the Owner. The Owner reserves the right to carry out independent review and
verification in accordance with Article 12.0 of the Contract.
2
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
The following drawings shall be considered as Deliverables subject to the review
requirements of Section 12.5 of the Contract:
o P&IDs
o Heat and Material Balances
o One Line Diagrams
o Site Arrangement
o General Arrangements
Other Deliverables or documentation as per Contract Section 12.4 to the Owner.
1.5 HAZOP REVIEW
Following in-house review of P&IDs the Contractor shall commission a hazards and
operability study (HAZOP) in accordance with CCPS guidelines. The Contractor
shall provide technical and support services, a meeting place, and schedule
allowance for the HAZOP study and shall incorporate recommendations from the
study as approved by the Owner.
The Contractor shall provide a third party facilitator and qualified
participants from the project engineering team. The Owner will participate in
the HAZOP study. The facilitator shall document the HAZOP study. The Contractor
shall submit the study with recommendations and resolutions to the Owner for
approval. The Contractor shall maintain a tracking of all recommendations and
resolutions from the HAZOP study.
Objectives of the HAZOP study include identification of:
o potential violations of laws, regulations, or codes
o how fires, spills, or process malfunctions may occur
o ways to reduce hazardous material inventories
o hazards associated with new equipment
o safety-critical equipment that must be regularly inspected, tested or
maintained
o hazards adjacent units may create for construction and maintenance
workers
o employee hazards associated with operating procedures
The Contractor shall develop the following information for use in the HAZOP
study:
o process limits stated in terms of flow, pressure, temperature, level, and
concentration - along with consequences of operating beyond the limits.
o process flow diagrams (with design heat and material balances)
o piping and instrumentation diagrams
o major material inventories
o health, safety and environmental data for raw materials, intermediates,
products, by products, and wastes.
1.6 ECONOMIC FACTORS
The following economic factors will be used where necessary.:
Unit Life 30 years
Base Year 2000
Maximum Saleable Power 49,000 kW
Capacity Factor 96%
Capitalized Value of Salable Power $1,800/kW
3
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
1.7 INSPECTION AND TEST PLAN
Within 90 days after Notice to Proceed or 120 days prior to the start of
fabrication, whichever is the earlier, the Contractor shall submit to the Owner
for review an inspection and test plan which shall include pertinent manufacture
and inspection operations. The Owner may, within 60 days of receipt of the
inspection and test plan, and in consultation with the Contractor, select a
range of points as a mandatory hold point for inspection before the item
concerned can be released for further manufacture or shipment.
Contractor shall conduct inspections and works testing of the equipment listed
below:
o Steam Turbine
o Generator
o Main Condenser
o Metal Clad Switchgear
o Fabricated Bus
o Control Panel
o DCS
o DCS Configuration and Software
o Generator Step-Up and Unit Transformers
o Steam Separators
o Steam Scrubbers
o Inter/After Condensers
o Ejectors
o Pumps over 150 hp
o Heat Exchangers
o Major Control and Isolation Valves
o Major Turbine Auxiliary Equipment
o Major Generator Auxiliary Equipment
o Lubrication Oil Systems
o Compressed Air Package
o Shop Fabricated Pipe
o Alloy Pipe and Fitting Fabrication
o Electrical Power Distribution Equipment
The Contractor shall give the Owner at least ten (10) working days prior notice
in writing of the date on and the place at which any equipment shall reach a
mandatory hold point or shall be ready for independent inspection and testing.
Unless the Owner shall advise the Contractor not to proceed with the inspection
and testing prior to five days before the date which the Contractor has stated
in its notice, the Contractor may proceed and any inspection and tests shall be
deemed to have been made in the Owner's presence, and the Contractor shall
forthwith forward to the Owner duly certified copies of the inspection and test
results.
Contractor shall give (and cause third parties to give) any representative,
designated by the Owner, full cooperation and assistance in any factory
inspection at the premises of Contractor or any other place of manufacture of
items supplied hereunder (or components thereof).
4
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
1.8 FACTORY TESTS
Major items supplied by Contractor shall be given standard applicable tests at
the factory during or at the completion of manufacture, whether manufacture is
by Contractor or a third party. A test procedure shall be prepared for each such
test which shall describe the test to be performed, the applicable item of
equipment being tested, the standards and method of testing, and the testing
facility's capabilities and shall state a proposed test date. All test
procedures shall be available for review by the Owner. Successful completion of
such test shall be a precondition to shipment of the tested item. The Owner
shall be notified in writing at least 14 days prior to any final factory test of
any major components to be supplied.
1.9 NON-DESTRUCTIVE EXAMINATIONS
1.9.1 GENERAL REQUIREMENTS
NDE methods, acceptance criteria, and additional general requirements shall be
in accordance with the applicable fabrication code and this specification.
Visual examination shall be by personnel certified to AWS QC1 requirements. All
other NDE shall be by personnel qualified to Level II or Level III requirements
of SNT-TC-1A of the American Society for Non Destructive Testing.
Visual examination shall be performed before other NDE.
Radiographic examinations required shall be done in accordance with the
requirements of the appropriate fabrication code or this specification and shall
comply with the acceptance criteria of ANSI B31.1 or as specified herein.
1 in 10 circumfrential butt welds on pressure piping shall be subject to
radiography examinations. For pipe size NPS 18 inch and smaller, the whole
circumfrential butt weld shall be examined. For pipe size NPS 20 inch and
larger, a minimum of 15 inch of circumfrential butt weld shall be examined for
each quadrant. One of these quadrants shall be at the bottom of the pipe. In
addition the first two welds by each welder shall be 100% radiographed.
When radiographic examination shows a defective weld requiring repair, two
additional welds performed by the same person shall be examined. If either of
these shows a defective weld requiring repair, a further two welds shall be
examined and if defects continue to show up then all the welds performed by that
person shall either be replaced or examined and repaired as necessary. The
welder or welding operator shall be retrained and requalified before being
allowed to perform further work. The Owner reserves the right to prohibit
further work by that person.
Radiographic examination not required by the fabrication code but required by
this specification shall be in accordance with the requirements of ASME Section
V. The results shall comply with the referenced acceptance criteria.
The Contractor shall be responsible and accountable for the safe handling,
security and storage of all radioactive sources used for non destructive
examinations. The Contractor shall submit for the approval of the Owner his plan
for storage and handling which shall comply with governmental requirements and
best trade practice. An accounting of all radioactive sources shall be performed
daily.
5
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
1.9.2 VISUAL EXAMINATION
The examination procedures shall be in accordance with the requirements and
methods specified in ASME Code, Section V, and this specification.
Surfaces of all finished welds shall be visually inspected.
1.9.3 MAGNETIC PARTICLE EXAMINATION
The examination procedures shall be in accordance with the requirements and
methods specified in ASME Code, Section V, Article 7 and this specification.
Base material 1 inch on each side of the weld shall also be included in the
examination of welds.
The evaluation of results and the acceptance criteria shall be in accordance
with ASME Code, Section VIII, Division 1 or 2, whichever is applicable.
Arc burns that occur during magnetic particle examination shall be removed and
the area re-examined by the magnetic yoke method.
1.9.4 LIQUID PENETRANT EXAMINATION
The examination procedures shall be in accordance with the requirements and
methods specified in ASME Code, Section V and this specification.
At least 5 percent of the first pass and 5 percent of the final pass of welds on
austenitic stainless steels and non-ferrous materials shall be examined by
liquid penetrant techniques.
Sulfur and chloride content of penetrant materials shall meet the requirements
of Paragraph T-644 of Article 6, Section V of ASME Code, regardless of the type
of material to be examined.
Base material 1 inch on each side of the weld shall also be included in the
examination of welds.
The evaluation of results and the acceptance criteria shall be in accordance
with ASME Code, Section VIII, Division 1 or 2, whichever is applicable.
1.9.5 ULTRASONIC EXAMINATION
The examination procedures shall be in accordance with the requirements and
methods specified in ASME Code, Section V and this specification.
Base material 1 inch on each side of the weld shall also be included in the
examination of welds.
The evaluation of results and the acceptance criteria shall be in accordance
with ASME Code, Section VIII, Division 1 or 2, whichever is applicable.
1.9.6 RADIOGRAPHIC EXAMINATION
The examination procedures shall be in accordance with the requirements and
methods specified in ASME Code, Section V and this specification.
Where spot radiography is required, as specified in ASME Code, Section VIII,
Division 1, paragraph UW 52, the welds selected for examination shall represent
each WPS on the piece of equipment inspected.
6
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
The evaluation of ASME Section VIII spot radiography results and the acceptance
criteria shall be in accordance with ASME Code, Section VIII, Division 1 or 2,
whichever is applicable.
1.10 SPECIAL TOOLS AND TEST EQUIPMENT
Contractor shall provide all special tools, inspection and test equipment
required for the operation, maintenance and overhaul of the Project. This shall
include also all lifting appliances, slings, spreader bars, supports and stands;
all specials gauges and measuring devices; and all special viewing and
inspection devices (including a boroscope set for internal inspection of the
turbine).
Where special tools and test equipment are purchased and deemed available by the
Owner, the Contractor may use the tools in the construction of the Project and
the tools and test equipment shall then be turned over to the Owner in undamaged
condition.
1.11 PAINTING
Painting systems for equipment, vessels and pipe shall be designed to provide
optimum performance (chemical resistance, appearance and minimum maintenance).
Such a system shall consist of near-white blast cleaning, inorganic zinc primer,
epoxy intermediate coat and polyurethane finish. Insulated surfaces shall not be
primed.
1.12 CLEARANCES
Vehicle access and major passageways shall be provided as necessary for
maintenance of equipment and shall be maintained clear of all piping and
equipment.
Platform clearances shall meet Cal-OSHA standards. Where 8'-0" of clearance is
not practical, measures will be taken to warn of the low clearance to platform
users.
Minimum clearance of 18" is required between insulation jacketing and pipe
flanges to allow room for air equipment used for tightening studs.
Lines on sleepers on the ground shall be spaced for convenient external
cleaning, painting, and inspection. Sleepers shall be a minimum of 24 inches
high above paving or finished grade.
In general, minimum clearances shall be as follows:
<TABLE>
<CAPTION>
Item Description
<S> <C> <C>
Headroom for primary access roads 22'-0"
(from the crown)
Width of primary access roads ex- 20'-0" or **
cluding 5'-0" shoulders
ROADS Headroom for secondary roads (from 16'-0"
the crown)
</TABLE>
7
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
<TABLE>
<S> <C> <C>
Width of secondary roads excluding 10'-0" or **
3'-0" shoulders
Clearance from edge of road shoulders 5'-0"
to platforms, equipment, pipe
associated with equipment, etc.
**Road width shall match existing roads
Horizontal and vertical clearance for 12'-0" Vert
equipment maintenance by hydraulic 10'-0" Hor
crane (12 T capacity)
MAINTENANCE Horizontal clearance for fork lift 6'-0"
(5000 lbs. cap.) and similar equipment
AISLEWAYS Vertical clearance for fork lift 8'-0"
AT GRADE (5000 lbs. cap.) and similar equipment
Horizontal clearance for equipment 3'-0"
maintenance by portable manual equip-
ment (hand trucks, dollies and similar
equipment)
Vertical clearance for equipment 8'-0" maintenance by
portable manual equipment (hand trucks, etc.)
WALKWAYS Horizontal clearance, not necessarily 3'-0"
in a straight line
Headroom (except for hand wheels) 7'-0"
Minimum width 2'-6"
PLATFORMS Minimum clearance around any 1'-6"
obstruction on the platform
Headroom 8'-0"
Minimum maintenance space required 1'-6"
between flanges of exchangers or
other equipment arranged in pairs
EQUIPMENT Minimum maintenance space required 1'-0"
for structural member or pipe
</TABLE>
8
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
<TABLE>
<S> <C> <C>
Clearance from edge of road shoulder 5'-0"
(the extreme projection)
Clearance between the outside 0'-1"*
diameter of flange and the outside
PIPE diameter of pipe or insulation)
(above-
ground) Clearance between the outside 0'-2"*
diameter of pipe, flange insulation
and structural member
</TABLE>
*With full consideration of thermal movements
9
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
2. CIVIL DESIGN CRITERIA
2.1 SCOPE
This document is designed to provide basic Civil, Structural, and Architectural
design criteria and design guides necessary to properly design the Brine
handling facilities and the power plant structures for the Salton Sea Unit 5
geothermal power plant (the Project).
2.2 CIVIL SITE WORK
Civil site work will consist of preparing the site area for construction
activities and final grading. The Contractor shall prepare the site for
construction of the Unit 5 power plant and the Region 1 Zinc Recovery Facility
(ZRF). The ZRF will be constructed by Others concurrently with the power plant.
2.2.1 CLEARING AND GRUBBING
The Project site is currently agricultural land. The Contractor shall clear and
grade the site in preparation for construction of the Project and the ZRF.
2.2.2 ABANDONMENT OF EXISTING DRAINS
Existing agricultural drains, buried approximately 6 ft deep and spaced at
approximately 60 ft apart (running north-south), shall be exposed and capped at
the south end of the site. A buried perimeter drain will be installed around the
Site to intercept any future subsurface irrigation water.
2.2.3 SITE PREPARATION
Site preparation shall consist of the excavation and replacement of soils
beneath structures and the building-up of the Site grades around structures to
aid drainage. Precast concrete piles will be installed beneath settlement
sensitive structures.
2.2.4 DRAINAGE
Site storm drainage will be designed for a 100-year 24-hr event. Design rainfall
shall be 3 inches in 1 hour and 3 inches in 24 hours.
Storm runoff on the Site will surface drain to a catch basin located at the
northwest corner of the Site. Storm water shall be pumped from the catch basin
to the existing Unit 3 brine pond. The cooling tower basin will have a perimeter
slab with a sump to contain spills and runoff.
Flood protection for the plant will be provided by building a levee on the east,
west and south Site boundaries to elevation - 220.0 ft MSL. Levee construction
shall be in accordance with Imperial County requirements. Road construction
shall also meet Imperial County and Caltrans requirements.
2.2.5 ROADS
Project roadways will be designed for H-20 highway loading and paved during
final grading operations. The Contractor shall maintain all Site access roads
during construction including dust suppression.
2.2.6 PAVING
The cooling tower perimeter slab shall be designed for H-10 truck loading
(16,000 lb. axle load). The turbine crane lift and laydown slab areas shall be
designed for 600 psf. Site roads and parking areas will be bituminous asphalt
concrete. The steam turbine area will be concrete. All other areas will be
covered with a minimum of 3 in. of gravel underlain by geotextile fabric to
prevent surface erosion and eliminate muddy Site conditions.
10
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
2.2.7 FENCES AND GATES
The plant Site shall be enclosed by an eight (8) ft. high perimeter fence for
security purposes. The fence will be a chain link fence with a V-bar-type
extension carrying three strands of barbed wire on each bar. Access gates will
be supplied as required for main entry and supply access. The main entry gate
shall be made of a 15 ft. swing gate and a 15 ft. cantilever sliding gate with a
motor operator on the sliding section. Other access gates shall be 30 ft. double
swing type. Personnel access gates shall be provided as required, but shall be
limited in number for security purposes.
All fence fabric, posts, barbed wire, hardware, and gates will be galvanized
steel, aluminum-coated steel, or aluminum to reduce deterioration from
atmospheric corrosion.
The substation and transformer area will be separately fenced and provided with
one 30 ft double swing equipment access gate and one personnel access gate.
2.3 STRUCTURAL AND ARCHITECTURAL MATERIALS
2.3.1 CONCRETE
Lean concrete shall have a 28-day strength of 3000 psi. Structural concrete
shall have a 28-day strength of 4000 psi.
Concrete mix will be designed to be chloride resistant, sulfide resistant, and
tolerate hot fluids for brief period of time. Concrete is to be placed over a
compacted class II base, and isolated with geotextile fabric when design
dictates. Concrete poured directed on top of native soil has often failed due to
salt migration into the concrete.
Concrete in acid handling areas shall have an acid and traffic resistant
coating.
2.3.2 REINFORCING STEEL
Reinforcing steel bars shall be Grade 60. All bars shall conform to the
specifications for Deformed Billet Bars for Concrete Reinforcement (ASTM-A615).
The number of different sizes of reinforcing bars used shall be kept to a
minimum. The maximum length of bars shall be 40 ft.
Reinforcing steel bars No. 11 and larger shall be spliced using Cadweld
reinforcing steel splices, "Type T full tension splices", or mechanical splicers
as Lenton Rebar splicing or Denton Grip Plain couplers. All other size bars
shall be lap spliced.
Minimum cover for all reinforcing steel is 3". Highly corrosive areas will be
addressed with appropriate wear and chemical resistant coatings, as opposed to
epoxy coated rebar.
o Standard galvanizing of all structural steel is adequate for Unit 5.
o Load indicating washers are required of load bearing structural steel
joints.
o All structural steel fasteners will be galvanized.
2.3.3 STRUCTURAL STEEL
All structural steel shall be ASTM-A36 unless otherwise specified. All
structural and miscellaneous steel shall be hot-dipped galvanized Field welding
shall be kept to an absolute minimum. Where field welding is required, damaged
galvanizing shall be repaired by the hot-stick method.
11
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Structural members and connections (welded) shall be designed to minimize
warping during galvanizing. Double angle members shall not be used.
2.3.4 STRUCTURAL CONNECTIONS
All field connections of structural members shall be field-bolted with ASTM-A325
high-strength bolts unless otherwise specified. For stairways, girt, and purlins
framing, ASTM-A307 bolts shall be used. Two grades of bolts shall not be used
for the same diameter size.
All ASTM - A325 and A307 bolts and associated nuts and washers will be
hot-dipped or mechanically galvanized.
Bolting for standard shop connections shall be used where practical.
Field connections with high-strength steel bolts shall be bearing-type
connections, except for members having reversible wind or seismic stresses,
which shall require slip critical type connections (friction).
All bolted connections shall be properly tensioned. Load indicating washers
shall be used on galvanized bolts.
Unless supported by calculations, all bolted end connections shall be not less
than the following:
<TABLE>
<CAPTION>
<S> <C>
Beam Depth Bolts in off side Leg of
inches Connection Angles
---------- ------------------------
36 18 = 9 rows
33 16 = 8 rows
30 14 = 7 rows
27 12 = 6 rows
24 10 = 5 rows
21 8 = 4 rows
18 & 16 8 = 4 rows
Beam Depth Bolts in off side Leg of
inches Connection Angles
---------- ------------------------
14 & 12 6 = 3 rows
10 & 8 4 = 2 rows
7 & under 2 = 1 row
</TABLE>
2.3.5 ANCHOR BOLTS
Anchor bolts cast in concrete shall be ASTM-A307 bolts and shall be hot-dipped
or mechanically galvanized for all permanent anchorage such as columns and base
plates. Anchor bolts for removable machinery, the cooling tower basin and sump,
and other areas subject to corrosive conditions shall be stainless steel ASTM -
A193 grade B8 bolts, ASTM - A194 grade 8 nuts and AISI type 304 washers.
Plastic anchor bolt sleeves up to and including 3 in diameter shall be used in
place of steel pipe sleeves for anchor bolts. All sleeves shall be back-filled
with grout.
12
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
2.3.6 STUD ANCHORS
Anchor studs shall be Nelson Shear Connectors S3L or concrete anchors H4L as
manufactured by Nelson Stud Welding Company, or concrete anchor studs headed 2X
type as manufactured by KSM Division, Omark Industries, Inc., or equal.
2.3.7 DRILLED CONCRETE ANCHORS
Drilled concrete anchor bolts shall be redhead wedge type stainless steel,
catalog number WW as manufactured by ITT Phillips Drill Division, or an equal.
In areas subject to damp corrosive conditions or where reversible loads are
anticipated, epoxy capsule anchors (Hilti HVA or Molly Parabond) with stainless
steel threaded rod and nuts shall be used.
Drilled and grouted anchor bolts shall be the same as required under Anchor
Bolts.
2.3.8 STEEL FLOOR DECK (TURBINE SUPPORT STRUCTURE)
Steel floor deck (or steel floor forms) shall be used to form the underside of
concrete floors. Decking will not be selected on the basis of composite design.
Decking will be treated only as a floor form and credit shall not be given for
features compatible with composite design. The deck shall be designed for the
weight of wet concrete to be placed on the deck plus 25 psf to allow for the men
and equipment used to place the concrete. Steel floor deck shall be at least 18
gauge.
Steel floor deck design shall be a minimum of 1 1/2-in deep and shall utilize
interlocking panels as produced by H. H. Robertson Co., Pittsburgh, PA. Steel
deck shall be galvanized steel.
Steel floor decking shall be attached to support framing by tack welding with
minimum 3/4 in diameter fusion welds (puddle) at 12 in on center at all bearing
points, or by other suitable means. The welded deck shall be considered
sufficient to provide full lateral support to the upper flange of framing
members.
2.3.9 DOORS
All standard doors shall be full flush-type, insulated (fire resistant
insulation), hollow metal doors. All hollow metal doors shall be 1 3/4 in thick.
Fire rated metal doors shall be used where required for fire protection.
Pressed metal frames shall be used for hollow metal doors in concrete block
walls (minimum 16 gauge for interior frames and 14 gauge for exterior frames).
Steel channel door frames or pressed metal frames shall be used for hollow metal
doors in concrete and metal siding walls.
Doors and frames shall be coated with a coating system approved by the Owner.
13
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Weatherstripping shall be specified for all exterior doors and for all interior
doors where a controlled atmosphere is required.
Entrance doors shall be wide stile, aluminum framed, full glass swing doors.
Hardware for doors shall be of materials resistant to the corrosive environment.
Locks shall be stainless steel; lock cylinders may be of brass. All leaf doors
shall be supplied with a lock mechanism keyed to the existing ASSA Twin key
system. All leaf doors shall be supplied with heavy duty industrial door
closers.
2.3.10 GRATING AND STAIR TREADS
Grating and stair treads shall be serrated steel or non-skid fiberglass.
Steel grating and stair treads shall be hot-dipped galvanized. Grating for floor
areas and walkways shall be minimum 1 1/4 in thick x 3/16 in x 1 3/16 in bar
spacing. Grating deflection shall be limited to 1/300 of the span. Substitutes
for the standard type of grating shall require the Owner's approval.
Fiberglass grating and stair treads shall be slip resistant configuration using
silica particles integrally embedded in laminate. FRP grating will be Chemgrate,
as supplied by Process Equipment Company, or Great-Grate as supplied by
Fiberglass Reps (510-778-2200) Other FRP use must be approved by owner.
Steel grating shall be placed so that the bearing bars span the short distance
between supports. Where steel grating is placed around equipment or pipe
penetrations, it shall be cut and banded with banding bars equal to the bearing
bars in depth and thickness. Where openings are required in the steel grating,
the designer shall provide for banded cut-outs or shall provide logical breaks
in the grating for easy removal. Banded openings shall have the bandings
extended 4 in above the top grating to act as a kick plate. Banding kick plates
shall be provided at column cut-outs.
Grating shall be supported by appropriate structural steel framing or on
concrete in such a manner as to limit bounce and deflection. Steel grating
sections shall be split and banded when placed around large size equipment
requiring future removal. Grating shall be fastened with stainless steel
hold-down clips.
No allowance shall be made for grating acting to laterally support beams.
Main access stair treads in turbine support structure shall be 11 in minimum
tread depth (including 1" nosing), and riser height 7 in. minimum in accordance
with the Uniform Building Code (UBC). A minimum stair tread of 3 ft wide, with
diamond plate or abrasive-type nosing shall be provided. Stair treads less than
3 ft wide and ship's ladders shall not be used. Stair treads for equipment
access shall be 10 in. minimum tread depth.
Headroom for stairs and landing shall be 7'-0" minimum.
2.3.11 HANDRAILS AND GUARDRAILS
Handrails and guardrails shall be nominal 1 1/4 in diameter railing with nominal
1 1/4 in diameter posts. Handrails and guardrails shall have three horizontal
rails in accordance with Section 1711 (4) of the Uniform Building Code. Railing
and posts shall be Schedule 40, ASTM-A53 Grade B pipe with welded connections.
Where field connections of handrail are required, single-lock splice locks (R&B
Wagner, Inc. Milwaukee, WI, or equal) shall be used to avoid disturbance of
galvanizing. Bends shall be uniform. All pipe shall be smooth and free of burrs
or sharp edges. Posts shall be spaced not more than 8 ft on centers. Removable
handrails with kick plates shall be provided around floor openings with
removable grating or removable concrete slabs.
14
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Handrails and guardrails shall meet the requirements of the California
Administrative Code, Title 8, Chapter 4, Subchapter 7, General Industry Safety
Orders.
Handrails and guardrails shall be hot-dipped galvanized. Internal vent holes
shall be provided to facilitate galvanizing. Vent or drip holes shall be
provided where closed end pipe is subject to water intrusion.
2.3.12 TOE PLATE
A 4 in high toe plate (kick plate) fabricated from 6 X 4 angle steel shall be
provided around all openings and stairs and along all handrails. Toe plates
shall be provided in accordance with the requirements of the California
Administrative Code, Title 8, Chapter 4, Subchapter 7, General Industry Safety
Orders.
Toe plate shall be hot-dipped galvanized and fabricated to preclude field
welding. Platform grating shall be contained by the angle toe plate.
2.3.13 LADDERS
Ladders shall meet the requirements of the California Administrative Code, Title
8, Chapter 4, Subchapter 7, General Industry Safety Orders and shall be 10ft
high maximum without cage and 30 ft high with cage. A self-closing gate or swing
bar shall be provided at the top landings. Self closing swing gates will be FRP
of the same type used at Unit 4. Where cages are required by regulation or
prudence, a Norton "Safety Climb" device or approved equal may be substituted
for the safety cage or may be used to supplement the safety cage. Rungs shall be
non-skid and a minimum of 7/8 in. diameter.
Ladders shall face equipment or equipment support columns where feasible.
When ladders are used to ascend to heights exceeding 20 ft, landing platforms
shall be provided for each 30 ft of height or fraction thereof, except where no
cage or ladder safety device is provided, landing platforms shall be provided
for each 10 ft of height or fraction thereof. Each ladder section shall be
offset from adjacent sections.
Steel ladders, safety cages, and gates shall be hot-dipped galvanized and shall
minimize field welding.
2.3.14 STAIRWAYS AND SAFETY EXITS
Stairways shall be provided as required in buildings to meet accessibility and
fire safety requirements of the California Administrative Codes, Title 8,
Chapter 4, Subchapter 7, General Industry Safety Orders and the NFPA. Main
stairways shall be provided to give access from ground floor levels to upper
floor levels. These main stairways shall be either exterior stairs or interior.
No point in an un-sprinklered building shall be more than 150 ft from an
exterior exit door, horizontal exit, exit passageway, or enclosed stairway,
measured along the line of travel. A minimum of two exits must be provided from
any enclosed room of major proportions. In addition to the main access
stairways, stairways shall be provided to access working platforms wherever
practical.
2.3.15 CONCRETE BLOCK WALLS
Concrete block walls shall consist of grout-filled hollow concrete masonry units
meeting the requirements of the Uniform Building Code. Block walls shall be
anchored to their bases and reinforced using standard reinforcing bars. All
reinforcing and anchorages shall be designed to meet the wind and seismic load
requirements as set forth in this criteria. Wall units shall be nominally 8 in x
8 in x 16 in size, hollow celled.
15
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
2.3.16 INTERIOR PARTITIONS
Interior, fixed partitions shall consist of metal stud walls covered with gypsum
board. Thickness of gypsum board shall meet minimum Uniform Building Code (UBC)
requirements. Partition walls shall use minimum 5/8 in fire rated gypsum board
where a fire rating is necessary. Where gypsum board is to be provided in moist
areas, special consideration shall be made for protective membranes. Partitions
shall be protected by means of coverings or coatings. All partitions shall meet
the requirements of these design criteria for seismic design as exposure
dictates and the UBC requirements for deflection limitations.
2.3.17 CHECKERED PLATE
Checkered plate shall be used only where absolutely necessary. When used, for
trench covers, hatches, or flooring, material shall be a minimum of 5/16 in
thick steel and shall have a diamond tread pattern on its upper surface. Care
shall be taken to limit deflections and stiffen the plates as required for
adequate design. Steel checkered plate shall be hot-dipped galvanized. Field
welding of checkered plate is not allowed.
2.4 PLATFORMS
Platforms with ladders or stairs shall be provided as required to permit service
and maintenance of valves and other equipment not readily accessible from the
main floors. Platforms shall be designed to provide a minimum of 7'-0" head room
underneath the platform framing. Platforms shall be normally covered with
grating and shall have handrail and kickplate on all exposed sides. Portable
platforms shall not be used unless approved by the Owner.
Where platforms are designed to service valves or other pieces of equipment, the
stairways or access ladders to the platform shall be designed to meet California
Administration Code, Title 8, Chapter 4, Subchapter 7, General Industry Safety
Orders requirements for safety and accessibility.
Wherever practical, all platform layouts shall allow for at least 3'-0" clear
access and working space around all equipment. Particular attention shall be
given to the design of platform posts or hangers and platform stability by using
sufficient bracing to prevent sway, bounce, or racking of the platform.
2.5 STRUCTURAL METHODS FOR FIRE PROTECTION
Concrete block walls or fire rated siding shall be provided where needed, to
prevent the propagation of fire. Structural steel, where required, shall be
two-hour fire rated and fireproof coated with Mandoseal P-50, Therm-Shield 40,
or equal. In the final configuration, the columns shall have UL Design X-719 and
beams UL Design N-724. All cable tray and pipe chase penetrations and
miscellaneous penetrations of a similar nature through walls shall be sealed
with Dow Corning 3-6548 silicone RTV foam, or equal.
2.6 EQUIPMENT REMOVAL
Provisions shall be made for removal of equipment through floored areas.
2.6.1 HATCHES
Openings with removable concrete plugs, gratings, or checkered plate shall be
provided in elevated floors in areas where temporary access is needed for the
removal of heavy pieces of equipment. A removable handrail shall be provided for
placement around these temporary openings.
2.6.2 MONORAILS
Subsequently, the Contractor shall design the steel framing above a prospective
area requiring the monorail-hoist system for the estimated loading of that
system in addition to other loads. Monorails shall
16
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
be "S" hot rolled steel shapes sized to specific hoist load ranges unless
otherwise directed by a particular trolley manufacturer.
2.7 DESIGN LOADS FOR BUILDINGS, STRUCTURES AND EQUIPMENT
This section describes the design loads that shall be considered in the
structural design of building systems, equipment, and structural elements within
the plant. These loads shall include but may not be limited to the following
load types:
Dead loads
Live loads
Equipment loads
Wind loads
Earthquake loads
Special load allowances
2.7.1 DEAD LOADS
Dead loads acting on a structure or a portion thereof shall consist of the
weight of all permanent construction, including that for foundations, framing,
walls, floors, roofs, partitions, stairways, and all fixed service equipment.
2.7.2 LIVE LOADS
For the purpose of this design criteria, "live loads" shall be considered to be
those loads applied as non-fixed floor or roof loads.
The live loads listed in Table 8.2-1 shall be the minimum used for structural
design. Live loads include all loads other than dead loads, load allowances,
equipment loads, and special loads. Live loads are considered to consist of
loadings not permanently fixed to the structures and occurring over areas not
occupied by equipment. Actual equipment loads shall be used wherever they exceed
the live load specified for that particular area, and the live loading may be
omitted from design consideration where actual equipment is placed.
2.7.3 EQUIPMENT LOADS
Where specific equipment is to be placed on a floor system or within an area to
be loaded, for structural design purposes, that equipment load shall be applied
to the structure in lieu of floor loads as defined above. Should specific
loading information not be available for equipment, a conservative estimate of
that equipment's loads shall be made and applied using available vendor
information and literature, wherever possible and practical. Estimated loads
shall be verified upon receipt of Vendor Data. Where no equipment loads are
available from specific vendor information or available literature, the designer
shall consider appropriate Table 8.2-1 floor loads to be used; if necessary,
these live loads shall be increased to accommodate the anticipated loading
conditions.
2.7.4 WIND LOADS
Buildings and elevated structures shall be designed for wind load considerations
in addition to other loading conditions identified herein. Wind loads shall be
in accordance with the Uniform Building Code using a basic wind velocity of 75
mph at the standard height of 33 feet above ground and with exposure C
conditions. The Normal Force Method (Method 1) of the Uniform Building Code has
been used to determine wind forces. An importance factor of I=1.15 has been used
for all structures and equipment.
17
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
2.7.5 SEISMIC LOADING
The project is located in an area of frequent and intense seismic activity and
is classified as Zone 4 by the Uniform Building Code risk map. Zone 4 is
associated with close proximity to major fault systems.
Plant structures and equipment shall be designed by the Equivalent Lateral Force
method. Forces shall be developed from the criteria contained herein.
2.7.6 STRUCTURES
All structures shall be designed for the Equivalent Lateral Force developed by
the UBC for Seismic zone 4.
The distribution of lateral forces to structures shall be in accordance with the
requirements set forth in the UBC.
2.7.7 EQUIPMENT
The turbine and generator equipment shall be designed for an Equivalent Lateral
Force of 0.45W and a Simultaneous Vertical Force of 0.30W.
All other equipment shall be designed for the Equivalent Lateral Force developed
by the Equipment anchorages (anchors, supports, bases, skirts, etc) shall be
designed for the forces developed for the equipment except that equipment
anchorages shall be designed for I = 1.5 (Importance Factor).
LP and VLP Separators
Atmospheric Flash Tanks
Turbine Generator
Main Condenser
Air Removal Equipment
Vacuum Pumps
Condensate Pumps
. Circ-Water Pumps/Auxiliary Cooling Water Pumps
Heat Exchangers
Transformers and Switchyard Structures
Switchgear, Motor Control Centers, Power Distribution Centers,
Load Centers,
Distributed Control System, and Main Control Panel.
Gantry Crane
Air Compressors
Turbine Lube Oil Components
Fire Protection Pumps & Diesel Drive
Emergency Power Generator
Demisters and scrubbers
Brine Pumps
The Equivalent Lateral Force shall be applied to the center of gravity of the
equipment.
2.8 FOUNDATIONS
Structures and equipment foundations shall be designed to the parameters
described in Geotechnical Design Criteria. Foundations shall bear on either soil
structural replacement fill or on piles. Piles will be precast concrete.
18
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
TABLE 8.2-1
<TABLE>
<CAPTION>
MINIMUM LIVE LOADS*
Live Load, Live Load, Psf
Floors** Columns and
Location Psf Footings Remarks
--- -------- -------
<S> <C> <C> <C>
a. General
-------
Stairs 100 50 See Note 1
Corridors and Lobbies 100 50
Storage, Heavy 250 250
Roofs 30 30
Platforms 100 100 See Note 7
b. Turbine Area
------------
Ground Floor
General Areas 250 100 See Note 6
Turbine Structure
Operating Level
Rotor Removal Area Concrete 600 600 See Notes 3 and 6
Concrete Laydown Area 300 220 See Notes 5 and 6
Remainder of Concrete Areas 250 200 See Note 5
Grating or Checkered Plate 200 125
c. PDC Building (Elec. Equip.)
Ground Floor 250 150
</TABLE>
* These loads are minimum loads. Where actual loading information is
available, it shall be used with due consideration for contingency loading.
** Girders carrying live loads of 100 psf or less, may be reduced as allowed
by UBC Sec. 2306.
19
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
NOTES:
-----
1. Members shall be designed to support safely the uniformly distributed
live load or a concentrated load of 300 lb on an area of 4 sq in at the
center of the tread.
2. Floor members shall be designed to support the uniform live load or a
concentrated load of 3,000 lb, whichever produces the greater stresses.
The concentrated load shall be applied on an area 2 1/2 ft sq located so
as to produce a maximum stress. This loading shall not be carried to
girders, columns, or footings.
3. All slabs at the generator end of the unit shall be designed for an
anticipated live load of 600 psf. The beams and girders shall be
designed for a live load of 300 psf, or a concentrated load of one-half
the weight of the rotor, plus 100 psf, whichever is higher. The
remainder of the operating floor (grating areas) is not to be used for
turbine laydown purposes.
4. The accumulation of live load for all grating floors, walkways, and
miscellaneous platforms to any column shall not exceed 50 kips.
5. When automotive or lift trucks are to be used on floors, the members,
grating, and floor slabs shall be designed for wheel loading. Vehicle
paths shall be shown on drawings.
6. Girder design shall consider the condition with both ends of the rotor
cribbed on the floor simultaneously. Actual loading in the lay-down area
for turbine-generator parts and the movement of large equipment to final
locations shall be accommodated.
7. Platforms where heavy maintenance may occur shall be designed for a
live load of 150 psf.
20
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
3. GEOTECHNICAL DESIGN CRITERIA
3.1 PURPOSE
This chapter describes preliminary basic criteria to be used for the
geotechnical design of the station. This criteria will be revised and updated,
as required, after the on-site geotechnical reports become available.
The goal of the preliminary criteria is to provide a basis for the initial
design for foundations, roads and buried structures. The design should mitigate,
as much as possible, the effects of the Zone 4 UBC earthquake as well as
minimize static settlements, both total and differential.
The effects of the Zone 4 earthquake include liquefaction of the upper soil
strata, dynamic shakedown, regional tilting, and ground rupture. The first two
effects, liquefaction and shakedown, are the only effects that can be reasonably
dealt with. To mitigate these effects, the structure induced stress increase to
the unsuitable soil layers should be minimized. The best way to minimize the
stress increases is to found the structures below the inadequate soil layers.
This would be the preferred solution for all structures, and it is the only
solution for settlement sensitive structures such as the turbine structure. It
is not economical to use deep foundations for all structures, so for
non-settlement sensitive structures, the removal of a reasonable amount of
unsuitable material will be considered and replacement with reinforced
structural fill to help minimize the stress increases. For very light structural
loads, structural fill without reinforcement will be considered to be adequate.
A design based on minimizing the earthquake effects will also minimize the
static settlements.
3.2 EXCAVATION AND REINFORCED STRUCTURAL BACKFILL
Excavations will be backfilled with structural fill compacted to a dry density
of 95 percent of the maximum dry density as determined by ASTM D1557. The
structural fill will be placed at a moisture content between optimum and 3
percent less than optimum. The structural fill shall be similar to Caltrans
Class 2 Aggregate Base with an increase of fines to reduce permeability. The
gradation is shown in the following table.
Where drainage is required, an aggregate subbase material will be used in
conjunction with a geotextile filler fabric. The subbase material gradation is
shown in the following table.
Common fill, consisting of excavated on-site soils, may be used as appropriate.
It shall be compacted to a dry density of 90 percent of the maximum dry density
as determined by ASTM D1557 and at a water content of + or - 3 percent of
optimum moisture content.
A geotextile filter fabric will be specified on the drawings which shall have an
equivalent sieve size to prevent piping or flow of fine sands and silts into the
subbase material.
The structural fill reinforcement will be used as required to: 1) enhance
vertical stress distribution to reduce settlement and stress concentrations
within the weak layers susceptible to liquefaction, and 2) create a reinforced
soil structure to resist potential seismic effects. The geogrid should have high
strengths in both principal directions at low strains and be heat resistant to
accommodate the temperatures of the brine.
Possible recommendation for structural fill subbase materials are:
21
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
<TABLE>
<CAPTION>
<S> <C> <C>
Fill Type Sieve Size Percentage Passing by Weight
--------- ---------- ----------------------------
Structural Fill 2 inch 100
1 1/2 inch 87-100
3/4 inch 45-90
No. 4 20-50
No. 30 6-29
No. 200 5-12
Subbase Material 3 inch 100
2 1/2 inch 80-100
1 inch 45-80
1/2 inch 25-50
No. 4 0-5
</TABLE>
3.3 BASIC DATA FOR FOUNDATIONS ON SOIL
3.3.1 BEARING CAPACITY
The allowable bearing stress for footings and mats founded on structural fill is
expected to be 4.5 ksf. The allowable increase for wind or seismic loading
combinations is 1/3. Settlements for shallow footing and small mats are expected
to be on the order of 1 1/2 inches or less, with 3/4 inch or less differential
settlement.
If differential settlement between footings needs to be minimized, an allowable
bearing stress of approximately 2 ksf with an allowable increase for wind or
seismic loading combinations of 1/3 will be used. Static settlements will be
limited to 1 inch or less, with differential settlement less than 1/2 inch.
The settlement resulting from earthquake loadings will be controlled by seismic
shakedown of the upper 60 feet of loose material and can be on the order of 6
inches or more.
3.3.2 DEEP FOUNDATIONS
Piles and stone columns will be considered of ruse as deep foundations. The
following table is provided listing pile size and vertical and lateral capacity.
Typical spacing will be approximately 7 to 8 ft. center to center. In isolated
areas, a minimum spacing of 4 ft., center to center, would be allowable for
clusters or for pile adjustments necessary for foundation interferences. Pile
load capacities anticipated are based on previous load tests in the vicinity and
are provided below.
<TABLE>
<CAPTION>
<S> <C> <C>
Pile Size Vertical Capacity Lateral Capacity
--------- ----------------- ----------------
(in) (kips) (kips)
12 130 10
14 130 14
16 130 20
</TABLE>
Lateral capacity is for seismic loading, which includes the vertical and lateral
loads with the 1/3 increase in the vertical load. Lateral movement will be on
the order of 1/2 inch or less.
22
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Spring constants for pile reaction will be determined from the pile load tests.
The lateral spring constant (Kh) for the pile/soil reaction is anticipated to be
23 K/in. The dynamic vertical spring constant (Kv) will be approximately 1600
K/in., and the static vertical spring constant (Kv) will be approximately 730
K/in.
3.3.3 UNIT WEIGHT
The following table is provided listing of preliminary material types and
corresponding unit weights.
<TABLE>
<CAPTION>
<S> <C> <C>
Wet Unit Weight Buoyant Unit Weight
Soil Type (pcf) (pcf)
--------- --------- ------------
Insitu Soil 125 62
Common Fill 130 68
Structural and
Subbase Fill 135 73
</TABLE>
3.3.4 POISSON'S RATIO
The Poisson's ratio for the insitu material is approximately 0.3.
3.3.5 MINIMUM DEPTH OF FOUNDATIONS
The ring walls used in the large tanks should be founded at least 3 ft. below
the lowest adjacent soil surface to minimize settlement.
3.3.6 GROUND WATER
The existing ground water elevation will be provided after receiving the
geotechnical report.
3.3.7 ROADS
Pavement thickness design can be based on the following table listing soil type
and the corresponding CBR value. The road will be designed for a H-20 loading.
Soil Type CBR
-------------------------------------- ---
Compacted Structural Fill 70
Insitu Soils at Existing Grade 2
Site Soils (Sands and Silts) Compacted 15
to 90% ASTM D1557
Soil Cement (10% Mix Ratio Cement
to Dry Soil) 70
3.3.8 MODULUS OF SUBGRADE REACTION
The modulus of subgrade reaction for insitu material will be approximately
14+/ft(3). The modulus of subgrade reaction for structural fill and soil cement
is approximately 50+/ft(2).
3.4 LATERAL EARTH PRESSURE
Preliminary lateral earth pressures will be determined based on the following
table.
23
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
<TABLE>
<CAPTION>
Coefficient of
Soil Lateral Earth
Soil Type Condition Pressure (K)
------------------ --------- --------------
<S> <C> <C>
Insitu Soils 0'-6' Active .59
At Rest .74
Passive 1.70
Insitu Soils 6'-14' Active .31
At Rest .47
Passive 3.26
Compacted Fill
On Site to 90% Mod. Active .49
Sand, Silt & Clay Mix At Rest .66
Passive 2.04
Compacted Structural Fill Active .20
At Rest .33
Passive 5.05
</TABLE>
3.5 COEFFICIENTS OF FRICTION
The friction angle to be used for concrete against structural and subbase fill
should be 35(degree) (=0.70). The friction angle to be used for concrete against
common fill (silts & sands) should be 20(degree) (=0.36).
Other information may be obtained from the Geotechnical Report, Attachment 6,
document 4.0-1.
24
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
4. ELECTRICAL DESIGN CRITERIA
4.1 GENERAL INFORMATION AND PURPOSE
This document is designed to provide basic Electrical design criteria and design
guides necessary to properly design the Salton Sea Unit 5 geothermal power plant
(the Project).
As applicable, the design shall meet the requirements of the current revision of
the National Electric Code (NEC), the National Electrical Safety Code (NESC) and
the California Codes. The requirements of Underwriters Laboratories (UL) and
Factory Mutual (FM) shall also be met.
The electrical system will operate at a power factor of 0.95 or better. The oil
filled Generator Step-Up Transformer and station service transformers will each
have two 2 1/2% taps above and below the center tap. The tap changers on the
generator step-up transformer shall be on the high side and shall be of the
automatic load type.
Transformer ratings should not exceed their normal operation loads by more than
25%, except where required by motor starting limitations.
25
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Service voltages are:
13.8 KV volts, three-phase, 60 cycle, 4 wire wye, resistance grounded
neutral;
4160 volts, three-phase, 60 cycle, 4 wire wye, low resistance grounded
neutral;
480 volts, three-phase, 60 cycle, 4 wire wye, high resistance grounded
neutral;
120/208 volt, three-phase, 60 cycle, 4 wire wye, solid grounded neutral;
277/480 volt, three-phase, 60 cycle, 4 wire wye, solid grounded neutral;
The Step-Up transformer will supply power to the IID System at 92 kV.
The plant will be designed to be controlled from the existing Region 1 control
room located at Unit 3. The switchgear, motor controls, batteries, UPS system,
I/O cabinets and logic cabinets for the Unit 5 DCS system, the generator
excitation switchgear, turbine governor system, vibration monitoring and other
control cabinets for Unit 5 will be located in a new Unit 5 modular electrical
building called the Power Distribution Center (PDC) furnished and installed by
the Contractor. A redundant data highway will be installed from this PDC to the
common control room. Control insert panels for the voltage regulator and
governor control will be mounted in the combined control room at Unit 3.
All control will be through the DCS System.
All modular electrical equipment buildings shall have redundant HVAC systems
equipped with filtration suitable for a geothermal atmosphere, and these
buildings shall be pressurized. Modules will be interconnected and main access
doors shall have air locks.
4.2 RACEWAY SYSTEMS
Properly designed raceway systems will provide for the safety and accessibility
of electrical circuits. They will also provide spare circuit and feeder capacity
for initial and future needs, as well as flexibility to accommodate future
changes and rearrangements of cable runs.
Raceway systems will consist primarily of conduits, cable trays, and underground
ducts. Cable trenches will not be used.
4.2.1 SYSTEM REQUIREMENTS
The functions of a raceway system are to provide a means of supporting cable
runs between electrical equipment and physical protection to the cables, and,
for a metallic raceway system, to provide a path to ground for the
noncurrent-carrying part of an electrical system. Electrical raceways will carry
power, control, lighting, instrumentation, and CCTV cables.
Adequate spare capacity in raceways will be provided whenever feasible or
practicable. Since every raceway system is unique, there is no strict rule to
determine the percent of spare capacity; however, a minimum of 30percent spare
ducts will be provided in duct banks at time of installation. The Contractor
will employ good engineering judgment in providing spare capacity in raceway
systems but the minimum acceptable in any raceway shall be fifteen percent.
The metallic portion of all raceway systems will be electrically continuous and
grounded.
26
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Special attention will be paid to the adequacy of the raceway system. The
National Electrical Code (NEC) regulations provide information for the
installation of lighting systems and electrical systems in offices, warehouses,
shops, computer room, elevators, switchboards and panelboards, and temporary
construction power. In addition to safety and ample capacity, the raceway system
will provide flexibility to accommodate future changes in the electrical system
or will be routed along pipe support systems.
The routing of conduit runs and cable trays will be laid out to avoid conflict
with passageways or blocking access to equipment for operation, removal, or
maintenance. Exposed raceway systems shall be routed to run either parallel or
perpendicular to building structures.
Conduit approaches to equipment shall be embedded whenever possible to avoid
conflict with equipment access for removal or maintenance.
All trays and exposed conduit near piping will be located to provide at least 6
in. clearance, after the maximum expected deflection of pipe, between the
raceway and the pipe to permit space for the application of insulation on the
pipe. Where pipe insulation surfaces are allowed to exceed 150 F, Clearance
shall be increased to 12 inches. All raceways shall be designed to provide safe
clearance from all process vents and heat sources.
Independent raceway systems will be utilized to separate primary and backup
protective relaying systems and redundant electrical circuits.
Raceway fill will be monitored by the Owner during the design and construction
phases.
The raceway system is expected to remain in service for the life of the plant
with little or no maintenance. The raceway system will have sufficient
flexibility to be adaptable to changes.
The latest issue of the following codes and standards will be used where
applicable to the design, manufacture, and installation of raceway systems:
NEC National Electrical Code
UL1 Flexible Metal Conduit
UL6 Rigid Metallic Conduit
UL543 Fiber Conduit
UL651 Rigid Nonmetallic Conduit
NEMA TC6 Underground Duct
NEMA BC1 Bituminized-Fibre Conduits
and Fittings for Electrical Use
NEMA VE1 Cable Tray Systems
API RP-500A American Petroleum
27
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Institute Recommended
Practice for Classification
of Area for Electrical
Installation in
Petroleum Refineries
NFPA No. 497 National Fire Protection
Association
Raceway systems will be designed to allow for early partial installation of some
sections so that they may be used during construction. This is particularly true
in lighting and power outlet systems, fire protection, and water supply systems.
4.2.2 SYSTEM DESIGN
Electrical materials shall be as follows:
Area Equipment Material
---- --------- --------
All Areas Tray Hot dipped Galvanized Steel
Except Cooling Conduit Hot dipped Galvanized Steel
Tower Cable Tray Cable
Strut. Hot dipped Galvanized Steel
Cooling Tower Tray Fiberglass UV Resistant
Conduit P.V.C. UV Resistant
Cable Tray Cable with Ground Conductor
Strut. Fiberglass UV Resistant
4.2.2.1 CONDUIT
Conduit will be as follows:
a. UV resistant fiberglass tray and hot dipped galvanized steel
conduit shall be employed between the PDC and the cooling towers,
and in the cooling tower area. Hot-dipped galvanized steel
conduit and tray shall be employed in all other areas.
b. Only Schedule 80 PVC shall be used underground.
c. Conduit concealed in floor slabs or otherwise embedded in
concrete structural members shall be rigid galvanized steel.
d. EMT may be used inside buildings for lighting circuits where
adequately protected as required by the NEC.
Metallic conduit and fittings will be of the threaded type.
Conduit sizes shall be based on percent fill as required by NEC. Sizes are
limited to 3/4, 1, 1 1/2, 2, 3 and 4in. to minimize stock inventories.
28
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Where embedded conduit crosses a vibration joint in a slab, either an 18 in.
length of flexible steel conduit, wrapped with 1/2 in. of oakum and three
thicknesses of burlap, will be installed and thoroughly painted with asphaltum,
or a Crouse-Hinds XD coupling may be used.
Unused conduit will be capped to prevent entrance of foreign material.
Conduit bend radii will conform to NEC articles 300-34 and 346-10. Conduit will
not be supported by process piping but may be supported on pipe racks.
Conduit systems will be designed to minimize the pulling tension of cables.
Maximum length of runs, number of bends, and spacing of pull boxes and condulets
will be predetermined by the Contractor to allow cable to be installed and
removed without exceeding permissible pull tension or side wall pressure which
ever is the lesser value, with minimum difficulty, and without damage to cable.
General rules to be followed are that no exposed conduit will be designed with
more than four equivalent 90 deg bends and no concealed conduit will be designed
with more than two equivalent 90 deg bends between pull boxes or terminal
devices.
Classification of hazardous, semi-hazardous and non-hazardous shall be based on
the latest edition of the American Petroleum Institute Classification of Area
for Electrical Installations in Petroleum Refineries".
In general, conduit will be shown diagrammatic on drawings. Where required to
facilitate installation or to minimize interference, the runs will be
dimensioned.
Pull boxes and junction boxes will provide access points for pulling and feeding
conductors in the raceway. In straight pulls, the length of the box will be at
least twelve times the diameter of the largest conduit. In angle pulls, the
distance between the conduit entry side and opposite wall side of the box will
be at least six times the diameter of the largest conduit, plus the sum of the
diameters of parallel conduits entering the box; the distance between conduit
entries for the same conductor will not be less than ten times the diameter of
the largest conduit. Boxes involving both straight and angle pulls will be sized
by combining the above rules. Pull sleeves as manufactured by OZ may be provided
in straight runs.
Fittings of the "Condulet" type will not be used as splicing points.
To the extent practical, conduits will enter junction boxes from below.
Outdoors, the conduit will terminate at the box with a "T" fitting and plug to
allow for draining the conduit.
Conduit fittings will preferably be of the same basic material as the conduit.
Where necessary at connections to small devices such as push-button stations,
solenoid operated valves, etc, a suitable box or condulet will be used to
provide proper space for cable terminations. They shall be Crouse-Hinds Form 8
with cast cover or approved equivalent.
4.2.2.2 LIQUID TIGHT FLEXIBLE METALLIC CONDUIT
Liquid tight flexible hot dipped galvanized conduit will be used between rigid
metal conduit and equipment conduit boxes on all motors, connections to
thermocouples, or in any situation where vibration is anticipated.
Flexible conduit length should be as short as practicable, but not less than 1.6
times the minimum bending radii recommended for the cable which is to be
installed. Flexible conduit will permit free movement of vibratory equipment.
29
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Electrical continuity between conduit and equipment will be provided by suitable
connectors or jumpers. Refer to Section 4.4.3.3, Grounding, for methods of
installing jumpers.
4.2.2.3 CABLE TRAYS
The design and installation of the tray system will conform to Article 318 of
the NEC.
The cable tray system will consist of units of suitable strength and rigidity,
forming a continuous rigid assembly for providing support for all contained
cables. It will not present sharp edges, burrs, or projections which would be
injurious to the insulation or jackets of the cable, will have side rails or
equivalent structural members, and will include fittings for changes in
direction and elevation of runs.
Hot-dipped galvanized steel will be utilized for all areas within the Power
Generation Facility, Brine Processing Equipment, Turbine Building and Control
Building. Width will be 12-36 in., with minimum inside depth of 4 in. and rung
spacing of 9 in. All bend sections will have a 1 or 2 ft radius. In special
situations other sizes may be used and noted on the drawings.
Cable tray run between the PDC and the cooling towers and cable tray in the
cooling tower area shall be UV resistant fiberglass tray.
Tray covers, will be ventilated, requiring no derating of cable. Trays will not
be located close to heat sources or process vents unless cables are derated for
the expected temperature. Horizontal cable trays exposed to falling debris and
water, will be covered on the top tray only. All outdoor trays will be covered.
The longitudinal distance between tray supports will not exceed 8 ft. Vertical
distance between stacked trays (i.e., bottom to bottom of tray or bottom to
ceiling) will be 16 in., unless otherwise noted on the drawings.
Trays will not be supported by process piping, but may be supported from the
structural members of the pipe racks. Straight runs in excess of 200 ft. and
areas where trays cross building joints will be provided with expansion joints.
For calculating tray support requirements, the following weight of cable per
linear foot of tray will be used:
Tray Width Loading
(In.) (lb/ft)
---------- -------
12 20
18 to 36 50
30
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Supports will be designed to perform, without damage or permanent deformation,
loads as specified above multiplied by safety factor of 3.3. In addition the
trays must withstand a point load of 250 lbs applied at mid-span without damage
or permanent deformation. Supports will be designed for seismic zone 4.
Cable trays will be given letter designations according to service as follows:
"H" trays for 5kVand above power cable.
"P" trays for 600Vpower and control cable.
"I" trays for low-level signal shielded and non-shielded instrumentation cables.
All cable tray systems will be designed so that the higher voltage cable tray is
above the lower voltage cable.
Most cables will leave trays from below. A standard drop-out fitting will be
used to ensure that the cable minimum bending radius is maintained.
All cable trays will be dimensioned on the Contractor's tray layout drawings and
checked for interference with other plant equipment by the Contractor.
4.2.2.4 UNDERGROUND DUCT SYSTEMS
Ducts to be encased in concrete, as in a bank, will be 4 in. PVC. Where long
runs to isolated loads are required, and where conduit is to be used as a ground
return, rigid galvanized steel conduit will be used.
Layout of the underground system will be designed so that a minimum of handholds
or manholes are required.
Ducts for direct burial, as in single runs, will be rigid galvanized steel,
utilized for isolated nonprocess loads, such as substation lighting.
Duct sizes are based on 50 percent fill for one cable, 31 percent for two
cables, and 40 percent for three or more cables and are limited to 4 in.
When ducts turn up for termination near building walls, equipment foundations,
or elsewhere, a female threaded bushing will be installed flush with the
concrete, and a flush plug installed.
Ducts will be spaced to provide adequate heat transfer, and cables in ducts will
be derated according to duct configurations.
Concrete for conduit encasement and duct banks shall be 3,000 psi with aggregate
3/4-inch or smaller. Concrete shall be colored red by the addition of 10 pounds
of red oxide powder to each cubic yard of mix. The coloring shall be thoroughly
mixed into the concrete before pouring. Concrete shall be thoroughly vibrated
during placement to eliminate voids. Such vibration shall be carefully
performed, so that conduit spacing will not be disturbed. Non-metallic spacers,
tie-downs, and bracing shall be provided to maintain conduits in place during
the pouring of the concrete. Where ductbank passes under roads, other areas
where heavy traffic may be expected, or where ductbank bridges over pipe runs,
reinforcing bar shall be used.
31
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Spacers shall be located at 10 ft. intervals.
The minimum depth from grade to top of the concrete envelope shall be 18 inches.
Maximum depth shall be 6 feet 0 inches.
All RGS conduit underground joints shall be made wrench tight with proper
lubricant, taped with two layers of plastic electricians tape, one layer of
friction tape and painted with Glyptol.
Duct runs will be as straight as practicable, avoiding major interference with
foundations, pipes, etc. The straight line route between pulling points will be
selected without regard for paralleling or being perpendicular to building steel
or underground piping. Anticipated use of excavations common to other
underground work will, however, influence the routing, particularly on long
runs.
When bends are required to avoid obstructions, they will be located as close as
possible to an end rather than in the middle of the run. This applies to both
horizontal and vertical bends.
Duct lengths will be such that the maximum pulling tension and side wall
pressure, recommended by cable manufacturers are not exceeded.
The length of duct between pulling points will not exceed:
Straight run (with up to 30 deg in bends) - 550 ft
Up to 90 deg in bends - Length to be based on not exceeding maximum
allowable side wall pressure
Up to 180 deg in bends - Length to be based on not exceeding maximum
allowable side wall pressure
Runs requiring more bending (max 270 deg.) may be used in extreme cases, but
will not exceed 50 ft in total length. A curve using the above points can be
made to select maximum duct run lengths for intermediate bend angles. The above
lengths are based on the assumption that the most fragile cable will have a
maximum pulling tension of 30 lb. Cables with less than 30 lb max tension
require either shorter ducts or a messenger cable for installation.
Each bend will have the largest possible radius consistent with duct
configuration and material being used. Horizontal bends are more adaptable to
large radii than vertical bends which are quite often restricted when turning up
to equipment.
The cable side wall pressures to be observed during installation usually dictate
the minimum radius that can be used. Side wall pressures will be satisfactory if
the maximum pulling tension in pounds is not more than 200 times the minimum
bend radius in feet.
32
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
The minimum bending radius can be determined as follows:
1. For bends up to 90 deg.
200 R = 1.095 WL - 1.75 WR
or
R = 1.095 WL
------------
200 + 1.75 W
2. For two bends up to 90 deg. each
200 R = 1.75 WL - 5.5 WR
or
R = 1.75 WL
-----------
200 + 5.5 W
R = Duct radius, ft
W = Combined unit weight of all cables to be pulled into duct,
lb/ft
L = Total length of duct, ft
(The coefficient of friction is assumed to be 0.5)
All cable pulling points will have covers large enough to permit exit and
reentry of cable without compromising the minimum bending radius of the largest
cable to be pulled through.
Duct bank standard design for power cables will not exceed 12 normally operating
circuits in each bank. Larger banks which contain both power and control cables
will have the power cables in the top row and/or in the extreme outer vertical
rows.
Power cables shall be spaced in accordance with API 550, Section 7, Table8.4-3,
except for single motor feeds where the power cables are lightly loaded and RGS
conduit is used. In these instances, power cables and instrumentation wire shall
be spaced much closer than recommended in API550. This is considered acceptable
due to the shielding affect of both rigid galvanized steel conduit and twisted
pair instrumentation wire.
Spacing of ducts within the group will conform to dimensions of commercially
available spacers. The design will permit reasonable (15 percent) deviations, in
the spacing dimensions, to allow for the use of spacer material which may be
unknown when the design is developed, and, also, for installation tolerances.
33
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
4.2.3 INSULATED WIRE AND CABLE
The Contractor will specify, procure, schedule and install the following types
of wire and cable:
15 kV, 5 kV and 600 V Power Cables
600 V Control Cable
300 V or 600V Instrument Cable
300 V Thermocouple Extension Wire
Coaxial and Triaxial Cable
Lighting Wire
Fibre Optic Cable
The turbine vendor will provide wire and cable within their scope of supply
specifications. This wire and cable, shall be in accordance with these
specifications or will be subject to the Owner's approval.
<TABLE>
<CAPTION>
DEFINITIONS
<S> <C>
Power Cable - Low voltage (600 Vor less) cable and medium voltage (601 -
15,000v) cable used to supply power to utilization equipment of
the plant auxiliary system.
Control Cable - Multi-conductor cable used at relatively low
current levels or used for intermittent operation to
change the operating status of utilization equipment
of the plant auxiliary system. Low current levels
include single phase a-c and d-c currents up to 10amps
continuous.
Instrument Cable - Low level signal cable operating at 50Vand
less, generally transmitting low level, under 1amp,
information.
Thermocouple - Low level signal cable operating at 50Vand less, used for
Extension Wire temperature transmission from thermocouples.
Coaxial Cable - Shielded, single-conductor cable with special
electrical characteristics used for accurate
transmission of low level signal information.
Triaxial Cable - Single-conductor cable with two concentric
shields having special electrical characteristics used
for the accurate transmission of small signal
information.
Lighting Wire - Low voltage power cable used to feed the plant's lighting system.
Triplex Cable - A cable consisting of three insulated and
jacketed conductors twisted together, without a common
overall jacket.
</TABLE>
34
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
<TABLE>
<S> <C>
Three Conductor - A cable consisting of three insulated or insu-
Cable (3/C) lated and jacketed conductors twisted together
with common overall jacket.
Thermoplastic - A plastic insulation material which softens when
Insulation heated above a certain temperature.
Thermosetting - An insulation material that when cured by the
Insulation application of heat, chemical crosslinking or radiation
crosslinking, changes into a substantially infusable and insoluble
material.
Ampacity - The current-carrying capability of a wire or cable, expressed in
amperes.
AWG - American Wire Gage - Standard numerical identification method for
cable sizes.
Intermittent - Operation for not more than 40 percent of the time or for not
longer than 30 min. for any one operation.
</TABLE>
4.2.4 SYSTEM REQUIREMENTS
The electrical wire and cable outlined in this criteria provides reliable
transmission of energy and information to utilization equipment. The conductors,
insulation and jacketing materials are selected to be suitable for the
electrical load and environmental conditions encountered during the expected
30-year life of the plant.
In general, wire and cable will be specified and procured in the following
categories:
5 and 15 kV Power Cable
600 V Power Cable
600 V Control Cable
300 V or 600 V Instrument Cable
300 V Thermocouple Extension Wire
Coaxial and Triaxial Cable
Lighting Wire
Fibre Optic Cable
Miscellaneous Wire & Cable
All power and control cable conductors will be copper.
35
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
The cables are installed in raceway systems (including conduits and trays) in
accordance with specific raceway fill requirements. Where applicable, the cables
are firmly attached to the raceway or otherwise firmly supported.
4.2.4.1 CABLE TESTING
Prior to their connection to equipment, all cables are to be tested in
accordance with the following table and procedures.
Cable Size 5,000 volt 15,000 volt
AWG 600volt (Unshielded) (Shielded)
--- ------- ------------ ----------
8 & smaller 1.5 5.0
6 1.0 4.0
1/0 to 4 inc. 0.4 2.5
2/0 - 250 MCM 0.3 2.0 4.0
300 MCM and
larger 0.2 1.5 3.0
High-pot testing of all power cable is to be witnessed by the Owner or his
representative.
4.2.4.2 INSTRUMENT, THERMOCOUPLE, COMMUNICATION, COAXIAL AND TRIAXIAL CABLE
1. Perform continuity and ground check before connecting to
equipment.
2. Perform cable shield (if applicable) continuity check before
connecting to equipment.
3. Meggering is only required for cable in ducts 50 ft and longer,
and buried conduit. When meggering is required, megger as
follows:
Bundle all conductors together and megger to ground using a
500Vmegger for 10-15 seconds. Meggering shall be performed
anytime after pulling and before terminating. The cable is
considered acceptable if the reading is at least R megohms where
R is (rated kv+ 1 megohm) x 1000/length in feet.
4.2.4.3 CONTROL CABLE
1. Perform continuity and ground check before connecting to
equipment.
2. Perform cable shield (if applicable) continuity check before
connecting to equipment.
3. Meggering is only required for cable in long (50ft and over)
ducts, buried conduit, and as direct burial. When meggering is
required, megger as follows:
Bundle all conductors together and megger to ground, using 500Vor
1,000Vmegger for 10-15seconds. Meggering shall be performed
anytime after pulling and before terminating. The cable is
considered acceptable if the reading is at least R megohms where
R is (rated kv+ 1megohm)x 1000/length in feet.
36
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
4.2.4.4 600V POWER CABLE
1. Perform continuity and ground check before connecting to
equipment.
2. Megger all cables with conductors terminated but disconnected
from the equipment prior to energizing. Megger as follows:
a Take megger reading from each conductor to all other conductors
tied together and grounded using a 1,000Vmegger for 60seconds.
b Meggering shall be performed anytime after pulling and before
terminating.
c Minimum megger readings to be obtained for conductor test,
megohms per 1,000feet of circuit length at 60(degree)F. Record
all megger readings.
4.2.4.5 POWER CABLE ABOVE 600V
1. Perform continuity and ground check before connecting equipment.
2. Cables shall be meggered after terminating and before connecting
to equipment. Take megger reading from each conductor to all
others and shield (where applicable) tied together and grounded,
using a 2,500Vmegger for 60seconds.
3. Where cables are installed in ducts or buried conduit they shall
also be meggered immediately after pulling.
4. Designated cable shall be hi-potted, after terminating and
meggering. A d-c field acceptance test voltage as specified by
the cable manufacturer, applied for the recommended time shall be
used. The cable is acceptable if there is no discharge or
excessive leakage as specified by the cable manufacturer.
Minimal acceptable readings are listed above.
4.2.5 CODES AND STANDARDS
Cable shall comply with the requirements of the latest versions of industry
codes and standards:
<TABLE>
<S> <C>
Short Name Complete Identification
---------- -----------------------
ASTM B8 American Society for Testing and Materials; Concentric
Lay Stranded Copper Conductors Hard, Medium, or Soft
ASTM D 2843 American Society for Testing and Materials; Standard
Method for Measuring the Density of Smoke from the
Burning or Decomposition of Plastics
ASTM D 2863 American Society for Testing and Materials; Standard
Method of Test for Flammability of Plastics using the
Oxygen Index Method
IEEE-S-135 Power Cable Ampacities-Aluminum & Copper Conductors
</TABLE>
37
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
<TABLE>
<S> <C>
NEMA WC51 Ampacities, Cables in Open-top Cable Trays
NEMA WC3 Rubber Insulated Wire and Cable for the Transmission and
Distribution of Electrical Energy
NEMA WC7 Standard for Cross-Linked Thermo-setting Polyethylene
Insulated Wire and Cable for the Transmission and
Distribution of Electrical Energy
NEMA WC8 R1983 Standard for Ethylene-propylene-rubber-insulated
Wire and Cable for the Transmission and Distribution of
Electrical Energy
NEC 1987 National Electrical Code
</TABLE>
All cable is specified to maintain its critical electrical and physical quality
during the plant life expectancy, 30 years. Aging data for the performance of
cable insulation materials in long-term physical aging tests shall be obtained
from the cable supplier.
4.2.6 SYSTEM DESIGN
The wire and cable shall be installed in conduit, cable trays, and underground
duct lines. Direct burial of wire and cable is unacceptable. When installing any
specialized cable (e.g., Coaxial Cable, Fibre Optic Cable), specific
installation precautions provided by the cable manufacturer should be followed.
In general, the design of wire and cable shall be based on a maximum ambient air
temperature of 50(degree) C, and additionally for power and control cable the
continuous conductor temperature for normal operation will be 90(degree) C. The
individual conductor insulation material for these types of cable shall be a
90(degree) C thermosetting type. The cable jackets shall be of a thermosetting
material. Non-hygroscopic flame-retardant fillers and binders may be used, as
necessary, to round the cable.
All cables will be soft annealed copper wire conductors. 5kV and 15kV cables
shall be bare copper, 600V cables shall be bare copper, and instrumentation
cable shall be tinned copper. Cable splices are not allowed. Cable smaller than
AWG No. 16 shall be tinned copper.
Design of wire and cable which will be installed in underground duct lines shall
be based on an ambient earth temperature of 35(degree) C.
All wire and cable shall be capable of meeting its performance requirements
throughout its installed life. Cable manufacturers must provide positive
evidence that their cable passes the Cable Tray Fire Propagation Tests as
specified by IEEE 383.
The normal current rating (ampacity) of an insulated conductor is limited to
that continuous value which will not cause excessive insulation deterioration
from heating. This current rating for a given size of insulated conductor varies
with the type of insulation, operating voltage, frequency, type of installation
(ducts, conduit, aerial or open air), and ambient temperature.
Power and control cable will be 600 volt NEC 90(degree) C cable will be utilized
but will be loaded only to its 75(degree) C rating. The outer jacket will be
ultraviolet resistant. 15kV, 5kV, and 600V cables shall be EPR.
38
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Current carrying capacity (ampacity) tables are based on stated ambient
temperatures with multipliers given for other than stated ambient temperature.
50(degree)C will be used except for areas where the ambient differs greatly.
4.2.6.1 CABLE TRAY SYSTEMS
This section outlines cable-raceway interfaces which affect the sizing and
selection of wire and cable.
Raceway service designations are defined below:
4.2.6.2 TRAYS
The "H" trays will be used for 5 and 15kV power cable. NEC de-ratings shall be
applied. Ampacity of cables shall be in accordance with NEC.
Cables shall be installed one layer deep with maintained spacing. Minimum tray
size should be equal to 1 1/2 times the sum of the diameters of the cable
installed therein. Ampacities for cables spaced 1/4 to 1 diameter apart shall be
used. When installed, the cables shall be spaced 1/4 cable diameter from each
side rail with a spacing between cables of .25 times the sum of the diameters of
the two cables.
4.2.6.3 TRAYS
The "P" trays will be used for 600Vpower and control cables. Ampacity of cables
in "P" trays for intermittent service shall be in accordance with NEC for cables
in air without de-rating for spacing. Cables for continuous operation shall be
in accordance with NEC.
"P" tray fill is determined by the sum of the installed cable cross-sectional
area and shall not exceed 40percent of the tray cross-sectional usable area.
4.2.6.4 TRAYS
The "C" trays would be used for communication cables. They will not be used on
the Project.
4.2.6.5 TRAYS
The "I" trays will be used for 300Vinstrument cable, 300Vthermocouple extension
wire and 600Vcontrol cables operating at less than 50v.
The "I" tray fill, determined by the sum of the installed cable cross-sectional
area, should not exceed 50 percent of the tray cross-sectional area.
Cables which are run in a combination of duct, conduit, and tray should be
analyzed for ampacity limiting factor. As a general rule if that part of the
raceway which would be the limiting factor on current carrying capacity is more
than 10ft long then it should govern the cable rating for the entire run.
The use of cable tray barriers may be permitted where necessary to eliminate,
for example, a separate tray on an isolated run. This separation may be
maintained by a barrier. Each side of the barrier should be assigned a different
raceway number for identification.
39
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
In order to assure that power cables will operate within their design
temperature limits, the cables shall be sized as follows:
a. Determine the maximum continuous current of the load.
b. Multiply this current by appropriate factor such as service
factor, overload factor, etc.
c. Apply proper de-rating factors.
d. Determine cable size from NEC tables.
e. Check voltage drop considerations.
f. Check short time rating.
g. Check short circuit currents.
Single conductor triplexed power cables smaller than No.6 AWG shall not be used
in trays since these cables will propagate flame. A 3/C cable shall be specified
for these sizes.
Insulation and jacket thicknesses for all power cable shall be in accordance
with NEMA standards for the voltage rating of the insulated conductor.
Insulation materials shall be ethylene propylene rubber (EPR). Jacket materials
shall be chlorosulfonated polyethylene (Hypalon).
For 5kVand above, insulation thickness shall be based on 133% insulation level.
4.2.6.6 CONTROL CABLE
Some important considerations in selecting control cable include ampacity,
voltage drop, reliability, special circuit requirements and mechanical strength.
Insulation and jacket thickness for all control cable shall be in accordance
with ICEA standards for the voltage rating of the insulated conductor.
Insulation materials shall be EPR. Jacket materials shall be Hypalon. Individual
conductors shall be color coded per ICEA S-68-516 TableK-2.
4.2.6.7 INSTRUMENT CABLE
Instrumentation cable will be twisted/shielded with a tinned copper drain wire.
Insulation materials shall be cross-linked polyethylene.
4.2.6.8 THERMOCOUPLE EXTENSION WIRE
Thermocouple extension wire shall be Chromel-Constantan, Type E selected to be
compatible with the instruments to which it is connected. Insulation and jacket
materials shall be cross-linked polyethylene.
(Important parameters include wire type eg/"KX", conductor material, temperature
range and limits of error.)
40
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
4.2.6.9 COAXIAL AND TRIAXIAL CABLE
Coaxial and Triaxial Cable shall be selected to be compatible with the systems
to which it is connected.
Insulation materials shall be thermosetting, if possible. Jacket materials shall
be thermosetting or neoprene.
4.2.6.10 COMMUNICATIONS CABLE
No communication cable is required.
4.2.6.11 LIGHTING WIRE & CABLE
For Lighting Wire refer to Section 8.4.3, Electrical Design Criteria for
Lighting.
4.2.7 SAFETY CONSIDERATIONS
Insulation and jacket materials for all wire and cable used shall be of
flame-retardant, thermosetting materials. Cable manufacturers must provide
positive evidence that the cable they are supplying passes the IPCEA Vertical
Flame Test and IEEE-383 Cable Tray Fire Test (both oily-rag and gas-burner
parts). The test data must be certified by an independent agent.
All cable runs shall be splice free except for terminations in junction boxes as
specifically shown on the drawings.
Installation instructions shall require removing as little jacket as possible
within panels, boards, terminal boxes, etc.
Cables passing through floor and wall sleeves, and entering equipment will be
sealed in accordance with the requirements of Section 8.4.10.
Cables will be sized to carry the expected overcurrent experienced during a
fault, for a sufficient amount of time to allow the protective devices to clear
the fault.
The Contractor will specify all cable insulation taking into account protection
from anticipated or possible overvoltages and sheath voltages.
4.3 LIGHTING SYSTEM
4.3.1 DEFINITIONS
Illumination-Density of light upon a surface, expressed in foot-candles
or lux.
HID-High Intensity Discharge Lamps. These include Mercury, Metal Halide
and High Pressure Sodium.
Means of Egress-A continuous and unobstructed way of exit travel from
any point in a building or structure to a public way.
Exit-Defined as those doorways and protected ways of travel to a
doorway at ground level which open into plant roads or walkways.
41
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Emergency Lighting-A lighting system designed to supply illumination
essential to safety of life and property, in the event of failure of
the normal supply.
General Lighting-Lighting Units installed above the ordinary head level
to secure a general illumination over a considerable area.
Receptacle-A contact device installed at an outlet for the connection
of an attachment plug and flexible cord to supply portable equipment.
4.3.2 SYSTEM REQUIREMENTS
The lighting systems installed by the Contractor shall provide adequate
illumination at all times with power supplied from normal a-c sources, and d-c
batteries in emergency lighting units. The systems will provide adequate
emergency lighting during all operating conditions, including transients, upset
conditions and the effect of the loss of normal power, by use of batteries for
emergency d-c lights. The systems provide, as a minimum, lighting intensities at
levels recommended by the Illuminating Engineering Society. State and local
regulatory agencies requirements may modify the criteria. Outdoor lighting
levels and coverage shall equal or exceed those at the Owner's Unit 4.
The a-c lighting system is supplied from 3 phase, 4W, 480/277Va-c distribution
transformers and panels, and 120/208Va-c distribution panels.
Fluorescent lamps shall be used for indoor lighting. High Pressure Sodium (HPS)
shall be used for general outdoor plant lighting. HPS lighting shall be used for
cooling tower area, high-bay areas and roadways. The plant's perimeter shall not
be provided with light.
Lighting fixtures shall be selected with due consideration for environmental
conditions and ease of maintenance. Access to lighting fixtures will be
available to maintenance personnel. Fixtures in high bay areas such as the
turbine hall will be serviceable from area cranes.
Maintenance factors for both lamp life and accumulated dirt will be factored
into the lighting systems design.
Auxiliary lighting shall be provided in approximately 10% of the indoor HID
fixtures and on the turbine deck.
Illumination shall be provided in accordance with current OSHA requirements for
all exit facilities and means of egress. Exit signs shall be illuminated by a-c
and d-c systems. The d-c system for these signs may consist of local battery
packs.
Lighting circuits should be loaded with care to avoid overloading and the
subsequent tripping of breakers which would effect lighting reliability. To
prevent faults in one system from rendering another system inoperative, separate
conduits should be used to feed lighting systems derived from different sources.
Therefore, emergency lighting circuits should not be run in the same raceways
with normal lighting.
By putting all fixtures in an area on one circuit, reliability is reduced to the
extent that when the circuit fails all lighting in the area fails. In large and
critical locations the area shall be fed from two different power sources and
gain the reliability of having alternative sources.
42
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Illumination shall be provided outside of doorways. These fixtures shall be
separately controlled and fed from normal a-c lighting circuits.
Fixtures used in hazardous areas shall be approved for the classification of the
area.
The plant lighting system will be designed so that portions of the system can be
selectively energized during normal plant operation and the remainder can be
energized in selected areas for maintenance operations.
All lighting layouts shall be approved by the Owner.
4.3.2.1 STATION EMERGENCY LIGHTING
The station lighting is composed of three separate systems:
1. Normal a-c lighting system supplied from the normal power buses
with load distributed between buses.
2. Emergency d-c lighting system supplied from local self-contained wall
packs.
3. Emergency a-c lighting system supplied from the emergency/critical
buses.
Normal a-c lighting is supplied throughout the plant while emergency a-c
lighting is confined to the following areas:
1. Outdoor lighting, approximately 10%.
2. PDC
- Switchgear and relay rooms, approximately 10%
- Battery Room, approximately 10%
These fixtures will be equipped with rapid re-strike. Normal a-c and emergency
a-c systems shall be physically and electrically separated to prevent a common
mode failure.
In order to comply with the rules and regulations of OSHA concerning exit signs
and egress lighting, the following egress lighting is required:
a. Internally illuminated exit signs shall be provided at all exits.
b. Adequate and reliable illumination for all exit facilities and
clearly visible routes, both vertical and horizontal, shall be
provided.
Internally illuminated "Exit" signs and egress lighting shall have self
contained battery packs.
Means of Egress (access routes) shall have an illumination level of average
0.5fc measured at floor.
Emergency lights shall be provided with a power source which can sustain the
specific level for a period of at least 11/2hr.
A-c emergency lighting shall be fed from MCC-03 located in the PDC. This MCC
will in turn be connected back to Emergency Bus MCC-306 in the Unit 3 PDC-303.
43
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
4.3.2.2 CODES AND STANDARDS
The latest versions of the following codes and standards shall be used where
applicable to the manufacture, testing, installation, inspection and operation
of the specified lighting systems:
<TABLE>
<CAPTION>
<S> <C>
OSHA Occupational Safety and Health Act Federal Register, Vol. 37, No. 202
Means of Egress lighting, Exit lighting Subpart E, Par. 1910.35
Illumination Subpart C, Par. 1926. 56
ANSI American National Standards Institute
Industrial Lighting IES RP7
Protective Lighting IES RP10
Street & Highway Lighting IES RP8
Fixtures, Electrical UL57
Panel Boards, Safety Standards UL67
IES - Illuminating Engineering Society 5th Edition
Levels of Illumination
Lighting Guidelines
NFPA - National Fire Protection Association 70
NEC-National Electrical Code
Wiring, Protection, Grounding,
Materials, Methods
Life Safety Code 101
Egress and Exit Lighting
</TABLE>
4.3.3 SYSTEM DESIGN
Receptacles will be supplied from 120/208Vor 277/480Vdistribution panel
circuits.
The drawings will show the type of fixture to be used in a specific area, in
lighting tables.
Fixtures will be assigned dimmer controls, located on walls, by control console
and equipment arrangement.
4.3.3.1 MISCELLANEOUS POWER LOADS
In general, miscellaneous power loads, such as space heaters, unit heaters, heat
tracing, and fractional hp motors rated 120Vshall be supplied from a separate
power system. These loads shall be supplied from the lighting panel only in
isolated cases where the installation of a separate panel is impractical.
Panelboards shall be in safe and accessible locations. They shall be located in
the PDC buildings.
Branch circuit breakers for lighting and receptacles shall not have a continuous
connected load exceeding 80 percent of the branch circuit rating. Twenty percent
spare installed breakers shall be provided at initial design stage with the
remaining panel-board space provided with connections for future breakers. No
more than six receptacles shall be connected to any branch circuit.
The color code for lighting branch circuits shall be black, red and blue for
phase conductors, white or natural gray for the neutral (grounded) conductor and
green for equipment ground.
44
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Throughout the installation, there will be 120VAC receptacles protected by
ground fault interrupters (GFI's). They will be used where required by code.
There will also be 3phase 480Vreceptacles for use with welders or heavy power
equipment. Outdoor installations of these receptacles will be appropriately
housed.
D-c circuits shall be coded white or natural gray for the negative and black for
the positive conductor.
GFCI circuits shall have a separate neutral wire for each circuit brought back
to the panel-board.
4.3.3.2 LIGHTING MAINTENANCE
There are two major maintenance factors to be taken into consideration in the
design of a lighting system; one is the Lamp Depreciation Factor (LDF) that
converts initial lumens to average or mean lumens. These rates are determined
from published data for the specific lamp used.
The other is the luminaire Dirt Depreciation Factor (LDD) which varies with the
type of luminaire and the atmosphere in which it is operated. For a 12month
luminaire maintenance program the following combined maintenance factor (MF)
will be used:
.70 for general plant
.75 for control, computer room, etc
.80 for offices
4.3.3.3 GROUNDING
The a-c lighting system shall be solidly grounded with a grounded neutral wire
and an equipment ground, in accordance with Article 250 of the NEC. A metallic
cable sheath, raceway, and/or conduit system, where used, may take the place of
the equipment ground.
Poles will be roadway lighting type, non-metallic or fiberglass, with anchor
base, hand hole and tapered elliptical arm. Poles will be grounded.
Each of the outdoor lighting panels will have an associated photoelectric eye,
contactor and hand-off-automatic control switch.
4.3.3.4 LIGHTING FIXTURE REQUIREMENTS
Lighting fixtures will be selected to meet the quantity and quality requirements
specified in this document, as well as the mechanical performance that will meet
installation, operation, and maintenance conditions.
Specific requirements for fluorescent fixtures:
a. Lampholders must be of the spring loaded, tombstone type and have
positive backing to preclude longitudinal disposition.
b. Ballasts shall meet UL "Class P" requirements.
c. Fuses in the fixtures should be slow-blow type and rated
sufficiently high to accommodate the inrush current.
d. Louvers, lenses, and other normally removable fixture parts
should be positively latched and have captive hinging to prevent
them from falling should they become unlatched.
45
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Specific requirements for incandescent and HPS fixtures:
a. Fixture components such as reflectors, globes, guards, and
louvers should be securely fastened.
b. Industrial or vibration service lamps should be specified.
c. Lampholders should be of the shock absorbing and vibration-proof
type.
d. Pendant hung fixtures shall have hook attachments and shall be
hard wired.
e. Rapid restrike ballasts will be used.
4.3.3.5 TRANSFORMERS
General purpose, dry-type, 480v-120/208Va-c or 480 - 277/480Va-c, three phase)
transformers will be used to supply lighting, receptacle and miscellaneous load
distribution panels. Transformers shall preferably be in 30, and 45KVA sizes.
The transformers will usually have two 2 1/2 percent full capacity taps above
and below rated primary voltage. All transformers shall conform to NEMA-ST20.
Transformers shall have a 220O C insulation system and be designed not to exceed
150OC rise. Normal life is based on 40OC average ambient. The transformers shall
be arranged for wall or floor mounting, as required, and near the load served.
4.3.3.6 WIRING, CONDUIT AND MISCELLANEOUS EQUIPMENT
Lighting and receptacle wire shall be No.12 or larger stranded copper type THWN,
90(degree)C insulation, moisture and heat resistant, 600Vrating. All fixture
stems and fixtures shall be wired with stranded copper cable fixture wire type
SFF-2, moisture and heat resistant, with suitable nonmetallic covering. Portable
rubber cord type SJO will be used to supply fluorescent fixtures, if required.
Splices and taps in the lighting wire shall be made by insulated wire nuts
(Scotchlok Spring Connectors). Lighting branch circuit wire size shall be in
accordance with NEC Table310-16 for rated conductor temperature corrected to
proper ambient of 40(degree)C except as noted.
All lighting conduit shall be a minimum of 3/4 in. hot-dipped galvanized steel.
Commercial EMT conduit may be used indoors, where allowed by NEC. Lighting
fixture stems shall be 3/4 in.
hot-dipped galvanized steel conduit unless otherwise noted.
All exposed receptacle outlet boxes shall be FS series, and switch outlet boxes
shall be FD series, unless otherwise noted. Outlet boxes exposed to the weather
shall have suitable weatherproof covers.
All exposed lighting and junction outlet boxes shall be Crouse-Hinds Krylon,
fiberglass or equal 2-1/8 in. deep, unless otherwise noted. All recessed light
and junction boxes in concrete shall be hot-dipped galvanized pressed steel 3
in. deep, unless otherwise noted. All recessed light outlet boxes shall be
provided with 3/8 in. fixture studs. Receptacles and local switches in offices,
laboratories, control room, and partitioned rooms with hollow walls shall be
flush mounted in outlet boxes, with coverplates to match other hardware.
Local switches shall be specification grade for lighting circuits in offices,
laboratories, control room, and partitioned rooms.
46
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Receptacles shall be specification grade, duplex, two-pole, three-wire,
grounding type for 125v, 20A Service.
Photoelectric cells shall be designed for automatic quick response switching of
outdoor lighting loads or contactor coils. Operating level will be preset for
turn-on at 1.5 +/-0.6fc and turn-off at 6 to 10 fc when the control voltage is
120v. The enclosure shall be fitted with locking type plug and shall be of
non-corroding, nonconductive material.
4.3.3.7 INSTALLATION
Installation of the lighting system shall be in accordance with the installation
specification and the latest edition of the National Electrical Code, unless
otherwise noted.
The lighting shall be designed for early installation to facilitate the use of
portions of the permanent system during construction.
Fluorescent fixtures may be hung on chains attached to each end of the fixture.
The cord from the fixture shall be hard wired.
Fixtures shall be placed away from critical equipment.
Recessed fluorescent fixtures shall be double-suspended, i.e., from suspended
ceiling and from structure.
Sufficient interleaving and inter-spacing of both parallel a-c lighting and
parallel emergency a-c lighting shall be provided to prevent the total loss of
lighting in critical areas.
4.3.3.8 SYSTEM VOLTAGE RANGE
The a-c lighting system will be designed to operate with a +/-10 percent voltage
variation.
4.3.3.9 SYSTEM OPERATION
The normal and emergency a-c lighting system is normally operating during all
modes of plant operation including the relay, switchgear rooms and adjacent
related areas. On loss of normal a-c power, a-c emergency lighting remains
energized, and is transferred to the emergency source.
4.3.3.10 SAFETY CONSIDERATIONS
Emergency lighting shall meet the requirements of NEC article 700-D.
The levels of illumination listed in the lighting tables (Appendix8.4-3) provide
greater than the minimum levels required where safety is related to seeing
conditions.
4.3.4 MAINTENANCE
The Contractor shall maintain the system until turnover to the Owner.
47
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Preventive maintenance should include group re-lamping of areas before the end
of the average rated life of the lamps, instead of spot re-lamping only as
individual lighting elements burn out. Also periodic cleaning of lens, fixtures,
lamps and tubes can maintain the average light intensity at the design level.
All maintenance and cleaning of lighting system components will be done in
accordance with manufacturers' recommendations.
Design of the lighting systems shall permit routine testing without disrupting
normal service. The self-contained units shall be provided with local test
switches to simulate loss of normal a-c power.
Lighting Tables
---------------
The following tables show the illumination level* and type of fixture by
building and area:
Switchgear and Related Areas I
Turbine Building II
Misc. Buildings and Areas III
Outdoor Areas IV
* Illumination level is shown as the minimum foot-candles required for
a task and as average foot-candles for an area.
TABLE I
Control Building
----------------
Foot-
Area Candles Fixtures
---- ------- --------
Levels and Landings 5 Fluorescent
Switchgear Room 35 Fluorescent
Relay Room 80 Fluorescent
HVAC Area 20 Fluorescent
Battery Room 20 Fluorescent
48
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
TABLE II
Turbine Building
----------------
Foot-
Area Candles Fixtures
---- ------- --------
Levels, Landings, 5 (Enclosed & Gasketed) HPS
and Corridors
Ground Floor 20 (Enclosed & Gasketed) HPS
Turbine
Oil Room 20 (Enclosed & Gasketed) HPS
Operating 35 (Enclosed & Gasketed) HPS
Level
TABLE III
Miscellaneous Buildings
-----------------------
and Areas
---------
Foot-
Location Candles Fixture
-------- ------- --------
Circulating 30 (Enclosed & Gasketed) HPS
Water Pump
Area
TABLE IV
Outdoor Areas
-------------
Foot-
Location Candles Fixture
-------- ------- --------
Main Entrance 5 (Enclosed & Gasketed) HPS
Roadways 1 (Enclosed & Gasketed) HPS
Parking Areas 2 (Enclosed & Gasketed) HPS
Switchyard
(General) 0.2 (Enclosed & Gasketed) HPS
(Disconnects) 2.0
Tanks 1 (Enclosed & Gasketed) HPS
49
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Cooling Tower 5 (Enclosed & Gasketed) HPS
Brine Processing
Areas 5 (Enclosed & Gasketed) HPS
4.4 GROUNDING SYSTEM
The grounding system will consist of the interconnected grounding conductors and
ground electrodes necessary to provide an adequate electrical connection to
earth. The grounding system will minimize shock hazards to personnel and will
provide a ground path for a-c system faults and direct stroke lightning
currents.
The plant and switchyard will have a ground grid designed to IEEE standards.
The turbine structure and PDC will have a ground system installed which will be
tied by two ground conductors to the substation grid.
The metal enclosure or frame of all electrical equipment, the air terminals of
lightning protection systems, building steel and other metallic objects which
could become energized will be connected to the grounding system.
This section also includes methods to be used for the grounding of instruments.
The grounding system layout shall be approved by the Owner.
<TABLE>
<CAPTION>
DEFINITIONS
<S> <C>
Ground - A conducting connection, whether intentional or
accidental, by which an electrical circuit or equipment is
connected to the earth or to some conducting body of
relatively large extent that serves in place of the earth.
Grounded - Connected to earth or to some extended conducting body
which serves in place of the earth, whether the connection
is intentional or accidental.
Ground connection - A connection used in establishing a ground and consisting
of a grounding conductor, a grounding electrode, and the
earth (soil) which surrounds the electrode.
Ground conductor - A conductor providing an electric connection between part
of a system, or the frame of a machine or piece of
apparatus, and a ground electrode or a ground bar.
Ground electrode - A conductor or group of conductors in intimate contact
with the earth for the purpose of providing a connection
with the ground.
Ufer Ground - A system used in establishing a ground by utilizing steel
reinforcing bars in concrete foundations.
</TABLE>
50
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
<TABLE>
<S> <C>
Ground grid - A system of grounding electrodes consisting of
interconnected bare cables buried in the earth to provide
a common ground for electric devices and metallic
structures.
</TABLE>
4.4.1 SYSTEM REQUIREMENTS
4.4.1.1 CODES AND STANDARDS
The grounding and lightning protection systems will be designed and installed in
conformance with the latest versions of the following codes and standards:
National Electrical Code
Article 250 Grounding
NFPA No. 78 Lightning Protection Code
IEEE 80 Safety in a-c Substation
Grounding
IEEE 142 Grounding of Industrial and
Commercial Power Systems
NESC National Electric Safety Code
4.4.1.2 SYSTEM GROUNDING
System grounding consists of the connection of the neutral or one of the normal
current-carrying conductors of the power system to ground, for the purpose of
enhancing overvoltage and short circuit protection. Such connections will be
effected at various points and they may be connections of no intentional
impedance such as solid grounding, resistance such as low or high resistance
grounding, or inductance such as reactance grounding.
The 13.8 kV generator will be resistance grounded through a distribution
transformer.
4.4.1.3 MEDIUM VOLTAGE SYSTEM-4.16KV
The medium voltage system grounding will consist of low resistance grounding of
the system neutral. Each of the medium voltage source neutrals, such as
transformers, will be connected to ground through a resistor.
The low-resistance method will have the advantage of immediate and selective
clearing of the grounded circuit but also will require that the minimum
ground-fault current be large enough (400A) to positively actuate the applied
ground-fault relay.
4.4.1.4 480V SYSTEM
The 480V3-phase, 3-wire system will be wye connected and low or high resistance
grounded. Bus MCC 03 will be designed to be connected back to the 4.16 kV bus
which is in turn connected to the reconditioned 12kW diesel generator bus and
will be low resistance grounded.
51
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
The individual motors will be grounded through the raceway system. Where this is
impractical, or fault current could exceed raceway current rating, a separate
ground conductor will be installed. Where motors are remote from the station
grounding system, a ground rod will be installed.
4.4.1.5 120/208V SYSTEM AND 277/480V SYSTEM
Both the 120/208Vthree-phase system and the 277/480Vthree-phase system neutral
will be solidly grounded at the various sources of supply.
4.4.1.6 D-C SYSTEM
The d-c system will be ungrounded. Ground tracing features will be used to
detect and alarm unintentional connections to ground.
4.4.1.7 MAIN GENERATOR NEUTRAL
The unit-connected main generator neutral will be grounded through a
high-resistance arrangement. This method consists of connecting the generator
neutral to the primary winding of a sealed, dry type, two-winding, single-phase
distribution transformer, with a primary rating equal to the generator
line-to-neutral voltage nearest standard voltage rating, and a low voltage,
high-current (200amp) resistor connected to the transformer 190Vsecondary
winding.
4.4.1.8 STRUCTURAL STEEL
Structural steel will be grounded in accordance with NEC. Steel structural
members which will be isolated from ground because of the building design will
be connected to the nearest grounded structural steel member or directly to the
grounding system by cable.
Where overhead high voltage conductors and ground wires are secured to a
building, ground cable will be installed from the station grounding system to
each point of cable attachment on the building.
4.4.1.9 MOTORS
All local motors 25 hp or smaller will use the conduit system for ground fault
current return. When conduit is not used, a ground conductor equal in ampacity
to the phase leads will be provided for motor frame grounding. In addition,
4160volt motors and remotely located motors will have a driven ground rod. In
addition, they will be grounded to the raceway, where feasible. Where
non-metallic raceway is used, the cable feeder to the motor shall have a fourth
grounding conductor (half size) to which the motor frame shall be grounded.
4.4.1.10 SWITCHGEAR
The ground bus in metal-clad switchgear, load centers, and motor control centers
will be connected to the station grounding system at each end by ground cables.
Switchgear, load centers, and motor control centers will be provided with a
fault current return path grounding conductor; rigid conduit or the ground cable
in the cable tray will be used.
4.4.1.11 RACEWAYS
A ground cable (No. 4/0 AWG copper) will be laid in all nonmetallic trays
containing power cables. The ground cable will be fastened to tray rungs in the
same manner and at the same intervals as the power conductors. The ground cables
will be routed through wall and floor sleeves, as required, to make a continuous
run. Where a metallic sleeve is used to enclose a grounding conductor, each end
of the sleeve will be connected to the ground conductor.
52
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
In the non-remote areas, hot dipped galvanized tray will provide a ground fault
current return path. Sections of the tray shall be jumpered with a green
insulated wire to provide continuity of the return path. The connection of the
jumper wire to the tray shall be given special consideration as a point of
possible corrosion.
In the non-remote areas, hot dipped galvanized conduit between equipment or
between cable tray and equipment will provide a ground fault current return path
when properly connected. Conduit ground connections to equipment will be made
with a threaded hub, boss, or two locknuts, one on either side of the box or
cabinet. Conduit ground connections to cable tray will be made with a
non-insulating type grounding bushing on the conduit and a bonding jumper to the
ground conductor within the tray. The size of the bonding jumper will be the
largest the bushing can accommodate. All flexible conduit will be jumpered with
a bare conductor, using a green insulated wire.
Conduits shall be bonded to metallic tray, or to the copper ground conductor in
nonmetallic tray.
Each duct bank containing power cables will have a bare tinned copper grounding
conductor encased in the duct enclosure.
4.4.1.12 PIPING AND TANKS
Metallic underground piping and fixed piping of the fire extinguishing systems
will not be connected to the station grounding system, unless cathodic
protection is required.
Metal tanks shall use a ground rod with PVC protected copper, 4/0 cable attached
to above ground steel.
4.4.1.13 FENCE AND RAIL
4.4.1.13.1.1 Fences for the substation will be connected to the grounding
system. Fence posts will be connected at intervals of approximately 50ft to a
parallel tinned copper ground conductor buried 3ft outside the fence. Posts on
each side of a gate or removable fence section will be bonded together below
grade. For each permanent gate, a potential grid will be installed.
Crane rails will be connected to ground and rail joints will be jumpered.
4.4.1.14 BUILDING LIGHTNING PROTECTION AND GROUNDING
The following lightning protection and grounding requirements shall apply:
1) Turbine Structure
- Shall be protected from lightning by Air Terminals located
on light poles and tied directly to the ground system.
- Grounding shall be by redundant conductors to the
switchyard mat.
- Stator housing and neutral grounding transformer
downcomers on turbine pedestal shall be grounded to the
substation grid via cable in PVC conduit.
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Exhibit "A"
Attachment 1 - Design Criteria
2) Cooling Tower
- Lightning protection shall be provided by wood poles,
static lines, and ground rods.
- All motors shall be provided with adequate ground
connections. Each motor will carry a ground conductor
routed through tray.
3) Modular Equipment Buildings
- No lightning protection is required.
- The PDC will be surrounded by a ground loop which will in
turn be grounded with two ground rods and grounded to the
switchyard grid.
4) Vessels
- No lightning protection is required.
- Vessels shall use a ground rod with a 4/0 copper cable
(insulated) tied to above ground steel. 3/4" PVC shall be
used to protect the cable. (This alternative is necessary
because of epoxy coated rebar.)
5) Pipe Racks
- Ufer grounded, every other column. Rebar may be tied
directly to anchor bolts.
6) Switchyard
- Lightning protection shall be by static wires.
- An underground ground-grid shall provide ground
protection, the ground grid shall consist of 316 stainless
steel, one inch diameter ground rods, 10feet in length
tied together with tinned copper ground conductors. All
connecting points shall be coated.
4.4.1.15 DISCONNECT SWITCHES
The operating position for the 92kV hand-operated disconnect switch will be
protected from voltage potentials arising between the switch handle and ground
by a copperweld wire mesh grounding mat buried 4in. below grade, or a metal
grating located at or above finished grade where a person stands to operate the
switch. No point within the protected area will be more than 3ft from the mat.
The mat will be connected to the grounding grid at the same point as the switch
supporting structure.
4.4.1.16 ELECTRONIC CONTROL SYSTEMS
The following procedure will be implemented unless manufacturer's instructions
are to the contrary.
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Exhibit "A"
Attachment 1 - Design Criteria
Terminal cabinets, control panels and consoles involved with electronic signals
will require two grounding systems as follows:
1. Safety Ground: Grounding bus is attached to cabinet and panel
structures.
2. Signal Ground: Instrument cable shielding and instrument signal
reference ground attached to this bus.
In loops containing multiple instruments, the shields of all cables used in the
loop should be connected together and connected at only one point to the shield
ground bus, at the signal source cabinet. Intermediate terminal boxes for signal
wiring is unacceptable.
The signal ground shall be isolated from the safety ground with the exception of
a single point of connection. The design shall prevent ground loops in the
signal ground system.
Grounding of the equipment ground bus will be made by directly connecting to the
station grounding system. System specifications should advise the manufacturers
of the intent to ground shields and cabinets in this manner.
4.4.1.17 LIGHTING
All lighting circuits will be grounded in accordance with the National
Electrical Code.
4.4.1.18 MISCELLANEOUS
All miscellaneous items not included in this criteria will be grounded in
accordance with the National Electric Code.
4.4.1.19 COMPONENT DESIGN
The size of each medium voltage (4160V) system neutral grounding resistor will
be such as to limit the fault current through the source neutrals to a minimum
of 400A.
The station grounding system cable shall be tinned copper for underground and
bare copper for indoor applications. For outdoor applications above ground, the
grounding system cable shall be stranded, insulated copper. Where a grounding
cable is used for both indoor and outdoor applications, the entire cable shall
be as dictated by the outdoor application.
Ground rods shall be 10 feet in length and 1 inch in diameter, 316 stainless
steel.
Ground wells shall consist of 316 stainless steel, 2 inch, schedule 160 pipe.
For convenient access the pipe shall be installed in a 10 inch concrete pipe or
plastic box with removable cover, standard water meter box is acceptable. No
coke breeze fill shall be utilized.
Where ground cable in concrete crosses expansion joints, the cable shall be
wrapped with burlap and painted with asphaltum or wrapped with polyethylene. The
ground cable shall be wrapped a distance of 18in. either side of the expansion
joint.
All grounding connections shall be by the compression type, or of a clamping or
crimping type approved by the Owner.
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Exhibit "A"
Attachment 1 - Design Criteria
4.4.1.20 ARRANGEMENT
The station grounding system's general arrangement shall be shown on the
Contractor's drawings.
4.4.1.21 CONSTRUCTION NOTES
Continuity of the station grounding system shall be verified during
construction. After construction, ground resistance to remote earth will be
measured and compared with computed value, and proper corrective action shall be
taken by the Contractor, should the measured value be substantially higher than
one ohm.
4.4.1.22 SYSTEM RELIABILITY
The reliability of the system shall be ensured over the life of the plant, as
long as the conductors are of adequate size, all joints are made up tightly, and
scheduled testing is performed.
4.4.2 SYSTEM LIMITATIONS, SET POINTS AND PRECAUTIONS
Resistance of the station grounding system to remote earth shall be a maximum of
one ohm.
4.4.3 OPERATION
The station grounding system is passive. No human, mechanical, or electrical
control or operation will be required. Its functions are protective, preventing
harm to personnel and damage to equipment or structures.
4.4.4 SAFETY CONSIDERATIONS
Electric shock accidents are caused by the coincidence of the following
unfavorable factors:
1. High ground fault current in relation to ground resistivity.
2. Distribution of ground fault current such that high potential
differences are possible.
3. Presence of an individual at such a place and time and in such a
position that his body bridges two points of high potential
difference.
4. Absence of sufficient contact resistance or other series
resistance to limit current to a safe value.
5. Duration of the fault and body contact for a sufficient time to
cause harm at the given current intensity.
Accidents of this nature are infrequent because of the low probability of
coincidence of all five conditions. The probability of coincidence will be
lowered in the following manner. The ground grid shall have a low enough
resistance such that the maximum short circuit current results in a ground grid
potential below safe values. All metallic structures or equipment which might
accidentally become energized shall be connected to the grid in order to prevent
the possibility of high potential differences. Clearing of faults shall be
provided in a reasonably fast time to limit the duration of current flow. Where
it is impractical to eliminate the possibility of excessive potential
differences during faults, personnel access shall be barred or limited.
4.4.4.1 GROUND FAULT RISKS
The following situations are considered potentially dangerous in terms of
personal ground fault risks, and receptacle circuits in these areas should be
protected by GFCIs:
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Exhibit "A"
Attachment 1 - Design Criteria
o All outdoor locations accessible from grade level
o Brine Processing Area
o At outside transformers and switchyard area
o Cooling tower
o Rooms with metal floors
EQUIPMENT GROUNDING
Number
Service Required Wire Type
------- -------- ---------
Medium Voltage A-c Motors 1 No. 4/0 copper
Load Centers and MCCs 2 No. 4/0
Medium Voltage Switchgear 2 No. 4/0
Power and Control Cable Tray 1 No. 4/0 copper
Instrument Cable Tray 1 No. 4/0
Main Step-up Transformer 2 No. 4/0 copper
Station Service Transformer 1 No. 4/0 copper
Auxiliary Transformers 1 No. 4/0
Lighting Transformers 1 No. 2/0
Structural Steel Column 1 No. 4/0
Main Generator 4 No. 4/0
Non-Segregated Phase Bus (Following 1 No. 4/0 copper
mfr's instructions)
Control and Relay Boards 2 No. 4/0
Lighting Panels 1 No. 2/0
Crane Rails, Fences 1 No. 4/0
Tank and Pressure Vessels 1 No. 4/0
Computer and Other Electronic Control 1 No. 2/0
Signal Systems 1 No. 4/0
Stairways, Handrails, Gratings
(If isolated) 1 No. 4/0
Lightning Arresters (per pole) 1 No. 336.4 KMC
Lightning Rods and Air Terminals 2 No. 336.4 KMC
Inverters 1 No. 2/0
Chargers 1 No. 2/0
Small Low Voltage Loads 1 No. 6
57
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Exhibit "A"
Attachment 1 - Design Criteria
COMMUNICATIONS SYSTEM
There will be no additions to the existing communications system.
4.6 METERING AND RELAYING
4.6.1 SYSTEM REQUIREMENTS
The station electrical protection consists of protective devices or relay
systems which monitor the electrical characteristics of the station equipment
and/or power system to assure operation consistent with designed parameters, as
follows:
1. Initiate the removal from service of any piece of equipment which
has sustained a short circuit.
2. Provide automatic supervision of manual and/or automatic
operations which could jeopardize the safe operation of the
station.
3. Initiate automatic operations and/or switching which may be
required for the continued safe operation or shutdown of the
station.
The station electrical protection described in this criteria applies to the main
generator, transformers, and auxiliary station service system for a geothermal,
steam-turbine generating plant and shall be shown on the one-line diagrams by
the Contractor.
The station electrical protection shall be designed to accept a single assumed
failure so that the failure does not result in the loss of the capability of the
protection to perform its desired functions.
The station electrical protection shall be designed to provide minimal clearing
times in order to limit short circuit damage and minimize the effects of
abnormal operating conditions on the station and/or the power system.
The structural and mechanical requirements for all relay panels and switchgear
equipment on which station protection is mounted shall be outlined in detailed
specifications by the Contractor.
The station electrical protection equipment shall be mounted such that the
mounting structure will not amplify or attenuate the input signal or relay
action.
The station electrical protection shall be designed with overlapping and
redundant zones of protection. This may be in the form of a duplicate protection
scheme or in the form of time coordinated steps of protection. The electrical
protection shall be designed so as to remove a minimum of equipment from service
and readily identify the faulted equipment or system.
The station electrical protection provides a high-speed scheme of protection for
major equipment in the station. This would include, shall but not necessarily be
limited to, the main generator, and the generator step-up transformer.
Where possible, the station electrical protection shall maintain sufficient
separation so as to eliminate the common failure mode. The common failure mode
is defined as a mechanism by which a single event can cause redundant equipment
to be inoperable.
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Exhibit "A"
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The station electrical protection shall be designed and assembled to provide
access to the individual components of the various protective schemes for
maintenance purposes. This requirement shall not be limited to the protective
relays but would also include the input current and/or voltage devices, output
devices and their associated wiring.
The station electrical protection shall make use of terminal blocks on the entry
of all protection current and/or voltage circuits entering the relay panels or
switchgear to ease maintenance of these circuits.
The station electrical protection shall be designed to permit in-service testing
of the individual protective schemes. The in-service testing of one particular
protective scheme shall not jeopardize the remaining system protection in any
manner.
All protective relays shall preferably be mounted in drawout type cases equipped
with current-shorting switches on all active current circuits or shall be
equipped with independent current-shorting test switches to facilitate testing.
The trip contacts of all protective schemes shall be wired in series with a
single-pole test switch to open trip circuits during in-service testing. The
test switches shall be front-of-panel mounted with covers which cannot be
replaced with switches open.
The station electrical protection shall be sufficiently independent from
metering and voltage regulating equipment so as not to affect protection during
testing of the metering and voltage regulating equipment.
The d-c voltage to all protective schemes will be monitored and an alarm
provided for low voltage.
Control wiring and all auxiliary control devices shall be of such quality as to
assure high reliability with due consideration given for published codes and
standards, fire hazards, current-carrying capacity, voltage drop, insulation
level, mechanical strength, shielding, grounding, and environment.
Sufficient instrumentation and metering shall be provided to allow safe and
reliable operation of the station for such functions as synchronizing and live
bus transfer.
Reliable operation of the station electrical protection is enhanced by the
redundancy in design. Short circuits in the generating station shall be detected
by at least two different schemes of protection.
4.6.2 GENERATOR PROTECTION
4.6.2.1 DIFFERENTIAL PROTECTION
Differential protection of the generator stator shall be provided by a
high-speed generator differential relay. This relay has adequate frequency
response down to 20Hz and will detect three-phase and phase-to-phase faults in
the stator winding. Since the current transformers for the differential relay
have very high ratios, the differential relay will be insensitive to
phase-to-ground faults. The relay has a variable percentage characteristic to
provide high sensitivity at light loads and avoid incorrect relay operation
during heavy external faults. Turn-to-turn protection of the stator winding is
not required since modern synchronous generators employ single turn
construction. The relay shall trip and lock out the main generator breaker, trip
and lock out the generator field, trip the turbine, and annunciate through a
generator lock out relay. A similar differential relay shall protect the
generator step up transformer.
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Exhibit "A"
Attachment 1 - Design Criteria
4.6.2.2 PRIMARY GROUND PROTECTION
Phase-to-ground primary protection of the generator stator shall be provided by
a generator neutral ground relay. The generator is essentially high-resistance
grounded through a distribution transformer, thereby limiting ground fault
current to approximately 10 amperes. This relay consists of a time-overvoltage
element which is frequency-tuned to operate on the 60 Hz voltage drop across the
secondary resistor, resulting from the flow of ground fault current in the
distribution transformer primary winding. The ground relay protects
approximately 95percent of the stator winding and must coordinate in pickup and
time with the generator voltage transformer fuses. This relay shall trip and
lock out the generator breaker, trip and lock out the generator field, trip the
turbine, and annunciate through the generator lock out relay.
4.6.2.3 BACKUP GROUND PROTECTION
Backup protection against ground faults in the generator stator, the generator
bus and the delta windings of connected generator step-up and normal station
service transformers shall be provided by a second time-overvoltage relay. The
backup ground relay shall detect the presence of voltage across the broken-delta
secondary of a set of wye-delta connected auxiliary voltage transformers. During
un-faulted operation no voltage will be developed across the relay; however,
during a single phase-to-ground fault, the voltage will be 3V, or approximately
200 volts with 69 volt secondary windings. The relay shall have a 16 volt pickup
and a 199 volt continuous rating, which shall detect fairly high resistance
faults. This relay shall trip and lock out the 13.8kV GSU XFMR Loadside Breaker,
trip and lock out the generator field, trip and lock out the main generator
breaker, trip the turbine, trip the 92KV line breaker, and annunciate through
the unit lock out relay. This relay shall be supervised by a voltage balance
relay to prevent undesired tripping due to blown potential transformers.
4.6.2.4 FIELD AND EXCITER PROTECTION
The generator field circuit shall be ungrounded to provide reliability;
therefore, a single ground in this circuit would not require taking the
generator out of service immediately. The continued operation of the generator
must be weighed against the possibility of a second ground which could result in
unbalanced torques on the rotor and possible shaft damage. The following
discussion covers the protection schemes for the brushless excitation system.
4.6.2.5 BRUSHLESS EXCITATION SYSTEM
The generator field circuit with the brushless excitation system consists of the
generator field, the field diodes, the exciter armature mounted on the generator
rotor shaft, and a permanent magnet generator mounted to the generator rotor
shaft.
Since the brushless exciter possesses no external field leads from the
generator, conventional ground detector relays cannot be applied. Instead, an
Automatic Ground Detector (AGD) will be provided to initiate a ground test every
24 hr, or upon manual initiation. If a ground exists, an alarm is given and the
operator will initiate a normal shutdown of the generator. The automatic ground
detector accomplishes this test by lowering brushes onto slip rings.
The field and exciter protection are provided by the generator manufacturer as
part of the exciter package.
4.6.2.6 LOSS-OF-EXCITATION PROTECTION
Decrease or loss-of-excitation on a synchronous generator can result in thermal
damage to the generator, or can cause system instability due to low-voltage
conditions. Absence of field current in the rotor reduces the magnetic coupling
between the rotor and stator. With a constant mechanical input, the rotor
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Exhibit "A"
Attachment 1 - Design Criteria
accelerates, runs above synchronous speed, and the machine operates as an
induction generator. The machine will draw inductive power from the system
through the stator windings. These stator currents induce heavy currents in the
rotor teeth and wedges which may damage the machine.
A two-zone scheme shall be used to provide loss-of-excitation protection with
the following advantages:
1. Reduced sensitivity to stable system swings due to the time-delay
associated with the zone 2 element.
2. High-speed clearing is retained for valid loss-of-excitation
conditions with the zone 1 element.
3. The zone 2 element provides backup protection for a valid
loss-of-excitation condition.
The setting of the two-zone protection provides for a zone1 characteristic with
a negative offset setting equal to one-half of the direct-axis transient
reactance (1/2X'dv). The diameter of the mho circle is equal to 1.0 per unit
reactance and operates with no intentional time-delay. The zone2 setting has the
same negative offset and a mho circle diameter equal to the synchronous
reactance (Xd), however, a time-delay of 1second or more is used to prevent
operation on stable swings.
The loss-of-excitation relay shall trip and lock out the generator breaker, the
generator field, trip the turbine, and annunciate through the generator back-up
lock out relay. Since loss of relaying potential may permit undesired operation
of the loss-of-excitation relay, it will be supervised by a voltage balance
relay.
4.6.2.7 NEGATIVE SEQUENCE PROTECTION
Unbalanced three-phase stator currents cause double-system-frequency (120Hz)
currents to be induced in the rotor iron, which tend to flow in the surface of
the rotor's solid forging, and in the nonmagnetic wedges and retaining rings.
The IR losses will quickly cause rotor overheating and serious damage if the
generator is allowed to continue operating in this unbalanced condition.
Negative sequence protection shall be provided by a negative phase sequence
current relay applied to detect the presence of negative phase sequence current
in the stator windings. The relay alarms at low values of negative phase
sequence current. The relay shall initiate trip and lock out of the generator
breaker, trip and lock out of the generator field, trip the turbine, and
annunciate through the generator backup lock out relay if the current increases
to a higher value.
4.6.2.8 PHASE FAULT BACKUP PROTECTION
Phase fault backup protection shall be provided to prevent exceeding the thermal
limit of the stator winding as specified in ANSI C50.13 for faults remote from
the generator zone. This protection is primarily for three-phase fault
protection but may provide phase-to-phase protection as well.
The relays shall be induction disc overcurrent relays with voltage restraint.
Each relay shall provide a trip output when the current exceeds the current
setting and the voltage is less than the voltage setting. Since the loss of a
single potential transformer will cause the relays to trip for loss of
potential, the trip outputs shall be supervised by the voltage balance relay,
described in 8.4.6.2.12.
The time dial settings for these relays shall be coordinated with the time delay
and line distance settings of the distance relays discussed in more detail in
Section 8.4.6.11.1.
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Exhibit "A"
Attachment 1 - Design Criteria
These relays with the generator step-up transformer overcurrent relays shall
constitute the primary 3 phase fault protection for the 13.8kV bus. There shall
be no 3 phase fault backup protection for this bus.
These relays shall trip and lock out the generator breaker, trip and lock out
the exciter breaker, trip the turbine, and annunciate through the unit primary
lock out relay.
Since the relay is dependent on voltage sensing, a loss of relaying potential
may appear as a fault to the relay and cause undesired operation. For this
reason, a voltage-balance relay shall be used to supervise the distance relay. A
more detailed description of the voltage-balance relay is given in Section
8.4.6.2.12.
The relay shall trip and lock out the generator breaker, trip and lock out the
generator field, trip the turbine, and annunciate through generator backup lock
out relay.
4.6.2.9 ANTI-MOTORING PROTECTION
Loss of steam, with the main generator breaker closed and with the generator
field applied, will result in the generator running as a motor connected to the
high-voltage system. From the electrical point of view, this usually presents no
problem. However, when the steam supply to the prime mover is removed and the
generator begins motoring, the absence of steam passing through the turbine to
carry away the heat that will be produced by windage loss results in overheating
and quite possibly damage to the low pressure turbine blades. The length of time
that a turbine can withstand this condition varies with the type of turbine,
steam conditions, and turbine back-pressure.
Antimotoring protection shall be provided by a reverse power relay to
electrically sense the real power (kW) flow into the machine which may be as low
as 1/2 of 1 percent of generator rating. The reverse power relay is insensitive
to var flow so that the generator is capable of accepting reactive power from
the system without relay operation. The power directional unit of this relay
shall be supervised with the main generator circuit breaker "a" contacts to
prevent intermittent closing of the power sensing unit of the relay prior to
synchronizing. The timing circuit shall be provided to override transient power
flow into the generator that might occur during synchronizing. This relay shall
trip and lock out the generator breaker, trip and lock out the generator field,
trip the turbine, and annunciate through the generator backup lock out relay.
Backup anti-motoring protection shall be provided by a turbine valve limit
switch circuit. This circuit shall produce a trip when all four turbine inlet
ports are closed. This circuit shall trip and lock out the generator breaker,
trip and lock out the exciter breaker, trip the turbine and annunciate through
the generator primary lock out.
4.6.2.10 OUT-OF-STEP PROTECTION
Out-of-step protection is not required.
4.6.2.11 STANDSTILL OR TURNING GEAR PROTECTION
Not required.
4.6.2.12 BLOWN FUSE PROTECTION
The failure of the generator voltage transformers could result in undesired
operation of some of the generator control and protection circuits. If the
voltage to the regulator sensing circuit is lowered by a blown voltage
transformer fuse or a transformer failure, the automatic voltage regulator will
sense this
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Exhibit "A"
Attachment 1 - Design Criteria
lowered voltage and attempt to raise the terminal voltage of the generator. If
voltage is lost to certain relays, such as the backup ground and the loss of
excitation relays, undesired tripping could occur.
Blown fuse protection shall be provided by two voltage-balance relays applied to
monitor the two sets of generator voltage transformers.
Both relays shall annunciate blown fuses in either set of fuses. One of the
relays shall trip the generator automatic regulator to manual. Both relays shall
be used to supervise protective type relays.
4.6.2.13 SYNCHRONIZING SUPERVISION
The closing of the generator circuit breaker when the generator voltage is
out-of-phase with the system voltage could have adverse consequences. With the
generator voltage 180 degrees out-of-phase with respect to the system voltage,
the winding stresses could approach twice those of a three-phase short circuit.
Supervision of manual synchronizing of the generator shall be provided to
prevent the operator from closing the generator circuit breaker with the
generator more than 10 degrees out-of-phase with the system. A synchronizing
check relay to limit the angle at which the operator may close the generator
breaker. A zero degree cutoff shall be provided in this scheme to block closing
after the in-phase position has been exceeded until the next approaching
in-phase condition. In order for breaker closing to be initiated, the
synchronizing check relay must operate, then the operator must close the control
switch before the machine reaches the in-phase position with the system, and the
machine must be running faster than the system.
4.6.2.14 START-UP PROTECTION
Not required.
Generator manufacturers do not recommend applying field to the generator until
the turbine is near rated speed. This being the case, start-up (reduced
frequency) protection is not required.
4.6.2.15 FREQUENCY PROTECTION
At other than the designed frequency limits, the turbine generator is limited to
the degree of over- or under- frequency operation. As the departure from rated
frequency increases, the withstand time of the turbine generator decreases.
Frequency relays shall be applied to the generator voltage transformer to detect
operation at increased or reduced frequencies. These relays will trip and lock
out the 92 KV breaker, and trip and lock out the 13.8 kV XFMR load side breaker,
initiate run back to station service load and annunciate through the line
lockout relay.
4.6.2.16 GENERATOR METERING
CalEnergy will have electrical generation metering separate from Imperial
Irrigation District's revenue metering. It will also have its own potential and
current sources.
These meters shall be redundant to the revenue metering and will be used to
verify calibration but will not be used for re-calibration. They shall be
located on the 92KV system.
63
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Exhibit "A"
Attachment 1 - Design Criteria
The 92kV meters for CalEnergy shall provide the operator with accurate visual
indication as to the electrical characteristics of the net output of the plant.
This indication shall be located in the control room. This shall include the
following:
a. Phase Current
b. Watts
c. Vars
d. Voltage
In addition electrical meters shall be provided to maintain an accurate account
of the net electrical output of the plant over extended periods of time as
follows:
e. Watt hours in
f. Watt hours out
g. Var hours in
h. Var hours out
The main generator shall be provided with the necessary metering to provide the
operator in the control room with accurate visual indication as to the
electrical characteristics of the machine. These meters shall be located on the
13.8 kV system. This shall include the following:
a. Generator Phase Current (3 phase)
b. Generator Watts (3 phase)
c. Generator Vars (3 phase)
d. Generator Voltage (3 phase)
e. Generator Frequency
f. Generator Power Factor
In addition, electrical meters will be provided to maintain accurate account of
the electrical output of the machine over extended periods of time as follows:
g. Generator Watt hours (3 phase)
h. Generator Var hours (3 phase)
Test switches shall be provided to remove portions of the metering circuits from
service without rendering all instrumentation inoperative.
A Var transducer and a Watt transducer from both the 92kV and 13.8kV meters
shall be provided with inputs to the DCS.
4.6.2.17 OVEREXCITATION PROTECTION
Overexcitation (excessive volts/Hertz) describes a condition where excess flux
saturates the core of a wound device and flows into the adjacent structure,
causing high eddy current losses in the core and adjacent conducting materials.
The heat from these losses may quickly damage the insulating materials if the
overexcitation condition is severe. The overexcitation withstand capability of
the generator and the connected transformers has an inverse characteristic.
Dual-level overexcitation protection shall be provided for protection of the
generator and its connected transformers. In some instances, this equipment may
be provided as part of the excitation equipment
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Exhibit "A"
Attachment 1 - Design Criteria
furnished by turbine-generator manufacturer. In any case, it is suggested that
one relay be set at 110 percent volts/Hertz with a time delay of 45 seconds. The
second relay would be set at 118 percent volts/Hertz with a time delay of 2
seconds. Both relays would trip and lock out the 92KV breaker, trip and lock out
the main generator breaker, trip and lock out the generator field, trip the
turbine, and annunciate through the generator backup lock out relay.
4.6.3 GENERATOR STEP-UP TRANSFORMER
Differential protection of the generator step-up transformer shall be provided
by three high-speed, harmonic-restrained, percentage-differential relays applied
to provide sensitive protection against internal three-phase and phase-to-phase
faults. This protection shall also detect phase-to-ground faults in the
high-voltage winding of the transformer. The relays shall trip and lock out the
92kV line breaker, trip and lock out the transformer loadside breaker, initiate
runback to station service load and shall annunciate through the transformer
lock out relay.
Sudden pressure protection for internal faults of the generator step-up
transformer shall be provided by a sudden pressure relay. The sudden pressure
relay responds to the increase in internal pressure generated by the arcing of
turn-to-turn or phase-to-ground faults inside the transformer. This relay shall
trip and lock out the 92 kV line breaker, trip and lock out the transformer
loadside breaker, initiate runback to station service load and shall annunciate
through the transformer lock out relay.
The high-voltage winding of the generator step-up transformer shall be solidly
grounded thereby providing a source of ground current during line-to-ground
fault conditions on the high-voltage system. Line-to-ground faults on the
high-voltage system which are external to the unit zone of protection would
normally be cleared by the switchyard or transmission line protection. In the
event that system protection fails, a ground backup overcurrent relay shall be
applied to a current transformer in the neutral bushing of the generator step-up
transformer. This relay must coordinate with the system protection and initiate
trip and lock out of the 92kV line breaker, the GSU XFMR Loadside breaker, and
annunciates through the transformer lock out relay.
Three time and instantaneous relay functions provide overcurrent protection for
the generator step-up transformer. These same three relay functions, with the
generator voltage restrained overcurrent relays, also constitute the primary 3
phase fault protection for the 13.8kV bus. There is no backup three phase fault
protection for this bus. These relays shall trip and lock out the 92kV line
breaker, trip and lock out the GSU transformer loadside breaker, initiate
runback, and annunciate through the GSU transformer lock out relay.
4.6.4 NORMAL STATION SERVICE TRANSFORMERS PROTECTION
4.6.4.1 DIFFERENTIAL PROTECTION
Differential protection of the normal station service transformer is not
required.
4.6.4.2 SUDDEN PRESSURE PROTECTION
Sudden pressure protection for internal faults of the transformer shall be
provided by a sudden pressure relay. The sudden pressure relay responds to the
increase in internal pressure generated by the arcing of turn-to-turn or
phase-to-ground faults inside the transformer.
4.6.4.3 PHASE OVERCURRENT PROTECTION
Phase overcurrent protection for the normal station service transformers shall
be provided by three time and instantaneous overcurrent relays.
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4.6.4.4 GROUND PROTECTION
A phase-to-ground fault on the 4.16kVvoltage system shall be limited to 400
amperes and a phase-to-ground fault on the 480V system shall be limited to 3.5
amperes.
4.6.5 METERING
The station service power shall be monitored at the 1200A, 13.8kV feeder
breakers in the PDC, by watt-hour meters and ammeters connected to the current
transformers on the 13.8kV feeder buses. The potential circuit shall be supplied
from the 13.8kV feeder bus. 4.6.6 4.16KV AND 480V SWITCHGEAR
4.6.6.1 4.16KV AND 480V BUS SUPPLY PROTECTION
Protection for the bus supply feeders from the transformers shall be provided by
time-overcurrent relays applied in the bus feeder breakers.
Phase overcurrent protection shall be provided for the 4.16kVbus by three
time-overcurrent relays applied to each of the bus supply breakers. These relays
shall provide three-phase and phase-to-phase fault protection for the bus by
tripping and lock out of the bus supply breaker.
4.6.6.2 KV MOTOR FEEDER PROTECTION
All 4kV motors shall be fed by medium voltage starters. Each starter will be
equipped with motor protection relaying Multilin.
All 4 kV motors shall be equipped with six 100ohm RTD's embedded in the stator
windings. These RTD's will provide high temperature alarm to the DCS system.
Motors 1500hp and larger shall have differential protection across the windings
and surge protection at the motor terminals.
4.6.6.3 KV AND 480V SWITCHGEAR METERING
A voltmeter and a voltmeter selector switch shall be provided on the 4.16kVbus
and at each incoming breaker to allow local inspection of the three line-to-line
voltages at the bus and at the breakers.
The switchgear for the power plant and the Minerals Recovery Facility shall have
individual watt hour metering for accounting purposes.
Phase overcurrent protection shall be provided for MCC feeders consisting of
low-voltage air circuit breakers containing overcurrent direct-trip devices with
adjustable long-time and short-time trip elements. The long-time delay unit
shall be set to pickup at a value higher than the expected full load current and
less than the rated current carrying capacity of the cable, with sufficient time
delay to coordinate with the maximum overload device setting in the motor
control center. The short-time delay unit shall be coordinated with the maximum
instantaneous setting in the motor control center.
The MCC feeder breakers shall also be provided with negative sequence voltage
relaying protection.
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Exhibit "A"
Attachment 1 - Design Criteria
4.6.7 MOTOR CONTROL CENTERS (MCC)
4.6.7.1 MOTOR LOADS
The 480Vmotor control centers shall be supplied from the 480Vstation service
transformers. The loads fed from the MCC shall be limited to motors up to and
including 200 hp as well as other small miscellaneous loads.
Phase overcurrent protection shall be provided for motor feeders consisting of
motor circuit protectors (MCP and contactor overload relays. The molded-case
breakers with instantaneous magnetic elements shall provide short-circuit
protection, while the contactor overload relays shall provide thermal
protection.
The magnetic elements of the MCPs shall be set to provide short-circuit
protection for both continuous and intermittent duty motors.
The contactor overload relays for continuous duty motors will be selected
115-125 percent of rated full load current. The contactor overload heaters for
the intermittent duty motors shall be selected between 80 to 150 percent of
rated full load current.
4.6.7.2 NON-MOTOR LOADS
Phase and ground overcurrent protection shall be provided for non-motor feeders
consisting of molded-case breakers with long-time thermal trip elements to
provide overload or low current fault protection, and instantaneous magnetic
trip elements to provide short-circuit protection.
The rating of the thermal element shall be approximately 150 percent of rated
full load current and the pickup of this element is nonadjustable. The magnetic
element may or may not be adjustable; however, in either case the pickup of this
element shall vary between 500 and 1,500 percent of the thermal rating.
All current transformers used in the station protection shall have relaying
accuracy ratings in accordance with ANSI C58.4.13, and their performance at high
current levels shall be compatible with the protection requirements.
All voltage transformers used in the station protection shall have accuracy
ratings in accordance with ANSI C58.4.13 and shall have sufficient thermal
capabilities for the associated protection.
Current and voltage circuit lengths shall be designed to minimize burden
requirements. The routing of these circuits will provide adequate separation of
redundant zones of protection.
The station electrical protection shall be applied with the intent of providing
overlapping zones of protection for high-speed clearing of the major items. This
principle shall also apply to the control circuitry for the station. Similar
high-speed zones of protection shall initiate clearing of the fault by means of
separate auxiliary lock out relays. Station protection, which shall provide
time-delayed clearing of faults, shall initiate clearing by means of a third
auxiliary lock out relay.
The d-c control power for the 4.16kVswitchgear as well as the 480V MCC supply
breakers shall be provided by the 125Vd-c power system. Motor starters shall be
self-powered a-c controlled.
The control power for all motor controllers or contactors at the 480Vmotor
control center (MCC) level shall be provided by 480-120Vcontrol transformers.
Each control transformer shall be connected to its
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Exhibit "A"
Attachment 1 - Design Criteria
associated 480VMCC branch circuit. Therefore, the a-c control power for 480VMCC
shall be provided by the a-c power system. The secondaries of all
480-120Vcontrol transformers shall be fused and grounded.
4.6.8 SYSTEM OPERATION
The station electrical protection shall be in service at all times and shall
automatically initiate corrective action upon inception of a fault or abnormal
condition which may be detrimental to the safe operation of the station and/or
the system.
In some instances, the station protection shall lock out the affected equipment
to prevent re-energizing. In these cases, it shall be necessary to manually
reset the auxiliary lock out relay before re-energizing.
It shall be necessary to indicate to the station operator the occurrence of
certain undesired conditions. These conditions shall include, but not
necessarily be limited to, a blown fuse on the generator voltage transformers,
grounds on the d-c battery system, loss of dc control power to the station
protection schemes, loss of d-c control power to circuit breakers, and
overexcitation of the unit.
4.6.9 SAFETY FEATURES FOR POTENTIAL EMERGENCIES
Because of its requirements, the station protection physically encompasses a
large area. The a-c current and voltage sensing circuits, as well as the d-c
control circuits are exposed to the natural elements such as heat, moisture,
dust, etc., which could cause insulation failure.
The possibility exists whereby relays with cup-type or balance beam construction
may be made to operate falsely due to a sudden shock to the relay case or panel.
During certain conditions, significant voltages could exist on the a-c current
and voltage circuits due to differences in ground potential.
Current, voltage, and control circuits which extend to the high-voltage
switchyard may be subjected to induced high-voltage as a result of mutual
coupling to the high-voltage conductors.
The inadvertent opening of a current transformer secondary circuit could result
in extremely high-voltages at the current transformer secondary.
Because of the reliability in past current transformer design and the
criticality of current circuits, no fuses or interrupting devices shall be
applied. The insulation shall be resistant to the natural elements. The
reliability of the current and voltage circuits, as well as the d-c control
circuitry, shall be stressed in the design of duct runs and cable trays. Since
the a-c voltage and the d-c control circuitry are much more complicated and are
not as critical as the current circuits, fusing will be permitted, and the
circuits shall be monitored to detect the blown fuse.
The location of the station protection shall be in a designated area where only
qualified personnel shall be permitted. The location of relays on control panels
and switchgear shall be such as to minimize vibration.
The grounding of each a-c current and voltage circuit shall be at the relay
panels or the switchgear and shall be grounded in one location only.
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Attachment 1 - Design Criteria
The current transformer secondary circuits shall be wired to current-shorting
type terminal blocks or test switches in cases where metering and relaying
circuits are combined.
Power supplied to the Mineral Recovery Facility on the Unit 5 site will be
separately metered for accounting purposes.
4.6.10 SYSTEM MAINTENANCE
The station electrical protection shall be designed to permit easy access for
the removal or replacement of the individual relays which make up the protective
systems
The station electrical protection shall be designed with the majority of relays
having glass covers to permit visual in-service inspection. All fault-detecting
relays shall have mechanical or electrical targets to readily identify the relay
responsible for interruption. These targets shall be visible without dismantling
any of the protection.
Drawout-type construction of the fault-detecting relays shall provide easy
removal of the relay for bench maintenance and also provide for injection of
current and/or voltage for in-place testing.
4.6.11 KV LINE PROTECTION
4.6.11.1 PRIMARY LINE PROTECTION
The first zone distance relay provides 3 phase and phase to phase fault
protection for 90% of the line length to the utility substation.
The second zone distance relay provides time delayed 3 phase and phase to phase
fault protection for 125% of the line length to the utility substation.
The directional/ground overcurrent relay provides time and instantaneous ground
overcurrent for the line.
These relays trip and lock out the 92 kV line breaker, trip and lock out the GSU
load side breaker, initiate runback to station service load, and annunciate
through the 92 kV line lock out.
4.6.11.2 BACKUP LINE PROTECTION
The directional phase overcurrent relays provide time overcurrent protection for
the 92 kV line. These relays trip and lock out the 92 kV breaker, trip and lock
out the 92 kV breaker, trip and lock out the GSU transformer, initiate runback
to station service load and annunciate through the 92 kV line lockout relay.
The backup ground protection for the 92 kV line is the neutral overcurrent relay
on GSU transformer. It is described in Section 8.4.5. The Contractor shall
coordinate the 92 kV protection scheme with IID.
4.7 MEDIUM AND LOW VOLTAGE POWER SYSTEMS
The medium and low voltage power systems shall consist of 13.8 and 4.16 kV
metal-clad switch gear, 4,160 V motor controllers and 480Vmotor control centers.
The station service transformers shall step the voltage down from the 13.8 kV
generator voltage to the 4160Vor 480Vbus voltage.
480 volt loads and motors up to and including 200 HP shall be powered from motor
control centers (MCCs) located in controlled air environments within the PDC.
Motors larger than 200 hp shall be powered from 4,160 V motor controllers.
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Exhibit "A"
Attachment 1 - Design Criteria
The 4.16 kV switchgear and motor controllers, as well as the 480 volt MCCs shall
be designed with adequate space capacity to anticipate future load growth.
4.7.1 SYSTEM REQUIREMENTS
The function of the ac power system shall be to supply reliable ac power to all
electrical equipment.
The ac power system shall include transformers, switchgear, motor control
centers, motors, conductors, and associated instrumentation and controls.
A nominal system voltage of 4.16 kV, 3 phase, 60 Hz shall be provided to supply
large motors (over 200 HP).
A nominal system voltage of 480 V, 3 phase, 60 Hz shall be provided to supply
small motors (1/2 hp through 200 hp) and loads less than, or equal to, 300 kW.
A nominal system voltage of 120/208 V, three phase, 60 Hz shall be provided to
supply fractional horsepower motors (1/2 hp and smaller) and small single phase
loads.
The voltage at the terminals of motor leads during start shall not be allowed to
dip below 80 percent.
The horsepower ranges stated above, that will be assigned to each voltage level,
are intended as a guide. There may be instances of overlap, where the Contractor
may assign a motor to a bus not in accordance with the above. Assignment of
motors to a bus shall take into consideration availability of power source and
increases or decreases in motor horsepower after switchgear is purchased.
The 4.16 kV system shall be grounded at the wye-connected secondary windings of
each unit and reserve station service transformer through a resistor to limit
the maximum line-to-ground fault current to approximately 400 amperes. The 480 V
system will be high and low resistance grounded. The 208/120 V system will have
its neutral solidly grounded at the various sources of supply. Lighting and
outlet circuits requiring a solidly grounded neutral will be supplied from a
480V-277/480V transformer with its secondary solidly grounded.
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Exhibit "A"
Attachment 1 - Design Criteria
Oil-filled transformers shall be located outdoors. All non-segregated phase bus
duct shall be located outdoors. Motors shall be located both outdoors and
indoors as required . All other equipment such as switchgear, air-cooled
dry-type transformers, silicon filled transformers, MCCs, and distribution
cabinets shall be located indoors, in the controlled environment of the PDC.
The equipment shall be arranged to facilitate repair and removal for
maintenance. Metal-clad switchgear and transformers shall be arranged to
facilitate uniform phasing. Standard transformer connections shall be used
(wherever possible). Incoming and outgoing feeder conductors for switchgear, and
MCCs shall be identified (as viewed from the front), as phase A, B, and C, left
to right and top to bottom, or front to back, as applicable.
Periodic maintenance shall be performed on components of the ac power system.
This maintenance shall be consistent with the manufacturer's recommendations. In
addition, adequate floor space shall be provided around the equipment for proper
maintenance.
Testing and inspection shall be provided for all normal ac systems. The
particular tests and inspections and their frequency will depend upon the
specific components installed, their function, and their environment. These
tests and inspections shall be directed at detecting the deterioration of the
system toward an unacceptable condition and to demonstrate that standby power
equipment and other components that are not running during normal operation are
operable.
The normal ac power system instrumentation and control shall consist of the
following:
1. 13.8 kV station service power supply breaker control
2. 4.16 kV feeder breaker control
3. 480 V feeder control
The 92, 13.8, 4.16 kV and 480 V breaker control shall:
1. Be powered from a dc source (when not prohibited by distance).
2. Provide control from the control room and switchgear for the 92
kV breaker and generator breaker. All other breakers will be
controlled locally at the switchgear.
3. Provide protective interlocks.
The DCS inputs shall record that a breaker is tripped.
4.7.2 SYSTEM DESIGN
Connections of the power supply feeders and busing arrangements of the ac power
system are shown on the main one-line diagram.
During normal operation, while the plant is generating, the main power source
shall be from the unit turbine-generator. A 13.8 kV non-segregated phase bus
shall connect the generator to the 13.8 kV bus.
Voltage at the motor terminals at any voltage level shall not be less than 80
percent of rated motor voltage during starting. The voltage at the terminals of
any power transformer shall not exceed 110
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Exhibit "A"
Attachment 1 - Design Criteria
percent of rated voltage under no-load conditions when the high voltage supply
from the 92 kV line is 102.5 percent of rated nominal voltage.
The system frequency shall not exceed 60 Hz, +5 percent. The maximum system
frequency decay rate shall not exceed 5 Hz per sec.
The generator step-up transformer shall consist of a two winding three phase
transformer. The transformer shall be fed from the non-segregated phase bus
leads connected to the generator step-up transformer primary side breaker.
The station service transformers shall be located outdoors, near the power
distribution centers (PDC). The station service transformers shall be 2 winding
transformers.
The 4.16 kV and 480 V switchgear equipment shall be located in a fire protected
area in the power distribution centers which will also be a controlled
environment area.
The 120/208 V buses and their respective 480-120/208 V transformers will be
located in environmentally controlled areas of the PDC.
No automatic fire suppression system will be furnished for the PDC. Smoke
detectors and temperature sensors provided by the Contractor will alarm in the
control room. There will be a fire extinguisher located at each end of each
P.D.C.
4.7.3 COMPONENT DESIGN
4.7.3.1 MAIN TURBINE GENERATOR
The main generator shall be rated * (by Contractor) MVA, three-phase, 3600 rpm,
13.8 kV, 60 Hz, 0.90 leading power factor to 0.85 lagging power factor. The
generator will be wye-connected and will be capable of operating with a neutral
grounding device having a high impedance which will limit the maximum phase
current. The neutral terminal enclosure shall be furnished with the generator,
with provisions for the Contractor's conduit for the grounding lead. The
Generator Step Up Transformer shall have an automatic LTC providing +/-10%
voltage control.
Each of the stator terminals shall be equipped with bushing type current
transformers of suitable rating. All current transformers shall have 5 amp
secondaries. The main terminals shall be arranged for non-segregated phase bus
duct connections. The generator excitation system shall be capable of regulating
the generator voltage from 95 to 105 percent of the rated voltage at any load
level up to the generator nameplate rating. Suitable excitation switchgear shall
be furnished for control of the generator exciter.
The generator shall be supplied complete with all the auxiliary equipment
required for the successful operation of the generator.
4.7.3.2 NON-SEGREGATED PHASE BUS
The non-segregated phase bus shall connect the main generator to the main
generator breaker located in the PDC and from the main generator breaker to the
generator step up transformer. It shall be self-cooled and rated to carry the
maximum generator output. It will be fully insulated. The bus shall be designed
for outdoor operation at maximum ambient temperature.
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Exhibit "A"
Attachment 1 - Design Criteria
The non-segregated phase bus shall include the following:
1. The main bus leads including metal enclosure
2. Supporting structures
The bus duct shall be of the totally enclosed type with galvanized steel
comprising the formed duct and bolted, gasketed covers.
4.7.3.3 GENERATOR STEP-UP TRANSFORMER
The three phase transformer for the generator step-up transformer shall have
full capacity no-load taps on the high voltage winding and shall be rated to
deliver the MVA output of the turbine generator at rated frequency. The
transformer winding insulation shall be operated at no higher temperatures than
it would be subjected to if operated in a standard ambient. The transformer
shall be connected delta-wye, and shall; be solidly grounded on the high voltage
wye connected side. The high side of the transformer shall be equipped with an
automatic load tap changer.
4.7.3.4 STATION SERVICE TRANSFORMERS
The station service transformers impedance values shall be selected to satisfy
the following criteria:
1. Be small enough to provide good plant voltage regulation down to
the 120 V ac level.
2. Be small enough to successfully start large ac motors. (In
general, the voltage, upon starting large motors, will be limited
to not less than 80 percent of nominal.)
3. Be large enough that the interrupting rating of connected
switchgear is not exceeded.
The station service transformers shall be three phase with full capacity no-load
taps on the primary winding. All transformers shall be rated to carry the
connected normal bus load at maximum ambient. Transformers shall be connected
delta-wye resistance grounded and provided with ground resistors on the
secondary neutral. The transformers shall be oil filled, rated to supply the
normal load on the bus, three-phase, with class H (220 C) insulation with full
capacity no-load taps on the primary windings. Transformers shall be connected
delta-wye.
4.7.3.5 SWITCHGEAR
The switchgear shall be rated for interrupting capacity based on maximum
short-circuit availability at its location. The switchgear bus full-load ampere
rating shall be sized to have the standard available bus ratings above the
maximum coincidental load. The buses shall be braced to withstand the maximum
momentary short-circuit current, taking into consideration the fault
contribution of all connected rotating machines and source transformers and
making proper allowance for system X/R ratio at the point of fault.
The vacuum breakers, if used, shall be selected with a maximum symmetrical
interrupting rating (kA) which will exceed that available from the power system
at the point of application. This shall take into consideration all the
contribution of connected induction motors.
4.7.3.6 MOTOR CONTROL CENTERS
Motor control centers shall be rated 480 V, 3 phase, 60 Hz, utilizing
combination motor starters and molded case circuit breakers for motor branch
circuit protection. The motor branch circuit breakers, as well as those for
feeders, shall have a minimum symmetrical interrupting rating of 42,000 A.
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Exhibit "A"
Attachment 1 - Design Criteria
4.7.3.7 MOTORS
All motors shall be sized to develop sufficient horsepower to drive the
connected load under runout or maximum expected flow or pressure, whichever is
larger, and permit the driven equipment to develop its specified capacity
without exceeding the temperature limits of the motor. Motors shall be specified
with the following special features:
a. All motors not located in a clean dry area protected from the
atmosphere, shall be totally enclosed and will be specified with
a 1.15 service factor. Motors located indoors may be furnished
with drip-proof enclosures and have a 1.15 service factor.
b. During normal operation, no encroachment on the service factor
will be permitted.
c. During infrequent and short periods in an emergency, such as
runout operation, exceeding of the service factor rating will not
be permitted.
d. Motor insulation shall be specified as Class F with a 90(degree)C
rise at service factor load for a 34(degree)C average ambient,
and with an 80(degree)C rise at service factor load for site
maximum ambient. Although motors are to be specified with a Class
F insulation system, they shall be sized on the basis of Class B
temperature rises.
e. A minimum torque margin of 15 percent of rated full load torque
from standstill to speed at which breakdown torque occurs at
specified minimum starting voltage shall be specified to assure
rapid acceleration.
f. A minimum locked rotor thermal limit time equal to the minimum
voltage acceleration time shall be specified for the rated
voltage condition.
g. For all low voltage motors non-hygroscopic type insulation shall
be specified. Motors to be run from variable frequency drives
shall be designed and specified for the application.
For all medium voltage motors, VPI Insulation systems shall be
specified. Medium voltage motors shall be furnished with six
duplex 100 ohm Platinum stator RTDs.
h. Coil ends of open motors shall be provided with abrasion
protective coats to resist wear, such as a resilient silicone
rubber spray coat.
i. All anti-friction bearings shall be specified with a minimum L-10
life of 50,000 hr. Motors with anti-friction bearings shall be
furnished with duplex thermocouples on each bearing. Sleeve
bearings shall be furnished with duplex 100 ohm Platinum RTDs
j. Motors 1/2 hp and smaller shall be TEFC.
k. Motor larger than 200 hp shall be form wound.
4.7.3.8 KV AND 4.16 KV METAL-CLAD SWITCHGEAR
The 13.8 kV and 4.16 kV switchgear vacuum circuit breakers shall be of the
electrically operated drawout type with stored energy mechanisms. Switchgear
breaker control dc power shall be supplied from batteries of the 125 Vdc power
system.
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Exhibit "A"
Attachment 1 - Design Criteria
13.8 kV circuit breakers shall have the capability of being manually operated at
the switchgear and remotely from the new mimic panel in the combined control
room.
The 4.16 kV fused vacuum contactors shall feed 4 kV motors. They shall be both
manually operated locally or remotely from the DCS.
Open and closed positions of all 13.8 kV and 4.16 kV circuit breakers and the
contactors shall be indicated at the switchgear, and in the control room. 13.8
kV positions shall be indicated by lights on the mimic panel. 4.16 kV breaker
and contactor positions shall be indicated in the DCS. All trip functions shall
be alarmed through the DCS.
An Ammeter and Ammeter Switch shall provide local indication of 4.16 kV loads
and an amp transducer will be provided for remote monitoring at the DCS.
4.7.3.9 V LOAD CENTER TYPE BREAKERS
The load center type air circuit breakers shall be provided with dc control
power supplied from batteries of the 125V dc power system.
Load center type air-magnetic circuit breakers applied as MCC feeders shall be
manually operated at the MCC lineup.
Tripping and closing positions of the main 480 V circuit breakers shall be
indicated at the switchgear, tripping will be alarmed in the control room
through the DCS.
4.7.3.10 V MOTOR CONTROL CENTERS (MCC)
For motor starters, heater feeders, or other load feeders, 480-120 V control
power transformers shall be connected to the load side of the circuit breakers
to supply control power to the starter or contactor. Loss of ac supply power to
a starter or contactor shall cause it to fail open, disconnecting the load.
However, the 480 V system shall be designed such that the voltage at the MCCs
will be within the starter pickup voltage rating.
The MCC distribution and miscellaneous feeders shall be provided with manual
control at the circuit breakers. Motor and heater feeder breakers shall be
provided with automatic and/or remote control, as required.
4.7.3.11 V BUSES
Each circuit originating from a 120 V ac distribution cabinet shall be protected
with a manually operated single-pole circuit breaker.
Where a circuit shall be used with automatic or remote control, a separately
mounted motor starter or a single-pole relay connected to the load side of the
circuit breaker shall be employed.
4.7.4 SYSTEM LIMITATIONS AND SET POINTS
The components of the ac power systems shall be loaded only within their
nameplate ratings. Loads in excess of this will cause reduced life expectancy
and may cause automatic disconnection of the loaded circuit. Electrical
equipment shall be sized and load groupings shall be assigned such that the
maximum coincidental load falls within the rating of each ac power system
component.
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Exhibit "A"
Attachment 1 - Design Criteria
4.7.4.1 SET POINTS
Various components of the ac power system shall have set points which are
discussed in the following paragraphs:
4.7.5 SWITCHGEAR AND RELAY PANELS
4.7.5.1 PROTECTIVE RELAYS
Protective relay settings shall represent the most desirable compromise between
equipment protection and continuity of station service. Examples of the
parameters which must be set are current pickup, current tap settings, and time
dial positions.
4.7.5.1.1 TIME DELAY RELAYS
Time delay relays shall be set to delay actuation of a device in order to
accomplish a particular function. Relays of the fixed timer type shall be set to
agree with the time settings given on elementary diagrams to be developed by the
Contractor.
4.7.6 MOTOR CONTROL CENTERS
4.7.6.1.1 OVERLOAD RELAY SELECTION
Overload relays shall be selected and installed by the Contractor to protect
motors or connected equipment from overload for excessive periods of time. They
shall be selected to protect the specific load in question, taking into
consideration the ambient temperature in which the relay operates.
4.7.6.1.2 ADJUSTABLE TRIP SETTINGS
If required, in order to more closely match the heater characteristics with the
protected equipment or to prevent false tripping, the relay pickup point may be
changed through the range of 90 to 110 percent of the stamped rating on the
bimetallic heater element.
4.7.7 POWER TRANSFORMERS
Oil-filled transformers shall be equipped with liquid temperature devices (top
oil) and/or winding temperature devices (top oil temperature augmented by a heat
generating current proportional to load). These devices shall function to alarm,
start radiator fans, or start oil circulating pumps, where applicable.
Air-cooled transformers, if supplied, shall be equipped with thermostatic
devices which automatically turn on cooling fans at a particular temperature
setting and alarm at a higher temperature setting.
The setting of the temperature devices shall be the responsibility of the
respective transformer manufacturer and shall be a function of the transformer
design.
4.7.8 SYSTEM OPERATION
4.7.8.1 START-UP AND SHUTDOWN
The Project shall be designed so that power required for start-up will be
provided from Unit 3 or from IID at the Owner's option. A 13.8 kV feed shall be
installed to connect Unit 5 to Unit 3. Once the Unit 5 turbine is operational,
the load will be transferred to the Unit 5 generator and the tie breaker to Unit
3 will be opened. At this point, Unit 5 can be synchronized to the system.
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Exhibit "A"
Attachment 1 - Design Criteria
4.7.8.2 NORMAL OPERATION
Adequate power will be supplied to the ac system during normal operation to
energize all required loads for this mode of operation. The power source during
normal operation will be the main turbine-generator.
4.7.9 SYSTEM MAINTENANCE
4.7.9.1 MAINTENANCE APPROACH
The maintenance program for the ac power system will consist of periodic testing
following the pre-operational and initial system tests and inspections. A
complete schedule of manufacturer's recommendations concerning components of the
system will be maintained as well as an outline of various problems, their
causes, diagnostic indications, and recommended corrective action. All
instruments and equipment required to inspect, test, and maintain the system
components will be part of the plant stock supply.
4.7.9.2 PREVENTIVE MAINTENANCE
Routine preventive maintenance will be performed on components of the system in
accordance with manufacturer's recommended procedures.
The station maintenance program will include testing requirements for all ac
systems following the pre-operational and initial system tests and inspections.
The particular tests and the frequency of these tests will depend upon the
specific components installed, their function, their environment, and the fact
that they are on the station maintenance program. These tests will be directed
at detecting the deterioration of the system toward an unacceptable condition
and will demonstrate that standby power equipment and other components that are
not running during normal operation are operable.
4.7.9.3 TESTING
During the pre-operational stage with all components of the ac power system
installed, tests shall demonstrate that all components are correct and are
properly mounted, all connections are verified as being correct and continuous,
all components are operational, and all metering and protective devices are
properly calibrated and adjusted.
Following satisfactory checkout of all components of a system, the initial
system test will be performed with all components installed. The initial system
test will be operational tests conducted to demonstrate that the equipment
operates within design limits and that the system is operational and meets its
performance specifications.
The 4.16 kV and 480 V circuit breakers and associated devices will be tested
while individual equipment is shut down or not in service. Protective relays
will be tested under a simulated overload or fault condition, and their
calibration will be verified. The breaker opening and closing capabilities can
also be demonstrated. Availability of breaker control power will be indicated by
breaker indicating lights.
The in-service periodic testing requirements of the loads will be met in part by
actual operation of the active normal components of the system. The capability
of the distribution circuits of the normal system to transmit sufficient energy
to start and operate all required loads will be confirmed during these periodic
tests of the loads themselves. These tests will also confirm the capability of
the supply breakers to operate and transmit the required energy upon receipt of
a control input.
77
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
4.7.9.4 INSPECTION
Typical inspections will include visual inspection of switchgear, metering, and
surveillance equipment. Availability of breaker control power will be shown by
breaker indicating lights at the main control room DCS console and at the
switchgear.
4.7.9.5 CORRECTIVE MAINTENANCE
Corrective maintenance will be performed on components of the ac power system,
as required. The specific maintenance action will depend on the type of
equipment, type of correction to be made, and manufacturer's recommendations on
the subject.
CODES AND STANDARDS
-------------------
The normal ac power system will be designed and constructed in accordance with
the latest versions of the following codes and standards:
American National Standards Institute
ANSI C37 Power Switchgear
ANSI C50 Rotating Electrical Machinery
ANSI C57 Transformer, Regulators, and
Reactors
Institute of Electrical and Electronics Engineers
-------------------------------------------------
ANSI C38.4.96 Guide for Induction Motor
Protection
National Electrical Manufacturer's Association
----------------------------------------------
NEMA AB-1 Molded Case Circuit
Breakers
NEMA E12 Instrument Transformers
NEMA FU1 Low-Voltage Cartridge
Fuses
NEMA ICS Industrial Controls and
Systems
NEMA PB-1 Panelboards
NEMA PB-2 Dead-Front Distribution Switch-
boards
78
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
NEMA SG3 Low Voltage Power Circuit
Breakers
NEMA SG4 AC High Voltage Power Circuit
Breaker
NEMA SG5 Power Switchgear
Assemblies
NEMA SG6-1974 Power Switching
Equipment
NEMA TR-1 Transformers, Regulators, and
Reactors
NEMA MG1 Motors and Generators
Miscellaneous
-------------
NFPA No. 78 Lightning Protection Code
UL 96A Installation Requirements -
Master Labeled Lightning
Protection System
Title 24, CAC California Administrative Code
Title 24California Building Code
4.8 D.C. SYSTEMS
The dc power system shall consist of one 125 V dc battery, distribution panels
and associated equipment. The dc power system will supply dc power for the
operation and control of equipment and dc loads. The dc power system nominal
voltage shall be 125 V dc, ungrounded.
4.8.1 SYSTEM REQUIREMENTS
The 125 V dc power system will supply dc power for the operation and
control of equipment, dc motors, and other loads. The UPS System shall
be supplied at 125VVdc from a separate battery.
The dc power system will include power supplies and distribution systems
arranged to provide dc electric power to all dc loads. The power supply
will consist of one 125 V dc battery, and one battery charger. The
distribution system will consist of all equipment in the distribution
circuits from the supply devices to their loads. Components of each
system will be marked for easy identification.
A nominal voltage of 125 V dc will be provided from a 60-cell station
battery to supply power and control loads for two hours following a loss
of normal power. The voltage at
79
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
the terminals of the dc electrical equipment fed from this battery may
vary between 140 and 105 V dc.
System equipment will be housed in the PDC Building. The batteries will
be enclosed in a separate ventilated room. Under normal conditions, the
dc buses will be supplied from battery chargers. On loss of ac power,
the batteries will supply power to the dc buses for a minimum of two
hours.
Periodic maintenance will be performed on components of the dc power
system. This maintenance will be consistent with manufacturer's
recommendations. In addition, adequate floor space will be provided
around the equipment including the station batteries for proper
maintenance.
Testing will be provided for the dc power system. The particular tests
and inspections and their frequency will depend upon the specific
components installed, their function, and their environment. These tests
will be directed at detecting the deterioration of the system toward an
unacceptable condition and to demonstrate that backup power equipment
and other components that are not running during normal operation are
operable.
In general, the testing requirements will be met in part by actual
operation of the active components of the system. The capability of the
distribution circuits of the dc power system to transmit sufficient
energy to start and operate all required loads will be confirmed during
these periodic tests and inspections of the loads themselves. These
tests will also confirm the capability of the supply breakers to operate
and transmit the required energy upon receipt of a control input.
The normal dc power system instrumentation will consist of battery,
battery charger, and dc bus monitoring, as well as annunciation in the
control room so that corrective action may be initiated to restore the
system to normal operation.
The following functions will be monitored or controlled:
Battery Monitoring output/input current
Charger Monitoring and Control
Output current and voltage
High output voltage
AC power failure to battery charger
Control for float and equalize charge
80
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
DC Bus Monitoring
Voltage
Ground detection
Local indication will be provided.
The DCS will monitor sufficient parameters to alert the control room
operators that corrective action is required to restore the system to
normal operation.
The dc system will be operated at a normal float charge voltage level to
maintain the batteries in a fully charged condition. The battery charger
associated with each battery will be rated to supply the largest
combined demands of the various steady state loads and the charging
capacity to restore the battery from the design minimum charge state to
the fully charged state.
The dc power system shall be designed and constructed in accordance with
the codes and standards listed in Appendix 8.4.7.
4.8.2 SYSTEM DESIGN
Under normal conditions, 480V motor control centers shall supply power to the dc
bus through a battery charger. In the event of loss of ac power the battery
shall directly feed the dc bus.
The dc power system shall be operated at a normal float charge voltage level to
maintain the battery in a fully charged state.
All auxiliary electrical equipment connected to the 125 V dc power system shall
be capable of operating on a voltage range of 140 to 101 V dc.
The batteries shall be housed in a separate room from the battery chargers and
main distribution panels.
81
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Exhibit "A"
Attachment 1 - Design Criteria
The principal components of the dc power system shall consist of one 60-cell
battery, one 125 V static battery charger, and distribution panels as required
for D.C. loads.
4.8.2.1 BATTERY ROOM
A separate battery room shall be provided as part of the PDC for the batteries
of the dc power system. The room will provide a well ventilated, clean, cool,
and dry place so that the cells will not be affected by sources of radiant heat
such as sunshine, steam pipes, or heating units.
The battery room shall have a designed ambient temperature of 77 (plus or minus)
5(degree)F (25 (plus or minus) 2.8(degree)C) year round to provide optimum
battery life, ease of maintenance, and low cost of operation. Since variations
in electrolyte temperature between cells of more than 5(degree)F (2.8(degree)C)
may cause the warmer cells to become unequal, proper battery location,
ventilation and cell arrangement shall be provided to keep this variation within
the above limits, and prevent deterioration of the positive plates thus
prolonging battery life. The battery temperature shall not exceed 90(degree)F
for more than 1% of the year, nor exceed the range of 60 to 120(degree)F at any
time.
The battery room shall be ventilated to maintain the design temperature and
prevent accumulation of hydrogen. The room air shall be changed a minimum of 5
times an hour, which is more than sufficient to keep hydrogen liberated from
battery cells from exceeding the maximum allowable concentration of less than 2
percent by volume. A separate exhaust fan shall be provided for the battery
room.
The battery room shall not be provided with permanent flush or wash facilities.
However, in compliance with OSHA 1910.132, neoprene or rubber gauntlet gloves,
chemical eye protection goggles, and eye wash units such as plastic squeeze
bottles containing clean water, readily available to flush the eyes shall be
provided close-by outside the battery room. The requirement for rubber aprons,
safety shoes, etc., will depend on the operator's tasks.
The battery room shall be provided with adequate aisle space for inspection,
maintenance, testing, and cell replacement. Space shall also be provided above
the cells to allow for operation of lifting equipment, addition of water, and
taking measurements (e.g., temperature, specific gravity, etc.). The battery
room floor shall have an acid resistant coating.
4.8.2.2 BATTERIES
The battery shall be lead-calcium, power-station type. The battery shall be
sized per IEEE 485 for ampere-hour capacity suitable for supplying all connected
for a minimum period of two-hours, in the event of loss of all ac power and
without the use of battery chargers. At no time during the two hour period will
the battery terminal voltage drop below 1.75 V per cell. The characteristics of
each load, the time duration each load is required and the basis used to
establish the power required for each load will be used to establish the
combined load demand to be connected to the dc power supply during the "worst"
operating conditions.
Intercell and terminal connectors shall consist of lead-plated copper
connectors.
The battery shall be provided with a battery disconnect switch for maintenance
and safety. Annunciation shall be provided in the control room when disconnect
switch and/or breaker are "open" to indicate the battery is disconnected from
the dc bus.
The battery shall be mounted on battery racks constructed of steel rails,
frames, and braces. The racks shall be provided with acid resistant insulated
channels on which the battery cells will rest, and
82
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
noncombustible, moisture and acid-resistant spacers between the cells to keep
them aligned. The metal surfaces of all racks shall be coated with
acid-resistant enamel paint and shall be solidly connected to the station
grounding system. The Contractor shall design the rack to ensure that it will
withstand the seismic forces encountered at the plant site.
4.8.2.3 BATTERY CHARGER
The static type battery charger shall have ample capacity to supply the steady
state loads under any plant condition, while recharging the battery to a fully
charged condition from the design minimum charged state within 24 hours.
The static battery chargers connected to the 125 V dc buses shall have a nominal
output float voltage of 130 to 135 V dc, with an input of 480 V ac, 3-phase, and
shall limit the output ripple voltage under full load without the battery
attached, to 1 percent rms or less.
4.8.2.4 DC DISTRIBUTION
The battery shall be connected to a dc distribution panel which will supply the
appropriate dc loads. The battery distribution panel shall be equipped with a
battery main air circuit breaker with only long-time and short-time trip
attachments. In addition, ground detection equipment shall be provided
consisting of a zero-center voltmeter and a center tapped resistor connected
across the bus. The negative meter terminal shall be connected to the resistor
tap and the positive meter terminal to the ground. With a ground the meter shall
indicate positive or negative voltage depending on which side of the bus is
grounded, with no ground the meter shall indicate zero. Meters shall be provided
with alarm contacts that will be used to annunciate a ground in the control
room.
4.8.2.5 OTHER CONSIDERATIONS FOR SYSTEM DESIGN
All branch circuits shall have overcurrent protection on both wires.
The average ambient temperature of the area in which the battery distribution
panel will be located, shall be maintained at less than 90(degree) F
(32.2(degree) C) year round.
All dc motors shall be capable of delivering adequate power so that the driven
equipment will perform its intended function properly when the voltage at the
motor terminals varies between 140 V and 105 V dc. All equipment specifications
shall state these requirements.
Auxiliary electrical equipment such as motor starters, breakers, and relays used
in the 125 V dc power system shall be capable of operating between 140 V and 105
V dc.
Motor starters shall be single-pole of the reduced-inrush type, using step
starting resistors and timers to limit the current to safe values during
acceleration.
Motor starters shall be located close to the battery rather than near the motor
and separate leads will be run to the motor shunt fields. This will minimize the
voltage drop problem due to high inrush currents which may result in
unsatisfactory starting performance because of low field excitation levels.
The dc power system instrumentation shall consist of measuring the battery
output current to the dc distribution system, and displaying the battery voltage
at the distribution panel. Battery voltage shall also be continuously monitored
in the control room through voltage-to-current transducers. Undervoltage relays
shall alarm for low voltage and critical low voltage conditions.
83
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Main circuit breakers shall be provided for each battery and with only long-time
and short-time trip attachments.
Ground detection shall be provided for the dc bus consisting of a voltmeter
containing auxiliary contacts to alarm for a ground on the bus. The alarms shall
be annunciated in the control room.
The battery charger shall be provided with an output voltmeter and ammeter, as
well as pilot lights to indicate that input voltage is available. In addition,
relays shall be provided to alarm on low power ac input voltage on any phase,
and high dc output voltage. The charger input ac and the output dc shall also be
provided with circuit breakers sized not to trip with the output short
circuited. A manually adjustable timer shall also be included to automatically
control the duration of equalizing charge cycles. An interruption of timer
supply during a charging cycle shall not result in return of output voltage to
float level on restoration of power supply.
4.8.3 SYSTEM LIMITATIONS, SET POINTS, AND PRECAUTIONS
The dc power system shall be operable with or without ac power. It shall supply
all normal dc loads for a minimum of two hours without ac power, and
continuously with ac power.
Low, critical low and high battery bus voltage, high battery current, ac
failure, and ground detection shall be annunciated in the control room.
The low, critical low, and high voltages that shall be annunciated for the 125 V
dc bus will be 125 V, 108 V, and 140 V, respectively.
4.8.4 SYSTEM OPERATION
During unit start-up, the dc power system will receive dc power through the
battery charger. The battery charger will be supplied from the 480 V motor
control centers.
During normal plant operations and shutdown, the dc power system will receive dc
power through the battery charger to supply all required loads for these mode of
operation.
During an abnormal condition, when ac power is lost to the battery charger, the
dc system will receive dc power directly from the batteries. When ac power is
restored, the dc system will again receive dc power through the battery charger.
4.8.5 SYSTEM MAINTENANCE
The station maintenance program will include preventive maintenance, periodic
testing and inspections and corrective maintenance.
A complete schedule of manufacturer's recommendations concerning components of
the system will be maintained as well as an outline of various problems, their
causes, diagnostic indications, and recommended corrective action. All
instruments and equipment required to inspect, test, and maintain the system
components will be part of the plant stock supply.
Routine preventive maintenance, including routine replacement of components
which may be susceptible to common mode failure near the end of their expected
life, will be performed on the system in accordance with manufacturer's
recommended procedures.
During preventive maintenance circuit breakers will afford the opportunity of
component isolation from an energized condition to a de-energized state.
84
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Maintenance performed on the dc equipment will be done only by qualified
personnel who are familiar with the component maintenance manuals and plant
operational testing procedures.
4.8.6 TESTING
The station maintenance program will include periodic testing for the dc system
following the pre-operational and initial system tests and inspections. The
particular tests and the frequency of these tests will depend upon the specific
components installed, their function, their environment, and the fact that they
are on the station maintenance program.
During the pre-operational stage with all components of the dc power system
installed, tests shall demonstrate that all components are correct and properly
mounted, all connections are verified as being correct and continuous, all
components are operational, and all metering and protective devices are properly
calibrated and adjusted.
4.8.6.1 INITIAL START-UP SYSTEM TESTS
Following satisfactory checkout of all system components as described above, the
initial system start-up tests shall be performed with all components installed.
The initial start-up system tests will consist of operational tests conducted to
demonstrate that the equipment operates within design limits and that the system
is operational and meets its performance specifications. These operational tests
will demonstrate:
1. That the normal dc loads can be operated from the ac power
source through the battery charger supplied from the load
center, and
2. That upon the loss of the normal ac power source, the battery can
supply the design load.
Pre-operational testing of the dc power system will include the following:
1. The backup features of the battery and battery charger system
will be checked out.
2. The capacity of the battery and the voltage profile will be
verified by acceptance test per IEEE Standard 450, Section 5.5.1.
3. The recharging of a discharged battery within a specified period
will also be verified. (This is a maximum time of 24 hr.)
4. Instruments will be calibrated; also, relays, breakers, and
interlocks will be checked.
4.8.6.2 ACCEPTANCE TESTS
Acceptance tests shall be made in accordance with IEEE 450, Sections 4.1, 5.4.1,
and 5.5.1, at the factory. Onsite performance tests will be made in accordance
with IEEE 450, Sections 4.2, 5.4.1, and 5.5.1. A battery service test, described
in Sections 4.3 and 5.6 of IEEE 450, will be performed during a scheduled plant
outage, with intervals between tests not to exceed 18 months.
85
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Corrective maintenance will be performed on components of the dc power system in
accordance with IEEE Standard 450, Section 3.4.
CODES AND STANDARDS
The dc power system will be designed and constructed in accordance with the
latest versions of the following codes and standards:
American National Standards Institute
-------------------------------------
ANSI C37 Power Switchgear
Institute of Electrical and Electronics Engineers
-------------------------------------------------
IEEE Std 484 Recommended Practice for
Installation of Large Lead
Storage Batteries for Genera-
ting Stations and Substations
IEEE Std 450 Recommended Practice for
Maintenance, Testing, and
Replacement of Large Lead
Storage Batteries for Genera-
ting Stations and Substations
IEEE Std 485 IEEE Recommended Practice for
Sizing Large Lead Storage
Batteries for Generating
Stations and Substations.
National Electrical Manufacturer's Association
----------------------------------------------
NEMA AB-1 Molded Case Circuit Breakers
NEMA FU1 Low-Voltage Cartridge Fuses
NEMA ICS Industrial Controls and Systems
NEMA PB-1 Panelboards
NEMA PB-2 Dead-Front Distribution Switch-
boards
86
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
4.9 FIRE STOPS AND SEALS
Fire stops and seals shall be provided where raceways penetrate walls, floors
and equipment, and require a barrier against smoke, dust, water and airborne
contaminants. A fire stop has a fire rating and a seal does not.
Penetration Fire Stop - A sealed cable penetration through a fire barrier wall
or floor. The rating of the fire stop is equal to the required fire rating of
the barrier.
Penetration Seal - A sealed cable penetration through non-fire rated wall or
floor. The "Penetration Seal" is not required to have a fire rating. It may,
however, provide a dust, moisture, or pressure seal.
4.9.1 SYSTEM REQUIREMENTS
Normal design practice dictates that the openings around cables passing through
floor and walls be sealed.
The seals are required to perform two distinct functions:
1. Act as a fire stop
2. Act as a seal
When cables penetrate a fire barrier, the seal is a penetration fire stop and
must fulfill the following requirements:
a. Must have a fire rating equal to or greater than the required
fire rating of the fire barrier it penetrates. Performance must
be proven by test.
b. Satisfy insurance company requirements.
c. Be compatible with cable insulation and jacket material.
d. Consider derating, if any, of power cables.
e. Prevent passage of flame and smoke for a time interval equal to
or greater than the fire rating of the wall it penetrates.
f. Allow future addition or removal of cables.
When cables penetrate a nonfire rated wall, the following requirements must be
met:
a. Be compatible with cable jacket material.
b. Consider derating, if any, of power cables.
c. Allow future addition or removal of cables.
87
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Fire stops and penetration seals shall be suitable for use in environmental
conditions encountered. These requirements are:
1. Temperature, ambient, 93(degree) F
Temperature, max, 120(degree) F
2. Pressure, 15 psia
3. Humidity, 90 %
4. Chemical compatibility
The seals around cables penetrating walls and floors shall provide adequate
mechanical strength to provide necessary pressure barrier and seal against 15
psi.
The seal shall facilitate the removal or addition of cables and be capable of
being resealed so as to retain the original integrity of the seal.
The following materials shall be used as fire stops and seals for raceway
penetrations:
Dow Corning Silicone Foam Q3-6548
Thomas & Betts flame safe
No normal maintenance is anticipated during the useful life of a fire stop/seal.
After installation, periodic inspections should be made to determine any obvious
deterioration, such as holes not originally noted or discoloration.
4.9.2 DESIGN
The cable penetrations shall be designed as a system, taking into consideration
the size of the opening, depth of the opening, type of cable insulation, and
jacket, etc.
The cable shall penetrate the floors and walls through round metallic sleeves or
rectangular slots.
Cable trays shall not be carried through fire barrier walls, to minimize the
transfer of heat.
4.9.3 MAINTENANCE
Fire stops which have been breached (to add or remove cables) shall be restored
to their original design integrity shortly after the work is complete.
4.10 UNINTERRUPTIBLE POWER SYSTEM
The Contractor shall design, specify, furnish and install the uninterruptible
a-c system.
The uninterruptible power system shall provide control and instrument power to
critical systems in the plant. The uninterruptible power system shall supply
reliable, stable, and regulated 120 V a-c, three phase, 60 Hz control and
instrument power. It will be ungrounded.
4.10.1 SYSTEM REQUIREMENTS
The function of the uninterruptible power system will be to supply continuous,
regulated, and reliable single phase ac control and instrument power to the DCS
System, critical instrumentation and protection circuits during all modes of
plant operation.
88
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
A voltage of 120 V (plus or minus) 2 percent will be maintained at the 120 V ac
bus. The frequency of the inverter output will be maintained at 60 Hz (plus or
minus) 0.3Hz. The frequency of the regulating transformer output will vary with
that of its input power.
In general, the testing and inspection requirements may be met in part by actual
operation of the active components of the system. The capability of the
distribution circuits of the uninterruptible power system to transmit sufficient
control and instrument power to operate all required loads will be confirmed
during these periodic tests and inspections of the loads themselves.
These tests and inspections will ensure the capability of the uninterruptible
power system to furnish control and instrument power, and will be performed at
scheduled intervals to demonstrate the operability of the uninterruptible power
system.
The uninterruptible power system instrumentation and controls will consist of
battery charger, battery, inverter and ac panel local monitoring as well as
monitoring in the control room so that corrective action may be initiated.
The static inverter will be provided with indicators to monitor voltage,
current, and frequency, with input and output protection with alarm relays.
The essential 120 V ac distribution panels will be provided with incoming and
feeder protection.
The annunciators will monitor sufficient parameters to alert the control room
operator that corrective action is required to restore normal system operation.
Local instrumentation will be furnished to monitor sufficient parameters to:
1. Assist in determining system operation for any annunciated
malfunction.
2. Monitor system equipment performance so that long term
deterioration of performance can be detected.
The system is normally connected to a battery and rectifier/charger through the
static inverter, and to the ac power system through a regulating transformer
used during inverter maintenance.
4.10.2 SYSTEM DESIGN
The uninterruptible power system shall supply 120 V ac control and instrument
power to critical systems and certain control building emergency lighting loads.
The uninterruptible power system shall consist of a power system with adequate
capacity to supply its own essential loads.
The 120 V ac vital bus shall provide power for critical instrumentation and
protection circuits. The bus shall be fed from a 125 V battery and battery
charger through a static inverter, or from a 480 V bus through a regulating
transformer when the inverter is out of service. The 120 V ac and 125 V dc
systems shall be shown on the 125 V dc and 120 V ac vital bus one-line diagrams
prepared by the Contractor.
The output of the static inverter shall be connected to a vital bus distribution
cabinet through a normally closed circuit breaker. The regulating transformer
shall supply an ac input to the 120 V ac vital bus when the associated inverter
is down for maintenance.
89
<PAGE>
A manual by-pass switch will be provided to connect the regulating transformer
to the vital bus distribution cabinet. When this switch is in this "alternate",
or bypass position, this condition shall be alarmed.
The distribution cabinets for the 120 V ac vital bus system shall have 15 and 20
ampere branch fused disconnects to feed protection and other instrument loads.
The 120 V ac vital bus system shall constitute a very reliable electrical system
with independent conversion equipment. This system shall provide a stable
instrument power supply to critical equipment and shall guarantee supply to this
equipment. Spurious shutdowns shall be minimized as a result of the reliability
and stability of the 120 V ac system.
The 120 V ac vital bus voltage shall be maintained at 120 (plus or minus) 2.0 V.
When the vital bus is fed from the inverter source the system frequency
variation shall not exceed 60 Hz, (plus or minus) 0.3 Hz.
The 120 V ac vital bus regulating transformer shall be located in the electrical
equipment and control building near the static inverter.
The 120 V ac vital bus shall be located in the same area of the plant as the
inverter and regulating transformer.
The static inverter shall be suitable for input voltage range of 105 V to 140 V
dc, and output voltage maintained at 120 V (plus or minus) 2 percent from no
load to full load. Harmonic distortion of output voltage shall not exceed 5
percent, and its frequency shall be maintained to within (plus or minus) 0.3 Hz
over the full range of load and input voltage. The inverter shall be current
limiting at 150 percent of full load and shall permit indefinite operation at
that level. Upon sudden application or removal of full load, output voltage
undershoot or overshoot shall be corrected to a level that will not cause damage
or improper operation of the inverter. In addition, voltage shall recover to
within 2 percent of steady state within 0.1 sec after the occurrence of this
event.
The inverter shall operate in continuous synchronism with a 60 Hz, 480 V ac sine
wave reference power system.
The yearly average ambient temperature of the area where the static inverter is
located shall be maintained at less than 82(degree) F.
The voltage regulating transformer shall be suitable for input voltage range of
417 to 528 V, ac, three phase, 60 Hz, (plus or minus) .3 Hz and output voltage
maintained at 120 V (plus or minus) 2 percent from no load to full load with
output adjustability of (plus or minus) 10 percent. Harmonic distortion of
output voltage shall not exceed 5 percent. The regulating transformer shall have
current capability to withstand high in-rush load currents and momentary
overloads. Specifications for the transformers shall include the above
requirements. The yearly average ambient temperature of the area where the
regulating transformers are located shall be maintained at less than 82(degree)
F.
Instrumentation and control for the uninterruptible power system shall consist
of inverter control and instrumentation, as well as control and instrumentation
of the critical 120 V ac bus and loads.
The static inverter ac output shall be provided with a voltmeter, an ammeter,
and a frequency meter. Abnormal conditions existing for at least 0.05 sec will
be alarmed. These shall include output low
90
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Exhibit "A"
Attachment 1 - Design Criteria
voltage, overload, opening of any fuse, and reduced air flow when forced air
cooling is used. Local indicators shall be provided for the abnormal signals,
with signals for alarm in the control room.
The distribution panel shall be provided with three-pole disconnecting type
fuses suitable for 120 V service.
The uninterruptible power system shall normally interface with the static
inverter and with the ac power system through the voltage regulating transformer
during inverter maintenance.
4.10.3 SYSTEM LIMITATIONS, SET POINTS, AND PRECAUTIONS
The components of the uninterruptible power system can be loaded only within
their nameplate ratings. Loads in excess of this will cause reduced life
expectancy and may cause automatic disconnection of the loaded circuit.
Electrical equipment shall be sized and load groupings shall be assigned such
that the maximum coincidental load falls within the rating of each
uninterruptible power system component.
To prevent unnecessary unit tripping, all testing of vital bus loads must be
withheld, whenever the system inverter fails or is being taken out of service,
until the 120 V a-c vital bus is fed through the regulating transformer.
4.10.4 SYSTEM OPERATION
The 120 V vital bus shall be normally energized through a static inverter. An
alternate source of power will be from the ac power system through a regulating
transformer. The transformer will be used during periods of maintenance on the
inverter.
The 120 V vital bus will be energized to supply adequate power to the
uninterruptible power system during start-up by energizing all required loads
for this mode of operation.
Adequate power will be supplied to the uninterruptible power system during
normal operation to energize all required loads for this mode of operation.
For a normal plant shutdown, adequate power shall be supplied to the
uninterruptible power system for this mode of operation.
In the event of an inverter failure, the corresponding voltage regulating
transformer can be temporarily connected to provide power to the bus.
4.10.5 SYSTEM MAINTENANCE
The maintenance program for the uninterruptible power system will include
preventive maintenance, periodic testing, inspection, and corrective
maintenance.
Complete schedule of manufacturer's recommendations concerning components of the
system will be maintained as well as an outline of various problems, their
causes, diagnostic indications, and recommended corrective action. All
instruments and equipment required to inspect, test, and maintain the system
components will be part of the plant stock supply.
Routine preventive maintenance will be performed on components of the system in
accordance with manufacturer's recommended procedures. These procedures will be
directed at detecting the deterioration of the system toward an unacceptable
condition and demonstrating that standby equipment and other components that are
not exercised during normal operation are operable.
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During preventive maintenance circuit breakers afford the opportunity of
component isolation from an energized condition to a de-energized state.
Any maintenance performed on the system equipment will be done only by qualified
personnel who are familiar with the component maintenance manuals and plant
operational testing procedures.
The station maintenance program will include periodic testing for the
uninterruptible power system following the pre-operational and initial system
tests and inspections. The particular tests and the frequency of these tests
will depend upon the specific components installed, their function, their
environment, and the fact that they are on the station maintenance program.
These tests will be directed at detecting the deterioration of the system toward
an unacceptable condition and will demonstrate that standby power equipment and
other components that are not running during normal operation are operable.
During the pre-operational stage with all components of the uninterruptible
system installed, tests will demonstrate that all components are correct and
properly mounted, all connections are verified as being correct and continuous,
all components are operational, and all metering and protective devices are
properly calibrated and adjusted.
Following satisfactory checkout of all system components as described above, the
initial system start-up tests will be performed with all components installed.
The initial start-up system tests will consist of operational tests conducted to
demonstrate that the equipment operates within design limits and that the system
is operational and meets its performance specifications.
Typical inspections will include visual inspection of inverter, metering, and
surveillance equipment.
Each static inverter will be given a thorough periodic inspection following the
manufacturer's recommendations.
Corrective maintenance will be performed on components of the uninterruptible
power system as required. The specific maintenance action will depend on the
type of equipment, type of correction to be made, and manufacturer's
recommendations on the subject.
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CODES AND STANDARDS
-------------------
The uninterruptible power system will be designed and constructed in accordance
with the latest versions of the following codes and standards:
American National Standards Institute
-------------------------------------
ANSI C57 Transformer, Regulators, and
Reactors
National Electrical Manufacturer's Association
----------------------------------------------
NEMA AB-1 Molded Case Circuit Breakers
NEMA FU1 Low-Voltage Cartridge Fuses
NEMA ICS Industrial Controls and Systems
NEMA PB-1 Panelboards
NEMA TR-1 Transformers, Regulators, and
Reactors
NEMA WC5-1973 Thermoplastic - Insulated Wire
and Cable
Miscellaneous
-------------
NFPA No. 70 National Electrical Code
NFPA No. 78 Lightning Protection Code
UL 96A Installation Requirements -
Master Labeled Lightning
Protection System
5. INSTRUMENTATION AND CONTROLS DESIGN CRITERIA
5.1 GENERAL
5.1.1 GUIDELINES
The Instrumentation and Control (I&C) Design Criteria are prepared to present
guidelines that will be followed in the design and installation of the I&C
systems for Salton Sea Unit 5 (the Project). It is intended that this document
shall be used by the EPC Contractor as input to equipment specifications,
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installation drawings and instructions.
The design criteria are based upon the following design objectives:
1. Maintain the plant in a safe condition at all times. Automatic
protection and plant trips shall be provided so that if a potentially
dangerous situation should occur, the plant will be maintained in a
safe and undamaged condition without the need for any operator
action.
2. Prevent the violation of environmental regulations concerning air,
land, and water quality requirements.
3. Provide for smooth startup and shutdown of the power plant and
auxiliary systems in accordance with pre-planned operating procedures
with a minimum of operator intervention.
4. Provide for efficient steady-state control of the power plant and
auxiliary systems.
5. Provide reliable steady power plant operation at the full range of
possible operating capacity levels.
6. Minimize the effects of abnormal process conditions, load upsets, and
equipment malfunctions on power plant operations.
7. Provide operator interfaces that minimize the potential for operator
error.
8. Minimize the number of plant forced outages and spurious trips.
9. Provide for reliable, economical/optimum operation of the turbine
generator and related systems.
10. Provide for ease of construction.
11. Provide a control system that allows for maximum flexibility to
expand the system and/or modify control functions that affect the
performance of the unit during initial startup, testing and
operation.
12. Minimize the effects of corrosion and scaling through proper
equipment and material selection, equipment location, environmental
control, and on-line maintenance capability.
5.1.1.1 CONTROL SYSTEM
In general, during normal operation of the plant all control and monitoring
functions will be performed from the control room, however, startup and shutdown
of equipment for maintenance will be performed locally at the equipment using a
hand/off/auto select switch along with start/stop push buttons. These controls
shall be wired directly into the MCC, eliminating the need for the DCS, should
it be down. DCS control shall only be enabled if the H-O-A select switch is in
the auto position. The circuits within the hardwired controls shall incorporate
all necessary interlocks for safe operation of the equipment utilizing process
mounted switches. The DCS shall not be used for these interlocks.
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5.2 MAIN CONTROL ROOM AND POWER DISTRIBUTION CENTER
5.2.1 CONTROL ROOM AREA
The existing main control room for Units 1, 2, 3 and 4 will be used for control
of Unit 5. New Unit 5 related control equipment will be added in space currently
available or, if necessary, by expanding the existing room or converting rooms
currently used as offices to control room purposes. The control room will be
designed in accordance with human factors engineering principles to the maximum
extent possible for the comfort and efficiency of operations personnel. Control
items not requiring operator attention such as protective relays, computer
hardware, EHC and excitation control cabinets, will be located in the modular
Power Distribution Center (PDC) adjacent to the Unit 5 turbine building.
The main control panel serves as the operator/plant interface, and it is
essential that information be presented to the operator in a clear and simple
form and in order of priority. The following design guidelines will be observed:
1. The control room area will be designed to permit three control room
operators to control and monitor plant operation and identify plant
abnormalities for the brine flashing operation and power generation
facilities for Units 3, 4 and 5. This will be accomplished by
minimizing the length of the control panel and by minimizing the
number of display devices which must be continuously monitored during
plant operation.
2. Although the panel is designed to permit three operators to monitor
plant operation, the size and arrangement of the new panels will
accommodate additional operators, if necessary, during test
operations or other periods of unusual operating conditions.
3. Testing and maintenance procedures involving control panel-mounted
equipment will be possible with minimal interference with the plant
operation.
4. All alarm functions will be handled by the DCS. No separate
annunciator system will be provided.
5. One (1) additional color CRT's with keyboards will provide the
operator interface with the plant distributed control system (DCS).
All primary control and monitoring functions for the process will be
done through the DCS. All of the CRT's will have access to the same
data base.
6. The main control panel will be a bench type panel which will house
the CRT stations alarm and operations keyboards.
7. A Contractor furnished fire protection monitoring panel for Unit 5
shall be located in the control room area.
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8. Two graphic capable, laser jet type printers will be provided as part
of the distributed control system. One printer shall be dedicated to
alarm printing; one dedicated to event logging.
In general, cables shall enter equipment from the bottom of the panels. There
shall be no exposed conduits or cable tray in the control room.
Ambient temperature will be controlled at 75(degree) (plus or minus) 2(degree)F.
Relative humidity will be controlled to 50% (plus or minus) 10(DEgree)%. The
contractor shall increase the capacity of the existing air conditioning units,
if necessary, to ensure ambient conditions are maintained with the additional
equipment.
Non-electric signals of plant instrumentation and control shall not be connected
direct to control room equipment.
5.2.2 POWER DISTRIBUTION CENTER (PDC)
The PDC shall be placed on concrete pillars with 6'-0" clearance between ground
elevation and floor of the PDC. The Owner has found this to provide superior
access for installation, maintenance and additions to existing PDC's with this
clearance. In order to minimize the effects of corrosion on sensitive control
equipment, the PDC environmental conditions will be controlled using redundant
air conditioning units.
These rooms will also be designed to minimize the amount of unnecessary traffic
and maintain the highest practical level of cleanliness.
Ambient temperature will be controlled at 75(degree) (plus or minus) 2(degree)F.
Relative humidity will be controlled to 50% (plus or minus) 10(degree)%.
Non-electric signals of plant instrumentation and control shall not be connected
direct to the PDC equipment.
In general, cables shall enter the cabinets from the top.
The following equipment shall be located in this room:
o DCS process control units and other equipment not otherwise
required in the control room
o Vibration monitoring racks
o Turbine Generator governor controls
5.3 DISTRIBUTED CONTROL SYSTEM
5.3.1 GENERAL
The plant will generally be operated via a distributed control system (DCS). The
DCS shall be complete with all necessary hardware and software.
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Units 1, 2, 3, and 4 utilize a Rosemount RMW 9000 DCS for control. The
contractor shall provide the following for DCS expansion to accommodate Unit 5.
1. Convert the existing DCS to a Rosemount Delta 5 based control system.
The principle element of this conversion is to replace the old RMW
9000 CCMs with Delta 5 controllers. The balance of the existing
hardware would be utilized as much as possible without modification.
The additional DCS hardware shall include one (1) operator interface station.
The contractor shall review the need for a second operator interface station,
and, if required, shall supply a second station.
Following modifications, any DCS screen shall be capable of accessing any
information within the DCS for any unit.
The DCS for Unit 5 shall be provided with the following hardware and software
accessories.
1. Sequential and discrete digital logic for motor control and
interlocking as well as analog control for modulating control loops.
2. Sequence of events capability shall be provided within the DCS with
time resolution of 1 msec.
3. All unit devices capable of communicating with one another on a
redundant data highway.
4. CRT interactive graphics with dynamic data updating.
5. Efficiency calculation, custom report generation, and long term data
archiving. This may be done in the DCS or in an auxiliary computer
system dedicated to any or all of these function. Data archiving
shall be done on optical disks. Any I/O points or internal alarms
shall be capable of being logged.
6. spare rack space containing approximately 20% spare I/O hardware for
each type of I/O will be provided.
7. The system should have the capability for future expansion.
8. The system should have the capability to interface through a modem
with a personal computer for transfer of report data.
The alarm reporting system shall have the capability to group and prioritize
incoming alarms as well as to disable individual or groups of alarms.
The system will have the capability to interface with the major brands of
programmable logic controllers. Following summarizes the PLCs that could be
expected on site:
o Modicon
o Chesel
o IPAC
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o Bentley
o Woodward 509
5.3.2 TURBINE GENERATOR GOVERNOR / DCS INTERFACE
The DCS will make provisions for the necessary I/O and displays to interface
with the Turbine Generator control system. The turbine generator will utilize a
Woodward Governor 509 System.
All T/G controls and monitoring necessary for operation of the T/G shall be
incorporated into the DCS. The DCS operator shall interface with the governor
system through graphic displays on the DCS.
A separate T/G control interface shall be provided in the control room. The
primary purpose of this panel is to monitor the Woodward 509 system. This panel
shall not contain the actual governor controls, but will only be a monitoring
window to the Woodward 509.
The T/G controls shall allow:
o Isochronous Control Mode
o Speed Control Mode
o Load Control Mode
o Pressure Control Mode
o Have provisions for Droop control.
The DCS shall indicate and alarm all T/G alarms.
5.3.3 DCS REQUIREMENTS
5.3.3.1 GENERAL
The DCS will be separate from the hard wired Station Electrical Protection,
Metering System and the Turbine Generator control system, but will have access
to select variables within these systems. (Refer to Electrical Design Criteria
and the Turbine Governor Specification).
The DCS shall be capable of handling any normal logic complexity associated with
plant interlocks and shall also be capable of being programmed in the field with
minimum effect on plant operations. The application software (firmware) shall be
non-volatile.
The DCS shall be designed and constructed so that it will not be affected by
transient or continuous electro-magnetic interferences. This will include the
capability to continue normal operations with RF emission from a hand held FM
transceiver keyed adjacent to DCS equipment, including the process control units
and the operator interface stations. Credit may be taken requiring DCS enclosure
doors to be closed. The engineering work station is exempt from this
requirement.
All trips shall be alarmed on the operator interface and printed at the
operations printer
DCS control nodes shall be equipped with dual power supplies and redundant
control processors.
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The DCS shall be of modular design, with a fault tolerant, redundant
architecture such that the failure of one section will not affect the operation
of other sections of the equipment. The reliability of each constituent part of
the system, and the system as a whole shall be such as to meet the overall plant
performance criteria. This shall be achieved by suitable levels of redundancy on
the equipment.
Critical I/O shall be duplicated implemented with redundant inputs. Digital
inputs shall utilize a "1 out of 2" voting system to propagate the condition.
Analog signals shall utilize a select feature, and the ability to switch primary
controlling signal. An alarm shall be generated if redundant analog signals
deviate by more than 10% of span.
There should be no process change resulting from the failure of a controller.
The final fully configured system shall have a total round-trip time for a
command to be processed, including display of the feedback signal from the local
processor, of less than 2 seconds.
5.3.3.2 I/O REQUIREMENTS
5.3.3.2.1 ANALOG INPUT
The DCS shall be capable of accepting the following analog signals:
o Current inputs 4 to 20 mA with individual A/D conversion. The system
shall be capable of supplying the 24 V dc loop power for 4 to 20 mA
2-wire or 3-wire transmitters.
o Current inputs of -1.2 - 0 - +1.2 mA (nominal) from standard SCADA
compatible metering and relaying devices,
o Voltage inputs within the range of -10 Vdc to +10 V dc.
The choice of field or system power shall be user selectable for each point.
Inputs shall be via a low-pass filter to reject high frequency interference.
Common mode noise rejection shall be a minimum of 110 dB at 60 Hz. Normal mode
rejection shall be a minimum 60 dB at 60 Hz. Accuracy shall be (plus or minus)
0.2% of full span or better.
As an option, the Contractor may utilize SMART field communications between
field transmitters and the DCS. The contractor may daisy-chain multiple
transmitters one a single field bus type loop. Use of SMART communications must
be done in such a way as to be fault tolerant (e.g.; ring topology).
5.3.3.2.2 ANALOG OUTPUT
The DCS shall be capable of driving 600 ohm standard or up to 750 ohms total
loop resistance at 4 - 20 mA. The system shall be capable of supplying the 24 V
DC loop power. The choice of field or system power shall be user selectable for
each point. The system shall also be capable of providing a user selectable
default output state for each individual point in the event of an error.
Accuracy shall be (plus or minus) 0.2 % of full span or better.
As an option, the Contractor may utilize SMART field communications between
field devices and the DCS. The contractor may daisy-chain multiple transmitters
and/or final control elements on a single field bus type loop. Use of SMART
communications must be done in such a way as to be fault tolerant (e.g.; ring
topology).
5.3.3.2.3 DIGITAL INPUT
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The DCS shall be capable of receiving the following signals:
o 24 Vdc,
o 48 Vdc,
o 120 Vac or
o 110 Vdc
All digital inputs shall be available with selectable filtering from 2 to 20
millisecond.
Inputs shall be high impedance type.
5.3.3.2.4 DIGITAL OUTPUT
The DCS shall provide isolated contact rated at 125 V dc, 3A and 220 Vac and
user selectable as normally open or normally closed, momentary or maintained.
The system shall be capable of providing a user selectable default output state
for each point in the event of an error.
5.3.3.2.5 TEMPERATURE INPUTS
The DCS shall be capable of receiving the following temperature detector inputs:
o RTD Input: Capable of receiving 100 ohm platinum resistance
temperature detectors (RTDs) inputs directly. Lead length compensation
for 3-wire RTDs shall be provided. Other types of RTDs such as 10 ohm
copper RTDs shall not be used due to the presence of hydrogen
sulphide.
o T/C Input Capable of receiving all types of thermocouple inputs
directly. Cold junction reference compensation and open circuit
detection shall be provided. Millivolt input ranges of -100 to +100 mV
and 0 to +100 mV shall also be provided. Thermocouple reference
junction temperature compensation shall be provided. The thermocouple
reference junction temperature compensation value shall be available
for display to the operator and shall have alarm limits.
5.3.3.2.6 PULSE INPUT
The DCS shall be capable of receiving square wave or contact input of 1-10 volts
and a pulse rate of up to 25 kHz.
5.3.3.3 GENERAL GUIDELINES
In general, the following signal standards shall be used:
o Analog input signals shall be 4 to 20 mA.
o Analog output signals shall be 4 to 20 mA.
o Digital inputs interrogated by the DCS shall be 24 Vdc.
o MCC monitoring and interrogation shall utilize MCC control power and
shall be 120 Vac or 125 Vdc as appropriate.
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o Turbine trip circuitry shall be 125 Vdc.
o Field cables shall not terminate directly onto electronic circuit
boards.
o For each analog input and output, two terminals plus isolated ground
connection shall be provided.
o For digital inputs, a minimum of one common terminal for each four
digital inputs shall be provided. Common terminals supplying outgoing
field power shall be individually fused.
5.3.3.4 SPARE CAPACITY
The DCS shall have spare capacity after the Unit is fully commissioned as
follows :
o Multi-loop controller - 50% of total processing capacity per module.
o I/O - 20% of I/O per process control unit.
o Cabinet space for expansion - 25%.
o All spare I/Os shall be active and wired to terminations and clearly
shown on the termination drawings.
o The DCS shall allow for system expansion through the addition of
controllers, operator work stations and I/O modules while system is on
line.
5.3.3.5 DISTRIBUTED CONTROL SYSTEM CABINETS
A 19 inch rack mounting shall be provided for all DCS modules, modular power
systems and terminations. The cabinets shall be able to accommodate either top
or bottom cable entry. The cabinets shall provide front and rear doors to
provide easy access for installation and maintenance of power systems and
mounting assemblies.
5.3.3.6 POWER SUPPLIES AND SYSTEM POWER FEEDS
The DCS components within the power plant shall be supplied from two secure 120
Vac sources: one from an uninterruptible power supply (UPS) and the second from
a reliable 120 Vac bus. The DCS shall monitor alarms from the internal power
supplies.
Redundant power supplies shall be provided to power process control modules and
field termination devices. The power supply output voltages shall be well
regulated and not fluctuate more than (plus or minus) 1% with input voltages of
120 V ac (plus or minus) 10%.
5.3.3.7 OPERATOR WORK STATIONS
One (1) Operator work stations (OWS) and an engineering work station (EWS) shall
be supplied and installed in a control desk to be located in the power plant
control room. The engineering work station shall be used primarily for system
maintenance, engineering and configuration functions.
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5.3.3.8 CONTROL DESK
All operator work stations shall be installed in the control room in a suitably
designed control desk. The desk shall be an extension of and be designed similar
to the existing control desk for Units 3 and 4. The control desk design shall
incorporate at least 2 work surfaces, each equal in floor space to the area
allowed for an OWS, to provide workspace for plant operators.
5.3.3.9 DATA STORAGE
At least two high density optical disk drives shall be supplied for redundant
storage and retrieval of historical and trend data, system software, and system
configuration files. Software shall be provided to allow easy transfer of
archived data into MicroSoft compatible database or spreadsheet format.
Tape Drives are not acceptable as backup devices.
5.3.3.10 PRINTERS
Two industry standard non-impact, laser jet type printers shall be provided.
This printer shall be a high resolution laser jet single color suitable for
printing 8-1/2x11 and 11x17 paper. These shall be desktop mounted in the Control
Room on suitable furniture with space for paper, toner cartridges and other
supplies. The printers shall include paper trays and feeders.
The 2 printers shall be utilized as follows:
o One dedicated to alarm printing
o One dedicated to event logging.
The minimum print speed acceptable is 300 characters/second.
Printers shall operate without sound hoods in a quiet control room environment
and printer noise level shall not exceed 47 dBA at distance of 3 feet from
printer.
Sufficient toner cartridge set(s) for each printer suitable for one year's
operation of the power plant shall be supplied with the equipment. Printers
shall use commercially available printer paper which is readily available.
Printouts shall be spooled, and printouts intended for a printer which has
failed shall be able to be re-routed to the other printer.
Each printer shall be able to be accessed via any operator work station.
Printers shall be network interfaced. Printer "Failover Switches" shall not be
used.
5.3.3.11 OPERATOR WORKSTATION SOFTWARE/DISPLAY SUBSYSTEM
The system software shall be designed by the DCS provider. It shall be design in
such a way as to provide a seamless, transparent connection to the existing
plant. Graphics shall be designed with similar symbology, colors and styles.
It shall be the responsibility of the contractor to provide any software
conversion upgrades to the control systems for Units 1, 2, 3 and 4 necessary to
make them completely compatible with the new system.
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As a part of this contract, the Contractor must convert the existing faceplate
displays on the Unit 1, 2, 3 and 4 control systems into integrated graphic
displays.
5.3.3.12 HISTORICAL DATA STORAGE AND RETRIEVAL SYSTEM
The system shall include a comprehensive historical storage and retrieval system
for long term archiving of predefined digital and analog process data in a
series of disk files. The number and the size of the disk files shall be user
configurable. This data shall be stored on a large capacity optical disk for
long term storage. Disk capacity shall include at least two years storage of
historical data collected from the system.
It shall be possible to view the data logged to disk search for any desired
portion of the file. Software shall be provided to allow easy transfer of
archived data into MicroSoft compatible database or spreadsheet format.
Facilities shall be provided to both archive and restore log files to and from
floppy or other backup media without taking the system off-line.
The data recorded by the historian shall be selected through the "event log"
database.
5.3.3.13 REPORTS
The DCS shall generate reports similar in information and style for Unit 5 as is
provided on Units 3 and 4.
5.4 INSTRUMENT APPLICATION
5.4.1 GENERAL TECHNICAL REQUIREMENTS
No process or instrument air lines associated with any instrumentation shall be
brought into the control room area or adjacent electrical/electronic equipment
rooms.
No electrical voltages in excess of 125V nominal associated with any
instrumentation shall be brought into the main control room area.
Instruments or other devices containing mercury shall not be used in any system.
Prime consideration will be given to the effects of corrosion and scaling on
instrument selection and installation. Materials selection will be based on
conditions of service and will be indicated on individual instrument data
sheets. Bronze and other copper bearing alloys shall be avoided. Diaphragm seals
shall be utilized on acid lines.
Engraved phenolic tags engraved with the instrument tag number shall be
permanently attached to all instruments.
Outdoor electrical enclosures shall have a NEMA 4X rating and shall generally be
of nonmetallic construction.
All instruments and control equipment will be readily available from U.S.
suppliers and shall be approved by a national testing agency such as FM or UL.
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All control and instrumentation items and associated valves shall be located for
easy access by operating and maintenance personnel from a floor, permanent
platform or walkway.
Portions of the process will contain fluids that are highly susceptible to
precipitation of silica. The Contractor is responsible for the design and
installation of heat tracing for instrument sensing lines as required to prevent
precipitation. Implementation of the heat tracing shall be coordinated with the
Owner.
5.4.2 INSTRUMENT ELECTRIC SUPPLY SYSTEMS
Electric power for all instruments shall be supplied from an Uninterruptible
Power Supply (UPS) system.
Dual redundant instrument power supplies shall be provided and have the
capability of being replaced on-line without affecting the operation of the
instruments. The output of the instrument power supplies shall be 24 Vdc.
Field instrumentation shall be standardized as much as practical.
Redundancy for sensors as controls shall be provided to meet the design
availability requirements for the Plant.
Multiple sensors shall be used in instances where a single sensor cannot be
expected to provide an average true value because of conditions or where a
single instrument cannot cover the expected range.
Generally, individual transmitters and controllers will be installed to permit
isolation without upsetting the process.
Separate test taps or thermowells shall be provided as required for performance
or acceptance testing.
Instruments dials and scales shall be white with black markings. The number of
markings on all instruments dials shall be kept to a minimum consistent with
easy reading to the required accuracy. All instrument dials shall be at least 4
inch diameter. Instrument ranges shall be selected so that the dial pointer is
at the 2 o'clock position under normal operating conditions.
Measuring devices shall be complete with all necessary condensation chambers,
isolating valves and seal pots.
One pair of tapping points with isolating valves only shall be made in the
pipeline and any multiplication of signal output shall be carried out elsewhere.
Bellows-type meters shall be capable of taking full line pressure on one side
only, without damage or loss of calibration.
Snubbers will be added only after their installation is shown to be required.
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5.4.3 INSTRUMENTATION DESIGN IMPLEMENTATION
5.4.3.1 GENERAL
In general, alarm contacts from field devices should be open during normal
operation and close to alarm. The exception to this is in the case of fail safe
items such as turbine tripping schemes.
Alarms shall generally be generated within the DCS off of the analog signal
measuring the process variable.
In cases where additional reliability or redundancy of signals are required, the
trip signals should be generated off of process switches.
Process switches monitoring critical process variables (such as liquid levels
protecting against turbine water induction), redundant switches will be used in
a 1 out of 2 switching scheme. Analog signals shall utilize a select feature,
and the ability to switch primary controlling signal. An alarm shall be
generated if redundant analog signals deviate by more than 10% of span.
5.4.3.2 VALVE LIMIT SWITCHES
Limit switches from on/off control valves shall be wired such that both contact
are closed in mid-travel.
The closed limit switch is that limit switch that changes state at the valve
closed position. Similarly, the open limit switch is that limit switch that
changes state at the valve open position
5.4.3.3 INITIATING DEVICES
Trip signals shall be derived as directly as possible from the initiating
device. Wherever possible, pending trip conditions shall be alarmed at the
operator interface.
Critical process trip signal systems shall operate on a 2 out of 3 voting system
basis. When one signal is locked out of service, the trip signal system shall
operate on a 1 out of 2 voting system basis. Analog signals shall utilize a
select feature, and the ability to switch primary controlling signal. An alarm
shall be generated if redundant analog signals deviate by more than 10% of span.
5.4.3.4 SYSTEM SAFETY
The control and plant protection systems shall be designed to ensure that the
plant reverts to a safe state upon failure of any individual plant item or power
supply, and that the operator is notified of the failure. The following means
may be used to ensure a "safe" state:
o Automatic switching to a standby device or power supply
o Shutdown of the affected plant
o Locking of the control system at the settings prevailing immediately
prior to the failure
5.4.3.5 SUBSYSTEMS
Individual systems comprising this power generation plant may have equipment
which requires some form of proprietary control or monitoring system. The
distributed control system shall provide as much of this control and monitoring
as possible. Separate specialized electronic controls dedicated to a
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particular control task or sub-system shall be utilized only when the
specialized nature of the task or subsystem requires it (eg AVR, governor
controls, vibration and temperature monitoring subsystems).
Where such specialized electronic controls are utilized, they shall be fully
interfaced with the DCS, using compatible communication hardware and by the
provision of communication software as necessary. The interface to the DCS shall
be made at the node allocated for the control of that local plant / subsystem.
On/Off and start-up of back-up equipment shall generally be determined via
discharge flow or pressure monitoring. Motor control circuit energized status
shall be used where redundant motor/pumps combinations or other electrically
driven redundant or standby equipment exists, or where discharge condition
monitoring is inappropriate.
5.4.3.6 ELECTRICAL NOISE
The field instrumentaion performance shall not be affected by electro-magnetic
or radio frequency interference up to 3 V/m and according to IEC 255-22.
In order to minimize the effects of generated or radiated electrical noise:
The dc power and signal cables shall not run parallel or in close proximity to
ac power cables.
The dc and ac control and instrumentation cables of differing voltages shall be
segregated.
Proper grounding techniques shall be utilized
Shields shall be terminated on the monitoring system end only, and only to an
isolated ground.
The primary ac power source shall be noise free
5.4.4 INSTRUMENTS CABLES AND WIRING
Power wiring to and from the instruments and power supply units shall be such
that power supply units can be removed without total system shutdown.
Wire and cables of electronic instrument installation shall be single pair not
less than 16AWG tinned copper conductors with PVC insulation, twisted, with
aluminum shielded mylar tape separators with drain wire, extruded PVC inner
sheath, wire braid or armor, and overall PVC jacket.
Single pair wires shall be run in separate trays from the various transmitting
and control devices to centrally located field terminal junction boxes in the
process area. From the centrally located junction boxes, 20 pair cable shall be
run to the DCS termination cabinets. If all pairs within a particular cable is
not utilized, they shall be identified as spare. Cable sizes of less than 20
pair connecting field junction boxes and the DCS shall not be utilized.
The ac power and signal wiring shall be separated by a minimum spacing of 4
inches in all cases, and shall not under any circumstance be run in the same
wire way.
Wiring between terminals shall be point-to-point and free from wire splicing and
T connections.
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When shielded cables or wires are necessary, an insulating sheath shall be
included. Provision for termination of shields, or means to maintain the
continuity of isolated shields shall be provided as required.
In general, the plant electrical system will be designed, built, and tested in
accordance with the most recent NEC Standards. The basic design philosophy shall
provide the most effective measures to ensure high reliability and low
maintenance.
5.4.5 ISOLATED GROUND
Grounding of control systems and instrumentation equipment shall follow good
industry practice and be such as to ensure that equipment operates reliably,
safely and without damage in the presence of large electrical disturbances such
as occur in power generation plant. A separate grounding system for control and
instrumentation systems shall be established:
o The plant shall incorporate an isolated ground system for use by the
instrumentation and control system
o The isolated ground system shall tie into the plant equipment ground
system at only one point.
o The system shall be isolated from the power system
o The isolated ground system shall not have any ground loops.
o In general, shields shall be terminated in the rack or cabinet where
the measurement is monitored. The shield at opposite end of the cable
shall be cut and taped.
5.4.6 INSTRUMENT REQUIREMENTS
5.4.6.1 ELECTRONIC INSTRUMENTS
Electronic equipment offered shall be of a type having proven record of
reliability under geothermal power station service conditions.
All remote control loops shall be solid state electronic and control signal
transmission shall be current type, 4-20 milliamps d.c., and utilize a 2-wire
circuit (ISA Type 2).
Dual-auctioneered, regulated power supplies shall be used in the distributed
control system I/O cabinets and shall operate on 120V a.c., 60 HZ house power
(with isolation transformer) and from the plant UPS.
Field mounted transmitters shall have a minimum load resistance capability of
300-800 ohms at a corresponding power supply voltage of 23-32.7V d.c. (ISA Class
U). Accuracy shall be 0.25% of calibrated span or better, including
repeatability, linearity, and hysteresis.
Signal reference and cable shielding ground connections shall be made at one
point only and that point shall be the isolated grounding bus in the appropriate
electronic cabinet in the relay room unless otherwise specified. The field end
of the shielded cable shall have the shielding clipped off close to the outer
layer of insulation and an insulating tape applied to assure that the shielding
does not touch the local instrument or appurtenances at any point. (Refer to
Electrical Design Criteria for additional details).
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5.4.6.2 TRANSMITTERS AND TRANSDUCERS
All transmitters shall be as much as possible of the SMART variety and shall
conform to the HART protocol requirements.
In general, the range for an analog input shall be sized such that the maximum
process value is approximately 85% of the range. The range shall always be
rounded to a convenient number such as 50, 100, 800, 1000, etc.
Accuracy shall be 0.10% of calibrated span or better, including repeatability,
linearity, and hysteresis.
All wetted parts of the transmitter shall be at least 316 stainless steel
construction.
Transmitter fill fluid, if used, shall be silicone.
Transmitters shall be provided with flange adapter kits and mounting brackets.
Transmitters shall be housed in a NEMA 4X rated enclosure.
A hand-held SMART transmitter calibrator shall be provided with the
transmitters.
Diaphragm seals shall be used where acidic liquids are in the process and
require process isolation from the transmitter element. Seals shall be
standardized as much as possible for interchangability.
Analog measurements from process plant and electrical power supply systems for
remote indication and control purposes shall be transmitted as 4-20 mA dc output
signal. Alternately, the Contractor may utilize SMART field bus type
communications.
Transmitters and transducers shall be solid state electronic devices suitably
designed for the location and services required.
Appropriate measures shall be taken to prevent any impurities in the fluid being
measured from affecting transmitter and transducer operations. This shall
generally be achieved by providing double diaphragm seals.
5.4.6.3 PNEUMATIC INSTRUMENTS
All modulating control valves and dampers, unless otherwise specified, shall be
air operated. The conversion from an electronic control signal to a pneumatic
control signal will be made at the final control element with a current to
pneumatic (I/P) transducer with pneumatic valve positioner where necessary.
Critical final control elements will have a local pneumatic loading station for
testing or emergency operation.
Pneumatic valve positioners shall have the following design features as required
on a case by case basis:
o Characterizeable (feedback cams).
o Useable for double or single acting service.
o Direct or Inverse action.
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o High capacity pilot valves.
o Suitable for linear or rotary movement.
All pneumatic instruments shall be fitted with inlet filters.
All vents off of pneumatic instruments shall be fitted with bug screens.
All pneumatic instruments shall be mounted in separate, non-metallic enclosures
with an air purge from the instrument air supply.
Instrument air will be supplied In accordance with section 10.16. Instruments
shall be designed to operate over an air supply pressure range of 80-125 PSIG.
Pressure reduction to the level required by the instrument or valve will be done
locally at the instrument.
Where appropriate for multiple runs of tubing, trays and/or tube bundles will be
utilized.
5.4.6.4 PROCESS SWITCHES
Process switches, e.g. pressure, temperature, flow, limit, shall contain a
minimum of two isolated Form C contacts, unless otherwise specified. Switches
shall be snap-acting type.
The switch element shall be located in a hermetically sealed enclosure which
prevents exposure of contacts to atmosphere.
Switch contact ratings for specific applications will be shown on the respective
technical data sheets.
5.4.6.5 TEMPERATURE
5.4.6.5.1 RESISTANCE TEMPERATURE DETECTORS (RTD)
For general process applications, three lead, 100 ohm @ 32(degree)F platinum RTD
shall be used. These devices shall not be used for temperatures in excess of
650(degree)F. They shall be duplex, sheathed, ungrounded, and ceramic insulated.
The sheath O.D. shall be 0.250". They shall be furnished with terminal blocks
and grounding lug.
Manufacturer supplied copper RTD's, (10 ohm @ 77(degree)F), are not acceptable.
RTDs monitoring process fluids shall be mounted in suitable thermowells.
5.4.6.5.2 THERMOCOUPLES
For applications not suitable for RTD's, chromel-constantan (Type E)
thermocouples shall be used. These shall be duplex, sheathed, grounded, and
ceramic or magnesium oxide insulated. They shall be furnished with terminal
blocks and grounding lug. The sheath O.D. shall be 0.250". Thermocouple
extension wire, of the same material as the attached thermocouple, shall always
be used to interconnect the thermocouple to its transducer.
Thermocouples monitoring process fluids shall be mounted in suitable
thermowells.
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5.4.6.5.3 BIMETALLIC THERMOMETERS
For local temperature indication, not requiring high accuracy, bimetallic type
thermometers with a universal angled, 5" nominal diameter dial and 0.250" O.D.
stem shall be used. These shall be inserted in a thermowell.
5.4.6.5.4 FILLED THERMAL SYSTEMS
In general, filled thermal systems shall not be used. In those applications
where no other technology is practical, filled instruments may be used.
Instruments using filled systems include the sensor bulb and the readout device
or switch as a complete system. The class of the system and bulb diameter are
generally determined by temperature range, length of capillary required and
whether a uniform scale is required if there is a readout device. Thermowells
compatible with a specific type of bulb will be specified with the thermal
system.
5.4.6.5.5 THERMOWELLS
Thermowells for use with filled thermal systems are not included in the scope of
this section. (See previous Subsection on filled thermal systems.)
There shall be two means of attachment:
o Socketweld - 1" socketweld shall be preferentially utilized for clean,
low pressure and temperature service.
o Flanged - The flanged means of attachment shall be used on all vessels
and for all services where socketweld wells are not appropriate. In
general, 1 1/2" RF flanged wells will be used.
Thermowells shall be constructed of the following materials:
o Water and other benign fluids: 316SS
o Steam and Brine service: Alloy 625/Hastelloy C, or 2205 flange welded
to Alloy 625/Hastelloy C probe.
5.4.6.5.6 TEST WELLS
Test wells, where required, shall meet all the criteria for material, design,
construction and certification specified for thermowells. Each test well shall
be furnished with a stainless steel extension nipple and screwed cap. Extension
nipple length shall be as determined by the manufacturer, unless otherwise
specified by the A/E.
5.4.6.6 PRESSURE
Local pressure indicators shall be bourdon tube type with an accuracy of +/-0.5%
of span. Dials shall be white with black markings and shall be 4 1/2" diameter
with a dial arc of 270(degree) unless otherwise specified. Units of measurement
shall be indicated on the dial face and the pointer shall be externally
adjustable from the front of the gauge. The gauges shall be a solid front,
blow-out back, hermetically sealed type. Gauge movements shall be stainless
steel, geared type and the bourdon tubes and sockets ANSI 316 SS (Refer to ANSI
B40.1-1974 for application guidelines).
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Pressure gauges shall be Ashcroft or 3D gauges. 3D gauges shall be used on
vibrating platforms such as near pumps and level control valves.
5.4.6.7 FLOW
5.4.6.7.1 GENERAL
For general flow measurement applications, head type flowmeters shall be used.
Where higher, wide range accuracies are required, or special operating
conditions exist that preclude the use of head type meters, other types of
metering systems will be specified. All steam flow measurements shall have
associated pressure and temperature measurements to be used for mass flow
calculation in the DCS.
Differential pressure primary elements in hot liquid services shall be under
sufficient hydrostatic head to prevent flashing at the lowest pressure point in
the element outlet.
Differential pressure type flowmeters shall be fitted, as a minimum, with
5-valve manifolds including an equalizing valve for zero check.
Primary flow elements shall be readily accessible for maintenance or
calibration.
5.4.6.7.2 ORIFICE PLATES
Orifice plates shall be of the sharp, square-edged, thin plate, concentric bore,
paddle type with flange taps. The differential pressure at design flow shall
generally be 100" wc. Diameter ratio (Beta Ratio) shall not exceed 0.70. Sizing
and installation practice will be in accordance with the American Gas
Association (ANSI/API 2530). Plates shall be of alloy 625 or C-276 for SA, LA
services. Plates shall be 316L for all other applications except steam service.
All steam service plates will be the same as for SA and LA services.
Vent and drain holes shall be provided in orifice plates to prevent the build-up
of vapor pockets in liquid service pipes and condensate in vapor service pipes.
5.4.6.7.3 WEDGE FLOW METERS
Wedge flow meter may be used where low loss and pluggage concerns exist. Wedge
flow meter shall be used in brine service. Wedge flow meters shall have a H/D
ratio between 0.2 and 0.5 with a nominal differential pressure at the taps at
rated flow between 50 and 200 in H2O. Flow meters shall be calibrated prior to
installation. Wedge flow meters shall have an accuracy of 0.75% or better when
operated within the calibrated range.
5.4.6.7.4 MAGNETIC FLOW METERS
Magnetic flow meters may be used for slurry flows or other difficult flow
measurements. Magnetic flow meters will be installed with a minimum of 10
diameters of straight pipe upstream and 2 diameters downstream. Lining and
electrode materials shall be compatible with the requirements of the fluid. The
electronics shall be separately mounted in a non-corrosive NEMA 4X enclosure.
Meters shall be fed from the UPS should the meter require external power.
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Magnetic flow meters shall be used for measurement of hotwell condensate, acid
delivery individual injection points, NORMS injection rates, scrubber drain
rates, purge water flow rates, and heat exchanger hot water flow to Region I IX
and Region II IX, and heat exchanger cold water supply rate. Mag meters will be
Krohne unless approved by the Owner.
5.4.6.7.5 MASS FLOW METERS
For applications where measurement of mass flow is required, the use of direct
mass flow (Coriolis Effect) meters or thermal dispersion type will be
considered.
Mass flow meters shall be used for the primary acid delivery feed pumps to
compensate for differences in HCL metering and control due to variability in the
HCL concentration from the Mineral plant R.O. system. Two meters are required,
and must be available for use in all operating modes.
5.4.6.7.6 VELOCITY AVERAGING PITOT TUBES / ANNUBAR (DIETERICH STANDARD CORP.)
These type meters may be used only with prior approval of the Owner. In general,
the rangeability and accuracy of this element is comparable to an orifice plate.
The permanent pressure loss is significantly less than orifice plates in most
applications and the installation cost is less than an orifice plate. In
particular, these devices may be used where permanent pressure loss is an
important factor, where removal of the element for inspection and/or maintenance
is required without interrupting flow in a process line, or where line size may
make orifice plates uneconomical. Flow elements shall be calibrated prior to
installation.
Annubars shall be of Hast. C material construction for all steam and NC gas
applications. They shall be either retractable or have a purge style head with
purge water hooked up via 316L instrument tubing to periodically flush the
Annubar. Due to the unique service and history, the only approved supplier of
Annubars at the Salton Sea is Dieterich Std. Annubars.
5.4.6.7.7 FLOW TEST PORTS
The flow test port (where required) consists of a single (1") pipe branch, (4")
long with a (1") full port ball valve ((1 1/2") pipe and (1 1/2") ball valve
with (1") minimum bore on lined pipe). The pipe branch shall be located just
upstream of the flow element or meter. It shall be perpendicular to the main
pipe axis and shall be positioned on the circumference such that nothing
obstructs the insertion of the pitot tube.
The ball valve materials shall be compatible with the fluid in the main line. On
unlined pipe the full port ball valve shall be threaded. On lined pipe the ball
valve shall be flanged.
5.4.6.7.8 VENTURI FLOW ELEMENTS
A steam flow measuring device, which shall be a venturi flow meter shall be
installed after the interface point isolation valve. This device shall be
connected to the Power Plant monitoring system and shall be used for measurement
of steam flow during normal operation of the Power Plant and during performance
testing. Performance testing of the plant shall be carried out using the
calibrated venturi meter installed in the main steam line. The venturi meter and
its installation shall comply with relevant ISA standards sufficient to give
flow measurement with at least +/-0.5% accuracy. Refer to Section 10.24.2.2 for
additional requirements concerning venturi flow elements.
112
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Exhibit "A"
Attachment 1 - Design Criteria
5.4.6.8 LEVEL MEASUREMENT
Suitable bosses, stub pipes and isolating valves shall be provided on all tanks,
and vessels where level measurements are required.
Wherever practical an external level bridle shall be provided wherever
turbulence or other undesirable conditions are present to enable representative
and stable level measurements to be made. Where a level bridle cannot be
incorporated, a stilling well shall be provided for this service.
Wherever possible, liquid level measurements will have a gage glass for direct
visual observation as well as transmitters or switches. Gages shall normally be
of the armored reflex type, except that armored transparent type will be used
for brine service.
In general, level measurements shall be made using electronic differential
pressure transmitters. In applications where the differential pressure
transmitter is undesirable, displacers, bubbler, capacitance or ultrasonic beam
based devices may be used. Flange ratings shall be in accordance with vessel
specifications. For multiple instruments connected to a vessel an external stand
pipe will be utilized. Flange ratings shall be in accordance with vessel
specifications.
Differential pressure type level transmitters shall be fitted, as a minimum,
with 5-valve manifolds including an equalizing valve for zero check.
For fluids with high solids content, high temperature, or other service
conditions where float mechanisms are not appropriate, hydrostatic head,
electric probes, or sonic type level measurements may be utilized. Where
feasible, purging of level taps will be considered to prevent pluggage.
In general, sonic or RF probes shall be used for solids level detection.
5.4.6.9 LEVEL SWITCHES
Locally mounted liquid level gauges shall be used for sight monitoring and
measurement purposes. Locally mounted magnetic coupling glandless level switches
shall be used for alarm and control purposes.
5.4.6.10 CHEMICAL ANALYSIS EQUIPMENT
Where specified for conductivity or pH measurement, the instruments shall be of
the immersed electrode type, in-line for pipe measurement and dip type for
measurement in open vessels. The measurement electrode, reference electrode and
temperature compensation shall all be contained in the same probe.
5.4.7 FINAL CONTROL ELEMENTS
5.4.7.1 AIR OPERATED CONTROL VALVES - RPF SERVICE
Control valves and all required accessories shall be provided as a complete
assembly by the valve manufacturer. This shall include all solenoid valves,
limit switches, valve actuators, valve position transmitters and other
accessories as required by the installation. Where air actuation is not feasible
and economically justifiable electric, hydraulic or electro-hydraulic actuators
shall be used for modulating service.
The control valves shall be installed to the manufacturer's recommendations for
minimum length of straight pipe upstream and downstream of the valve as well as
the location of pipe reducers.
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Exhibit "A"
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Except where specified or approved by the Owner, all control valves shall have
upstream and downstream isolation valves. A bypass valve of a capacity equal to
or greater than the control valve shall also be provided, where required by the
mechanical design (refer to Section 8.6.10.3). The upstream and downstream
connections of the bypass valves shall be made outside the isolation valves
provided for the control valve. This would enable the bypass line to be placed
in service while the control valve is isolated and serviced. In addition, a
3/4-inch drain line and valve (ball or gate) shall be installed upstream and
downstream of all control valves mid-way between the control and isolation valve
in an accessible area. Hydraulic and Motor operated valves shall have the same
block, bypass and drain features.
Control Valves shall be designed to fail in the position that is safest for the
process as defined by the P&IDs.
Unless the process requires otherwise, control actuators shall be pneumatic.
Electric, hydraulic or electro-hydraulic may be used where necessary and where
life-cycle costs show them to be competitive.
All drain valves in the RPF must be 1-1/2" min. size for both steam and brine
service.
Control valves or control valve accessories requiring air pressure tanks must
meet all state requirements for pressure tanks (e.g.; safety valve, pressure
indication).Eccentric disk type valves (Masoneilan Camflex II or equivalent)
will be utilized for brine and steam services. Masoneilan Camflex II control
valves must be used in flashing and cavitating services for brine and
condensate. Refer to the pipe class specification sheets for additional valve
specifications.
5.4.7.2 AIR OPERATED CONTROL VALVES - PGF SERVICE
Unless otherwise specified on the data sheets, all control valves shall have
flanged ends or be lugged wafer type for insertion between line flanges. Minimum
flange rating shall be 300 lb class for sizes 4" and under.
During the normal range of operating conditions the sound level at any point 3
ft. radially from the surface of the downstream pipe at a distance of 3 ft.
downstream of the valve outlet should not exceed 85 dBA. Body outlet velocity
should not exceed MACH 0.3. Should sound levels exceed 90 dBA, the valve vendor
shall provide recommendations for mitigation of the problem.
The maximum allowable seat leakage must be determined from process design
considerations and for a particular valve is dependent on body and trim
construction. The permissible leakage rates shall be in accordance with ANSI FCI
70-2 1976, Classes 1-6 and will be specified on the valve data sheet.
Instrument air supplied to the air operated control valves will be at 100 PSIG
nominal and a minimum of 75 psig. Air pressure reduction, as required for
operation, will be accomplished at the valve location.
Control valves shall normally be sized with normal flow at approximately 70% of
valve capacity. Pressure drop across the valve should be at least 25% of total
system frictional losses or 10% of total system pressure whichever is greater.
All sizing calculations will be verified by the valve manufacturer. Minimum size
shall be 1".
Safe failure modes will be determined at the time of system design and indicated
on the valve data sheets.
5.4.7.3 VALVE ACCESSORIES
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Local control valve accessories shall be mounted on the valve unless otherwise
specified. Accessory items include the following:
o I/P transducer /Positioner Unit with gauges
o Air Pressure Regulator and Filter
o Solenoid Valve(s)
o Limit Switch(es) (on on/off service DCS controlled valves only)
o Volume Booster (as required)
o Position Transmitter (on DCS controlled modulating valves only)
Double acting cylinder actuators shall be provided with air accumulators when
required to achieve required failure positions.
Solenoid enclosures shall be corrosion resistant IP 66 (NEMA 4X) unless
otherwise specified.
Solenoid coils shall be Class H high temperature construction, at (120 Vac) and
shall be suitable for continuous duty.
Three-way direct acting solenoid valves shall normally be used to actuate
control valves when interlocked with fail safe or shutdown circuits, or when
used for on/off service type control valves. Universal (reversible ports) are
preferred.
The valve bodies for two-way solenoid valves shall follow the piping
specification in the Mechanical Design Criteria when used in process lines.
I/P and hand stations shall be mounted in a Nema 4X enclosure.
The coil shall be molded design with waterproof housing and shall be furnished
to meet area electrical code classifications.
Outdoor installations shall be weatherproof.
Solenoid vents shall have bug screens.
Those solenoids that have top mounted vents shall be piped so that moisture does
not enter the valve.
Solenoid Valves shall be manufactured by Berkert. If an application such as high
pressure hydraulic systems, cannot be serviced by Berkert, another valve may be
substituted.
5.4.7.4 LIMIT SWITCHES
Limit switches shall be supplied as an integral part of the valve-actuator
assembly.
All limit switches shall be snap acting type limit switches and shall be
provided and installed at the factory with mounting brackets and associated
hardware. Switches shall have two normally open and two normally closed contacts
and a corrosion resistant IP66 (NEMA 4X) enclosure.
5.4.7.5 PRESSURE GAUGES
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Gauges for control air supply and signal pressures integral to the instrument
shall be in accordance with the control manufacturer's standards. All other
gauges shall be as specified herein.
5.4.7.6 MOTOR OPERATED VALVES
All motor operated valves shall be equipped with a non-relaxing gear train and
non-rotating handwheel during electric operation. A minimum of eight
independently set limit switches shall be provided.
Torque seating and/or torque back seating requirements shall be determined by
the type of valve and application. In general all valves, except rotary valves,
will be torque seated.
If position indication is required, it shall be by resistance to current or
angle to current (4-20 mA) 2 wire.
MOVs s shall be as manufactured by Limitorque for electro-mechanical
applications and as manufactured by REXA for electro-hydraulic applications.
5.4.7.7 SAFETY RELIEF VALVES
In general, line and vessel protection shall be accomplished by the use of
rupture disks. However, for applications protecting against thermal expansion
and low flows, safety relief valves may be used.
Safety relief valves shall:
1. Conform to the requirements of ASME VIII, Division 1, Pressure Vessel Code.
2. Be top guided.
3. Be supplied with lifting levers for steam and air service.
4. Be suitable for use on ANSI B31.1 piping.
5. The seat leakage test for all valves will be as follows:
6. Air and vapor service as per API-Std-RP-527.
7. Liquid service - 10 cc/hr per inch of valve size at 90 percent set pressure.
8. Bodies shall be constructed of 316 Stainless Steel with Stellite seats.
9. Relief valves shall be supplied with gags.
10. Bellows shall be specified where back pressures could affect proper
operation.
For location and piping criteria see Mechanical Design Criteria.
5.5 EQUIPMENT INSTALLATION AND SERVICE CONNECTION
5.5.1 INSTRUMENT TUBING AND ACCESSORIES
5.5.1.1 GENERAL
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Exhibit "A"
Attachment 1 - Design Criteria
This criteria applies to all piping, tubing, fittings, and valves required for
primary instrument, sampling, air supply, and pneumatic control systems in ANSI
B31.1 installations.
Class, size, routing and valving shall be as shown on Stone & Webster
Engineering Corporation Drawings, Standards, Technical Data Sheets, and
Specifications. Instrument process connections will generally be 3/4" with 3"
connections for level bridles.
Compression fittings and connections shall be used for all stainless steel
primary sensing, air supply, and control tubing. Transition from welded to
compression fittings will be made at the instrument root valve.
Instrument locations and connections shall be designed for maximum accessibility
and for ease of operations and servicing. Instruments shall be close coupled in
scaling or corrosive service. When several instruments are located in close
proximity they will be grouped together on an instrument rack. In the resource
production facility area these racks shall be nonmetallic closed cabinets with
gasketed doors.
Instrument process connections shall be designed to be roddable and root and
isolation valves shall have removable seats and straight through flow paths for
ease of maintenance.
Nonmetallic tubing may be considered for services with severe vibration or
corrosion problems.
5.5.1.2 INSTRUMENT VALVES
Blowdown and drain valves are required in the connecting lines to all
transmitters and instruments used on water, steam and condensable vapor
services.
The method of attaching isolating valves to instruments shall be such that it is
possible to disconnect the instrument from the connecting pipe without having to
drain the pipe.
Manifold Valves - Differential pressure type flowmeters shall be fitted, as a
minimum, with 3-valve manifolds including an equalizing valve for zero check.
5.5.1.3 INSTRUMENT PIPEWORK AND FITTINGS
Instrument root connections at the process piping or process vessel shall
generally be (3/4"). The Mechanical Design Criteria will detail the requirements
for both the connections at the process piping and process vessel and the vessel
instrument isolation valve associated with these connections.
Monel tubing, fittings, valves, and manifolds shall be used for all brine
piping. Stainless steel tubing, fittings, valves, and manifolds shall be used
for all other primary piping.
The Instrument Installation Diagrams will show the physical requirements for
mounting and routing of the instrument tubing.
5.5.1.4 INSTRUMENT FITTINGS AND TUBING SUPPORT
All tubing shall be (.25"), (.375"), or (.500") stainless steel; other sizes of
tubing shall not be provided.
All tubing and capillaries shall be supported and protected from external damage
using TubeTrack or similar product. Tubing support components shall be
manufactured from materials which are suitable for the harsh chemical
environments likely to be encountered. Tubing support systems shall be routed so
as
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not to impede removal of adjacent equipment. Tubing support systems shall be
mounted to structure only, not to equipment.
Flexible hoses or conduit shall be used to ensure that movement between actuator
devices and stationary devices are absorbed in the flexible hose and not in the
rigid tubing or conduit.
Ports for flushing instrument sensing lines shall be provided as required.
5.5.1.5 PRIMARY INSTRUMENT TUBING REQUIREMENTS
Compression fittings shall be used for all primary instrument sensing tubing.
Tubing runs greater than 50 feet should be avoided.
All tubing for this service shall have a minimum outside diameter of 1/2-inch
and shall conform to the following requirements:
o ASTM A-213 Grade TP316 (S31600)
o Seamless Stainless Steel
o Cold Drawn Fully Annealed
o 10 ft. Lengths or Longer
Dimensions:
Actual O.D. Wall Thickness I.D. MWP
Inches Inches Inches @1,000F
3/8* 0.049 0.291 4,261
1/2 0.049 0.402 3,070
5/8 0.072 0.481 2,690
3/4 0.083 0.584 2,575
*3/8-inch tubing may be used only for those parts of sampling systems that are
located within a panel or a rack.
Weld repairs shall not be allowed on the tubing.
The supplier of the tubing shall verify that all requirements of the material
specifications have been complied with and that the tubing meets these
requirements.
5.5.1.6 INSTRUMENT AIR SUPPLY AND PNEUMATIC CONTROL TUBING DESIGN
316 Stainless steel tubing, fittings, and valves shall be used for all
instrument air and control pneumatic tubing.
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Instrument and pneumatic pipe routing shall maintain adequate distances from
outside walls, doorways, and areas of extreme heat to minimize ambient effects
on control lines.
Lines in the instrument air supply distribution system shall be sized such that
the maximum pressure drop from the air dryer to the most remote air user does
not exceed 5 psid with a 100 psig supply when all users are taking air at
approximately 2 to 5 scfm.
Instruments requiring air shall generally be supplied from a branch instrument
air header. The maximum number of instrument air users that shall be taken off a
(1/2") branch shall be four. The maximum number of instrument air users that
shall be taken off a (1") header shall be twenty. Separate connections shall be
taken off the main instrument air header for instruments requiring large amounts
of air for operation with a (1/2") minimum line being used. Shutoff valves at
the instruments shall be swing-out ball valves with compression fittings.
A separate reducing filter regulator shall be furnished for each instrument
requiring a source of instrument air.
All tubing for this service shall have a minimum outside diameter of 1/2-inch
(except as noted in the table below) and shall conform to the following
requirements:
o ASTM A-213 Grade TP316 (S31600)
o Seamless Stainless Steel
o Cold Drawn Fully Annealed
o 10 ft. Lengths or Longer
The supplier of the tubing shall verify that all requirements of the material
specification have been complied with and that the tubing meets these
requirements.
The requirements for all instrument air piping above 1/2" is covered in the
Mechanical Design Criteria.
5.5.2 MATERIAL
5.5.2.1 STAINLESS STEEL FITTINGS
5.5.2.1.1 COMPRESSION TYPE FITTINGS
This type of fitting shall be used for all of the following connections:
o Connection of a primary sensing line or sampling line from the root
valve transition fitting to an instrument.
o Connection of an individual instrument air supply line between the air
supply header shut-off valve and the instrument.
o Connection of instrument air supply headers assembled from stainless
steel tubing ( Not pipe).
o Connection of a pneumatic control line to an instrument, control
valve, control drive or accessory device.
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Compression fitting shall be furnished with the following specifications:
o Tube Size, O.D. inches: 1/4, 3/8, 1/2, 5/8, 3/4
o Type: Compression
o Material: 316 Stainless Steel
o Manufacturer: Crawford "Swagelok"
3/8-inch tube fittings may be used only for those parts of sampling systems that
are located within a panel and/or a rack.
Manufacturers recommended tools and installation procedures shall be strictly
followed.
5.5.2.1.2 SOCKET WELD FITTINGS (PRIMARY SENSING & SAMPLE LINES)
Socket weld fittings shall have full annular stops, a straight bore and shall be
furnished in accordance with the following specifications:
o Tube size, O.D. inches: 3/8, 1/2
o Manufacturer: Cajon Company* or equal
*Swagelok to weld fittings are also available from Cajon which provide easy
transition from welded to non-welded tubing systems.
5.5.2.2 STAINLESS STEEL VALVES
The valves applicable to this section are the instrument valve, blowdown valve,
test valve, backup root valve (when specified) and sample regulating valves. The
valves for these applications shall be furnished in accordance with the
following specifications:
o Style: Ball, full port
o Rating: 6,000 psi @ 100F
o Body Design: Replaceable seat roddable
o Body Material: 316 Stainless Steel, except for brine service which
shall be Alloy 20.
o Construction: Union Bonnet, 316 Stainless Steel
o Stem: Stainless Steel
o Seat: Reinforced TFE
o Packing: Reinforced TFE
o End Connections: NPT or Compression Tube Fittings
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o Manufacturer: TBV
Exception: Low pH root valves shall be C276 or Inconel 625.
In general, 3/4" valves shall be used.
3/8-inch valves may be used only for those parts of sampling systems that are
located within a panel and/or a rack.
Weld repair of defects on the pressure boundaries of a valve body shall not be
allowed.
5.5.2.3 INSTRUMENT AIR SUPPLY VALVES
The valves applicable to this section are the individual instrument air supply
shut-off valves. They shall be furnished in accordance with the following
specifications:
o Style: Ball, full port
o Working Pressure: 3000 psi @ 100F
o Body Material: 316 Stainless Steel
o Body Construction: Ball
o Construction: Screwed Bonnet
o Stem: Stainless Steel
o Sizes: 1/4, 3/8, 1/2 inch
o End Connections: Pipe to pipe, pipe to tube, tube to tube
o Manufacturer: Whitey Co., "43" Series, or equal
5.5.2.4 MANIFOLDS
Three valve manifolds shall be supplied as follows:
o Body Design: Removable Seat, Roddable
o Body and Bonnet Material: 316 Stainless Steel
o Stem Material: 316 Stainless Steel
o Seat: Reinforced TFE
o Packing: Reinforced TFE
o Process and Instrument
o Port Connections: 1/2 Inch NPT
o Manufacturer: HEX VALVE HM452 Series, or equal
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5.6 RACKS AND PANELS
5.6.1 FIELD ENCLOSURES
Unless otherwise specified, all indicating instruments shall have dust and
moisture proof cases to NEMA 4X. All enclosures shall be specified to be
corrosion resistant.
Enclosures will protect the field instrumentation from solids, hazardous
conditions and washdowns with high pressure hoses. The enclosures will be
designed to permit in-place calibration of instrumentation and instrumentation
removal from the enclosure front. In all cases corrosion-resistant housings
(NEMA 4X) are required with stainless steel or non-corroding hinge material.
In addition to the above requirements, panels will be provided with replaceable
corrosions resistance ion emitters
An instrument air purge shall be provided on electrical or control enclosures
with an interior volume greater than 1 cubic foot (1728 cubic inches). Design of
panel purge and purge flow rates shall be sufficient to provide positive
pressure within the enclosure under all conditions
5.6.2 LOCAL CONTROL PANELS
Local control panels shall meet the same requirements as for field instrument
enclosures. The construction and finish of all local control panels shall
conform to the requirements of the ambient conditions. In all cases
corrosion-resistant housings (NEMA 4X) are required with stainless steel or
non-corroding hinge material.
5.6.3 TERMINAL BLOCKS
Terminal blocks shall be rated at 600 volts and shall be provided for all
external connections to cabinets and consoles. Terminations to compression type
terminal blocks shall include a metal ferrule, compressed over all conductor
strands. Termination of bare wires in compression terminal blocks is not
acceptable. Alternately, terminations may be made to terminal blocks accepting
locking ring tongue compression type lugs.
Thermocouple terminal blocks shall be of the same material as the thermocouple
extension wire.
5.6.4 CONTROL PANELS AND RELAY PANELS
In addition to the requirements set forth above, all control panels and relay
panels shall have lights and receptacles installed within the cabinet. The
lights and receptacles shall be wire to separate power entry terminal blocks
such that a separate feed may be used to power these loads. Cabinets which are
installed as a unit, such as the DCS, should have a single feed connection point
for all the cabinets in the set.
5.6.5 LOCAL PUSH BUTTON STATIONS
All motors and loads controlled via the DCS will have an auxiliary local push
button control station located adjacent to the equipment for local control of
the equipment. The bush button station will have controls for start and stop of
the equipment, as well as a local/remote select switch that enables DCS control
of the load. The local start/stop control shall be wired directly into the
associated MCC, along with the appropriate field instrumentation interlocks, to
allow complete pump operation apart for the DCS. Modulating valves shall have
local manual loading stations.
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Design implementation of the local controls will provide for bumpless transfer
from DCS to field control and from field control to the DCS. This includes motor
on/off control stations as well as valve manual loading stations.
Local panels shall be NEMA 4X rated and constructed of stainless steel.
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6. MECHANICAL DESIGN CRITERIA
6.1 GENERAL
The Project, Unit 5, is a bottoming cycle geothermal power plant that receives
geothermal steam and brine from the existing Salton Sea Units 3 and 4. After
energy is extracted from the brine in Unit 5 , the brine is routed through a
Silica Control System where the silica in solution is reduced from approximately
850 mg/l to 200 mg/l. The brine is then delivered to the Region 1 Minerals
Recovery Facility (MRF). The brine must exit Unit 5 at a specified temperature.
6.2 OPERATING MODES
The Project will operate as a base load merchant plant. The project also
supplies geothermal brine feedstock to the Region 1 MRF where zinc is extracted
from the brine in a continuous process. The Project supplies utilities to the
MRF including:
o Electric power
o Steam at atmospheric pressure
o Auxiliary steam
o Makeup water (excess condensate)
o Fire water
6.3 RELIABILITY
The Project shall de designed with installed spare capacity, redundancy, and
other features to achieve a 96% Reliability during normal operation.
The design of systems and equipment shall provide maximum reliability. All
rotating equipment shall be provided with installed spare capacity unless
otherwise specified.
6.4 POWER CYCLE
The power cycle is shown on the General Process Flow diagram included in
Attachment 8.1-1. The power cycle uses geothermal steam at three different
pressures. Standard Pressure (SP) steam is delivered to the Project from an
intertie with Units 3 and 4. Low Pressure (LP) steam and Very Low Pressure (VLP)
steam is flashed from geothermal brine that is delivered to the Project from
Units 3 and 4. Steam at all three pressures is delivered to a condensing steam
turbine generator. The turbine exhausts to a surface condenser located below the
turbine. Steam condensate from the condenser is pumped to the main cooling water
system as makeup. Additional makeup is available from the Region 1 MRF. The
cooling water system uses a wet, mechanical draft cooling tower to reject waste
heat to the environment. Circulating water pumps deliver water from the cooling
tower basin to the condenser and back to the cooling tower.
Geothermal steam contains non-condensable gas that must be removed from the
condenser. The Gas Removal System extracts the gas from the condenser,
compresses it to slightly above atmospheric pressure, and delivers the gas to
the cooling tower for release to the environment with the cooling tower plume.
The gas contains Carbon Dioxide and Hydrogen Sulfide. Hydrogen Sulfide abatement
is not required.
Plant auxiliary equipment is cooled with water from the cooling tower basin. The
auxiliary cooling water system also delivers make up water to the MRF.
Geothermal brine from Units 3 and 4 is pumped to, and through, two levels of
cascading steam separators to generate LP and VLP steam. From the steam
separators the brine is delivered to a silica control system.
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The temperature of the brine is reduced in the first reactor of the silica
control system by flashing at atmospheric pressure to meet the requirements of
the minerals extraction process. Brine exiting the silica control system is
pumped to the Region 1 MRF.
6.5 CYCLE HEAT BALANCE
The Contractor has developed a Guaranteed Heat and Material Balance diagram for
the Project. This diagram is included in Attachment 6, document 8.1-1, to this
specification.
6.6 MATERIALS OF CONSTRUCTION
The geothermal fluids are extremely corrosive to standard materials of
construction. The Contractor's material selections are represented on the
Station Materials Diagram included in Attachment 6, document 8.1-1.
Products which contain asbestos are prohibited. This prohibition includes items
such as packings or gaskets even though the item is encapsulated or the asbestos
fibers are impregnated with binder material.
6.7 SEISMIC DESIGN
Equipment and anchorages shall be designed to withstand a seismic event as
specified in Section 8.2. All process equipment shall remain operative after
being subjected to the design seismic event without loss of performance or
structural integrity.
Analysis shall be made using the equivalent lateral force (ELF) method. A value
of 2/3 of the ELF shall be simultaneously imposed as a vertical force on the
equipment. No credit for friction shall be taken in designing the anchorage
system to resist lateral loads. The seismic load shall be included with the
normal operating loads of the equipment.
6.8 VIBRATION
Vibration shall be minimized by good design and by the adoption of high
standards of balancing of both components and rotating assemblies during
manufacture.
Except where otherwise specified the vibration amplitude of rotating equipment
when measured on the bearing housings under steady state conditions shall not
exceed the middle values of the bands designated "brauchbar" (satisfactory) in
VDI 2056 for the class of machine concerned.
Steam turbines and generators shall be installed with proximity transducers on
all bearing housings. The transducers shall measure x & z direction vibration on
all housings and y direction (axial) vibration on thrust bearings. Vibration
limits for turbines and generators shall comply with the relevant sections of
API 612 and API 546 respectively. Design and installation of vibration
monitoring equipment shall comply with the requirements of API 670.
Continuous vibration monitoring equipment shall be provided for turbines,
generators and circulating water pumps. Equipment shall be Bentley-Nevada 3300
series or approved equal. All vibration signals shall be brought to a monitoring
panel. The panel shall provide relay access for hook up of spectrum analyzing
equipment. Summary indication and alarm signals shall be connected to the DCS.
Should vibration levels exceed the above limits, the Contractor shall reduce the
vibration to within the defined limits.
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6.9 FLUID VELOCITIES
The Contractor's design is based on the following fluid velocities at design
flow conditions. Deviation from these fluid velocities may be permitted for
intermittent operation or transient conditions. Any deviation above the maximum
specified fluid velocities requires approval by the Owner. Non-condensable gas
piping is sized based on pressure drop, not velocity.
FLUID RECOMMENDED VELOCITY
SP Steam 100 to 140 ft/sec
LP Steam 120 to 160 ft/sec
VLP Steam 150 to 190 ft/sec
Brine, single phase 5 to 9 ft/sec
SP Brine, two phase 100 ft/sec
LP Brine, two phase 120 ft/sec
VLP Brine, two phase 140 ft/sec
Water and oil 10 ft/sec
Pump suction and drain 6 ft/sec
lines
General service 15 ft/sec
Condensate pump suction 3 ft/sec
6.10 PUMPS
6.10.1 CENTRIFUGAL PUMPS
Particular attention shall be paid to the selection of pumps and their materials
of construction for the specific application.
Horizontal shaft pumps shall be either horizontal split casing or back pull out
Pumps shall be capable of operating continuously over their full operating range
without overheating, cavitating, excessive noise or vibration, surging or
instability when operating in single or in parallel with other pumps. Pumps
shall be selected for maximum efficiency at the design condition and shall have
a head/flow curve that rises steadily from rated flow to shut off. Pumps shall
either be installed with a flooded suction or shall be self priming.
Mechanical seals shall be used on all power generation cycle pumps. Pumps shall
be self flushing with process fluid wherever possible. Where flushing with the
process fluid is not possible, a seal flushing system including pumps where
necessary shall be provided to supply suitable quality seal flushing water to
the mechanical seals. All seal flushes shall be fitted with flow indication.
Seal water flush will be routed to the local drain system by way of stainless
steel tubing on discharge side of the seal.
Pumps and motors above 15kW shall be coupled and assembled on a common base.
Integral pump motor units are preferred for smaller pumps.
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All pumps, with the exception of the circulating water pumps, shall be specified
with a 10% flow margin above the design flow as set out on the heat and material
balance diagram. Circulating water pumps shall be specified with a margin of at
least 5% flow margin above the design flow as set out on the heat and material
balance diagram.
Pumps shall be installed with an adequate margin to ensure that the pump
operates without cavitating over the full range of flows and suction level
conditions. Motors shall have power ratings, including service factor at least
equal to the power required at runout flow.
For continuous duty, pumps driven at no more than 4-pole speed (1800 rpm) are
preferred. All pumps shall be close coupled without gearboxes.
All pump bearing housings, shall be fitted with surfaces suitable for the
fitting of portable vibration sensing transducers.
6.10.2 DIAPHRAGM PUMPS
Diaphragm pumps for chemical transfer service shall be double diaphragm pumps.
Diaphragm pumps shall be powered from the Service Air system.
The materials of construction shall be compatible with the system fluid.
6.10.3 METERING PUMPS
Metering pumps for chemical injection service shall be positive displacement
type pumps. The pumps shall be capable of supplying an infinitely variable feed
rate from zero to the maximum capability of the pump. Metering pump installation
shall include calibration pipes. The pump, or system shall include a pulsation
damper to eliminate pulsing of the flow at the injection nozzle. The pumps shall
have an internal relief valve for overpressure protection.
The materials of construction shall be compatible with the system fluid.
6.11
6.12 VALVES
Valve selection guide lines are included in Attachment 6, document 8.6-1 All
valves in brine service shall have the capability of applying grease to the
stem.
6.12.1 MANUAL ISOLATION VALVES
Valves shall be located to minimize the dead leg areas of brine piping.
For valves 8" and under, secondary isolation valves at easily accessible spots
shall be considered in lieu of the addition of valve access platforms, as long
as the primary valve is not a frequent service or maintenance item. Primary
valves of this nature must have access by way of a man basket.
Butterfly valves may be considered for primary isolation in steam service for
line sizes greater than 24". Valves shall be triple offset high performance
design. The valves shall be type 316L stainless steel or better construction,
metal seated, with replaceable seats on the body. Seats should be Stellite,
Inconel 625, or Hastelloy C. Stem shall Inconel 625. Accommodation in design
must be made to allow for a drop out spool and/or a slip blind downstream of all
butterfly valves in steam service upstream of the turbine.
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For 6" and under size line (and some 8") Type 316L stainless steel ball valves
are the preferred means of isolation for steam, condensate, and some brine
services. Valves shall be a two piece flanged design, and use PEEK seats.
6.12.2 MOTOR OPERATED VALVES
Motor operators shall be Limitorque or Owner approved equal.
6.12.3 CONTROL VALVES
Refer to Section 8.5.4.7 for specific requirements for control valves.
Not all control valves will require full bypasses. The function of the bypass
can be designed into the valve sizing criteria where parallel valve systems will
exist such as on brine vessel level control and dump systems, steam scrubber and
demister level control systems. Bypasses shall be installed on systems where a
malfunction of the control valve would result in a critical system shutdown in
order to perform maintenance on the item.
6.12.4 VENT AND DRAIN VALVES
Manual high point vent valves and low point drain valves shall be provided as
required for system fill and drain purposes. Valves shall be sized to permit
efficient venting and draining. Vent and drain valves shall be full port ball
valves.
6.13 STRAINERS
Permanent strainers shall be installed where necessary to protect equipment or
pumps from damage. Differential pressure instrumentation shall be provided to
monitor strainer operation.
Provisions are to be made to blow down the strainer of accumulated debris and
condensate. Local pressure gauges are required upstream and downstream of the
strainer, and all strainers in steam, and water services in critical systems.
Where permanent pump suction strainers are not installed, pump suction piping
shall include startup strainers that can be easily installed and removed.
A strainer shall be installed in the steam inlet line to steam jet ejectors.
Strainer basket shall be of C-276 or Alloy 625. The strainer body shall be
carbon steel.
6.14 EXPANSION JOINTS
Elastomer expansion joints shall follow the construction details outlined in the
Rubber Expansion Joint Technical Handbook. The overall design including the
selection of materials, shall be as recommended by the Contractor for the
intended service. The expansion joints shall not crack, peel, or show any
evidence of deterioration from exposure to the system fluids or the ambient
conditions.
The expansion joints shall provide for a maximum of 1/2 inch of lateral and 1
inch of axial displacement and a maximum of one degree of torsional or angular
displacement to accommodate erection misalignment.
The outside surface of all expansion joints shall be resistant to ozone, aging,
and sunlight. Cover protection, if painted, shall be completely bonded to the
cover and shall not crack or peel.
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The expansion joints shall be full face flange type, with integral flanges, and
shall be furnished complete with split retaining rings backing the flanges.
Flanges and retaining rings shall have the same pressure rating as the piping
system it is installed in.
The tube and cover shall be full thickness throughout and the bolt holes sealed
to completely cover the carcass fabric. Flange thickness shall be even over all
parts of the flange.
Arch fillers, when specified, shall be permanently attached to prevent
dislodgement from the arch.
Sufficient clearance shall be provided between the arches and the retaining
rings to allow for use of nuts to standard heavy hexagon dimensions, ANSI
B18.2.2.
Control units, when specified, shall conform to the dimensions of Appendix C of
the Rubber Expansion Joint Technical Handbook.
All expansion joints shall be visually inspected by the Seller for damage and
defects. The surfaces finish on all parts of the joint shall be smooth and free
from cuts, gouges or other detrimental defects. Repairs shall not be made
without the Purchaser's approval.
6.15 VESSELS
Vessel nozzles in brine service shall be no less than 4". Vessel nozzles in
steam service shall be no less than 3". Vessel nozzles in clean services shall
not be less than 2". All vessels shall be equipped with at least one manhole.
Manholes shall be at least 24 inches in diameter.
Vessels in the SP steam system shall have a design pressure of 180 psig. Vessels
in the LP and VLP steam systems shall have a design pressure of 100 psig.
Drain nozzles for steam scrubbers, demisters, and turbine casing drains shall be
made of Alloy 625 or Hast. C material. Carbon steel to alloy weld of the nozzle
to the vessel shall be of the same material as of the alloy. Valves for level
taps, drains, and other nozzles for these vessels may be type 316L stainless
steel ball valve with PEEK seats.
6.16 CRANES AND HOISTS
A gantry crane shall be installed over the turbine generator. The gantry crane
shall have one main hook and one auxiliary hook. Crane lift capability shall not
be less than 110% of the heaviest component plus rigging to be lifted during
maintenance. The gantry crane shall be designed, fabricated, and tested in
accordance with CMAA 70. Both hooks on the gantry crane shall be capable of
lifting any turbine or generator component from grade level up to any required
assembly or disassembly height.
The Contractor shall provide maintenance hoists for the following:
o Cooling water pump intake structure screen and stop logs
o Cooling tower mechanical equipment removal
o Maintenance hoists for other equipment that is not accessible to a
mobile crane
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7. PIPING DESIGN CRITERIA
7.1 GENERAL
Brine handling and steam production piping shall be designed, fabricated,
installed, and tested in accordance with ANSI B31.3 Process Piping. All other
piping shall be designed, fabricated, installed, and tested in accordance with
ANSI B31.1, Power Piping. Materials for piping systems shall be as shown on the
Station Materials Diagram. All piping shall be in accordance with the Piping
Material Specifications included in Attachment 6, document 8.7-1.
In general, yard water mains, circulating water pipe, water fire lines
connecting hydrants, and sewers shall be underground. All other lines shall be
aboveground except for special conditions where underground piping may be
desirable. Buried metallic piping shall be coated and wrapped to resist
corrosion.
1-1/2" drains shall be considered standard size for equipment, vessels, and
piping over 4 inch diameter unless otherwise noted. 1 1/2" drain valves shall be
provided on both sides of tubular heat exchangers, coolers, and condensers
unless otherwise indicated on the drawings.
Process vents and drains shall be identified during design development and shown
on P&ID's as required on high and low points of piping systems. Unless otherwise
specified piping shall have 3/4" minimum vents and drains.
Piping around equipment and heat exchangers shall be arranged and supported to
permit ready access for maintenance and inspection.
Radiographic examination (RT) of welds shall be performed as specified in the
individual pipe classes. All Alloy 625/Hast. C piping larger than 2" will be
100% radiographed and interpreted as per B31.1. All fillet welds of these alloys
will be inspected with LP. Weld maps are required for pressure vessels.
All steam and brine process vessels shall be designed with short drop-out spools
on the upstream and downstream ends of the vessels to facilitate isolation and
inspection for maintenance.
Alloy 625/Hast. C piping (SA pipe class) shall be designed such that the pipe
spools are easily removable for inspection and cleaning. One 90 deg. elbow
fitting or one tee fitting is permitted per removable spool piece. This design
will facilitate shop fabrication of alloy spool pieces. Field fabrication of
alloy components shall be kept to a minimum.
7.2 PIPE
Minimum pipe size shall be 3/4".
The following nominal pipe sizes shall not be used except where required to
connect the equipment.
1 1/4 in 4 1/2 in
2 1/2 in 5 in
3 1/2 in 7 in
Unless otherwise specified in the individual Piping Material Specifications, all
pressures specified are positive pressures.
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The design of G-cement lined steel piping systems shall take into account the
specific requirements necessary for this type of piping, including the following
features:
Flanges will have 1/8" 2205 rings welded to the surface of the flange,
protruding 0.500" into the ID of fitting. Welds are seal welded to ID
and the OD of the flange, and finished with a 125 to 250 RMS finish
suitable for gasketing. This added dimension must be accounted for in
the piping design.
All elbows are flanged on each end.
All tees are flanged on each end.
All reducers are flanged on end.
One drop out spool (a 40 ft flanged spool) is required per every
straight run and/or every 320 ft. for inspection and repair purposes.
Owner uses a video camera system with a 180 ft. line to inspect cement
lined pipe spools.
Clamp on galvanized pipe shoes are required. Refer to standard Owner
design. Gussets on the pipe shoes are not permitted. Pipeline guide
clips are to be similar to standard Owner design.
Drains, sample ports, TI's, PI's are made using Alloy 625/Hast C
nipples. These protrude 0.500" into the pipe and are seal welded on both
ends. These must be located at the end of a flanged run or on flanged
elbow/tee/reducer such that hand patching of the area can be
accommodated.
Additional detail design and fabrication requirements for Inconel Alloy 625 and
Hastelloy C piping and fittings and cement lined piping are included in
Attachment 8.7-2
7.3 STEAM PIPING
All branch lines shall be from the top or side of horizontal headers.
Branches from the main steam line to the other services shall be taken off at
the top of the pipe. All branch lines off of a primary steam line shall be
isolated as close to the branch connection as possible. Should access to the
isolation valve be difficult, consideration shall be given to placing a second
isolation valve at a readily accessible area, as opposed to the construction of
a permanent access platform at the branch connection isolation point. All low
spots shall be equipped with systems to remove condensate as it collects.
Galvanized clamp-on pipe shoes shall be used on all alloy steam piping where
pipe shoes are required. Shoe and guides shall be similar to the Owner's
standard design included in Attachment 8.7-3. Gussets on pipe shoes are not
permitted. Pipe shoes will be either 4" or 6" in height, the 6" shoes are used
where 3" or 4" of insulation thickness is required.
Galvanized clamp-on pipe shoes shall be used on all primary steam process lines.
Welded on shoes have been a source of preferential corrosion. The Owner has
found that use of clamp-on shoes has more than paid for themselves through
reduced construction time and less rework..
131
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Exhibit "A"
Attachment 1 - Design Criteria
Where weld seam pipe is used, the pipe system shall be designed to place the
seam at 10:00 or 2:00 position when the line is overhead, or otherwise direct
the seam away from work areas.
Steam wash water nozzle design and installation shall be similar to The Owner's
standard design included as Attachment 8.7-4.
There shall be no steam traps used in corrosive service. In non-corrosive
service the following shall apply.
Steam traps shall be installed at low points and dead ends of saturated
steam systems.
Traps should be installed on long runs of steam piping for sufficient
condensate removal to ensure dry quality steam at its destination.
Drip lines from steam headers or equipment, operating at different
pressures, should be independently trapped.
An isolation valve shall be installed upstream of the trap.
All valves at steam traps shall be trap size, but not less than 3/4 in.
A union shall be provided on each side of steam traps to permit their
removal.
Where several traps discharge into a single header which is, or may be
under pressure, a stop valve and a check valve shall be provided in the
discharge line from each trap. (B31.1 Par 102.2.5, B).
A Y-type strainer with blowoff valve shall be installed ahead of each
steam trap.
Before-seat and after-seat turbine stop valve drains shall be piped to the main
condenser.
It is preferred that steam piping be run overhead because access for cleaning is
not usually required. Dead legs shall be avoided by proper location of valves.
Condensate and gas buildup which may occur in such dead legs can produce water
hammer and accelerated corrosion.
7.4 PIPING AT CONDENSER AUXILIARIES
Condenser water box drains shall be 3 in. minimum and equipped with adequate
hose connections
7.5 COOLING WATER PIPING
Where bearings are provided with water jackets in the top and bottom halves,
cooling water shall be piped in series through the bottom half and top half in
that order, unless manufacturer specifies that parallel circuits are needed.
Exit piping shall be higher than the highest point of the bearing cooler to
ensure a complete fill.
132
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Exhibit "A"
Attachment 1 - Design Criteria
Valves in cooling water lines to oil coolers, cylinder jackets, and compressor
aftercoolers, shall not be less than 3/4 in. ball type. Individual connections
to small pump bearings may be smaller. Where solenoid valves are provided in
cooling water lines, suitable bypasses shall be provided.
Open cooling water outlets shall be visible from a point within reach of
regulating valves. When discharging into a funnel, the end of the cooling water
outlet line shall be no more than 1/2 in. below the top of the funnel. When a
number of drain lines discharge into a funnel, they shall be arranged so the
flow from each is clearly visible.
Ball valves (3" and under) or butterfly valves (4" and up) shall be used at the
inlet and outlet connections to air, oil, seal oil, etc., coolers.
All flanged rubber expansion joints shall be provided with limit rods and shall
be capable of withstanding system hydrostatic test pressure. Minimum face to
face dimensions for flanged rubber expansion joints for any service shall be as
follows:
Minimum Face to Face
Size, In. Dimension, In
--------- ---------------
2 to 12 6
14 to 16 8
18 to 36 10
48 to 60 11
66 12
Cooling water piping shall be 316L or FRP for above ground pipe. Below ground
pipe may be 316L, FRP.
Valves may be 316L, Teflon lined, rubber lined, FRP.
7.6 LUBRICATING OIL PIPING
Where a common suction line is provided for two or more hydraulic coupling oil
pumps, a separate strainer shall be provided inside the suction gate valve at
each pump.
7.7 PIPING AT PUMPS
Condensate pump suction lines shall be as direct as possible and shall be
arranged to permit removal of the pump impeller without removing the suction
valve.
When a reducer is required between the pump suction nozzle and the line, an
eccentric reducer shall be used if the pump has a horizontal suction. The
reducer shall be installed so that air pockets do not exist. Reducing flanges
shall not be used.
When a check valve is installed in the centrifugal pump discharge it shall be
installed upstream of the pump discharge shutoff valve. No check valves will be
used in corrosive service.
The condensate pump discharge check valves shall be submerged below the normal
hotwell level so a standby pump can be maintained completely filled by gravity
from the hotwell when the pump suction and discharge vents are open.
133
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Vertical condensate pumps shall be fitted with suction and discharge vents
unless such vents are known to be integral with the pump casing and the pump
manufacturer approves such omission. Each vent from each pump shall be run to
the condenser separately.
Brine pump suction piping from the separator vessel outlet nozzles to the brine
pump suction shall be as direct as possible. The use of inline expansion joints
may be required. The brine suction header manifold for the brine booster and
main injection pumps shall be similar to that currently used in Region I for the
P-3210 A/B/C and P-3211 A/B/C system. Any significant exception to this design
must be approved by the Owner. A drawing of the existing arrangement of the
Region I brine pumps is included as Attachment 8.7-5. When eccentric reducers
are used on pump suctions, the flat side should be on top. Strainers are not be
required for brine pumps.
When more than one level is required in yard pipe racks, a minimum of 18 in
vertical clearance shall be maintained between pipe banks.
Preferred minimum clearance from walls, floors, columns, etc. are listed below:
Pipe Diameter Clearance
------------- ---------
Up to 12 in 9 in
12 in to 16 in 12 in
18 in and larger 15 in
Piping run in horizontal layers shall have a minimum of 18 in between layers.
7.8 MAINTENANCE
Equipment, structures and piping shall be arranged to permit maintenance and
service by means of mobile equipment. Permanent facilities shall be provided
where maintenance by mobile equipment is impractical.
Exchangers with removable tube bundles shall have maintenance clearance equal to
the bundle length plus 5' measured from the tube sheet.
Piping at all equipment flanges shall have provisions for drop out isolation
spools as the primary means of providing for maintenance isolation. If this can
not be reasonably achieved, then provisions will be made for maintenance blinds.
The blind thickness will be per ANSI B31.1. Maintenance blinding may be provided
either by sufficient flexibility in the piping to allow installation of
maintenance blind or installed spectacle blind.
7.9 PERSONNEL PROTECTION
Eye wash and emergency showers shall be provided in areas where operating
personnel are subject to hazardous sprays or spills, such as acid, caustic, etc.
The system design shall account for solar heating and the high ambient
temperatures.
Personnel protection shall be provided at uninsulated lines and equipment
operating above 150(degree)F, when they constitute a hazard to the operators
during normal operation. Lines which are infrequently used such as relief valve
discharges do not require insulation.
Valve and flange shields, if required, shall be noted in the piping material
specifications.
134
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
7.10 BRANCH CONNECTIONS
Where reinforcement of pipe to pipe branch connections, is required for external
forces. The reinforcing pad shall have a thickness not less than 1 1/2 times the
pipe run thickness and a diameter twice the branch pipe diameter.
The Contractor shall determine the need for, and provide, pipe to pipe branch
reinforcement for internal pressure in accordance with Code rules. Duplication
of reinforcement for both internal pressure and external forces is not required.
Forged tees are recommended and fabricated stub-in type branch connections are
to be minimized. Use of weldolets is acceptable.
Branch reinforcement of alloy piping (Alloy 625/Hast C) may be Type 316L
stainless steel. Design of the reinforcement pad must take into account
differences in strength of the material. Full size reinforcing pads are required
on all Alloy branch connections for the following services:
o Steam service pipe.
o Two-phase brine service.
o Branches on the single phase brine side of the LCV's of the two-phase
brineservice.
Pulled tees are acceptable for Alloy piping. Pulled tees may be designed with
integral reinforcing pads as part of the pull process. This work can be
performed by Northwest Copperworks, in Portland Oregon.
7.11 FLANGES
In pipe classes which specify 150 lb flanges, any required orifice flanges shall
be 300 lb. One and one-half inch and smaller orifice flanges shall be socket
weld.
Raised face weldneck flanges to be used on 2" pipe or larger except for alloy
pipe, or where space requirements dictate otherwise.
Welding-neck pipe flanges shall be specified with bore to match mating
butt-welding fittings, or pipe.
Lap joint flanges shall be used in alloy applications.
Spiral wound gaskets shall be used in all brine and steam service.
Welding-neck orifice flanges shall be specified with bore to match mating pipe.
Orifice flanges in brine service shall have 3/4" NPT threaded taps.
Overlaid RFSO flanges may be used in lieu of lap joint flanges provided they
have a square ID with no notch or internal crevice or bevel on the ID of the
alloy pipe. The overlay shall be an 1/8" minimum, and be of the same material
type of the pipe. Owner must review any proposed use and design of the overlaid
flanges prior to fabrication. This technique has also been used to create flange
tapped orifice flanges out of carbon steel RFSO for alloy 625 systems. This type
of work has been done to Owner's satisfaction by Northwest Copperworks, in
Portland Oregon.
7.12 FITTINGS AND BENDS
Weld-o-lets shall be used for alloy piping. Thread-o-lets and sock-o-lets shall
not be used for alloy piping.
135
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Welding elbows shall be long radius elbows. Use of short radius elbows must be
approved by the Owner. Piping shall not be bent without approval of the Owner.
Weldolets and threadolets are commonly used for connecting small diameter piping
to larger diameter piping as opposed to collars, sockolets, or saddles.
7.13 THREADED CONNECTIONS
Piping 2" and smaller may be threaded or welded depending on the service. Seal
welding of threaded connections is not allowed. Small diameter piping in high
temperature, pressure, or corrosive service shall be welded.
7.14 BRINE HANDLING AND STEAM PRODUCTION PIPING
The following additional criteria shall apply to the brine handling and steam
production piping.
7.14.1 BRINE
Pressurized brine piping on the outlet of separators is at its bubble point
pressure plus the head supplied due to the liquid level in the vessel. Vertical
loops shall not be used and the number of fittings minimized to keep bubbles
from forming in the brine upstream of meters and control valves which are
adversely affected by upstream flashing. Only one elbow shall exist between
flanged connections.
Atmospheric brine is at its bubble point pressure plus any available head. The
piping design shall prevent flashing due to local pressure drops in pump
suctions and at meters.
Brine piping ID shall be designed to accommodate 1 inch thickness of rough, hard
scale adhering to the pipe walls with an absolute roughness factor of 0.03 to
0.125 inch.
Two phase flow will exist between the upstream vessel LCV and the inlet of the
downstream vessel.. This pipe is very sensitive to design. A design very similar
to the inlet of V-4210 as shown in Attachment 6 document 8.7-6 shall be used for
the inlet of the LP and VLP separator vessels. Any significant deviation to this
design may result in high vibration, unstable flow regimes, fatigue failure of
piping and structural components, and unreliable operation.
Piping calculations shall be based on 1/8" scale inside the alloy two phase
pipe, and 1/8" of scale for brine dump piping to the AFT.
For alloy brine and steam pipe in single phase flow conditions, alloy expansion
joints shall be considered. Expansion joints shall be of Alloy 625/Hast. C pipe,
sleeve, and bellows. Provisions shall be made such that the space between the
sleeve and the bellows can be filled with an inert material to prevent
accumulation of brine in a static area.
Drains line terminations on brine pipe shall be placed at an non-perpendicular
angle to the ground such that when drains are used under pressure, or when they
require rod out, that brine does not splash up to the operator. An angle of 60
to 75 deg. Shall be used.
Brine line meter runs and acid mixing spools shall be Owner standard dimensions
for diameter, length, and flange rating. This will allow use of existing spare
elements. This meter run is shown on the drawings included as Attachment 6
document 8.7-7. These spool pieces have been fabricated successfully be
Northwest Copperworks, of Portland Oregon. The 16" acid mixing spools are a
proprietary design and will be supplied by Owner.
136
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Drain valves in brine service shall be 1-1/2" Hast C ball valves. Sample valves
in brine service shall be 1" Hast C ball valves.
Instrument taps, level bridle isolation valves, level taps, and other valves
that are in a normally open position during operation may be Type 316L stainless
steel ball valves with PEEK seats. This is also true for steam service.
7.14.2 STEAM PIPING
Steam piping shall be sized for normal flow rates, unless otherwise indicated.
Dead legs should be avoided.
Piping shall be designed to avoid water hammer.
7.15 PIPE STRESS ANALYSIS
This section provides basic pipe stress design criteria and design guidelines
for analysis of 2 1/2 inch and larger piping for Unit 5 and the Brine Handling
and Steam Production equipment.
Brine piping shall be analyzed for the operating design density of the brine,
with the line full.
Two phase piping will be for the operating density of flashed brine, but pipe
and supports must be capable of a full hydrostatic condition. Springs and
hangers must be designed per operating conditions, not the full hydrostatic
condition.
Steam pipe 24" in diameter and under should be designed such that a hydrotest of
the system can be accomplished. Springs and hangers must also be designed for
the operating conditions.
Steam pipe above 30" diameter is not required to be hydrotested if in design the
hydrotest loads become the dominant loads for the pipe support system, support
spacing, and the wall thickness of the pipe. Alloy pipe will be 100%
radiographed. All bolt torquing will documented if a hydrotest is not required.
An inspection for leaks during initial operation will then be required.
7.15.1 DESIGN, OPERATING, AND TEST CONDITIONS
The Contractor shall specify the design conditions for the systems in accordance
with ANSI B31.1 or ANSI B31.3.
Where systems have multiple operating modes, sufficient thermal cases (in
addition to the normal operating case) shall be analyzed to insure that the
maximum range of thermal movements is obtained.
Any fluid transient loadings shall be included in the design of the systems.
7.15.2 RESTRAINT AND ANCHOR STIFFNESS
Equipment anchor stiffness shall be provided by the manufacturer. For
cylindrical vessels and similar equipment such as heat exchangers, nozzle
stiffness shall be approximated using Welding Research Council Bulletin #297 or
using Fourier Series Formulas developed and published by P.P. Bijlaard.
137
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
7.15.3 THERMAL ANALYSIS
All piping systems 300(degree)F or greater shall be computer analyzed. For
piping systems less than 300(degree)F, judgment shall be used as to when a
computer analysis, hand analysis, or no analysis should be performed. This
judgment shall be based on piping configuration, temperature, allowable
reactions on equipment, etc.
7.15.4 ALLOWABLE NOZZLE LOADINGS
Allowable nozzle loads for major equipment shall be provided by the equipment
vendor. Where the Vendor is not able to provide allowable loads, the actual
loads shall be transmitted for approval.
7.15.5 CONSIDERATIONS FOR PROCESS PIPING
Physical properties for polymer concrete-lined pipe or alloy pipe shall be
considered.
Where two-phase flow is expected and pipe fittings require overlay, the change
in flexibility and weight of the fittings shall be taken into consideration.
When the process fluid is brine or slurry, actual brine or slurry densities
shall be used in the analysis.
7.16 PIPE SUPPORTS
This section provides basic pipe support design criteria and design guidelines
for the design of pipe supports.
All pipe supports shall be verified for adequate capacity under the design
loading conditions.
Guide clips and limit stops should be similar to the Owner's standard as shown
in Attachment 6 document 8.7-8.
Anchoring on pipe supports with pipe shoes shall be accomplished by using 1/8"
gaps on the guides and limit stops on all four sides of the shoe, as opposed to
a rigidly welded out anchor system. Stress analysis shall take advantage of this
gap for these anchor types, as lower support load often will result, and the
pipe rack loads will be reduced.
Clips and guides shall be hot dipped galvanized and shall be cold galvanized
after installation.
The use of structural tube steel on pile driven column pipe supports is
acceptable for the single level brine line pipeways. The Owner has found this
system (10" tube steel on 8" to 10" pilings, driven 15ft to 30 ft deep) to be
the most cost effective support system for 24" brine lines, either multiple or
single line on the pipe rack. This type of support is finished with paint as
opposed to galvanizing.
Clamp on pipe shoes should be similar in design to the Owner's standard pipe
shoes as shown in Attachment 6 document 8.7-8. Gussets along the run of the shoe
are not permitted, so that the guides will not be torn up by the shoe during
line movement. Guides and stops shall be similar to the Owner's standard designs
shown in Attachment 6.
138
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
7.16.1 PIPE SUPPORT ANALYTICAL METHODS
Load Combinations and Allowable Stresses
The following load combinations shall be considered in the design of pipe
support supplemental steel, welds, and bolts:
Case Loads Allowable
---- ----- ---------
Normal DL + Therm + P AISC Part 5
Occasional DL + P + Therm (Max) + |OCC| Sect. 1.5 & 1.6
DL + P + Therm (Min) + |OCC|
Test DL + P Sect. 1.5 & 1.6
Where:
DL = Dead Load
Therm = Thermal Load (zero thermal load shall also be
considered when all thermal loads are of the same
sign)
P = Unbalanced pressure load due to expansion joints
OCC = Occasional Load = SRSS (Wind or Earth with Ft)
Wind = wind load
Earth = earthquake load (X or Z)
FT = Fluid transient load
For pipe support standard components, the manufacturer's catalog allowable loads
shall be used.
Loads from Computer Analyzed Piping
Pipe support loads from computer analyzed piping shall be combined as shown in
the previous section. Pipe support locations shall be per pipe stress ISO.
Hand Calculated Pipe Support Loads
Non-computer analyzed piping shall be supported using the following methodology
or other good engineering practice:
1. Place supports near each horizontal change in direction.
2. Support long risers (preferably at the top). No more than one
rigid support shall be used in a riser.
139
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
3. Place supports near valves and other concentrated weights or
reduce the maximum pipe span.
4. Place supports to maintain maximum suggested spans shown in ANSI
B31.1 Table 121.5.
5. Locate supports at existing steel wherever possible.
6. Locate lateral supports for seismic piping by the following
criteria:
a. In general, every 3rd support should be a guide.
b. Long straight runs of pipe should have one axial restraint
or a restraint immediately after a change in direction.
c. Place guides near valves or valve stations where possible,
especially MOV's.
7. Operating temperatures of the piping should be considered when
locating guides to avoid restricting thermal expansion.
Support loads shall be determined by standard engineering methods using
appropriate piping fluid, component weights, and seismic accelerations.
For seismically qualified piping, the horizontal acceleration is shown in the
Structural Design Criteria.
Standard support loads will be developed based on pipe size and should be used
to the greatest extent.
Piping near equipment shall be supported so as to meet the manufacturer's
specified maximum nozzle loads. Where piping is connected to rotating machinery
such as pumps or compressors, the use of a spring hanger at the first support
shall be used where practical.
Calculation Requirements for Supports
A pipe support calculation shall be produced for each high energy piping system.
The calculation shall serve as documentation for support loads. In addition, the
calculation shall include the analysis for all computer analyzed pipe supports
and other complex supports. No calculation is necessary for relatively simple
supports where the support component loads are easily obtainable. Where integral
attachments are welded to piping, determination of local piping stresses shall
be included in the calculation.
In addition to piping loads, the following items shall be considered in the
design and analysis of supports.
1. Self-weight load for large structures.
2. Friction loads for hot systems.
3. All supplemental steel spanning existing floor beams shall be
considered pinned irrespective of welding.
140
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
Support Configuration Sketches
------------------------------
Support configuration sketches shall be produced for all large bore piping. The
sketches should provide the following information:
1. General configuration with existing steel and elevations.
2. Interference check/clearances.
3. Pipe data and support location plan.
4. Piping loads and movements.
5. A detailed design for complex supports.
The sketches should also show standard hanger components and supplemental steel
including end connections for rod and spring hangers. All sketches shall include
the initials and date of preparer and reviewer, and associated node point number
for computer analyzed piping. Sketches shall utilize standard forms wherever
feasible.
The sketches shall be numbered as follows:
5-XXX-YYYY-###
Where:
5 is for Unit 5
XXX is the system designation (MSS, CCW)
YYYY is the support type
PSRH for rod hanger
PSSH for spring hanger
PSST for sway strut
PSSP for snubber/shock suppressor
PSR for other restraints
PSG for guides (two-way lateral restraint)
PSA for anchor
PSS for sliding support
### is a unique number associated with the support.
This shall serve as the support mark number.
Copies of support sketches shall be included with the piping stress analysis
calculations.
Special Considerations for Support Design
-----------------------------------------
1. Local attachments and integral welds shall be designed and shown
on the support sketches. The design shall insure that piping
stresses remain within allowable limits.
141
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Exhibit "A"
Attachment 1 - Design Criteria
2. Removable supports requiring supplemental steel shall be bolted
with ASTM A193 Gr. B8 bolts and A194 Gr. 8 nuts. This
information shall be included on the sketches.
3. Sliding supports shall include the effect of friction from
deadweight and thermal loads only. The coefficient of friction
shall be 0.30 for steel on steel and 0.15 for dry lubricant
bonded surfaces such as Teflon or Lubrite.
4. U-bolts may be used as guides for 4" and under piping when the
applied side load is below allowable limits.
5. Preferential corrosion has occurred on weld on type pipe shoes
and other components. This has not been observed with clamp on
shoes.
7.17 VALVES
Butterfly valves shall not be used for isolation in brine service. They may be
used for isolation in steam service only as outlined in the pipe specification
sheets.
All valves (except wafer type butterfly valves) adjacent to towers, exchangers
or vessels or expansion joints shall be attached directly to the nozzles where
possible.
Position of stems of all valves 3 in and larger shall be indicated on the design
drawings.
All operating valves shall be accessible for operation and maintenance. Chain
operators shall not be used unless approved by Owner as individual exceptions.
Valves shall not be located in the interior of piping bundles.
All safety valves, control valves, check valves, rupture discs, and equipment,
which may require servicing shall be located so they are readily accessible from
permanent platforms or ground level.
Generally, globe valves shall be installed with pressure under the seat, except
for globe valves in lines under vacuum, in which case the valves shall have
vacuum under the seat.
Infrequently used isolation valves shall be accessible but may be located more
than 7 ft above the operating level with a permanent access platform. Portable
access platforms must be approved by the Owner
Operating valves shall be oriented to optimize the manual operation of the
valve. Overhead valves shall be oriented so that the handwheels are
approximately 5 ft above the operating level or access platform. This
orientation may be increased to 7 ft maximum provided that the valve can be
opened or closed in this position.
Where valves are to be locked in an open or closed position, they shall be
provided with a suitable locking device, and shall be so noted on the P&IDs.
142
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Exhibit "A"
Attachment 1 - Design Criteria
Operating valves located underground or in trenches or below platforms shall be
provided with extension stems or otherwise arranged so the handwheels will be
above the surface of the ground or grating, and in such position as to be
readily reached and operated. Bonnet, yoke, and stem of rising stem gate valves,
when below grade and not in trenches, shall be protected with valve boxes or
other suitable means. Above grade valve extensions shall be protected from
damage by vehicular traffic.
Wafer type butterfly valves shall not be installed directly on equipment
nozzles.
The gate valve adjacent to a power control valve shall have flanged inlet and
outlet connections to permit removal of and repairs in the shop to both the gate
valve and the power control valve.
7.18 INSTRUMENTS AND CONTROLS
Control valves, block valves, and bypass valves around control valves shall be
individually sized by the Contractor and sizes noted on the flow diagrams or
drawings. In general, block and bypass valves will be line size for lines 2 in.
and smaller, and where line size is 2 1/2 in. and larger, bypass and block
valves may be one size smaller than line size, but in no case smaller than the
control valve.
Bypass valves shall be ball valves in sizes up to and including 3 in. Above this
size, use type of valve as specified in the piping class of the line.
Control valves shall be installed with block valves and bypass valves. Block and
bypass valves shall not be installed where redundant control valves are
installed. Control valves shall be installed with the valve stem vertical where
possible. Butterfly control valves in brine service shall be oriented with the
shaft horizontal.
Manifold shall be arranged to permit easy removal of the control valve while
line is in operation and should also provide clearance for removing inner valve
from above or below, while valve body remains in place, if possible.
Block and bypass valves may be omitted if the control valves are equipped with
manual operators (handjacks)and if approved by the Owner. Bypass valves may be
omitted where manual control of the process is not possible.
Carbon steel flanged control valves shall have the same rating as the piping
class in which they are installed. 4" control valve flanges and below shall be
rated 300# minimum.
A drain and bleeder valve shall be provided between the upstream block valve and
control valve for draining and pressure blowdown.
Unless otherwise specified by the Owner, where flashing occurs through control
valves located in control valve stations, the control valve shall be located as
close as possible to the downstream end of the line, in order to minimize
erosion.
First shutoff valves for all instrument connections shall be shown on P&IDs.
Main turbine vacuum trip feeler line shall be taken from a separate connection
in the main condenser neck and shall not be valved.
Each level control standpipe shall be provided with a 3/4 in. valved vent and
3/4 in. valved drain.
143
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Exhibit "A"
Attachment 1 - Design Criteria
Each level controller and level switch shall be provided with a 1/2 in. valved
vent and a 1/2 in. valved drain.
Orifice flanges shall be a minimum size and rating of 1 1/2 in., 300 lb ANSI
standard.
Thermometers in overhead lines shall be installed on the lower quadrant of the
pipe (but not on the bottom) for improved visibility.
Gage glass drains shall not be smaller than the size of the tapped connection on
the gage glass (usually 1/2 in.).
Pressure gage connections on pump discharge piping shall be located on pump side
of check and block valves.
Instrument connections shall be arranged so the line and valve are roddable.
For instrument branch connections, the first fitting and valve, if required,
shall be as follows:
<TABLE>
<CAPTION>
Instrument Connection Size, (in.)
---------- ----------------------
<S> <C>
Conductivity (cell inserted in line) 1 1/4
Flanged tap orifice 1/2
Flowmeter line taps 3/4
Level
External chamber controller 2
Switches 1
Differential pressure transmitters 3/4
Standpipes or multiple gage glass columns 2 (with 4 in. stand- pipes)
Pressure 3/4
Sample 1 1/2
Temperature well 1 1/2
</TABLE>
Liquid level controllers and level glasses shall be located to be accessible
from grade, platform or permanent ladder. The level glass shall be readable from
grade wherever practical.
144
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
7.19 RELIEF DEVICES
Relief line layout should avoid low spots where brine, condensate, or slurry can
accumulate. All relief lines shall have a 1/4" sentry hole downstream of the
relief device. Drains are to be installed when low spots cannot be avoided. The
minimum drain size is 1-1/2". For piping normally in service, roddable vents
(1-1/2") shall be supplied on the side or top of the pipe in conjunction with
the drain. Clearance, on the order of 36" for pressurized lines and 18" for
atmospheric lines, in the direction the valve points, is recommended to enable
rod-out (hot-tap) of a plugged valve.
Steam safety device vent lines shall not be manifolded, but shall be run
independently to atmosphere.
Relief devices shall be accessible. Wherever feasible, they should be located at
platforms which are functional for other purposes. Relief devices with a
centerline elevation over 15' above high point of finish surface shall be
accessible from platform or permanent ladder.
a. 1" and smaller thermal relief devices may be installed in a
horizontal position when it is impractical to install in the
vertical. 1-1/2" and larger relief devices shall be installed in
a vertical position.
b. Relief devices discharging to a closed system shall normally be
installed higher than the collection header. There should be no
pockets in the discharge line. Where economics dictate and with
the approval of the Owner, relief devices may be lower than the
collection header.
c. Relief devices discharging to atmosphere shall have tail pipes
extended to a minimum of 8'-0" above the nearest operating
platform within a radius of 25'unless otherwise approved by the
Owner.
7.19.1 ORIFICE RUNS
Orifice runs should be located in the horizontal. Vertical orifice runs may be
used with the approval from the Owner. Orifice flanges with a centerline
elevation over 15' above the high point of finish surface, except in pipeways,
shall be accessible from a platform or permanent ladder.
a. Orifice taps shall be located as follows:
1. Air and Gas - Top vertical centerline (preferred)
- 45(degree) above horizontal centerline
(alternate)
2. Liquid and Steam - Horizontal centerline (preferred)
- 45(degree) below horizontal centerline
(alternate)
3. Isometrics shall show the required tap orientations.
7.19.2 TEMPERATURE INSTRUMENT ACCESSIBILITY AND VISIBILITY
a. Temperature test wells located less than 15'-0" above high point
finish surface shall be accessible from grade or a portable
ladder. Those located in a pipe way shall be considered
accessible by portable ladder. Those located over 15'-0" above
high point of finish surface shall be accessible from a platform
or permanent ladder.
145
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
b. Temperature indicators shall be visible from grade, ladder or
platform.
c. Thermocouple and temperature indicators located less than 15'-0"
above high point of finish surface shall be accessible from grade
or a portable ladder. Those located in a pipe way shall be
considered accessible by portable ladder. Those over 15'-0" above
high point of finish surface shall be accessible from a platform
or permanent ladder.
Local pressure indicators shall be visible from grade, permanent ladder or
platform. Those located less than 15'-0" above high point of finish surface
shall be accessible from grade or a portable ladder. Those located in a pipe way
shall be considered accessible by portable ladder. Those over 15'-0" above high
point of finish surface shall be accessible from a platform or permanent ladder.
7.20 STRAINERS
Stainless steel temporary start-up strainers, 2 inch nominal pipe size and
larger shall meet the requirements in the individual Piping Material
Specifications.
7.21 VESSELS
Vessel design shall conform to ASME Section VIII. Where it will simplify and
economize piping systems, nozzle flexibility should be taken into account for
pipe stress analysis. Additional nozzle reinforcement should be considered to
increase the allowable forces and moments for a particular nozzle. Vessel
nozzles in brine service shall be 4" or greater.
7.22 CORROSION ALLOWANCES
Corrosion allowances not otherwise specified in the individual Piping Material
Specifications shall be specified by the Contractor such that the component
service life will meet or exceed the specified project life
7.23 CODES AND STANDARDS
As a minimum the Contractor's design shall comply with the current editions, at
the Date of Notice to Proceed, of relevant internationally recognized Codes,
Standards and Regulations and all applicable Codes, Standards, and Regulations
of Imperial County and the State of California. Where conflicts exist between
Standards, the more stringent requirements shall prevail. Deviations from
relevant Standards shall only be implemented with the written approval of the
Owner.
Codes and specifications from the following list will be preferred over
alternative codes:-
Codes & Standards
AASHTO American Association of State Highway and Transportation
Officials
ACI American Concrete Institute
AFBMA Antifriction Bearing Manufacturer's Association
AGMA American Gear Manufacturer's Association
AISC American Institute of Steel Construction
ANSI American National Standards Institute API American Petroleum
Institute
ASHRAE American Society for Heating, Refrigeration and Air Conditioning
Engineers
ASME American Society of Mechanical Engineers Boiler and Pressure
Vessel Codes
ASNT American Society for Non-destructive Testing
146
<PAGE>
Exhibit "A"
Attachment 1 - Design Criteria
ASTM American Society for Testing and Materials
AWS American Welding Society
AWWA American Water Works Association
BOCA Building Office Codes Association
CTI Cooling Tower Institute
DIN Deutsche Institut fur Normung
EJMA Expansion Joint Manufacturer's Association H
EI Heat Exchanger Institute
HI Hydraulic Institute
IEC International Electrotechnical Commission
IEEE Institute of Electrical and Electronics Engineers
IPCEA Insulated Power Cable Engineers Association
ISA Instrument Society of America
ISO International Organization for Standardization
JEC Japanese Electrotechnical Committee
JEM Japan Electrical Manufacturers' Association
JIS Japanese Industrial Standards
NACE National Association for Corrosion Engineers
NEC National Electrical Code
NEMA National Electrical Manufacturer's Association
NESC National Electric Safety Code
NFPA National Fire Protection Association
OSHA USA Department of Labor Occupational Safety and Health Act
SSPC Steel Structures Painting Council TEMA Tubular Exchanger
Manufacturer Association
UBC Uniform Building Code, 1997 UFC Uniform Fire Code
UL Underwriters Laboratories Inc.
UPC Uniform Plumbing Code, International Association of Plumbing and
Mechanic Officials
Specific dates and revisions of Codes, Standards and Regulations shall be
identified on issued drawings and specifications.
147
<PAGE>
<TABLE>
Tie Nos.: 1-500 Assigned by MRF EXHIBIT "A" REV A: 9/2/98
501-599 Assigned by U5 EXECUTABLE COPY
ATTACHMENT 2 - INTERTIE DOCUMENT REVISED IF MARKED WITH (*)
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Tie Intertie Participants Reference Drawings
--- ---------------------- -----------------------------------------------
U5 PFD U5 HB/PFD MRF PFD MRF
ID Area No. Commodity Receiver Supplier No. ???? Stream No No. ???? Stream No
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TP- 130 -017 L.P. Steam to IX1 (*) MRF EPC U5 EPC --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
TP- 130 -018 Brine Supply, IX1 MRF EPC U5 EPC 200-10-F55 67 100-10-F05 401
------------------------------------------------------------------------------------------------------------------------------------
TP- 130 -019 Brine Return, IX1 U5 EPC MRF EPC 200-10-F55 50 100-10-F05 404
------------------------------------------------------------------------------------------------------------------------------------
TP- 130 -021 Condensate to IX1 MRF EPC U5 EPC 200-10-F55 52 100-10-F06 463
------------------------------------------------------------------------------------------------------------------------------------
TP- 130 -022 RO Reject Water U5 EPC MRF EPC 200-10-F55 --- 100-10-F06 469
------------------------------------------------------------------------------------------------------------------------------------
TP- 130 -023 Atm Steam (*) MRF EPC U5 EPC --- 63 --- ---
------------------------------------------------------------------------------------------------------------------------------------
TP- 130 -024 Condensate (*) U5 EPC MRF EPC --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
TP- 130 -025 Service Water U5 EPC MRF EPC 400-10-F65 46 --- ---
------------------------------------------------------------------------------------------------------------------------------------
TP- 130 -026 Potable Water MRF EPC U5 EPC --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
TP- 130 -038 13.8 KV Power MRF EPC U5 EPC --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
TP- 130 -045 Fiber Optic Cable U5 EPC MRF EPC --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
TP- 130 -059 Brine from Sampler Instrument U5 EPC MRF EPC --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
TP- 130 -065 Compressed Air (*) U5 EPC MRF EPC --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
TP- 130 -071 Fire Water MRF EPC U5 EPC 600-10-F77 --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
TP- 130 -076 Drainage out IX1 U5 EPC MRF EPC 200-10-F55 --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
TP- 300 -088 Dilute HCl U5 EPC MRF EPC 600-10-F75 71 100-10-F13 704
------------------------------------------------------------------------------------------------------------------------------------
TP- 130 -099 Video Camera Signals U5 EPC MRF EPC --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
TP- 130 -100 Control Computer Signals Interface CEOC MRF EPC --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
TP- 200 -103 Drainage out Injection Pumps MRF EPC U5 EPC --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
O- 100 -501 92 kV Power U5 EPC IID --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
O- 100 -502 92 or 13.8 kV Power U5 EPC IID --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 100 -503 13.8 KV Power U5 EPC CEOC --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 100 -504 4.16 KV Power U5 EPC CEOC --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 100 -505 4.16 KV Power U5 EPC CEOC --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 100 -506 4.16 KV Power U5 EPC CEOC --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 100 -507 480V Power U5 EPC CEOC --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 100 -509 DCS Interface CEOC U5 EPC --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 200 520 Brine Pump Relocation U5 EPC CEOC --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 200 -521 Brine Supply to U5 U5 EPC CEOC 200-10-F55 10 --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 200 522 Brine Relief CEOC U5 EPC 200-10-F55 --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 200 -526 Brine to Injection CEOC U5 EPC 200-10-F55 50 (/2) --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 200 -527 Brine to Injection CEOC U5 EPC 200-10-F55 50 (/2) --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 300 -530 LPS Tie to U3 CEOC U5 EPC 300-10-F55 62 --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 300 -531 SP Steam U5 EPC CEOC 300-10-F60 --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 300 -532 SP Steam Scrubber Drain U5 EPC CEOC 300-10-F60 4 --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 400 -534 Cooling Tower Blowdown CEOC U5 EPC 400-10-F65 45 --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 600 -535 HCl Tank Vent CEOC U5 EPC 600-10-F75 80 --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 600 -536 HCl Tank Vent CEOC U5 EPC 600-10-F75 81 --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 600 -537 32% HCl U5 EPC CEOC 600-10-F75 72 --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 600 -538 32% HCl U5 EPC CEOC 600-10-F75 73 --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 600 -539 LP Purge Water U5 EPC U5 EPC 600-10-F75 74 --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 600 -540 Dilute HCl, SP CEOC U5 EPC 600-10-F75 79 --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 600 -541 Dilute HCl, HP CEOC U5 EPC 600-10-F75 77 --- ---
------------------------------------------------------------------------------------------------------------------------------------
I- 600 -543 NORMS U5 EPC Other 600-10-F75 86 --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 600 -545 32% HCl Drain (*) CEOC U5 EPC 600-10-F75 --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 600 -546 Dilute HCl Drain CEOC U5 EPC 600-10-F75 --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 600 -547 Fire Water U5 EPC CEOC 600-10-F77 --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
R1- 600 -548 Potable Water U5 EPC CEOC --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
I- 600 -549 Purge Water MU U5 EPC Other --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
I- 600 -551 Cooling Tower Chemicals U5 EPC Other --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
I- 600 -552 Lime (*) U5 EPC Other --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
I- 600 -554 Flocculant (*) U5 EPC Other --- --- --- ---
------------------------------------------------------------------------------------------------------------------------------------
O- 600 -555 Silica (*) Other U5 EPC --- 68 --- ---
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
Reference Drawings Capacity Est. Size
-------------------------------------- --------------------- -----------
U5 U5 Under Confirm TPs
ID P&ID No. One-Line Location Ground Req'd Available w/ MRF EPC
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
TP- J-0302 --- M-1A --- See MRF PFD By U5 EPC 12" Line (max)
----------------------------------------------------------------------------------------
TP- --- --- M-1A --- 60 psig (min) By U5 EPC See P& ID
----------------------------------------------------------------------------------------
TP- J-0606 --- M-1A --- 20 psig (min) By U5 EPC See P& ID
----------------------------------------------------------------------------------------
TP- --- --- M-1A --- 20 psig (min) By U5 EPC 4" Line
----------------------------------------------------------------------------------------
TP- --- --- M-1A --- See HB/PFD By U5 EPC 6" Line
----------------------------------------------------------------------------------------
TP- --- --- M-1A --- See HB/PFD By U5 EPC 36" Line
----------------------------------------------------------------------------------------
TP- --- --- M-1A --- See HB/PFD By U5 EPC 4" Line
----------------------------------------------------------------------------------------
TP- --- --- M-1A --- 200 gpm >200 gpm 4" Line
----------------------------------------------------------------------------------------
TP- --- --- M-1A --- 25 gpm 25 gpm 2" Line
----------------------------------------------------------------------------------------
TP- --- EE-1A M-1A --- 3.25 MVA 3.25 MVA ---
----------------------------------------------------------------------------------------
TP- --- --- M-1A --- --- --- ---
----------------------------------------------------------------------------------------
TP- --- --- M-1A --- --- --- 4" Line
----------------------------------------------------------------------------------------
TP- --- --- M-1A --- --- --- 2" Line
----------------------------------------------------------------------------------------
TP- --- --- M-1A --- 95 psi min 2500 GPM ---
----------------------------------------------------------------------------------------
TP- --- --- M-1A --- By MRF By U5 EPC <8" Line
----------------------------------------------------------------------------------------
TP- --- --- M-1A --- See HB/PFD By U5 EPC 6" Line
----------------------------------------------------------------------------------------
TP- --- --- M-1A --- --- --- ---
----------------------------------------------------------------------------------------
TP- --- --- M-1A --- --- --- ---
----------------------------------------------------------------------------------------
TP- --- --- M-1A --- By U5 EPC By U5 EPC 4" Line
----------------------------------------------------------------------------------------
O- --- EE-1A M-1A --- 55 MVA by IID ---
----------------------------------------------------------------------------------------
O- --- EE-1A M-1A --- --- by IID ---
----------------------------------------------------------------------------------------
R1- --- EE-1A M-1A --- 10 MVA >10 MVA ---
----------------------------------------------------------------------------------------
R1- --- EE-1A M-1A --- 1500 kW 1500 kW ---
----------------------------------------------------------------------------------------
R1- --- EE-1A M-1A --- 1500 kW 1500 kW ---
----------------------------------------------------------------------------------------
R1- --- EE-1A M-1A --- 1500 kW 1500 kW ---
----------------------------------------------------------------------------------------
R1- --- EE-1B M-1A --- By U5 EPC 150 kW ---
----------------------------------------------------------------------------------------
R1- --- --- M-1A --- By U5 EPC By U5 EPC ---
----------------------------------------------------------------------------------------
R1- J-1305 --- M-1A --- --- By U5 EPC By U5 EPC
----------------------------------------------------------------------------------------
R1- J-1305 --- M-1A --- See HB/PFD By U5 EPC By U5 EPC
----------------------------------------------------------------------------------------
R1- --- --- M-1A --- By U5 EPC By U5 EPC By U5 EPC
----------------------------------------------------------------------------------------
R1- J-0607 --- M-1A --- By U5 EPC By U5 EPC By U5 EPC
----------------------------------------------------------------------------------------
R1- J-0607 --- M-1A --- By U5 EPC By U5 EPC By U5 EPC
----------------------------------------------------------------------------------------
R1- J-0301 --- M-1A --- Norm Zero 330,000 max By U5 EPC
----------------------------------------------------------------------------------------
R1- J-0301 --- M-1A --- See HB/PFD < 140 kph By U5 EPC
----------------------------------------------------------------------------------------
R1- J-0301 --- M-1A --- See HB/PFD By U5 EPC By U5 EPC
----------------------------------------------------------------------------------------
R1- --- --- M-1A --- See HB/PFD By U5 EPC By U5 EPC
----------------------------------------------------------------------------------------
R1- J-1301 --- M-1A --- See HB/PFD By U5 EPC By U5 EPC
----------------------------------------------------------------------------------------
R1- J-1301 --- M-1A --- See HB/PFD By U5 EPC By U5 EPC
----------------------------------------------------------------------------------------
R1- J-1301 --- M-1A --- See HB/PFD By U5 EPC By U5 EPC
----------------------------------------------------------------------------------------
R1- --- --- M-1A --- See HB/PFD By U5 EPC By U5 EPC
----------------------------------------------------------------------------------------
R1- --- --- M-1A --- See HB/PFD By U5 EPC By U5 EPC
----------------------------------------------------------------------------------------
R1- J-1305 --- M-1A --- See HB/PFD By U5 EPC By U5 EPC
----------------------------------------------------------------------------------------
R1- J-1304 --- M-1A --- See HB/PFD By U5 EPC By U5 EPC
----------------------------------------------------------------------------------------
I- --- --- By U5 EPC --- See HB/PFD By U5 EPC By U5 EPC
----------------------------------------------------------------------------------------
R1- --- --- M-1A --- By U5 EPC By U5 EPC By U5 EPC
----------------------------------------------------------------------------------------
R1- --- --- M-1A --- By U5 EPC By U5 EPC By U5 EPC
----------------------------------------------------------------------------------------
R1- J-1501 --- M-1A --- 95 psi min 2500 GPM By U5 EPC
----------------------------------------------------------------------------------------
R1- --- --- M-1A --- By U5 EPC 1 gpm By U5 EPC
----------------------------------------------------------------------------------------
I- --- --- By U5 EPC --- By U5 EPC By U5 EPC By U5 EPC
----------------------------------------------------------------------------------------
I- --- --- By U5 EPC --- By CEOC By U5 EPC ---
----------------------------------------------------------------------------------------
I- --- --- By U5 EPC --- By CEOC By U5 EPC ---
----------------------------------------------------------------------------------------
I- --- --- By U5 EPC --- By CEOC By U5 EPC ---
----------------------------------------------------------------------------------------
O- --- --- By U5 EPC --- See HB/PFD By U5 EPC ---
----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
Tie Intertie Installation
ID Area Shut Down Brief Description of Tie Activities/Responsibilities - U5 EPC
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TP- 130 --- Pipe connection to carry LPS Provide and install piping to
from U5 to IX1 Battery Limits carry LPS from U5 to IX1 Battery
for hookup to IX1 LPS piping system Limits, stub end termination.
-------------------------------------------------------------------------------------------------------
TP- 130 --- Pipe from IX transfer pumps to IX1 Provide and install piping to
Battery Limits carry brine from U5 to IX1 Battery
Limits, flange end termination.
-------------------------------------------------------------------------------------------------------
TP- 130 --- Brine transfer from IX Battery Provide and install piping to
Limits (BL) to U5 Booster Injection carry brine return from IX1 Battery
Pumps Limits to U5 Injection Pumps,
flange end termination.
-------------------------------------------------------------------------------------------------------
TP- 130 --- Pipe for excess condensate to IX1 Provide and install piping to carry
BL when available (tie also condensate from U5 to IX1 Battery
provides LP purge water), 0-200 gpm Limits, stub end termination.
-------------------------------------------------------------------------------------------------------
TP- 130 --- Transfer from IX1 BL to U5 CT Provide and install piping to carry
Blowdown Line to U3, 400-500 gpm RO reject water from IX1 Battery
40 psi min. Limits to U5 Cooling Tower blowdown
system, stub end termination.
-------------------------------------------------------------------------------------------------------
TP- 130 --- Transfer steam from Primary Provide and install piping to carry
Reaction Tank to MRF Heat Exchanger atmospheric pressure steam from U5
Primary Reaction Tank to IX1 Battery
Limits, stub end termination.
-------------------------------------------------------------------------------------------------------
TP- 130 --- Transfer steam condensate from MRF Provide and install piping to carry
Heat Exchanger to Cooling Tower condensate from IX1 Battery Limits
to U5 cooling tower basin, stub end
termination at BL.
-------------------------------------------------------------------------------------------------------
TP- 130 --- Pipe to IX1 BL to draw from 1-step Provide and install piping to carry
treated Canal Water. Supplies U5 Service water from IX1 Battery Limits
wash water and Cooling Tower makeup, to U5 users including Cooling Tower
0-200 gpm @ hose station pressure. makeup, stub end termination.
-------------------------------------------------------------------------------------------------------
TP- 130 --- Pipe to IX1 BL to draw from U5 Provide and install piping to carry
potable water system, 25 gpm potable water from U5 to IX1 Battery
safety shower or toilet Limits, stub end termination.
-------------------------------------------------------------------------------------------------------
TP- 130 --- Feed from U5 Aux Power to IX1 Provide corridors, tray space in PDC;
PDC, main power supply for IX1 ductbank & turnups between U5 PDC to
Piperack to IX1; space on Piperack to
IX1 for conduit and tray to route 13.8
kV feeder cable and control/other
cables. Terminate cable at switchgear
within PDC.
-------------------------------------------------------------------------------------------------------
TP- 130 --- Data Highway from IX1 to U3 Region Pull data highway cable from IX1
1 Control Room terminal through U5 PDC and
subsequently to the Region 1 control
room at U3. Install duct bank from
piperack to U5 PDC. Supply and install
conduit to U3 control room.
-------------------------------------------------------------------------------------------------------
TP- 130 --- Brine return line from sampler Provide and install piping to carry
system in IX1 to U5. Included in brine return from IX1 Battery Limits
alternate bid with silica removal to U5 IX Feed Pumps suction, flange
system. end termination.
-------------------------------------------------------------------------------------------------------
TP- 130 --- Pipe line connection to supply air Provide and install piping to carry
to U5 from IX1 compressed air from IX1 Battery Limits
to U5, stub end termination.
-------------------------------------------------------------------------------------------------------
TP- 130 --- Pipe to IX1 BL to U5 fire loop at Provide and install piping to deliver
2 points for new IX1 loop fire water from U5 fire water loop to
IX1 Battery Limits, stub end
termination at two locations.
-------------------------------------------------------------------------------------------------------
TP- 130 --- Pipe to BL IX1. Transfer storm Provide and install piping to carry
drains to U5 storm drain system. plant drains from IX1 Battery Limits
Quantity to be determined by MRF to U5 storm drain system, stub end
EPC @ 30 psi. termination.
-------------------------------------------------------------------------------------------------------
TP- 300 --- Transfer piping from overland Provide and install piping to transfer
pipeline termination by MRF at dilute HCl from overland pipeline (by
Grade near T-5225. Final connect others) into tankage. Supply and
to tank inc. BL block valve, pipe, install isolation valve at intertie,
FIR, by U5 EPC. and route pipe from intertie point at
grade to dilute acid storage tank
supply/install acid % meter to tank
-------------------------------------------------------------------------------------------------------
TP- 130 --- Transfer video camera signals Pull video cable from IX1 terminal
from IX1 to Region 1 control through U5 PDC and subsequently to the
room at U3 Region 1 control room at U3. Install
duct bank from piperack to U5 PDC.
Supply and install conduit to U3
control room.
-------------------------------------------------------------------------------------------------------
TP- 130 --- Data interface between control Coordinate U5 control systems with
computers: U5 is Rosemount, MRF EPC and CEOC.
IX1 is Foxborough
-------------------------------------------------------------------------------------------------------
TP- 200 --- Drain piping for purge water and Provide and install piping to carry
drainage from Trench at Pumps to drains from the brine injection pumps
MRF sump; nominal 20 gpm purge area to IX1 Battery Limits, stub end
water plus storm runoff termination.
-------------------------------------------------------------------------------------------------------
O- 100 SD Tie output of Electrical Power Substation equipment supply and
from U5 to IID install; non-segregated phase bus
supply and install.
-------------------------------------------------------------------------------------------------------
O- 100 SD Tie output of Electrical Power Design currently on hold.
from U5 to IID. Design currently
on hold.
-------------------------------------------------------------------------------------------------------
R1- 100 SD Feed from U3 to U5 for startup and Provide all cable, raceway,
emergency installation.
-------------------------------------------------------------------------------------------------------
R1- 100 SD Feed to relocated Injection Pump. Provide all cable, raceway,
Contractor to review latest U3 installation. Relocate pump motors.
EW-503 (to be provided by CE,
later).
-------------------------------------------------------------------------------------------------------
R1- 100 SD Feed to relocated Injection Pump. Provide all cable, raceway,
Contractor to review latest U3 installation. Relocate pump motors.
EW-503 (to be provided by CE, later).
-------------------------------------------------------------------------------------------------------
R1- 100 SD Feed to relocated Injection Pump. Provide all cable, raceway,
Contractor to review latest U3 installation. Relocate pump motors.
EW-503 (to be provided by CE, later).
-------------------------------------------------------------------------------------------------------
R1- 100 --- Feed from Unit 3 MCC-306 for P-5425, Provide all cable, raceway,
P-5426. As-built U3 electrical installation.
distribution ratings not avail.
(EW-504 sht 4 of 4)
-------------------------------------------------------------------------------------------------------
R1- 100 --- CR PDC Dual Data Highway between Provide all cable, raceway,
U5 PDC and U3 Control Room. installation.
-------------------------------------------------------------------------------------------------------
R1- 200 --- Relocate existing brine injection Provide all equipment, materials, labor.
pumps P-3211 A/B/C from U3 to U5
-------------------------------------------------------------------------------------------------------
R1- 200 SD Transfer Brine from existing 2 Provide all equipment, materials, labor.
Brine Injection Lines into U5
-------------------------------------------------------------------------------------------------------
R1- 200 --- Transfer from T-5203 to U3 Provide all equipment, materials, labor.
Settling Basin
-------------------------------------------------------------------------------------------------------
R1- 200 SD Transfer brine from relocated main Provide all equipment, materials, labor.
injection pumps P-3211A/B/C to
existing CEOC pipeline
-------------------------------------------------------------------------------------------------------
R1- 200 SD Ditto above, 2 pipelines Provide all equipment, materials, labor.
-------------------------------------------------------------------------------------------------------
R1- 300 SD Transfer LPS to U3 from U5 during U5 Provide all equipment, materials, labor.
extended outages. Pipe from U5 LP
and VLP Separators to U3
-------------------------------------------------------------------------------------------------------
R1- 300 SD Transfer SPS from upstream of U3 Provide all equipment, materials, labor.
Scrubber to U5 Scrubber during U5
extended outages.
-------------------------------------------------------------------------------------------------------
R1- 300 --- Tie drain from V-5224 to existing LP Provide all equipment, materials, labor.
Scrubber via CE installed stub out
conn. w/ valve and cap.
-------------------------------------------------------------------------------------------------------
R1- 400 --- Transfer U5 blowdown to U3 CT Provide all equipment, materials, labor.
blowdown system. Contractor to
ensure U3 system hydraulics adequate.
-------------------------------------------------------------------------------------------------------
R1- 600 --- Tie Vent from New Tanks to existing Provide all equipment, materials, labor.
Tanker Vent Header
-------------------------------------------------------------------------------------------------------
R1- 600 --- Tie Vent from New Tanks to existing Provide all equipment, materials, labor.
Scrubber Vent Header
-------------------------------------------------------------------------------------------------------
R1- 600 --- Tie New Storage Tanks to existing Provide all equipment, materials, labor.
Tanker Unloading
-------------------------------------------------------------------------------------------------------
R1- 600 --- Tie existing Tanks to New Provide all equipment, materials, labor.
-------------------------------------------------------------------------------------------------------
R1- 600 --- Water to Tank Farm for dilution, etc. Provide all equipment, materials, labor.
Tie to Unit 3 source
-------------------------------------------------------------------------------------------------------
R1- 600 SD Tie acid downstream SP Separators. Provide all equipment, materials,
Use existing HCl pipe, fittings, labor; supply/install acid wt % meter.
instruments as practical. Replace as
needed.
-------------------------------------------------------------------------------------------------------
R1- 600 SD Tie acid downstream HP Separators. Provide all equipment, materials, labor.
Use existing HCl pipe as practical.
Contractor Tie Injection Spool
(provided by CE) into existing brine
lines with new pipe flanges.
-------------------------------------------------------------------------------------------------------
I- 600 --- Add new tanker unloading station Provide all equipment, materials, labor.
-------------------------------------------------------------------------------------------------------
R1- 600 --- Gravity Drain from containment pad Provide all equipment, materials, labor
of new T-3425C/D to containment pad for drain.
of existing T-3425A/B
-------------------------------------------------------------------------------------------------------
R1- 600 --- Gravity Drain from containment pad Provide all equipment, materials, labor
of new T-5225 to brine pond for drain.
-------------------------------------------------------------------------------------------------------
R1- 600 --- Tie to existing U3 fire loop at 2 Provide all equipment, materials, labor
points for new U5 loop for tie into existing fire loop
-------------------------------------------------------------------------------------------------------
R1- 600 --- Tie to draw from existing U3 Provide system for transferring limited
potable water system to Contractor- available potable water to U5 for storage
supplied tank for distribution and distribution to safety showers,
toilets.
-------------------------------------------------------------------------------------------------------
I- 600 --- Tie for receiving outside water to Provide for receiving condensate to tank
Condensate tank from haul truck pump.
-------------------------------------------------------------------------------------------------------
I- 600 --- Receive, store and deliver water Provide all equipment, materials, labor
treatment chemicals supplied by to install, initial supply of chemicals.
NALCO for the Cooling Water system.
-------------------------------------------------------------------------------------------------------
I- 600 --- Receive dry lime from truck and Provide all equipment, materials, labor
transfer to slaking system. to receive dry lime from trucks for
pneumatic transfer to slacking.
-------------------------------------------------------------------------------------------------------
I- 600 --- Receive dry flocculant from truck and Provide all equipment, materials, labor
transfer to mixing/aging system. to receive dry flocculant from trucks for
pneumatic transfer to mixing/aging tank.
-------------------------------------------------------------------------------------------------------
O- 600 --- Transfer and loadout of silica from Provide all equipment, materials, labor
the filter presses for removal by to install a truck loadout system for
truck (trucking by others) silica from the filter presses.
-------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------
Intertie Installation Activities/
ID Area Responsibilities- Others
----------------------------------------------------
<S> <C> <C>
TP- 130 All Connection hardware, supplies and
labor for final fit-up - by Minerals
Recovery Facility (MRF) EPC
----------------------------------------------------
TP- 130 All Connection hardware, supplies and
labor for final fit-up - by MRF EPC
----------------------------------------------------
TP- 130 All Connection hardware, supplies and
labor for final fit-up - by MRF EPC
----------------------------------------------------
TP- 130 All Connection hardware, supplies and
labor for final fit-up - by MRF EPC
----------------------------------------------------
TP- 130 All Connection hardware, supplies and
labor for final fit-up - by MRF EPC
----------------------------------------------------
TP- 130 All Connection hardware, supplies and
labor for final fit-up - by MRF EPC
----------------------------------------------------
TP- 130 All Connection hardware, supplies and
labor for final fit-up - by MRF EPC
----------------------------------------------------
TP- 130 All Connection hardware, supplies and
labor for final fit-up - by MRF EPC
----------------------------------------------------
TP- 130 All Connection hardware, supplies and
labor for final fit-up - by MRF EPC
----------------------------------------------------
TP- 130 Supply power cable; supply conduit and
trays outside PDC. Install conduit
and tray, and pull cable from PDC
termination in IX1 to U5 13.8 kV
switchgear. Test feeder cable. All by
MRF EPC.
----------------------------------------------------
TP- 130 Supply cable; supply conduit outside
PDC. Install conduit from termination
in IX1 to U5 duct bank to PDC.
Terminate cable at U3 and test. All by
MRF EPC.
----------------------------------------------------
TP- 130 All Connection hardware, supplies and
labor for final fit-up - by MRF EPC
----------------------------------------------------
TP- 130 All Connection hardware, supplies and
labor for final fit-up - by MRF EPC
----------------------------------------------------
TP- 130 All Connection hardware, supplies and
labor for final fit-up - by MRF EPC
----------------------------------------------------
TP- 130 All Connection hardware, supplies
and labor for final fit-up - by MRF
EPC
----------------------------------------------------
TP- 300 MRF EPC is to route overland acid
pipe to a termination point near the
dilute acid storage tank. All
Connection hardware, supplies and
labor for final fit-up by MRF EPC.
----------------------------------------------------
TP- 130 Supply cable; supply conduit outside
PDC. Install conduit from termination
in IX1 to U5 duct bank to PDC.
Terminate cable at U3 and test. All
by MRF EPC.
----------------------------------------------------
TP- 130 Determine and implement most effective
means of interfacing Foxborough system
with Rosemount system.
----------------------------------------------------
TP- 200 All Connection hardware, supplies and
labor for final fit-up - by MRF EPC
----------------------------------------------------
O- 100 Connection to 92 kV at dead end
structure - by IID
----------------------------------------------------
O- 100 Design currently on hold.
----------------------------------------------------
R1- 100 Access to U3 13.8 kV switchgear - by
CEOC
----------------------------------------------------
R1- 100 Access to pumps for relocation - by
CEOC
----------------------------------------------------
R1- 100 Access to pumps for relocation - by
CEOC
----------------------------------------------------
R1- 100 Access to pumps for relocation - by
CEOC
----------------------------------------------------
R1- 100 Access to MCC-306 - by CEOC
----------------------------------------------------
R1- 100 ---
----------------------------------------------------
R1- 200 Access to pumps for relocation - by
CEOC
----------------------------------------------------
R1- 200 Access - CEOC
----------------------------------------------------
R1- 200 Access - CEOC
----------------------------------------------------
R1- 200 Access - CEOC
----------------------------------------------------
R1- 200 Access - CEOC
----------------------------------------------------
R1- 300 Access - CEOC
----------------------------------------------------
R1- 300 Access - CEOC
----------------------------------------------------
R1- 300 Access - CEOC
----------------------------------------------------
R1- 400 Access - CEOC
----------------------------------------------------
R1- 600 Access - CEOC
----------------------------------------------------
R1- 600 Access - CEOC
----------------------------------------------------
R1- 600 Access - CEOC
----------------------------------------------------
R1- 600 Access - CEOC
----------------------------------------------------
R1- 600 Access - CEOC
----------------------------------------------------
R1- 600 Injection nozzles and mixing spools;
access - by CEOC
----------------------------------------------------
R1- 600 Injection nozzles and mixing spools;
access - by CEOC
----------------------------------------------------
I- 600 ---
----------------------------------------------------
R1- 600 Access - CEOC
----------------------------------------------------
R1- 600 Access - CEOC
----------------------------------------------------
R1- 600 Access - CEOC
----------------------------------------------------
R1- 600 Access - CEOC
----------------------------------------------------
I- 600
---
----------------------------------------------------
I- 600 ---
----------------------------------------------------
I- 600 ---
----------------------------------------------------
I- 600 ---
----------------------------------------------------
O- 600 ---
----------------------------------------------------
ID Codes: I=Infeeds; O=Outputs; R1=Region 1; TP=Ties to MRF
Notes: 1. Items denoted as "SD" under Shut Down may require shutting down Region 1 Facilities to complete Tie
</TABLE>
<PAGE>
EXECUTABLE COPY
EXHIBIT "A"
ATTACHMENT 3 - MAJOR EQUIPMENT LIST
SYSTEM EQUIPMENT EQUIPMENT NAME
NUMBER
--------------------------------------------------------------------------------
MECHANICAL EQUIPMENT LIST
Brine Handling
P-3210A Brine Injection Booster Pumps
(modifications to existing pumps)
P-3210B
P-3210C
V-5212 Low Pressure Steam Separator
V-5213
V-5214 Very Low-Pressure Steam Separator
V-5215
P-5210A Minerals Recovery Feed Pumps
P-5210B
P-5211A Brine Injection Booster Pumps (new)
P-5211B
P-5211C
P-3211A Brine Injection Pumps (relocate existing)
P-3211B
P-3211C
T-5201 Atmospheric Flash Tanks
T-5202
T-5204 AFT Condensate Tank
T-5203 Spent Brine Temporary Service Tank
P-5218A Spent Brine Transfer Pumps
P-5218B
Standard Pres. Steam
V-5224 SP Steam Scrubber
V-5251 SP SteamDemister
Low Pressure Steam
V-5226 LP Steam Scrubber
Very Low Pres. Steam
V-5228 VLP Steam-Scrubber
V-5229
Turbine Generator
STG-5100 Turbine
Generator
Main Oil Pump
Aux Oil Pump
Emergency Oil Pump
EO-5100A Oil Coolers
EO-5100B
Oil Conditioner
Eqpt List Page 1
<PAGE>
EXECUTABLE COPY
SYSTEM EQUIPMENT EQUIPMENT NAME
NUMBER
--------------------------------------------------------------------------------
GAE-5100- Generator Air Coolers
A/B
Condensate
P-5465A Condensate Pumps
P-5465B
E-5101 Condenser
Purge Water
P-5301A SP-Purge Water Pumps
P-5301B
P-5304A LP-Purge Water Pumps
P-5304B
T-5308 Purge Water Storage Tank
Circulating Water
P-5001A Circulating Water Pumps
P-5001B
CT-5000 Cooling Tower
Auxiliary Cooling Water
P-5002A Auxiliary Cooling Water Pumps
P-5002B
Gas Removal
J-5401A First Stage Steam Jet Ejectors
J-5401B
J-5401C
E-5401 Intercondenser
J-5402A Second Stage Steam Jet Ejectors
J-5402B
J-5402C
E-5402 Aftercondenser
HCL
P-3425A 32% HCL Transfer Pumps
P-3425B
P-5425A HCL Standard Pressure Pumps
P-5425B
P-5426A HCL High Pressure Pumps
P-5426B
T-3425C 32% HCL Storage Tanks
T-3425D
T-5225 4% HCL Storage Tank
NORMS
P-5528A Supply Pumps
P-5528B
P-5527A Feed Pumps
P-5527B
Eqpt List Page 2
<PAGE>
EXECUTABLE COPY
SYSTEM EQUIPMENT EQUIPMENT NAME
NUMBER
--------------------------------------------------------------------------------
P-5530 A Metering Pumps
P-5530B
T-5527 Storage Tank
T-5530 Surge Tank
CT Water Treatment
Potable Water
T-52XX Potable Water Storage Tank
P-52XXA Potable Water Pumps
P-52XXB
Compressed Air
T-52XX Instrument Air Receiver
T-52XX Service Air Receiver
Cranes and Hoists
Turbine Gantry Crane
Stationary Screen Hoist
Fire Protection
Storm Water
P-5366A Unit 5 Area Sump Pumps
P-5366B
Silica Control
Primary Reactor
Secondary Reactor
Primary Clarifier
Secondary Clarifier
Lime Feed Pump
Clarifier Underflow Pump
Clarifier Underflow Pump
Filter Feed Pump
Thickener Underflow Pump
Flocculant Injection Pump
1st Reactor Agitator
2nd Reactor Agitator
Primary Clarifier Turbine
Primary Clarifier Rake
Secondary Clarifier Turbine
Secondary Clarifier Rake
Lime Stroage Tank Agitator
Filter Press
ELECTRICAL EQUIPMENT LIST
PDC consisting of:
Eqpt List Page 3
<PAGE>
EXECUTABLE COPY
SYSTEM EQUIPMENT EQUIPMENT NAME
NUMBER
--------------------------------------------------------------------------------
13.8 kV swgr w/6 cbs
4 kV swgr w/3 cbs
4kV Motor Control Center - 01
480 V Motor Control Center - 01
480 V Motor Control Center - 02
480 V Motor Control Center - 03
125V, 800 AH DC Battery System w/200A
Charger and DC Switchboard
Redundant 40 kVA, 120V AC UPS System
Miscellaneous Distribution Transformers
and Panels
Relay Protection
Metering
Assembly of DCS I/O and Logic Cabinets
Transformer GSU-01-41/54/67 MVA,
13.8-92 kV, OA/FA/FA
Transformer XF-001-7.5/8.4 MVA,
13.8-4.16 kV, OA/FA
Transformer XF-002 & XF-003-1500/2000 kVA,
13.8-0.48 kV, OA/FA
Transformer XF-004-750/1000 kVA,
4.16 kV-0.48kV. OA/FA
3000A, 600V, Non Segregated Phase Bus
92 kV Switchyard Consisting of the Following:
92 kV, 1200A SF6 Circuit Breaker/
Disconnect Switches
Miscellaneous Lightning Arresters, Current
Transformers, and Voltage Transformers w/
Relaying
Relay Protection
Metering
1200kW, 4160 V Diesel Generator (existing)
Eqpt List Page 4
<PAGE>
EXHIBIT "A"
ATTACHEMENT 4 - PREFERRED SUPPLIERS
INSTRUMENTATION
Pressure gauges:
Ashcroft. Use 3D gauges on vibrating equipment
Actuators:
EL-O-Matic Square Head, Automax, Morin, Hi-torque, Bettis For Camflex
II valves 6" and under use the standard actuator. For Camflex valves
(6" and over) in all brine service and for high pressure drop
applications use the double cylinder 70-70 series actuator. For
conventional applications use the standard actuator.
Pressure regulators--Refer to Control Valves
Sight glasses:
Jerguson.
Solenoid valves:
Burkert.
Magnetic flow transmitters:
Krohne -- for brine service
Krohne, Foxboro -- for non brine service
Hydraulic actuators:
REXA.
Electric actuators:
Limitorque
Transmitters:
I / P -Rosemount
Pressure and Temperature--Rosemount 3051 series
Suspended Solids--Wedgewood
Annubars:
Dieterich Standard, ONLY AS SUPPLIED through CFM San Diego for special
Salton Sea trim requirements
Manifolds for transmitters:
Anderson Greenwood with block valves by TBV.
Tubing fittings and accessories:
Swagelok.
Pneumatic positioners:
PMV
DCS:
Rosemount, Foxboro,. Rosemount only for Units 1-5, and Foxboro for
the Mineral Plants
PLC:
Modicon.
Vibration monitors:
Bently Nevada
Temperature monitors:
Chessel Multiplex., or DCS supplied modules (preferred)
Page 1
<PAGE>
ELECTRICAL
15 kV switchgear:
GE, Square D, Siemens, Powell, Cutler Hammer/Westinghouse and ABB
(vacuum breakers).
4160 volt switchgear:
GE, Square D, Siemens, Powell, Cutler Hammer/Westinghouse and ABB
(vacuum contactors).
480 volt switchgear:
GE, Square D, Siemens, Cutler Hammer/Westinghouse and ABB (air
breakers), Powell.
MCC 480 volt:
Cutler Hammer/Westinghouse, GE, Square D, Allen Bradley, Siemens, and
ABB (advantage starters) .
Motors:
Siemens, ABB, Magne Tek, Louis Allis, US Electric Motors, and
Westinghouse (cast iron, TEFC, 1800 rpm or less).
Distribution panels 480, 280 / 120 volt
Cuttler Hammer, GE, Siemens, Square D, and Challenger.
92 kV Substation:
ABB, Mitsubishi, Siemens, GE, MS Engineering, and Fleming Electric,
Waukesha Electric, Cutler Hammer/Westinghouse.
13.8 kV / 4160 transformers:
Westinghouse, GE, Square D, Siemens, North American, Waukesha Electric,
Pennsylvania Transformers, Magnetek, GEC Alsthom, and ABB.
13.8 kV / 480 volt transformers:
Westinghouse, GE, Square D, Siemens, North American, Waukesha Electric,
Pennsylvania Transformers, and ABB..
480 / 280 / 110 transformers:
Westinghouse, GE, Square D, Siemens, North American, Waukesha Electric,
Pennsylvania Transformers, and ABB.
Protection relays:
Basler, Beckwith Electric, ABB, SEL, or General Electric.
Outdoor lighting:
Appleton ( high pressure sodium ).
IJB's, JB:
Hoffman.
UPS:
Solid State Controls Inc., Cyberex, Fuji
Custom Power:
Cyberex
Battery charger:
C&D, GNB.
Battery stations:
C&D (acid calcium), GNB.
Auxiliary relay timers:
Agastat (low voltage application).
Auxiliary relays:
Allen Bradley.
Selector switches, push button:
Allen Bradley.
Switches (Temp, pressure, flow):
Page 2
<PAGE>
SOR
Conduit bodies, fittings:
Appleton.
Cable trays:
B Line.
Bus Bars:
Ulrich, KME America.
Buss duct 15 kV:
Square D, EPP, Technibus, Calvert, or Unibus.
Alarm panels:
Panalarm., Ronan
Digital fault recorders:
General Electric.
Digital event recorders:
BETA.
MECHANICAL
Condenser:
Alstom Energy Systems (Ecolaire), Balcke-Durr, Graham Manufacturing
Heat Exchangers (shell and tube)
Ametek, Basco, Ketema, Perfey, Graham, Westland
Engineering-714-768-8699
Heat Exchangers (plate and frame)
Alfa-Laval, Mueller, Tranter, Vicarb, Graham, Westland
Engineeting-714-768-8699
Cooling Tower:
Hamon, Balcke-Durr, GEA-TDT, Marley
Compressors:
Gardner Denver, Ingersoll Rand, Sullair, Atlas Copco
Pumps:
Goulds, Flowserve Byron Jackson, United, Alstholm, IDP, ITT, Sulzer,
David Brown/Union, Weir, Duriron, Vanton.
Mechanical Seals:
Borg Warner, John Crane, Chesterton, Durmetallic.
Couplings:
Rexnord, Flexibox, Woods
Pumps, Metering:
Flowserve, Lewa, Milton Roy, Moyno, Aquacare, Pulsafeeder, LMI
Filter press:
Pneumapress Filter Corp.
Pressure Leaf Filters
Ametek Process Equipment, Enviro-Clear, Flowserve, Durco
Filter, Carbon Column
Calgon, Culligan, Osmonics, Spin-Tek, Eimco
Ion Exchange Header/Laterals
Glegg, US Filter, Ershigs, EIMCO, Robert Mitchell
Mixers, Solvent Extraction
Lightning, Outokumpu
Fans and Gear Drives:
Marley, Amarillo, Hudson Fans
Page 3
<PAGE>
Safety Valves:
Anderson-Greenwood PSV's
Expansion Joints:--Metallic
Senior Flexionics, Piping Technology, or Pathway Bellows, Wood
Pressure Control
Expansion Joints: Non-Metallic
Garloc EZ-Flow
Gantry crane:
Zenar Corp., American Crane, Kone-Landel, Harnischfeger or Philadelphia
Tramrail.
Crane (bridge):
ACCO, Wright, Dwight Foot, Harnischfegher, P&H, Kone, Zenar,
Provincial Cranes
Block Valves:
Cameron, Wood Pressure Controls, APP Vetco Gray. These are the API-6D
through conduit gate valves with the Salton Sea Trim package
specification referred to as FT-2 and FT-6.
Control valves:
Manoneilan/Camflex, Vanessa Valves, Fisher Controls or Valtek.
Ball valves:
Watt's, GWC, Cameron, Newco, Velan, Apollo, Kitz, KTM, PBV
VALVE TYPE VENDORS
C-276 ball valve with PEEK seats, Valve Automation and Control
flanged
All alloy stem and bonnet bolting
API 6-D gate valve FT-6 trim, Cameron Corp.
(Alloy 625 body, face, seat-pocket Wood Group Pressure Control,
overlay, 316L gate, seat w/ HF-6, APP Vetco-Gray
Alloy 625 stem) 316L SS Ball GWC, Watt's, Cameron,
Valves, PEEK seats, two piece Velan Newco, Velan, Apollo,
Kitz, KTM, PBV
API 6-D gate valve FT-2A trim Cameron Corp.
(316L gate, seats, HF-6 stellite Wood Group Pressure Control
overlay, 17-4 stem) APP Vetco-Gray
316L SS High Perf. Butterfly,
eccentric closure, HF-6 on disk Vanessa, Keystone, Atwood and
Alloy 625 on body seat, metal seat, Morro, Bray, Cameron, WKM
17-4 pH stem
316L SS Wedge Gate Valve Velan, other high end
manufacturers
316L SS Butterfly Valve Vanessa, Keystone, Bray,
Grinnell, Valtec
Alloy ball valve: Hast B w/ TA
ball, stem, Peek Seat--Hot service Nobel
Alloy
Teflon Lined plug valve Durco-Valve Automation and
Controls
Camflex II with full upgrade Masoneilan--CFM San Diego only
approved source: 760-434-8829
Camflex II with slurry upgrade Masoneilan--CFM San Diego only
approved source
Camflex II with 316L body &
Stellite plug Masoneilan--CFM San Diego only
Page 4
<PAGE>
approved source
Teflon Lined plug valve-V-notch Durco-Valve Automation and
316L SS Globe Valve Controls
Velan, other high end
manufacturers
Rubber lined butterfly valves: Media valve
Teflon, lined butterfly valve: Tufline, Amri valve, Durco,
(All lined butterfly valves must Grinnell, Bray Valve, Ultraflow,
meet standard dimensional face Garlock
to face dimensions!!!!
(Must be verified on service by
service basis)
FRP Ball Nil-Cor
Valve, FRP
Butterfly
Valve
Alloy pipe, fittings, custom fabrication:
Northwest Copperworks, Portland Oregon
Alaskan Copper, Seattle WA
Madden Fabrication, Portland OR
Vortex Clusters:
Northwest Copperworks, Portland Oregon
Industrial Alloy Fabrication, Forest Grove Oregon
Madden Fabrication, Portland Oregon
Alaskan Copper, Seattle WA
Freeport Welding, Freeport Texas
Alloy Spool Welding:
Northwest Copperworks, Portland Oregon
Industrial Alloy Fabrication, Forest Grove Oregon
Madden Fabrication, Portland Oregon
Alaskan Copper, Seattle WA
Freeport Welding, Freeport Texas
J.S. McKinney, Freeport Texas
Savage Machine Co. 800-777-7764
Alloy Pipe and Fittings:
Northwest Copperworks, Portland Oregon
Alaskan Copper, Seattle WA
Swepco Tube Sales
Custom Alloy -Ez Flow
Mach Pipe, Houston Texas
Madden Fabrication
Flowline-Energy Supply Division 619-697-3533
Kelly Pipe
Van Leeuwen
Savage Machine Co. 800-777-7764
Corrosion Materails-
800-535-8032
Concrete Lined Pipe:
ICO Permian, West Coast Pipe Linings
Piping (FRP):
Page 5
<PAGE>
Bondstrand, Ershigs, Fibercast, Reinforced Plastic Systems, Smith,
Prolite
FRP Tanks, Pipe and Fittings:
Ershigs, Fibercast, Beetle Plastics, Tankinetics, Tfi Internations,
Palmer Industrial Products, Prolite, CC&E
Field Fabricated Tanks:
PSP Industries, Eaton metals, Agitators, Vertical (top-mounted)
Chemineer, Ekato, Lightning, Philadelphia Mixer
Alloy Clad Vessels:
Northwest Copperworks, Industrial Alloy Fabricators, Allied Industries-
Houston Tx, ChemFab-Freeport Tx
Anodes:
George Royston, RSR Corporation, Seafab, Denver Minerals, Dremco,
Cromer
Casting Machine:
Allen Warwick Engineering, Louis Australia, Shepard
Cathodes:
Dremco, HMD, Denver Minerals
Cell Furniture (capblocks, capboards):
CTI, Southwestern, Dremco, Denver Minerals
Cells, Electrowinning:
Ancor, CTI, Delta Corrosion, HBS Equipment
Reverse Osmosis Units:
Glegg, Osmonics, HW Process Technologies, Spintek, Aquamatch
Settlers, FRP:
Ershigs, Koch, Mesa Fiberglass, Nemato Composite, QPEC
Stripping Machine:
Asturiana, Union Miniere, Wenmec, Outokumpu
Page 6
<PAGE>
EXHIBIT "A"
ATTACHMENT 5 - GUARANTEE POINT CONDITIONS
Salton Sea Unit 5 will receive Standard Pressure(SP) steam and geothermal brine
from Owner's Salton Sea Unit 3. The Guarantee Point Conditions for SP steam
delivered to the Unit 5 intertie are as listed in Table 1:
TABLE 1
SP STEAM TO UNIT 5
Flow, lb/hr 140,000
Pressure, psia 132.8
Temperature, (Degree)F 364.3
Enthalpy, BTU/lb 1202.5
The Guarantee Point Conditions for brine delivered to the Unit 5 intertie are
provided in Table 2:
TABLE 1
BRINE TO UNIT 5
Flow, lb/hr 11,613,700
Pressure, psia 132.8
Temperature, (Degree)F 364.3
Enthalpy, BTU/lb 250.1
Total Dissolved Solids, % 26.2
The Project is intended to generate Low Pressure (LP) and Very Low Pressure
(VLP) steam from the geothermal brine. The Guarantee Point Conditions for LP and
VLP steam that will be produced from the brine is predicted by the CalEnergy
Brine PVT Package, Version 2. With the brine conditions specified in Table 2,
the calculated flow and conditions of LP and VLP steam that can be produced from
the brine are listed in Table 3:
TABLE 3
LP AND VLP STEAM PRODUCED FROM UNIT 5 SEPARATORS
LP Steam VLP Steam
-------- ---------
Flow, lb/hr 577,922 510,103
Pressure, psia 57.3 21.3
Temperature 303.7 244.8
Enthalpy, BTU/lb 1185.2 1163.1
The atmospheric Guarantee Point Condition will be a 75 (Degree)F wet bulb
temperature.
Based upon the Contractor's design, the energy consumed by the Project in
producing the Net Electric Energy Production in accordance with Section 1.85 of
the Contract includes the listed auxiliary loads that are part of the Work and
required to operate the project in Table 4:
Page 1
<PAGE>
TABLE 4
COMPONENTS AND SYSTEMS COMPRISING AUXILIARY POWER
SP Purge Water Pumps Lime Feed Pump
LP purge Water Pumps Clarifier Underflow Pumps
Circulating Water Pumps Filter Feed Pump
Auxiliary Cooling Water Pumps Thickener Underflow Pump
Cooling Tower Fans Flocculant Injection Pump
Condensate Pumps 1st Reactor Agitator
NORMS Metering Pumps 2nd Reactor Agitator
Turbine AC Oil Pump Primary Clarifier Turbine
Turbine Lube Oil Conditioner Primary Clarifier Rake
Turbine Oil Vapor Extractor Secondary Clarifier Turbine
Transformer Losses Secondary Clarifier Rake
Plant Lighting Lime Storage Tank Agitator
Minerals Recovery Brine Feed Pumps Filter Press
Page 2
<PAGE>
EXHIBIT "A"
ATTACHMENT 6 -- LISTING OF REFERENCE TECHNICAL DOCUMENTS
The documents listed below are reference documents provided by the Owner.
4.0-1 Geotechnical Report dated April 1998
8.1-3 Owner's Equipment Numbering System
8.6-1 Valve Selection Guidelines
8.7-1 Piping Material Specs
8.7-2 Technical Requirements for Inconel Alloy 625 and Hastelloy Pipe and
Fittings
8.7-3 Steam Pipe Shoe Drawing
8.7-4 Steam Wash Nozzle Design Drawing
8.7-5 Arrangement Drawing of the Region I Brine Pumps
8.7-6 V-4210 Level Control Valve Piping Arrangement
8.7-7 Brine Line Meter Run Spool Drawing
8.7-8 Pipe Support Standards
10.2-1 Technical Requirements for Geothermal Steam Turbine generator
10.4-1 Technical Requirements for Scrubber Design and Fabrication
10.4-2 Technical Requirements for Demister Design and Fabrication
10.6-1 Technical Requirements for Gas Removal Equipment
10.12-1 Technical Requirements for Steam Separator Design and Fabrication
10.12-2 Unit 4 Steam Separator Drawings
10.12-3 Existing Brine Injection and Brine Injection Booster Pump Specification
and drawings
10.12-4 Unit 3 Atmospheric Flash Tank Drawings
10.12-5 Technical Requirements for Brine Piping
10.12-6 Separator Layout and Brine Piping Drawings
10.21-1 NORMS solution MSDS
10.20-1 Unit 5 Tower Chemical Addition Requirements
10.22-1 Chemical injection device drawings
11.4-1 Specification for Power Transformers
11.7-1 Specification for Power Distribution Centers
<PAGE>
EXHIBIT "A"
ATTACHMENT 7 - VALUE ENGINEERING SUMMARY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ITEM CLASS AREA DESCRIPTION STATUS
--------- ------- ------------------- ---------------------------------------------- --------
24 A Brine System Eliminate Heat Exchangers E5216 Accept
--------- ------- ------------------- ---------------------------------------------- --------
37 A Criteria Review Wet Bulb Design Temperature Decline
--------- ------- ------------------- ---------------------------------------------- --------
39 A Electrical Eliminate New IID T-Line Hold
--------- ------- ------------------- ---------------------------------------------- --------
56 A Brine System 2 x 100% Independent Trains w/2 x 100% Pumps Accept
--------- ------- ------------------- ---------------------------------------------- --------
62 A Site Layout Review Site Layout Accept
--------- ------- ------------------- ---------------------------------------------- --------
63 A Electrical Revise 92 kV Transmission kV Decline
--------- ------- ------------------- ---------------------------------------------- --------
64 A Brine System Revise Brine System Design Accept
--------- ------- ------------------- ---------------------------------------------- --------
66 A Commercial Reduce LDs from 20% to 15% Decline
--------- ------- ------------------- ---------------------------------------------- --------
7 B Site Layout Decrease Distance Between Turbine & Cooling Accept
Tower
--------- ------- ------------------- ---------------------------------------------- --------
10 B Site Layout Use Scrap Pipe for Piles Accept
--------- ------- ------------------- ---------------------------------------------- --------
13 B Site Layout Blend CE Onsite Fills with Offsite Fills Decline
--------- ------- ------------------- ---------------------------------------------- --------
15 B Site Layout Optimize Brine Pipe Layout at Clarifiers Accept
--------- ------- ------------------- ---------------------------------------------- --------
16 B Site Layout Eliminate Gantry Crane Decline
--------- ------- ------------------- ---------------------------------------------- --------
19 B Site Layout Move Brine Dump System Tanks Accept
--------- ------- ------------------- ---------------------------------------------- --------
21 B Process Materials Eliminate LP Steam Backfeeds Decline
--------- ------- ------------------- ---------------------------------------------- --------
23 B Process Materials Compare FRP CW Pipe Materials Decline
--------- ------- ------------------- ---------------------------------------------- --------
26 B CW System Evaluate Need for Condenser Isolation Accept
--------- ------- ------------------- ---------------------------------------------- --------
28 B CW System Don't Bury CW Lines Decline
--------- ------- ------------------- ---------------------------------------------- --------
35 B Criteria Use Thinner Cladding on Separators Accept
--------- ------- ------------------- ---------------------------------------------- --------
36 B Criteria Use Welded vs. Seamless Pipe Accept
--------- ------- ------------------- ---------------------------------------------- --------
40 B Electrical U/G vs. A/G Line to V/H Decline
--------- ------- ------------------- ---------------------------------------------- --------
43 B Electrical Impacts on Elec Dist Sys due to Brine Mods Accept
--------- ------- ------------------- ---------------------------------------------- --------
44 B Silica Control Reduce Dia. Of Primary Clarifier Decline
--------- ------- ------------------- ---------------------------------------------- --------
46 B Silica Control Derakane (FRP) Feed Pipes, Reactors & Accept
Clarifiers
--------- ------- ------------------- ---------------------------------------------- --------
48 B Silica Control C-276 to 2205 Downstream of First Reactor Decline
--------- ------- ------------------- ---------------------------------------------- --------
49 B Silica Control Lease Lime System Decline
--------- ------- ------------------- ---------------------------------------------- --------
51 B Silica Control Different Filter Press Supplier Decline
--------- ------- ------------------- ---------------------------------------------- --------
52 B Silica Control Optimize Based on Latest Pilot Plant Data Accept
--------- ------- ------------------- ---------------------------------------------- --------
53 B Silica Control Eliminate Valves Between Silica Control Accept
Vessels
--------- ------- ------------------- ---------------------------------------------- --------
57 B Brine System Use 2507 Piping in lieu of Inconel Decline
--------- ------- ------------------- ---------------------------------------------- --------
58 B CW System Use Coated Ductile Iron Circulating Water Accept
Pumps
--------- ------- ------------------- ---------------------------------------------- --------
60 B Criteria Evaluate Condenser Cleanliness Factor Decline
--------- ------- ------------------- ---------------------------------------------- --------
65 B Commercial Reduce Warranty Period Decline
--------- ------- ------------------- ---------------------------------------------- --------
67 B Silica Control Redesign 1st Stage Reactor Accept
--------- ------- ------------------- ---------------------------------------------- --------
1 C Site Layout Eliminate Berm Decline
--------- ------- ------------------- ---------------------------------------------- --------
2 C Site Layout Reduce Berm Decline
--------- ------- ------------------- ---------------------------------------------- --------
3 C Site Layout Reuse Existing Brine Line Decline
--------- ------- ------------------- ---------------------------------------------- --------
4 C Criteria Substitute Cement Lined Pipe for Inconel Accept
--------- ------- ------------------- ---------------------------------------------- --------
5 C Site Layout Delete Paving - Use Gravel Decline
--------- ------- ------------------- ---------------------------------------------- --------
6 C Site Layout Reduce Road Length Decline
--------- ------- ------------------- ---------------------------------------------- --------
</TABLE>
<PAGE>
EXHIBIT "A"
ATTACHMENT 7 - VALUE ENGINEERING SUMMARY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ITEM CLASS AREA DESCRIPTION STATUS
--------- ------- ------------------- ---------------------------------------------- --------
8 C Site Layout Rotate Primary & Secondary Clarifiers Accept
--------- ------- ------------------- ---------------------------------------------- --------
9 C Site Layout Move Region 1 IX to the North Accept
--------- ------- ------------------- ---------------------------------------------- --------
11 C Site Layout Reduce Fenced Area Decline
--------- ------- ------------------- ---------------------------------------------- --------
12 C Site Layout Reorient Separators Accept
--------- ------- ------------------- ---------------------------------------------- --------
14 C Site Layout Reduce Site Area Decline
--------- ------- ------------------- ---------------------------------------------- --------
17 C Site Layout Relocate Substation Hold
--------- ------- ------------------- ---------------------------------------------- --------
18 C Site Layout Optimize Lime Handling Location Accept
--------- ------- ------------------- ---------------------------------------------- --------
20 C Site Layout Move Road Access to Eliminate Pipe Ducts Decline
--------- ------- ------------------- ---------------------------------------------- --------
22 C Process Materials Review Cement Lined Pipe Spec (Wall Accept
Thickness)
--------- ------- ------------------- ---------------------------------------------- --------
25 C CW System Simplify Gas Discharge Accept
--------- ------- ------------------- ---------------------------------------------- --------
27 C CW System Reduce Size of CW Lines Accept
--------- ------- ------------------- ---------------------------------------------- --------
29 C CW System Evaluate Trickle Block CT Fill Accept
--------- ------- ------------------- ---------------------------------------------- --------
30 C Steam System Reduce No. of Governor Valves (6 to 4) Decline
--------- ------- ------------------- ---------------------------------------------- --------
32 C Steam System Optimize/Review GRS Accept
--------- ------- ------------------- ---------------------------------------------- --------
34 C Criteria Review Seismic Design Criteria Accept
--------- ------- ------------------- ---------------------------------------------- --------
38 C Condenser Eval Condenser Options re: Const/Install $ Accept
--------- ------- ------------------- ---------------------------------------------- --------
47 C Silica Control Reduce Insulation on Primary Clarifier Decline
--------- ------- ------------------- ---------------------------------------------- --------
50 C Silica Control Pump Material Specs Accept
--------- ------- ------------------- ---------------------------------------------- --------
55 C Silica Control Flocculant Transport System vs. Dumping Bags Accept
--------- ------- ------------------- ---------------------------------------------- --------
59 C SW System Use Coated Ductile Iron Service Water Pumps Accept
--------- ------- ------------------- ---------------------------------------------- --------
61 C Compressed Air Combined Mineral/Power Plant Air Compressors Accept
--------- ------- ------------------- ---------------------------------------------- --------
31 F Steam System Reduce VLP Pressure Decline
--------- ------- ------------------- ---------------------------------------------- --------
33 F Steam System Optimize Sizing/Quality Reqmts on VLP System Decline
--------- ------- ------------------- ---------------------------------------------- --------
41 F Electrical 13.8 kV Line to V/H Decline
--------- ------- ------------------- ---------------------------------------------- --------
42 F Electrical Eliminate Used D/G - Tie into Unit 3 D/G Decline
--------- ------- ------------------- ---------------------------------------------- --------
45 F Silica Control Eliminate Secondary Clarifier Decline
--------- ------- ------------------- ---------------------------------------------- --------
54 F Silica Control LCV Requirements in Vessels Decline
--------- ------- ------------------- ---------------------------------------------- --------
</TABLE>
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EXHIBIT "B"
DRAWING LIST
DRAWING NO. TITLE
GENERAL ARRANGEMENTS
08051 - EM - 1A Site Layout
MATERIAL & ENERGY BALANCE
08051-J-0110-A (2 Sheets) Acid and NORMS
P&ID'S
08051 - EJ - 0101 Fundamental
08051 - EJ - 0108 Guarantee Heat Balance
08051 - EJ - 0109 Materials Diagram
08051 - EJ - 0201 Circulating Water System
08051 - EJ - 0301 SP Steam System
08051 - EJ - 0302 LP Steam System
08051 - EJ - 0303 VLP Steam System
08051 - EJ - 0401 Condensate System
08051 - EJ - 0402 Purge Water System
08051 - EJ - 0501 Gas Removal System
08051 - EJ - 0601 Brine System Low Pressure Separators
08051 - EJ - 0602 Brine System Very Low Pressure Separators
08051 - EJ - 0603 Brine System Atmospheric Flash Tanks
08051 - EJ - 0604 Brine System IX Feedpumps
08051 - EJ - 0605 Brine Service Tank
08051 - EJ - 0606 Brine System Brine Injection Booster Pumps
08051 - EJ - 0607 Brine System Brine Injection Pumps
08051 - EJ - 0901 Auxiliary Cooling Water System
08051 - EJ -1201 Compressed Air System
08051 - EJ -1501 Fire Protection system
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DRAWING NO. TITLE
08051 - EJ -1301 32% Acid Storage System
08051 - EJ -1302 Dilute Acid Storage System
08051 - EJ -1303 Acid Distribution System
08051 - EJ -1304 HP Separator Acid Injection System
08051 - EJ -1305 SP Separator Acid Injection System
08051 - EJ -1306 NORMS Unloing System
08051 - EJ -1307 NORMS Storage and Distribution System
08051 - EJ -1501 Fire Protection system
ONE - LINE DIAGRAMS
08051 - EE - 1A High Voltage and Medium Voltage One - Line Diagram
08051 - EE - 2A 480 V One - Line Diagram - MCC - 01 and Unit 3 ESE
08051 - EE - 2B 480 V One - Line Diagram - MCC - 02
08051 - EE - 2C 480 V One - Line Diagram - MCC - 03
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EXHIBIT "C"
OWNER ACQUIRED PERMITS
1. Conditional Use Permit - Unit 5 (and modification of existing Region 1
CUP), including CEQA determination, obtained from Imperial County Planning
Commission.
2. Authority to Construct - Unit 5 (and modification of existing Region 1
ATC), obtained from Imperial County Air Pollution Control District.
3. Notice of Intent to Comply with General Permit, filed with the State Water
Resources Control Board.
4. Under 50 MW Determination - obtained from California Energy Commission.
5. Encroachment permits, to be obtained from Imperial County Public Works
Department and the Imperial Irrigation District.
6. Self-Certification and Supplemental Self-Certification of Qualifying
Facility Status filed with the Federal Energy Regulatory Commission.
7. Air Permit to Operate - to be obtained from Imperial County Air Pollution
Control District after commencement of operation.
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EXHIBIT "D"
PROGRESS PAYMENT SCHEDULE
(Part 1)
Attachment A hereto sets forth the Progress Payment Schedule.
The "Description" column of the Progress Payment Schedule sets forth
the separate milestones for which progress payments are payable and the "Amount"
columns sets forth the amount payable upon completion of each such milestone.
The "Completion Date" and "Remarks" columns are solely for the
convenience of the parties and do not have contractual significance.
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EXHIBIT "D"
PROGRESS PAYMENT SCHEDULE
(Part 2)
EXPENDITURE SCHEDULE
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
Payment Payment Percent
Numbers Due Date
-------------------------------------------------------------------------------------------------
Months from Incremental Cumulative
NTP
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------
No. 1 Sep-980 10.0% 10.0%
-------------------------------------------------------------------------------------------------
No. 2 Oct-981 3.1% 13.1%
-------------------------------------------------------------------------------------------------
No. 3 Nov-982 1.9% 15.0%
-------------------------------------------------------------------------------------------------
No. 4 Dec-983 7.1% 22.1%
-------------------------------------------------------------------------------------------------
No. 5 Jan-994 6.4% 28.5%
-------------------------------------------------------------------------------------------------
No. 6 Feb-995 7.2% 35.7%
-------------------------------------------------------------------------------------------------
No. 7 Mar-996 12.1% 47.8%
-------------------------------------------------------------------------------------------------
No. 8 Apr-997 3.6% 51.4%
-------------------------------------------------------------------------------------------------
No. 9 May-998 3.2% 54.6%
-------------------------------------------------------------------------------------------------
No. 10 Jun-999 6.7% 61.3%
-------------------------------------------------------------------------------------------------
No. 11 Jul-9910 7.0% 68.3%
-------------------------------------------------------------------------------------------------
No. 12 Aug-9911 6.7% 75.0%
-------------------------------------------------------------------------------------------------
No. 13 Sep-9912 6.6% 81.6%
-------------------------------------------------------------------------------------------------
No. 14 Oct-9913 5.9% 87.5%
-------------------------------------------------------------------------------------------------
No. 15 Nov-9914 5.2% 92.7%
-------------------------------------------------------------------------------------------------
No. 16 Dec-9915 3.7% 96.4%
-------------------------------------------------------------------------------------------------
No. 17 Jan-0016 2.5% 98.9%
-------------------------------------------------------------------------------------------------
No. 18 Feb-0017 0.4% 99.3%
-------------------------------------------------------------------------------------------------
No. 19 Mar-0018 0.3% 99.6%
-------------------------------------------------------------------------------------------------
No. 20 Apr-0019 0.2% 99.8%
-------------------------------------------------------------------------------------------------
No. 21 May-0020 0.2% 100%
-------------------------------------------------------------------------------------------------
</TABLE>
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EXHIBIT "E"
CHANGE IN WORK FORM
Change Order No.: _____________ Date Issued: _____________________________
Reference: ____________________________________________________________________
Description: __________________________________________________________________
_______________________________________________________________________________
Cost of Change: _______________________________________________________________
_______________________________________________________________________________
Impact on Milestone Schedule and Guaranteed Substantial Completion
Date: ____________________
_______________________________________________________________________________
Impact on Critical Path Schedule: _____________________________________________
_______________________________________________________________________________
Impact on Progress Payment Schedule: _________________________________________
_______________________________________________________________________________
Other Impacts on Contract: ___________________________________________________
_______________________________________________________________________________
Revised Contract Amount (Including Change): $________________
Owner Approval: Contractor Approval:
By: _____________________ By: __________________
Date: ____________________ Date: ________________
Distribution:
Owner
Consulting Engineer
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EXHIBIT "F"
FORM OF CONTRACTOR'S INVOICE
[Date]
Salton Sea Power L.L.C.
302 South 36th Street
Suite 400-K
Omaha, NE 68131
Attention: Vice President, Construction
[Agent for Financing Entities]
Gentlemen:
Stone & Webster Engineering Corporation, a Massachusetts corporation
("CONTRACTOR"), submits this application for payment ("CERTIFICATE") pursuant to
ARTICLE 7 of the Salton Sea Unit 5 Engineering, Procurement, and Construction
Contract (the "CONTRACT") between Contractor and Salton Sea Power L.L.C., a
Delaware limited liability company ("OWNER") dated as of August ____, 1998
("CONTRACT").
Unless otherwise defined herein, all capitalized terms used in this Certificate
shall have the meanings specified for such terms in the Contract.
1. The undersigned is a duly authorized representative of Contractor, authorized
to execute and deliver this Certificate on behalf of Contractor.
2. The following is a summary of the current status of the Contract account:
Original Contract Price: $_______
Contract Price to Date: $_______
Amount of Payments that Contractor
Has Received to Date: $_______
3. The information in all material documents and supporting papers prepared or
signed by Contractor or any of its officers or employees and submitted to Owner
and the Financing Entities' Consulting Engineers and in direct support of this
Certificate and in connection with the Work, taken as a whole, is in all
material respects, true, correct, and complete.
4. The Work is being performed in accordance with the Contract.
5. That portion of the Work, as particularly set forth in EXHIBIT "A" hereto
[EXHIBIT "A" SHALL DESCRIBE THE PROGRESS TO DATE IN COMPARISON TO THE PROGRESS
PAYMENT SCHEDULE AND
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INCLUDE ALL NECESSARY DOCUMENTARY EVIDENCE], was completed during the month of
_____________, 19__, entitling Contractor to a Milestone Payment of
$_____________.
6. There are no known mechanics' or materialmen's liens outstanding at the date
of this Contractor's Invoice, all due and payable bills with respect to the Work
have been paid to date or are included in the amount requested in the current
application, and, except for such bills not paid but so included, there is no
known basis for the filing of any mechanics' or materialmen's liens on the
Project or the Work except as described below, and all required releases from
all Subcontractors have been obtained so as to cover all amounts requested
herein (save amounts owing to Insignificant Contractors) in such form as to
constitute an effective release of lien (corresponding to payments received by
them) under the laws of the State of California (copies of which are attached
hereto and incorporated herein by this reference). Contractor, or a
Subcontractor, has actually performed and Contractor has not been paid for the
Work covered by this Contractor's Invoice.
7. Attached as EXHIBIT "B" hereto are the certifications, Unconditional Waivers
of Liens, and Conditional Waivers of Liens prepared by Contractor and each
Subcontractor and Vendor contracting directly with Contractor (other than
Insignificant Contractors) in accordance with Sections 7.2, 7.3 and 7.6, as
applicable.
8. Work uncertified from the Contractor's Invoice dated _________________, 19__
has been completed (except as set forth in the last sentence of this paragraph),
and any disputes concerning less than full certification have been resolved by
written agreement among Owner, Contractor, and the Financing Entities' engineer,
a copy of which resolution is attached as EXHIBIT "C" hereto, and Contractor is
entitled to a payment which includes:
9. Except as set forth in SCHEDULE "1" attached hereto, Contractor is aware of
no facts that would constitute the basis for a Change in Work as defined in
Section 17.1. SCHEDULE "1" describes each event including events of Force
Majeure that provides the basis on which Contractor can claim that the Contract
Price should be increased or that any of the Project Deadlines should be
extended and with respect to each such event, specifies the amount of such
proposed increase in the Contract Price and the duration of each such proposed
extension.
IN WITNESS WHEREOF, the undersigned has executed this Certificate on the date
first above written.
By:_________________________________
Project Manager
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EXHIBIT "G"
CRITICAL PATH SCHEDULE REQUIREMENTS
The Critical Path Schedule shall be a time-scaled critical path method
logic diagram schedule of all design and equipment procurement for the Project
and all material Work activities. The Critical Path Schedule shall include
allowance for normal delays and difficulties that may be encountered in work of
this nature including weather and holidays, etc. The Critical Path Schedule, as
a minimum, must show an orderly array of activities in support of all Milestones
established in the Milestone Schedule, and shall be sufficiently detailed so
that each of the following are included and will be readily apparent:
(a) the engineering and detailed design activities necessary to
complete design, procurement and construction;
(b) materials and equipment purchases and deliveries;
(c) subcontractor interfaces and requirements;
(d) engineering, procurement and construction;
(e) Milestone completion dates;
(f) activities as identified in Exhibit A;
(g) Contractor, subcontractor, and vendor data cycles, and owner
review cycles; and
(h) construction testing; start-up and performance testing.
The Critical Path Schedule shall include activities related to all
significant procurement.
The Critical Path Schedule shall identify Contractor's plan of
execution for the erection, start-up and testing, and acceptance phases of the
Work. The construction/start-up schedule, which shall be provided no later than
sixty (60) days after the Notice to Proceed, must be coded in such a way as to
provide individual test system progress and schedules in accordance with an
agreed upon start-up and testing plan.
The Critical Path Schedule shall be consistent with the Existing Plants
Access Schedule, EXHIBIT Y and the periods identified therein within which
Contractor has access to the Existing Plant Sites for performance of Critical
Path Items involving the Existing Plants or the Existing Plant Sites.
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An electronic version (on Microsoft "Project" or other software
compatible with Owner's computer system) of the Critical Path Schedule (and any
updates thereto) shall be provided to Owner with the printed copy.
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EXHIBIT "H"
RESERVED
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EXHIBIT "I"
DETERMINATION OF BUY-DOWN AMOUNT
A. The Buy-Down Amount to be determined by Owner pursuant to Sections 16.2 and
16.3 of the Contract shall be calculated under the Buy-Down Amount formula
set forth in paragraphs B and C of this Exhibit "I" using the results of
the most recent Capacity Test or Reliability Test, as the case may be,
corrected to the Guarantee Point Conditions.
B. The Buy-Down Amount formula with respect to the Net Generation Guarantee is
as follows:
T = $1,800.00 x (Net Generation Guarantee - Actual Production)
Where:
1. "T" = the Buy-Down Amount, in Dollars.
2. "Actual Production" = the Actual Net Electric Energy Production (in
kW) measured in accordance with the requirements of EXHIBIT "A" and
EXHIBIT "J" during the most recently attempted single run (whether or
not completed) of the Capacity Test.
Notwithstanding anything to the contrary, "T" shall not be less than zero.
C. The Buy-Down Amount formula with respect to the Reliability Guarantee is as
follows:
T=$1,800.00 x (Reliability Guarantee - Actual Production)
Where:
1. "T" = the Buy-Down Amount, in Dollars.
2. "Actual Production" = the Actual Net Electric Energy Production (in
kW) measured in accordance with the requirements of EXHIBIT "A" and
EXHIBIT "J" during the most recently attempted single run (whether or
not completed) of the Reliability Test, as the case may be.
Notwithstanding anything to the contrary, "T" shall not be less than zero.
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EXHIBIT "J"
TESTING REQUIRED FOR COMPLETION
1. Mechanical Completion Tests. Contractor shall perform and successfully
complete the following tests (each, a "Mechanical Completion Test"). The
Mechanical Completion Tests shall include (a) all tests necessary to demonstrate
that the Project can safely and reliably operate at its continuous and maximum
overload conditions; and (b) all tests as are reasonably necessary, customary or
required by Industry Standards to determine that all equipment and systems that
comprise a portion of the Project function properly and within the parameters
described in the Contract or in the Drawings and Specifications, as applicable.
Such tests shall include, without limitation, tests of the following items of
equipment and systems:
o low voltage switchgear and auxiliary transformers
o auxiliary cooling water systems
o compressed air system
o main cooling water system, including cooling tower
o condenser and NCG extraction system
o chemical addition systems
o medium and high voltage switchgear and electrical protection
o main transformers
o steam turbine
o main generator
o brine systems
o service water system
Such tests shall include, without limitation, the following types of tests:
o Radiograph selected piping
o Hydrostatic pressure tests per B31.1, NFPA, etc.
o Safety valve setting, if not factory set and sealed, and functional
test
o Balancing and vibration and alignment test of all major rotating
equipment
o Functional test of all safety devices, and interlocks, excluding
safety valves and rupture discs
o Functional tests of isolation and regulation valves
o Generator short circuit and open circuit tests, if not performed at
the factory
o Megger tests for power cables at voltages of 480V and higher
o Functional tests of controls and interlocks
o Operation of alarms, interlocks, and controls
o Bolt torque testing of field high voltage electrical connections
o Relay settings and amperage
o Electrical ground and/or insulation tests for all equipment
J-1
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o Check out of all instrument loops
o Operation of safety showers, eye wash stations, and spill containment
o Automatic intervention of stand-by equipment where required (HCI
pumps, lube oil pumps, etc.)
o Load test of overhead and other cranes or lifting devices
o Operation of fire detection and alarm systems
o Operation of fire fighting equipment (NFPA requirements for systems
operation)
o Other tests as specified in all applicable Codes and Industry
Standards)
The Mechanical Completion Tests will be deemed complete for a given piece of
Equipment when such piece of Equipment meets the requirements of the test
protocols (see Section 7.2 below) and can be operated properly without
endangering personnel, causing damage to Equipment and/or the Project or damage
to the Interconnections.
2. Performance Tests. Performance Tests shall be coordinated by the Owner with
IID's dispatch requirements. Contractor shall perform and successfully complete
the following tests (each, a "Performance Test").
2.1 No Load and Overspeed Trip Tests. The turbine shall be subjected to
no load test up to 110% rated speed. As part of this test the turbine overspeed
trip system shall also be tested. To pass this test, the Project must remain in
a safe condition without incurring any damage and be capable of immediate
restart. Additional no load tests include: oil trip test, excitation test and
synchronization circuit adjustment test.
2.2 Turbine Trip Test. The Contractor shall be required to demonstrate
the Project's ability to withstand a turbine trip from 25% of full load and 100%
of full load. The Project shall be loaded to and stabilized at the requisite
load and the turbine then manually tripped. To pass the test, the Project shall
shut down safely to a stand-by condition following such trip. The turbine trip
shall be initiated by either the panel or field located master trip button.
2.3. Part Load Operating Tests. Following initial synchronization, the
generating Unit that comprises a portion of the Project shall be load tested at
25% of full load, 50% of full load, 75% of full load and 100% of full load (the
"Part Load Operating Test"). At each load condition, the plant shall be
stabilized and held at that load for a minimum of four hours, during which time
full sets of readings shall be recorded at intervals of 1 hour.
2.4. Load Rejection Tests. Either prior to, or in conjunction with, the
Part Load Operating Test described above, the Project shall be load rejection
tested by opening the 92 kV circuit breaker at loads of 25% of full load, 50% of
full load, 75% of full load, and 100% of full load. The rejection test at 100%
of full load shall be conducted at a power factor of 0.90. Contractor shall be
required to demonstrate that the Project can remain operational following such a
load rejection, supplying unit and station auxiliary loads only.
J-2
<PAGE>
2.5. The Capacity Test. The Project's ability to satisfy the Net
Generation Guarantee, the Outlet Brine Temperature Guarantee and the Outlet
Steam Condition Guarantee shall be demonstrated by means of a continuous
(subject to Sections 7.1 and 2.6 of this Exhibit J) 24 hour performance test to
be carried out at full load (the "Capacity Test").
2.6. The Reliability Test. The reliable operation of the Project shall
be demonstrated during a continuous (subject to Section 7.1 of this Exhibit J)
28 day reliability test (the "Reliability Test"). During the Reliability Test,
the Project shall be required to satisfy the Reliability Guarantee, the Outlet
Brine Temperature Guaranty and the Outlet Steam Condition Guarantee. If outages
or load rejections caused by the Project or the Work (unless caused by equipment
listed in Exhibit AA that is provided by Owner and has been properly installed
by Contractor) occur during the Reliability Test, the Reliability Test shall be
resumed or recommenced at Contractor's option following investigation and
rectification of the fault. If the Reliability Test is resumed, the period of
time of the outage or load rejection will be included and considered for
purposes of assessing whether the Reliability Test has been successfully
completed. If the Reliability Test is recommenced, the time of recommencement of
the Reliability Test will be after the period of time of the outage or load
rejection and the period of time of the outage or load rejection will not be
included and considered for purposes of assessing whether the Reliability Test
has been successfully completed.
3. Commencement of Tests. The tests in Sections 2.1-2-4 are the "Operating
Tests." Contractor shall not commence the Capacity Test until the Operating
Tests are successfully completed. The Reliability Test shall be deemed not to be
successfully completed unless the Capacity Test has been successfully completed
at or prior to the completion of the Reliability Test.
4. Inspection After Completion. Following the Performance Tests, Owner shall
thoroughly inspect the Project in the presence of Contractor to determine that
no untoward degradation or deterioration of the Project has occurred during its
initial operation. This inspection may include internal inspection of the
turbine and any other machinery that the Owner may require.
5. Compliance with Applicable Laws. At all times, during all Performance Tests,
Contractor shall cause the Project to comply with all Applicable Laws and
Applicable Permits, including any applicable limitations on air and water
pollutant emissions subject to Section 7.1.4 of Exhibit A. If all or any portion
of the Project shall fail to comply with any Applicable Law or any Applicable
Permit (including, in either case, any limitations on the Project's production
of noise or emissions) during any Performance Test, then the Project shall be
deemed to have failed such Performance Test and Contractor shall evaluate and
remedy the cause of such failure before Contractor attempts any other
Performance Test or re-attempts such Performance Test.
6. General Testing Requirements. The requirements specified in this Section 6
shall apply to the Performance Tests and the Mechanical Completion Tests.
6.1 Testing Procedures. Contractor shall prepare two sets of reasonably
detailed procedures for the tests described in this Exhibit J. One shall cover
the Mechanical Completion
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Tests and the other shall cover the Performance Tests. Contractor shall comply
with the requirements of ANSI/ASME PTC 6 Sections 3.02 and 3.03 regarding
obtaining the agreement of Owner on details of the tests and procedures.
6.2 Correction of Defects. Contractor shall deliver a written notice to
Owner promptly after the discovery or occurrence of any Defect that was
discovered or that occurred during any test. Contractor shall promptly commence
and complete corrective measures to remedy each such Defect (including
re-engineering, repairs or replacement of any Defective parts, including removal
and reinstallation of all Defective components necessary to the performance of
such obligations, at Contractor's sole cost and expense). In the event that
Contractor's remedy for any Defect reasonably could adversely affect the
Project's ability to successfully complete any other test described herein,
which test Contractor shall have already successfully completed, then Contractor
shall be deemed not to have successfully completed each such affected test and
Contractor shall be required to re-perform and satisfactorily complete each such
affected test.
6.3 Test Equipment. Special test equipment or instrumentation used in
testing shall be calibrated and designed for its intended use. The cost of
special test instrumentation shall be borne by Contractor. Calibration
procedures and records shall be submitted to Owner as part of Contractor's
written test procedures.
6.4 Operation of Equipment. During testing, all items of equipment that
constitute a portion of the Work will be operated within their respective normal
operating limits and in a manner consistent with applicable standards for
long-term operation.
7. Performance Testing Requirements
7.1 Re-Testing and Test Suspension Procedure. If the test criteria are
not met, or problems or deficiencies arise during the conduct of the Performance
Tests that require cessation thereof, Contractor will establish the actions to
be taken to bring about a successful completion of the Performance Tests. Such
actions shall be taken by Contractor and each of the affected Performance Tests
shall be reconducted.
Contractor reserves the right, prior to Substantial Completion, to repeat any of
the Performance Tests. In case one or more of the Performance Tests are
repeated, the more favorable of the test results will be utilized to establish
the final results for the Performance Tests. Repeating one or more of the
Performance Tests does not require repeating any of the other Performance Tests
unless they are directly related.
Performance Tests may be suspended upon each occurrence of circumstances beyond
the control of the Contractor that do not reflect Equipment failure, design, or
construction defects (e.g., a problem with the IID grid, Force Majeure the
failure of Owner to provide the necessary Production Inputs or accept the
Products produced by the Project) and that make the completion of the
Performance Tests unfeasible. If the Performance Test period is to be resumed
after the period(s) of suspension, the Performance Test period shall include
period(s) of Project operation
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both before and after the period(s) of suspension. The Performance Test may be
resumed or recommenced following such a suspension at the Contractor's
discretion. If the performance Test is recommenced, the time of re-commencement
of the Performance Test will be after the period(s) of suspension and the
period(s) of suspension will not be included and considered for purposes of
assessing whether the Reliability Test has been successfully completed.
7.2 Test Protocols.
7.2.1 Introduction
a) This protocol is to serve as the basis for the more detailed
Performance Test Procedures which are to be prepared by
Contractor. The written Performance Test Procedures are to
contain an introduction Section which is to list the
individual tests to be performed and the Guarantee Point
Conditions. The Performance Test Procedures shall also
contain the definitions used in this Section and other
portions of the Agreement, as required.
b) Each Performance Test will be observed by Owner and other
representatives. Special test equipment or instrumentation
used in testing shall be calibrated and designed for its
intended use. The cost of special instrumentation shall be
borne by Contractor.
c) Plant and special instrumentation shall be calibrated before
commencement of each Performance Test. Calibration procedure
and records shall be submitted to Owner for approval prior
to start of testing.
d) Completed raw data sheets shall be signed and dated by
Owner's Representative and a copy provided to Owner
immediately upon completion of each test.
e) Data will be considered accurate to a level in accordance
with recognized standards.
f) During testing all items of Equipment will be operated
within their respective normal operating limits and in
manner consistent with applicable codes and standards for
long-term operation. A Performance Test shall not be deemed
to be completed successfully unless the Project is in
operable condition at the end of the test.
g) Control system must be in the normal automatic mode and be
functioning as designed with allowance for manual
adjustment.
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h) For the duration of each Performance Test. Project auxiliary
equipment shall be operated as required to maintain current
daily inventories of fuel, water and compressed air.
Equipment may not be shut down nor operation discontinued so
as to reduce station load and increase plant output.
i) Contractor shall, if required by Applicable Permits,
demonstrate that the Project complies with those Applicable
Permits when operated at any reasonable design output.
7.2.2 Test Organization
Contractor shall prepare an organization chart of the test
staff as well as points of interaction and approval by
Owner.
7.2.3 Data Records
a) Contractor shall prepare sub-routines for logging of data.
The logged test data will serve as the basic test record for
each performance test. Local data shall be logged on
separate data sheets specific for each test. Specific
instrument numbers shall be listed on all data sheets.
b) Frequency of data points shall be identified for each
specific test.
c) Contractor shall prepare data that corrects the test data to
the Guarantee Point Conditions. Determination of the test
results will be based upon test data that has been
appropriately corrected to the Guarantee Point Conditions.
7.2.4 Performance Test Report
a) At the completion of the test program for , Contractor shall
prepare a unified bound test report summarizing the data
collected, calculations clearly demonstrating the method of
generating results and the results of each individual
Performance Test. The test raw data and lab results shall be
included as Appendices to the test report.
b) The final test report will be delivered to the Owner as soon
as a reasonably practicable after satisfactory completion of
each Performance Tests.
7.3 Equipment Failures. The failure of non-essential controls and
instrumentation will not preclude initiation of a Performance Test under this
Exhibit J or require a Performance
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Test interruption if Contractor can reasonably demonstrate that the failure or
unavailability of such instrumentation would not require a Project shutdown
during normal operation.
7.4 Instrumentation. A list of key instruments to be used during a
Performance Test will be specified by Contractor in the Performance Test
Procedures. The instruments will be calibrated in accordance with the standards
of a recognized national organization such as American Society of Testing and
Materials (ASTM), Instrument Society of America (ISA), National Bureau of
Standards (NBS), or the Power Test Codes of the American Society of Mechanical
Engineers (ASME). Performance Test tolerances equal to maximum combined test
uncertainty of 2.0% shall be considered when evaluating the net power test
results.
7.5 Data Recording. Data for instruments connected to the central
station control system shall be accumulated by the DCS every two (2) minutes.
Data for instruments that must be recorded manually shall be recorded every
fifteen (15) minutes for the tests of Sections 2.1 through 2.5 of this Exhibit,
and every four (4) hours for the Reliability Test.
7.6 Staffing. During the Reliability Test, the Project shall be
operated at normal staffing levels using only Owner's operation and maintenance
personnel trained by Contractor to operate the Project, with the exception of
those additional personnel required solely to supervise, advise, or assist with
the gathering of data, sampling, test and instrument calibration, and
calculation of performance data.
7.8 Repairs and Alterations. Repair of any part or replacement of any
item of equipment the repair or replacement of which materially alters the
performance of the Project shall not be permitted during the conduct of the
Performance Tests.
8. Correction Curves.
8.1 If the actual Production Inputs and/or wet bulb temperature differs
from the Guarantee Point Conditions, the actual Correction Curves prepared by
Contractor and approved by Owner shall be used to adjust actual Project
performance, as applicable, for the purpose of determining whether the
Performance Guarantees have been satisfied.
8.2 Correction curves for changes in process parameters, including but
not limited to changes in the wet bulb temperature, steam temperature/wetness,
inlet steam pressure, brine temperature and pressure, brine solids,
non-condensable gas concentration in the inlet steam, and power factor shall be
prepared by Contractor and submitted with the Performance Test Procedures for
Owner's review. The following correction curves shall be submitted as a minimum
(all for 100% load)
o Change in Gross Generation vs. Ambient Wet Bulb Temperature
o Change in Gross Generation vs. SP Steam Flow
o Change in Gross Generation vs. SP Steam Pressure
o Change in Gross Generation vs. SP Steam Moisture
o Change in Gross Generation vs. SP Steam NCG Content
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o Change in Gross Generation vs. LP Steam Flow
o Change in Gross Generation vs. LP Steam Pressure
o Change in Gross Generation vs. LP Steam Moisture
o Change in Gross Generation vs. VLP Steam Flow
o Change in Gross Generation vs. VLP Steam Pressure
o Change in Gross Generation vs. VLP Steam Moisture
o Change in Gross Generation vs. Generator Power Factor
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EXHIBIT "K"
KEY PERSONNEL
INDIVIDUAL TITLE
Carl Harrell Project Manager
Fred McCoy Project Engineer
Richard Gast Stone & Webster Construction Manager
Peter Dillon Resident Engineer
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EXHIBIT "L"
OWNER PROVIDED LICENSE AND ROYALTY AGREEMENTS
Owner represents that it has, or will have when required for the Work,
agreements (the "Owner Provided License and Royalty Agreements") with CalEnergy
Company, Inc., a Delaware corporation ("CalEnergy"), and Magma Power Company, a
Nevada corporation ("Magma"), granting Owner the right to use, and the right to
permit Contractor to use, all patents, patent applications, trade secrets, know
how and other proprietary information related to the Work that are owned by
CalEnergy or Magma.
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EXHIBIT "M"
MILESTONE SCHEDULE
MILESTONE DAYS FROM NTP
Place Turbine/Generator Purchase Order 15
Complete Initial Site Clearing and Grubbing @ Region 1 IX 135
Turbine/Generator Delivery to Jobsite 450
Start Commissioning Period 520
Energize breaker 52-15 548
Mechanical Completion 590
Capacity Test Completion 610
Substantial Completion 638
Final Completion 698
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EXHIBIT "N"
FORM OF MONTHLY PROGRESS REPORT
Each Progress Report shall be a written statement of project status
prepared by Contractor for review by project participants. The following items
shall be included in monthly reports to be submitted by Contractor.
TABLE OF CONTENTS FOR MONTHLY REPORT
1.0 EXECUTIVE SUMMARY -- (CURRENT MONTH)
A synopsis of project status addressing specific aspects of the Project
to include construction, engineering, procurement, and start-up.
2.0 SUMMARY OF PROGRESS AND STATUS OF ENGINEERING, PROCUREMENT AND
CONSTRUCTION
2.1 Current Month
A synopsis of the Project progress completed as of the current month.
Reporting format shall be based on completion of Milestones and construction,
engineering (organized by discipline), procurement (issuance of purchase
orders), shipment of materials and equipment to the Site, training and start-up.
2.2 Next Month
The expected progress for the Project in the next thirty days shall be
provided in outline form based on construction, engineering, procurement,
shipment, training and start-up.
3.0 MEETING STATUS
A summary of major meetings for the current month identifying the date
and the attendees and including a one or two-sentence summary of anticipated
topics of discussion for the next month and schedule for next month meeting
date.
4.0 PRIORITIES/ISSUES/CONCERNS
Identification and evaluation of problem areas that are anticipated to
have a material effect on the working schedule or that may, in the opinion of
Contractor, require a modification of EXHIBIT "A" to the Contract.
5.0 SCHEDULE UPDATE
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Report important items and events, such as dates of arrival of Major
equipment components, completion of milestones in Exhibit D (Part 1) and M.
The reports shall be presented in a format used by the Contractor and
reasonably acceptable to Owner, such as Microsoft "Project." An updated copy of
the working schedule shall be attached to the Progress Report with a written
analysis of schedule status, including actual versus planned progress, with
reference to the Milestone Schedule and Critical Path Schedule. The schedule
shall indicate early, late, and actual curves.
6.0 PERMIT STATUS
Provide listing of all Contractor Required Permits including current
status and the date the permit is to be obtained.
7.0 DRAWING AND PROCUREMENT STATUS
Provide the updated engineering drawing list, Engineering and
Procurement Schedule, and current status as compared to overall schedule.
8.0 PROJECT FINANCIAL STATUS
The section shall include the billing breakdown for the current month,
a comparison of the Progress Payment Schedule with the actual progress payments
to date, and financial review of the Project to date.
9.0 PROGRESS PHOTOGRAPHS
Contractor shall supply color photographs to document progress and to
record significant completed elements of work. All photographs shall be dated,
captioned and securely fixed to 8 1/2 x 11 sheets of paper; three (3) copies of
each photo should be provided.
Also provide photographs of fabrication of major equipment and site
progress. Photographs should be chosen carefully to illustrate progress.
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EXHIBIT "O"
FORM OF PARENT GUARANTEE AND LEGAL OPINION
THIS GUARANTEE ("GUARANTEE"), effective as of [_____________], 1998, by
[____________________], a [__________________] corporation ("GUARANTOR"), to and
for the benefit of Salton Sea Power L.L.C., a limited liability company
organized under the laws of Delaware. ("OWNER").
W I T N E S S E T H:
WHEREAS, Owner proposes to develop, own and operate a 49 megawatt (net)
geothermal power plant in Imperial Valley, California (the "PROJECT"); and
WHEREAS, Owner and [___________________________], a company organized
under the laws of [________________] (hereinafter, "CONTRACTOR"), propose to
enter into that certain Salton Sea Unit 5 Engineering, Procurement and
Construction Agreement dated as of [___________], 1998 (as such agreement may be
amended, modified or supplemented from time to time, the "AGREEMENT");
WHEREAS, Contractor is a wholly owned subsidiary of Guarantor; and
WHEREAS, SECTION 35.2 of the Agreement requires that this Guarantee be
executed and delivered by Guarantor concurrently with the execution of the
Agreement;
NOW THEREFORE, for valuable consideration and as an inducement to Owner
to enter into the Agreement, Guarantor covenants with Owner as follows:
1. Guarantor hereby unconditionally guarantees to Owner the full and
timely performance when due and observance when due of all covenants, terms and
agreements to be performed and observed by Contractor under the Agreement and
all other present or future agreements and instruments between Owner and
Contractor in connection with the performance of the Agreement (such obligations
of Contractor collectively, the "OBLIGATIONS").
2. Guarantor covenants to Owner that if at any time Contractor should
default in the performance when due and observance when due of, or should commit
a breach of, any of the covenants, terms or agreements set forth in the
Contract, Guarantor shall, promptly upon written notice by Owner, perform in
Contractor's stead, or cause the performance of, such covenants, terms or
agreements.
3. 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
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to assume the Agreement and to perform all of the terms and conditions
thereunder for the balance of the term thereof should the Agreement 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 Agreement for the balance of the term of the Agreement, which said
new Agreement shall be in form and substance identical to the Agreement.
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 Guarantee, whether by suit or otherwise.
6. The obligations of Guarantor under this Guarantee 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
termination of any of the covenants, terms or agreements of Contractor set forth
in the Agreement;
(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 Agreement;
(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 Agreement;
(d) the modification or amendment (whether material or
otherwise) of any covenants, terms and agreements set forth in the Agreement;
(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 Agreement or this Guarantee;
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(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 Agreement 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 Agreement (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 Agreement.
7. Guarantor irrevocably and absolutely waives any and all rights of
subrogation, contribution, indemnification, reimbursement or similar rights
against Contractor with respect to this Guarantee, 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 Guarantee in the event that Contractor
becomes a debtor in any proceeding under the U.S. Bankruptcy Code. In addition,
Guarantor will not exercise any rights which it may acquire by way of
subrogation under this Guarantee by any payment made hereunder or otherwise,
until all of the liabilities and obligations of Contractor to Owner under the
Agreement 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
amount 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 of any nonmonetary obligation owed, to Owner pursuant to this
Guarantee, 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. Except as otherwise specifically provided in this Guarantee, all
existing and future indebtedness of Contractor to Guarantor and the right of
Guarantor to withdraw any capital invested by Guarantor in Contractor, is hereby
subordinated to all Obligations hereby guaranteed.
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Without the prior written consent of Owner, such subordinated indebtedness shall
not be paid or withdrawn in whole or in part, nor shall Guarantor accept any
payment of or on account of any such indebtedness or as a withdrawal of capital
while this Guarantee is in effect. At Owner's request, Guarantor shall cause
Contractor to pay to Owner all or any part of such subordinated indebtedness and
any capital which Guarantor is entitled to withdraw. Any such payment by
Contractor in violation of this Guarantee shall be received by Guarantor in
trust for Owner, and Guarantor shall cause the same to be paid to Owner
immediately upon demand by Owner on account of Contractor's Obligations hereby
guaranteed.
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 Guarantee
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 by reason of any order, decree or decision of any court or administrative
body resulting from any such proceeding.
(b) Guarantor shall file, in any bankruptcy or other proceeding
in which the filing of claims is required or permitted by law, all claims which
Guarantor may have against Contractor relating to any indebtedness of Contractor
to Guarantor, and hereby assigns to Owner all rights of Guarantor thereunder. If
Guarantor does not file any such claim, Owner, as attorney-in-fact for
Guarantor, is hereby authorized to do so in the name of Guarantor or, in Owner's
discretion, to assign the claim to a nominee and to cause proofs of claim to be
filed in the name of Owner's nominee. The foregoing power of attorney is coupled
with an interest and cannot be revoked. Owner or its nominee shall have the sole
right to accept or reject any plan proposed in any such proceeding and to take
any other action which a party filing a claim is entitled to take. In all such
cases, whether in administration, bankruptcy or otherwise, the person authorized
to pay such a claim shall pay the same to Owner, and, to the full extent
necessary for that purpose, Guarantor hereby assigns to Owner all of Guarantor's
rights to all such payments or distributions to which Guarantor would otherwise
be entitled; provided, however, that Guarantor's obligations hereunder shall not
be satisfied except to the extent that Owner receives cash by reason of any such
payment or distribution. If Owner receives anything hereunder other than cash,
the same shall be held as collateral for amounts due under this Guarantee.
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:
(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 guarantied;
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(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 guarantied;
(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 re 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 guarantied;
(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.
Without limiting the generality of the foregoing, Guarantor hereby expressly
waives any and all benefits which might otherwise be available to Guarantor
under California Civil Code Sections 2809, 2810, 2819, 2839, 2845 through 2847,
2849, 2850, 2899 and 3433.
12. This Guarantee shall inure to the benefit of and be binding upon
the Parties hereto and their respective successors and assigns, provided,
however, that Guarantor may not make an assignment or other transfer of this
Guarantee or any interest herein by operation of law or otherwise unless it has
obtained the prior written consent of Owner to such assignment or other
transfer.
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13. All notices to Guarantor required to be served under this Guarantee
shall be in writing and shall be served by registered mail and shall be
addressed as follows:
[_________________________________________]
[_________________________________________]
[_________________________________________]
or at such other address as Guarantor may from time to time designate in
writing.
14. This Guarantee shall in all respects be interpreted, and construed
and governed by and in accordance with, the internal, substantive laws of the
State of California and the United States of America. All agreements,
instruments and notices referred to herein or supplementary hereto shall be
prepared, furnished in, and governed, and controlled by the English language.
Guarantor irrevocably consents to the jurisdiction of the state and federal
courts located in San Diego, California, agrees that any action, suit or
proceeding by or among Owner and Guarantor may be brought in any court in San
Diego, California, 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
California). 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 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 California and had been lawfully
served in such state. Nothing in this Guarantee 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 California 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.
15. Guarantor represents, covenants and agrees to and with Owner that:
(a) the execution and delivery of this Guarantee and its
performance have been duly authorized by all necessary corporate action on the
part of Guarantor;
(b) this Guarantee is the legal, valid and binding obligation of
Guarantor, enforceable against it in accordance with its terms, subject to the
application of bankruptcy and similar laws and of general equitable principles;
(c) the execution, delivery and performance of the Guarantee
will not violate any law or any provision of any security issued by the
Guarantor or of any agreement, instrument or undertaking to which the Guarantor
is a party or by which it or any of its property is bound, and do not require
any license, consent or approval of any governmental authority; and
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(d) except as may be disclosed in writing to Owner, no
litigation, investigation or proceeding of or before any arbitrator or
governmental authority is pending or, to the undersigned's knowledge, threatened
by or against the Guarantor or any of its subsidiaries or against any of such
parties' properties or revenues which, if adversely determined, would be
reasonably likely to have a material adverse effect on the ability on the
Guarantor to perform its obligations hereunder.
16. 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 Guarantee and will obtain any that may become necessary in the
future.
(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 Guarantee.
(c) (i) Quarterly Financial Statements. Guarantor will deliver
to Owner, within sixty (60) days after the close of each of the first
three quarterly accounting periods in each fiscal year of Guarantor,
the consolidated balance sheets of Guarantor and its consolidated
Affiliates as at the end of such quarterly period and the related
consolidated statements of income, retained earnings and cash flows for
such quarterly period and for the elapsed portion of the fiscal year
ended with the last day of such quarterly period, in each case setting
forth comparative figures for the related periods in the prior fiscal
year, all of which shall be certified by the chief financial officer or
treasurer of Guarantor, subject to normal year-end audit adjustments.
(ii) Annual Financial Statements. Guarantor will deliver to
Owner, within one hundred twenty (120) days after the close of each
fiscal year of Guarantor, the consolidated and consolidating balance
sheets of Guarantor and its consolidated Affiliates as at the end of
such fiscal year and the related consolidated and consolidating
statements of income, retained earnings and cash flows for such fiscal
year, in each case setting forth comparative figures for the preceding
fiscal year and certified, in the case of the consolidated financial
statements, by independent certified or chartered public accountants of
recognized national standing in the United States.
(iii) Notice of Default or Litigation. Promptly, and in any
event within seven (7) Business Days after the President or Chief
Financial Officer of Guarantor obtains knowledge thereof, Guarantor
will give to Owner notice of the occurrence of any event or of any
litigation or governmental proceeding pending (x) against Guarantor or
any of its Affiliates which could affect the business, operations,
property, assets, condition (financial or otherwise) or prospects of
Guarantor so as to materially and adversely affect the ability of
Guarantor to perform its obligations hereunder or (y) with respect to
this Guarantee, which event or pending proceeding is likely to
materially and
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adversely affect the business, operations, property, assets, condition
(financial or otherwise) or prospects Guarantor and its Affiliates
taken as a whole.
(iv) Other Information. From time to time, such other
information or documents (financial or otherwise) 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 ARTICLE 27 of the Agreement.
(d) Upon the occurrence of a default by Guarantor (i) in the
payment of any principal, interest or other amount due under any agreement
involving the borrowing of money or the advance of credit, and the outstanding
amount or amounts in default with respect to Guarantor exceeds
[____________________] Dollars ($[__________]) in the aggregate; or (ii) in the
payment of any amount due under any guarantee of any agreement or obligation of
the type and in the amount described in the foregoing clause (but in either
case, only if the holder of the obligation concerned exercises its right to
accelerate the maturity of the indebtedness evidenced thereby and such
indebtedness is not promptly paid or promptly deposited into an escrow account
satisfactory to the Owner), Guarantor shall be obligated immediately to provide
a performance bond in the amount of [____________________] Dollars
($[__________]) to secure the obligations of Guarantor hereunder or provide such
other security for the performance of this Guarantee as shall be acceptable to
Owner. [TO BE DETERMINED BASED ON PROPOSED GUARANTOR'S TANGIBLE NET ASSETS.]
(e) Guarantor shall not sell, assign, transfer, convey,
mortgage, encumber, hypothecate, pledge or otherwise dispose of or grant any
interest in Contractor.
(f) At all times during the effectiveness of this Guarantee,
Guarantor shall maintain Tangible Net Assets (as hereinafter defined) of not
less than [____________________] Dollars ($[__________]). [TO BE DETERMINED
BASED ON THE PROPOSED GUARANTOR'S TANGIBLE NET ASSETS.] Any failure of Guarantor
to maintain Tangible Net Assets of not less than [____________________] Dollars
($[__________]) [To be determined based on the proposed Guarantor's Taxable Net
Assets.] shall be deemed a default hereunder whereupon Guarantor shall
immediately upon demand by Owner, either (x) pay to Owner [____________________]
Dollars ($[__________]) in immediately available funds in full satisfaction of
its obligations hereunder, (y) provide to Owner a letter of credit in the stated
amount of [____________________] Dollars ($[__________]) from a financial
institution satisfactory to Owner and in form and substance satisfactory to
Owner, in each case in Owner's sole discretion, to secure the obligations of
Guarantor hereunder or (z) provide a performance bond in the amount of
[____________________] Dollars ($[__________]) to secure the obligations of
Guarantor hereunder. For purposes of this SECTION 16(F), "Tangible Net Assets"
means the excess of the total assets of Guarantor (exclusive of all assets that
may be classified as intangible assets) determined in accordance with United
States Generally Accepted Account Principals ("GAAP") over the total liabilities
of Guarantor determined in accordance with GAAP.
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17. Termination; Reinstatement of Guarantee.
(a) Subject to the provisions of SECTION 17(B), this Guarantee
shall terminate upon termination of the Agreement, other than a termination
resulting from Contractor's breach of the Agreement.
(b) Notwithstanding the provisions of SECTION 17(A), this
Guarantee shall be reinstated if at any time following the termination of this
Guarantee under SECTION 17(A), any payment by Guarantor or Contractor under this
Guarantee or pursuant hereto is rescinded or must otherwise be returned by Owner
or other Person upon the insolvency, bankruptcy, reorganization, dissolution or
liquidation of 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 ARTICLE 17.
16. Any invalid or unenforceable provisions in this Guarantee shall be
deemed severed herefrom, and such whole or partial invalidity shall not affect
the enforceability or validity of the balance of this Guarantee.
17. Any capitalized terms used herein and not herein defined shall have
the meanings given to them in the Agreement.
IN WITNESS WHEREOF, Guarantor has caused this Guarantee to be executed
as of the date first above written.
[PARENT COMPANY],
a [_______________________]
By: ______________________________________
Name: ________________________________
Title: _______________________________
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FORM OF OPINION OF COUNSEL
TO PARENT
[_______________________________
_______________________________
_______________________________
_______________________________]
Gentlemen:
We have acted as counsel for [____________________], a
[_______________] corporation (the "COMPANY") in connection with the execution
and delivery by the Company of the Guarantee dated as of [______________], 1998
(the "GUARANTEE") made by the Company to and for the benefit of Salton Sea Power
L.L.C., a limited liability company organized under the laws of Delaware. This
opinion is being rendered to you pursuant to the requirements of SECTION 35.2 of
that certain Salton Sea Unit 5 Engineering, Procurement and Construction
Agreement dated as of [________________] 19[__] by and between the Owner and
[____________________________], a [_______________] corporation and wholly-owned
subsidiary of the Company.
In this connection, we have examined such documents, records and
matters of law as we have deemed necessary for purposes of this opinion. In our
examination, we have assumed the accuracy of the information furnished to us,
the genuineness of all documents submitted to us as original or certified
documents, the conformity to original or certified documents of all copies
submitted to us as conformed or photostatic copies, the genuineness of all
signatures on all documents and the legal capacity of natural persons.
Based on the foregoing, we are of the opinion that:
1. The Company (a) is duly organized, validly existing and in good
standing as a corporation under the laws of [____________], (b) has the
corporate power and authority to own and operate its property and to conduct its
business in the manner in which it does and proposes so to do, and (c) is in
compliance with its Certificate of Incorporation and Bylaws and any law, treaty,
rule or regulation, or any final and binding determination of an arbitrator or
order, judgment, decree or other determination of a court or other governmental
authority applicable to or binding upon the Company ("REQUIREMENT OF LAW").
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2. The Company has the corporate power and authority to execute,
deliver and perform the Guarantee and has taken all necessary corporate action
to authorize the execution, delivery and performance of the Guarantee. The
Guarantee has been duly executed and delivered on behalf of the Company and
constitutes the valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting creditors' rights generally and (ii) general principles
of equity (regardless of whether such enforceability is considered in a
proceeding at law or in equity) provided, however, that such equitable
principals will not substantially interfere with the practical realization by
the Owner of the benefits of the Guarantee.
3. The execution, delivery and performance of the Guarantee will not
violate any Requirement of Law or any provision of any security issued by the
Company or of any agreement, instrument or undertaking to which the Company is a
party or by which it or any of its property is bound, and do not require any
license, consent or approval of any governmental authority.
4. No litigation, investigation or proceeding of or before any
arbitrator or governmental authority is pending or, to the undersigned's
knowledge, threatened by or against the Company or any of its subsidiaries or
against any of such parties' properties or revenues which, if adversely
determined, would be reasonably likely to have a material adverse effect on the
business, operations, property or financial condition of the Company or any of
its subsidiaries.
Very truly yours,
_______________________________________
O-11
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EXHIBIT "P"
EXECUTABLE COPY
PRODUCTION INPUTS
The following are the Production inputs. Information on required quantities of
each input will be found in the following references:
INPUT REFERENCE DOCUMENT
----- ------------------
Brine Exhibit A, Attachment 5
Exhibit B, Drawing 08051-J-0108 A
Standard Pressure Steam Exhibit A, Attachment 5
Exhibit B, Drawing 08051-J-0108 A
Hydrochloric Acid (2% and 32%) Exhibit B, Drawing 08051-J-0110 A
NORMS Exhibit B, Drawing 08051-J-0110 A
Lime (95% Active CaO) In quantities requested by
Contractor for precipitation of Silica
Flocculant In quantities requested by
Contractor for precipitation of
dissolved solids.
Cooling Tower Chemicals As required by Owner for proper
water quality control.
Firewater Exhibit A, Section 10.13
Compressed Air Exhibit A, Section 10.15
Potable Water Exhibit A, Section 10.14
Service Water Exhibit A, Section 10.14
Electrical feed from In quantities requested by
Units 3&4 at 13.8 kV Contractor in order to start up Unit 5
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EXHIBIT "Q"
SPARE PARTS TO BE PROVIDED BY CONTRACTOR
The following Spare Parts are included in the Contract Price:
Turbine/Generator Spare Parts
One (1) turbine rotor, fully bladed with enclosed metal rotor stand
One (1) set of stationary blades
Circulating Water Pump
One (1) complete, warehouse spare, vertical turbine, circulating water pump with
motor. Pump body shall be carbon steel with heavy duty epoxy lining.
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EXHIBIT "R"
UNIT RATES
If a Change Order will be performed at unit rates under Section 17.4.1
or 17.4.2 of the Contract, the following rates shall apply:
Stone & Webster will charge the following fixed hourly rates for the
time of personnel engaged on such Work. These rates include employee salaries,
benefits, overhead, fee, payroll taxes along with estimated allowances for
non-local communication, postage, computer and reprographic charges. Rates are
firm for Work performed through the December 1999 billing period at which time
the rates will be subject to annual adjustment (not to exceed the percentage
increase in the Consumer Price Index, all items, from August 1998 to December
1999). The job titles are representative of titles in each of Stone & Webster's
classification codes. A complete listing is available upon request.
<TABLE>
<CAPTION>
Classification Billing
Code Representative Titles Rate
-------------- --------------------- --------
<S> <C> <C>
A Senior Manager, Project Manager, Construction Manager, Chief Engineer, Superintendent, Senior $135.00
Engineering Specialist, Sr. Site Manager
B Manager, Sr. Lead Engineer/Scientist, Technology Specialist, Senior Project Engineer, Project $113.00
Engineer 2, Chief Estimator
C Lead Engineer/Scientist, Asst. Superintendent, Asst. Site Manager, Asst. Manager, Principal $97.00
Engineer/Architect, Lead Task Engineer, Principal Estimating/Project Controls Engineer,
Design Supervisor, Engineering Specialist
D Supervisor, Sr. Contract Administrator, Senior Engineer/Architect, Principal/Task Scientist, $82.00
Sr. Resident Engineer, Sr. Engineering Assistant
E Engineer 2, Sr. Scientist, Sr Lead Designer, Lead Programmer/Analyst, Asst. Supervisor, $75.00
Resident Engineer, Contract Administrator, Sr. Purchasing Agent, Sr. Estimating/Project
Controls Engineer
F Construction Engineer, Sr. Accountant, Sr. Consultant, Engineer 1, Scientist, Sr. Designer, $70.00
Sr. Administrator, Sr. Analyst, Sr. Inspector, Sr. Specialist, Estimating/Project Controls
Engineer 2
G Asst. Sr. Constr. Engineer, Sr. Safety Engr., Sr. Mat'l Controller, LP Nurse, EM Tech., $59.00
Accountant, Sr. Buyer, Programmer/Analyst, Designer, Administrator, Estimating/Project
Controls Engineer 1
H Asst. Constr. Engineer, Timekeeper, Buyer, Sr. Drafter, Admin. Assistant, Inspector 1, Sr. $49.00
Technician, Editor Writer, Expediter 2
I Safety Engineer, Party Chief, Paramedic, Drafter, Sr. Technical Assistant, Sr. Aide, $41.00
Technician
J Surveyor, Asst. Accountant, Asst. Auditor, Clerk, Jr. Drafter, Aide, Technical Assistant $34.00
</TABLE>
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Also in accordance with Stone & Webster's usual practice, expenses incurred for
the benefit of such Work including travel and living expenses of personnel away
from their home office, subcontractor costs (with a 5% administrative handling
charge applied), and any other direct costs incurred in connection with the
services will be charged. As noted above, non-local communication, postage,
computer and reprographic charges are included in the hourly rates and will not
be directly billed.
In addition to the Rate Table above, all other Work shall be invoiced as
follows:
An amount equal to Contractor's direct costs resulting from such Change In Work
less any savings or costs not incurred due to such delay, plus, for profit and
overhead, a fee equal to fifteen percent (15%$) of such costs, if such direct
costs (less savings or costs not incurred) are less than or equal to $10,000 or
equal to ten percent (10%) of such costs, if such direct costs (less savings or
costs not incurred) are greater than $10,000.
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EXHIBIT "S"
WARRANTY PROCEDURES
1. Where Owner determines that an immediate need exists or has agreed in
accordance with the terms of the Contract to take corrective action, and upon
notifying Contractor as set forth in SECTION 18.7 of the Contract, Owner may
undertake corrective action, but Contractor reserves its right to investigate
and determine the eligibility of such warranty claims. An "immediate need" is a
situation when there is a threat of imminent harm to persons or property or a
situation that could imminently adversely impact operating cash flow revenues
generated by the Project or the Existing Plants.
2. Where Owner does not take corrective action under paragraph (1) above, Owner
shall notify Contractor in accordance with SECTION 18.7 of the Contract and
provide documents per paragraph (3) below, together with a written cost estimate
of the corrective action required. Within seven (7) days after receipt of said
documents and cost estimate, Contractor shall investigate the defect and shall
issue written instructions to Owner on the corrective action to be undertaken,
or Contractor shall undertake corrective action by its own employees or agents.
3. The following procedures shall be observed in all Contractor warranty claims
for the Project in connection with which Owner has independently taken
corrective action as identified in paragraph (1) above:
(a) A failure report, which shall contain technical and logistical
information sufficiently detailed to enable Contractor to assess the damage of
the Work and to evaluate appropriate corrective action in the form as agreed to
by Owner and Contractor, shall be provided by Owner within a reasonable period
of time after the occurrence of any event giving rise to a warranty claim.
(b) Warranty claims shall be submitted in accordance with paragraph (e)
below, and shall include, as a required minimum, the following documents:
(i) applicable failure report;
(ii) list of equipment and materials purchased or used in
accomplishing the repair, schedule of operations, and subcontractors
hours applicable to each claim, and a copy of any internal work orders
or purchase orders prepared in connection with each such claim;
(iii) Owner's maintenance and repair records with respect to
the equipment for which the claim is being made, including the
manufacturer/vendor part number and serial number and the
identification by part number and serial number of the next major
assembly call out (such as, but not limited to, turbine, generator,
electrical cabinet); and
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(iv) copies of invoices received or prepared for costs and
expenses claimed.
The documentation to be provided pursuant to paragraphs (b) (ii) and
(b) (iii) above, shall be in a form reasonably acceptable action during any
calendar month shall be submitted to Contractor.
(c) All warranty claims pertaining to failure of the equipment for
which Owner has independently undertaken corrective action during any calendar
month shall be submitted to Contractor on or before the last day of the
following calendar month. Claims shall be paid by Contractor on a net 30 day
basis. Work performed by Owner under a warranty claim shall be billed on a time
and materials basis as further defined below:
(d) "Time and Material" in connection with a warranty claim is defined
as follows:
(i) With respect to "Time," the product of 110% of the normal
hourly wage (including fringe benefits, insurance and taxes) Owner
pays with respect to its particular employee (not including overhead)
multiplied times the number of hours each employee performed the
particular.
(ii) With respect to "Material," 110% of the actual purchase
price paid by Owner or an Affiliate to a third party for the materials
incorporated or consumed in connection with the Work; and
(iii) With respect to Work performed by a subcontractor (other
than an entity which directly or indirectly controls, is controlled
by, or is under common control with, Owner, Work done by any such
entity being deemed Work done by Owner through its own employees for
purposes of this definition), 110% of the actual amount paid by Owner
to the subcontractor for such Work.
(e) Accounting settlement between Owner and Contractor due to warranty
claims shall occur on a quarterly basis.
(f) Owner shall maintain adequate records to support all warranty
claims and allow a Contract audit of warranty claims upon not less than ten (10)
days' notice.
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EXHIBIT "T"
SALES CONTRACTS
1. Transmission Service Agreement, dated April 14, 1998, between Imperial
Irrigation District and Salton Sea Power L.L.C.;
2. Plant Connection Agreement, dated April 14, 1998, between Imperial
Irrigation District and Salton Sea Power L.L.C.;
3. Construction Agreement, dated April 14, 1998, between Imperial Irrigation
District and Salton Sea Power L.L.C.; and
4. Distribution Service Agreement, dated April 14, 1998, between Imperial
Irrigation District and CalEnergy Minerals LLC.
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EXHIBIT "U"
FORM OF ASSIGNMENT CLAUSE FOR SUBCONTRACTS
Capitalized terms used in this EXHIBIT "U" have the meanings given
thereto in the Contract of which this EXHIBIT "U" is attached.
[Subcontractor/Vendor] under this [description of subcontract/purchase
order] with hereby, in the event of a default by Contractor under, or the
expiration or termination of, the Salton Sea Unit 5 Engineering Procurement and
Construction Contract, dated August __, 1998, between Salton Sea Power L.L.C and
Contractor, consents to the assignment of `s rights and guarantees in this
[subcontract/purchase order] by _________________ to [Owner] , its assigns
and/or its lenders and their respective assigns and agrees that our warranties
and obligations hereunder shall inure to the benefit of such parties, all as if
such parties were a party to this [subcontract/purchase order].
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EXHIBIT "V-1"
CONTRACTOR ACQUIRED INSURANCE
Contractor shall maintain or cause to be maintained the following types of
insurance subject to the general provisions included in Exhibit "V-3":
(1) Insurance Against Accidents to Workmen.
Contractor shall maintain employer's liability and, to the extent
required by Applicable Law, workers' compensation insurance during the
entire time that any persons are employed by them on the Site in
connection with the Project.
(2) Motor, Marine and Aviation Insurance.
Contractor shall at all times keep in force the following additional
insurance in as far as they may be applicable:
(a) Policies of motor insurance in respect of all mechanically
propelled vehicles used on public highways or in any
circumstances such as to be liable for compulsory motor
insurance in accordance with Applicable Law of California. The
limit of liability shall not be less than US$5,000,000 per
occurrence.
(b) Marine policies in respect of all floating craft and plant or
marine platforms, if applicable, covering loss of or to such
items and liability arising out of their use to include not
only the hull value thereof, but also the cost of removing the
same in the event of sinking, whether or not the same is
declared a total loss, and including protection and indemnity
and third-party liability cover to an amount equal to the hull
value and estimated cost of removal in the event of sinking,
or US$5,000,000, whichever be the greater.
(c) Policies of aircraft insurance in respect of all aircraft
owned, hired or chartered for use, if any, and hull and
aviation liability shall be arranged. The limit of liability
shall not be less than US$5,000,000 per occurrence.
(3) All Other Insurance Required by Applicable Law.
(4) Insurance providing coverage for Contractor's own equipment being used
at the Site and not becoming permanent works of the Site.
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EXHIBIT "V-2"
OWNER ACQUIRED INSURANCE
SCHEDULE OF MINIMUM INSURANCE REQUIREMENTS
Owner shall maintain or cause to be maintained the following types of insurance,
subject to the general provisions included in Exhibit "V-3".
(1) Ocean Marine Cargo Insurance ("OMC") covering imports of plant,
equipment, machinery and materials to the Project site.
(a) Cover is to be on the basis of Institute Cargo Clauses (A)
plus war plus strike, riot and civil strife, perils and should
include a minimum of 60 days of storage on or off the Project
site. The 60-day storage provision may be included in the
contractors all risks insurance. The sum insured with respect
to each shipment shall not be less than the value of all
plant, equipment and supplies, plus insurance and freight
(CIF), with respect to such shipment. OMC coverage to include
all voyages (land, water or air) and attaches from the time of
leaving the manufacturers'/suppliers' warehouses (including
inland marine), to final Project Site.
The OMC policy shall carry a 50/50 hidden damage provision.
(b) Deductibles shall not be greater than $50,000 for any one
shipment.
(c) Owner shall have obtained such OMC coverage on or prior to the
date on which the exposure to the risk covered by the OMC
coverage arises.
The only permissible cancellation is as follows: (i)
cancellation on 7 days' notice for war, strikes, civil
commotion, (ii) cancellation on 48 hours' notice for strikes,
riots, and civil commotion preventing passage to or from the
United States, and (iii) cancellation on 10 days' notice for
non-payment of premium. The policy may be subject to the Five
Powers Clause.
(d) Coverage to continue during storage until CAR policy is in
force.
(e) This coverage required only if applicable.
(2) Contractors All Risks ("CAR") insurance covering loss or damage to the
Project during the construction, and testing and commissioning periods.
(a) The policy will include the interest of all parties concerned
and is to be on an "all risk" basis including (subject to the
sublimits as described below) earthquake, and
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flood losses. Coverage shall also include testing, extended
maintenance cover for the warranty periods, inland transit
and on and off-site storage (to the extent storage coverage
is not provided under the OMC policy).
The CAR policy and/or separate policies shall also include a
third-party liability section with a minimum limit of
indemnity of $10,000,000 per occurrence and in the aggregate
and should include full cross liabilities, including coverage
during the twelve (12) month period following Substantial
Completion.
Sub-limits are permissible as follow:
(i) As respect debris removal, inland transit, storage,
express freight, air freight and overtime, Owner
shall maintain limits of not less than $10,000,000.
(ii) As respects earthquake, and flood and storm (e.g.,
tsunami, typhoon), riot, strike, and civil strife,
Owner shall maintain limits of not less than 50% of
insurable limits for direct damage, subject to a
maximum limit of $70,000,000.
(b) Deductibles shall not be greater than $250,000 or 5% of
values, whichever is greater, for earthquake, flood, testing,
maintenance, subsidence and collapse, and $25,000 for all
other losses.
(c) Owner shall have obtained such CAR coverage on or prior to the
date on which the exposure to the risk covered by the CAR
coverage arises.
(d) The only permissible cancellation is as follows: (i) for
10 days non-payment of premium.
(3) Marine Delay in Start-up ("MDSU") and Delay in Start-Up ("DSU")
insurance covering a delay in start-up of the Project as a result of
damage and admissible claims under the policy during transit to the
Site, at any time during construction, testing and commissioning.
(a) The sum insured is based on an indemnity period of twelve (12)
months for interest charges (including additional interest in
the event of principal rescheduling as a result of an
admissible claim under the policy) and continuing fixed
expenses (defined as salaries and benefits, routine and major
maintenance, outside services, political insurance premiums,
and bank and consultants' fees and other fixed continuing
charges incurred by the Project). The sum insured will not
include any amounts based on lost profits.
V-2-2
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For MDSU, if applicable, the scope of cover follows that of
the OMC policy as described in paragraph (1) above. For DSU,
the scope of cover follows that of the CAR policy as described
in paragraph (2) above.
(b) In no event shall the deductible exceed 60 days.
(c) If applicable, Owner shall have obtained the (i) MDSU coverage
at the same time, in the same manner and to be subject to the
same conditions as specified for the OMC insurance, and (ii)
the DSU coverage at the same time, in the same manner and to
be subject to the same conditions as specified for the CAR
insurance.
(d) The MDSU coverage may, at Owner's option, be included in the
OMC insurance. The DSU coverage may, at Owner's option, be
included in the CAR insurance.
(e) MDSU required only if applicable.
(4) Other Insurance
(a) Workers' compensation coverage, including United States
workers' compensation, if required by Applicable Law.
(b) Employer's liability of not less than US$1,000,000 per
occurrence.
(c) Automobile liability and physical damage coverage, with
respect to owners automobiles at the Site, if any. The limit
of insurance shall not be less than US$5,000,000 per accident.
(d) Aircraft liability, if any, for all Owner owned, hired or
non-owned aircraft used in connection with construction of the
Project, to the extent not covered under EXHIBIT "V-1."
(e) All insurance required by Applicable Law.
The insurance described in this paragraph (4) shall be obtained on or
prior to the date on which the exposure to the risk covered thereby
arises or as required by Applicable Law.
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EXHIBIT "V-3"
GENERAL INSURANCE PROVISIONS
(1) All insurance shall be denominated in United States Dollars .
(2) All insurance may be carried through the worldwide insurance programs
of Owner or Contractor or their respective Affiliates.
(3) All insurance required to be maintained in EXHIBITS "V-1" and "V-2"
shall be endorsed to the effect that Owner, the Financing Entities, the
Contractor, any subcontractors and such other persons as Owner may
specify in writing shall be included as named insureds thereon (except
that Contractor and subcontractors shall not be named insured on MDSU
or DSU policies). Third party liability policies shall provide for a
cross liability clause. Vendors, suppliers, material dealers and others
who merely transport, pick up, deliver or carry materials, personnel,
parts or equipment, or any other items or persons to or from the Site
shall not be considered "subcontractors" for purposes of insurance
coverage and this paragraph (3).
(4) In the event any insurance described herein (including the limits or
deductibles thereof), other than insurance required by Applicable Law,
shall not be available on commercially reasonable terms in the
commercial insurance market for facilities having a similar risk
profile, the Parties shall consent to waive the requirement to maintain
such insurance to the extent the maintenance thereof is not so
available on such terms, but the Parties shall continue to remain
obligated to maintain any such insurance up to the level, if any, at
which such insurance can be maintained on commercially reasonable terms
in the commercial insurance market for facilities with a similar risk
profile.
(5) Loss payable wording shall be reasonably acceptable to the Financing
Entities.
(6) Unless specified above, no insurance shall be canceled or reduced with
respect to the interest of the Financing Entities without 30 days (10
days nonpayment of premium) prior written notice. In the event of
cancellation due to nonpayment of premium, the Financing Entities shall
have the right to make payments in order to keep insurance in force.
(7) All insurance required to be maintained in accordance with EXHIBITS
"V-1," "V-2" and "V-3" shall be placed with financially sound and
reputable insurers and with coverage forms acceptable to the Parties
and the Financing Entities.
V-3-1
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EXHIBIT "W"
SITE DRAWINGS
Site Layout, Drawing No. 08051 - EM - 1A, Revision 1.
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EXHIBIT "X"
OWNER'S LAND RIGHTS AGREEMENTS
1. Those documents, agreements, easements and rights of way listed as items 1,
3, 4, 5, 6, 11 and 13 in Schedule B of the Preliminary Report, dated as of
February 23, 1998, by Commonwealth Land Title Company, a copy of which
report has been provided to Contractor and is incorporated herein by
reference;
2. Those documents, agreements, easements and rights of way listed as items
24, 25 and 26 in Schedule B of the ALTA Loan Policy, dated as of October
17, 1992, by Chicago Title Insurance Company, a copy of which report has
been provided to Contractor and is incorporated herein by reference; and
3. Those easements and rights of way depicted on those portions of the 1993
ALTA survey prepared by Tesco Technical Engineering & Surveying Co., which
were provided to Contractor by letter dated August 3, 1998 from Vincent
Signorotti of CalEnergy Company, Inc. to Mr. Fred McCoy of Contractor.
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EXHIBIT "Y"
EXISTING PLANT SCHEDULE
OUTAGE ACCESS
The following Salton Sea units will be available to Contractor for Work, that
will or might reasonably be expected to interfere with or disrupt the operations
of any such Existing Plant, only during the entire applicable time periods
listed below (except as provided in Note 1 below), unless such time periods are
modified based on mutual agreement between Owner and Contractor:
<TABLE>
<CAPTION>
1999 UNIT 1 UNIT 2 UNIT 3 UNIT 4
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Schedule Downtime
YEAR 1999
Duration (Days) 0 5 16 16
Starting Date & Time 0 2/20/99 0:00 2/20/99 0:00 2/20/99 0:00
Ending Date & Time 2/24/99 11:59 3/7/99 23:59 3/7/99 23:59
Duration (Days) 11 0 0
Starting Date & Time 2/25/99 23:59
Ending Date & Time 3/7/99 23:59
YEAR 2000
-------------------------------------------------------------------------------------------------------
Duration (Days) 21 21 21 21
-------------------------------------------------------------------------------------------------------
Starting Date & Time 2/12/00 0:00 2/12/00 0:00 2/12/00 0:00 2/12/00 0:00
-------------------------------------------------------------------------------------------------------
Ending Date & Time 3/4/00 11:59 3/4/00 11:59 3/4/00 11:59 3/4/00 11:59
-------------------------------------------------------------------------------------------------------
</TABLE>
Note 1: For each of the above outages, the first 24 hours of such period will be
used to cool down the brine system and the last 24 hours of such period will be
used to heat up such brine system, which activities will take precedence and may
limit activities by Contractor.
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EXHIBIT "Z"
RESERVED
Z-1
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EXHIBIT "AA"
OWNER FURNISHED ITEMS
Equipment*
One (1) Diesel Generator Set, Complete
Three (3) Existing Brine Injection Pumps with VFD's
Three (3) Existing Brine Booster Pumps (to be modified by Contractor)
Two (2) Filter Feed Pumps
Seven (7) Acid Mixing Spools
Spare/Unused Motor Starters on Unit 3 Emergency Bus 306
Miscellaneous Materials
Common backfill material (from land designated by Owner near the Project or the
Existing Plants) not to exceed 30,000 cubic yards. Contractor shall be
responsible for excavating such material and moving it to the site. No guarantee
regarding suitability is intended or implied by Owner. Contractor must verify
suitability of material with respect to its intended use.
Ten (10") inch diameter used drill casing for use as pipe piles. Contractor
agrees to pay Owner for the cost of cleaning such pipe for such use.
Documentation
Brine PVT Program
* See Exhibit A for more specific description.
Note: All equipment and material furnished by Owner shall be free of
contamination.
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EXHIBIT "AB"
Reserved
EXHIBIT "AC"
Reserved
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EXHIBIT "AD"
CALENERGY SAFETY PROGRAM
SAFETY
Contractor employee's shall adhere to safety requirements of Owner at all times,
during the performance of this contract, while on Owner premises (Reference
Appendix A). Contractor employees shall attend safety training indoctrination
with Owner's Safety Department prior to commencement of work on Owner premises.
Contractor shall supply all Contractor employee's with required safety
equipment. Contractor and its employee's shall follow all federal, state, and
local laws, rules, regulations, or ordinances (collectively, "Applicable Law").
Contractor is responsible to maintain all necessary items for worker
communication and CAL OSHA Incident Prevention Program (SB198). In the course of
doing business, Owner purchases and generates hazardous materials. During the
course of performing contracted activities, Contractor employee's may work
directly or indirectly with one of these materials. Specific hazardous materials
produced at Owner's facilities are:
1. Geothermal Scale
2. Geothermal Brine
3. Geocrete
Once removed, these materials are classified by Owner as California Hazardous
Wastes. Attached are copy(ies) of Owner's Material or Information Safety Data
Sheet(s) for materials relevant to this Contract activities.
In the course of performing contracted activities, Contractor will be
responsible for performing contracted activities and protecting Contractor
employees against exposures to all hazardous materials as required by applicable
regulations, including California Title 8 and Federal 29 CFR. In order of
regulatory preference, methods for limiting employee exposure to hazardous
materials are:
1. Engineering Controls
2. Administrative Controls
3. Personal Protective Equipment (?PPE?)
Contractor will be responsible for designing, implementing, and enforcing any
exposure protective controls required during the performance of the contracted
activities. Owner has established minimum standards for Owner employee's and
Contractor may use this standard as a guide (Reference Appendix B). Owner?s PPE
Standard was prepared without specific and detailed knowledge of how Contractor
performs the contracted activities. Contractor shall provide additional PPE
Standards, in excess of Owner's standard, as Contractor activities may require
in order to comply with applicable regulatory exposure standards.
Contractor, not Owner, shall be legally and financially liable if Contractor's
employees are endangered by exposure to hazardous materials or are otherwise
injured while performing contracted activities. Contractor shall indemnify and
hold Owner harmless from and against any third party claims or other loss
suffered by Owner (including attorneys fees) relating to Contractor activities.
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Contract activities covered under Owner's Personal Protective Equipment (PPE)
Standard:
Activity Hazardous Material Exposure Path
-------- ------------------ -------------
Hydroblasting Geothermal Scale Aerosol Inhalation
Geothermal Scale Spray Inhale/Ingest
Welding Welding Fumes Inhalation
Geothermal Scale Fumes Inhalation
Sandblasting Blasting Media Inhalation
Geothermal Scale Dust Inhalation
Scaffold Bldg. Geothermal Scale Dust Inhalation
FITNESS FOR DUTY PROGRAM
The use, possession, concealment, transportation, promotion or sale of the
following items or substances is strictly prohibited from all premises by Owner,
Contractor and other invitees:
ILLEGAL DRUGS
ILLEGAL DRUGS, CONTROLLED SUBSTANCES, LOOK-ALIKE, DESIGNER AND SYNTHETIC DRUGS
AND ANY OTHER DRUGS WHICH MAY AFFECT AND EMPLOYEE'S SENSES OR MOTOR FUNCTION.
With respect to the substances described in this paragraph A, it shall be a
violation of this policy for any employee, or other invitee, to report for duty,
come on Owner premises, or work while having a detectable amount of any of these
substances in the person's system.
ALCOHOLIC BEVERAGES
Alcoholic beverages - except as specifically authorized by Owner in advance.
With respect to alcohol, it shall be a violation of this policy for any employee
or invitee to report for duty, come on the premises of Owner or its affiliates,
or work while under the influence of alcohol.
FIREARMS, WEAPONS, AND EXPLOSIVES
Firearms, weapons, explosives and ammunition - except as specifically authorized
by Owner in advance.
UNAUTHORIZED ITEMS
o Stolen Property
o Drug Paraphernalia
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ENVIRONMENTAL CLEAN-UP
Contractor is responsible for the prompt cleanup of the work area to the
reasonable satisfaction of Owner. Contractor's cleanup responsibilities shall
include (without limitation):
A. Removal of Contractor equipment and supplies.
B. Removal of Contractor generated trash.
C. Clean up of Contractor generated ?Hazardous Waste? (drums, recycle oil,
etc.,) including without limitation, cleanup of ground contamination due
to oil spills, tank overflows, or other cleaning activity
D. Any other items found that are a result of or related to the
Contractor?s activity.
"Hazardous Waste? is defined to be any substance, constituent or waste
subject to environmental regulation under any applicable federal, state,
or local law, rule, regulation, or ordinance (collectively, ?Applicable
Law?).
Contractor has the responsibility for the cleanup and disposal of Hazardous
Waste in accordance with all Applicable Law, and will indemnify and hold Owner
harmless for any and all costs or losses suffered by Owner in connection with
such Hazardous Waste. Copies of any completed manifest(s) for shipping Hazardous
Waste to treatment or disposal facilities shall be given to Owner, as proof of
completion. Contractor shall promptly cleanup the area at his expense; and Owner
shall retain ten (10) percent of contract amount until (mutually agreed)
completion of such cleanup and disposal activities.
BARREL REMOVAL
Contractor will be responsible for the proper removal/disposal of all Contractor
barrels/containers from work site and Owner reserves the right to hold all
payments due Contractor until such time that all barrels/containers have been
properly removed by mutual agreement.
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OUTSIDE CONTRACTOR
REQUIREMENTS
REQUIREMENTS THAT MUST BE MET BEFORE AN OUTSIDE CONTRACTOR
CAN BEGIN WORK.
1. CALL PURCHASING TO VERIFY CERTIFICATE OF INSURANCE (PHONE # (760) 348-4000).
IF CONTRACTOR IS NOT ON FILE, CONTRACTOR CAN FAX THE CERTIFICATE OF
INSURANCE TO PURCHASING (FAX # (760) 348-2714). FOR OFF-SHIFT OR WEEKENDS,
FAX THE CERTIFICATE TO THE FOLLOWING FAX #?S 24 HOURS PER DAY, 7 DAYS A
WEEK.
VULCAN (760) 348-4042
DEL RANCH (760) 348-4056
ELMORE (760) 348-4071
LEATHERS (760) 348-4086
DRILLING DEPT. (760) 348-4022
UNITS 1,2,3 & 4 (760) 348-4186
2. ISSUE "OUTSIDE CONTRACTOR REGULATIONS" TO CONTRACTOR AND HAVE HIM/HER READ
AND SIGN PRIOR TO PERFORMING WORK.
3. SEND SIGNED ?OUTSIDE CONTRACTOR REGULATION? TO SAFETY/TRAINING. IF BUSINESS
IS DONE ON WEEKENDS OR OFF SHIFT TIMES SEND DOCUMENT AT THE START OF THE
NEXT WORKDAY.
SEE ATTACHMENT #1
4. CONTRACTOR WILL BE REQUIRED TO RE-SIGN "OUTSIDE CONTRACTOR REGULATION" WHEN
CERTIFICATE OF INSURANCE IS RENEWED.
5. IF THE SUB-CONTRACTOR WILL BE USING CALENERGY OR PARTNERSHIP EQUIPMENT, THEY
MUST READ AND SIGN THE SUBCONTRACTOR INDEMNIFICATION AGREEMENT. THE USE OF
OUR EQUIPMENT BY VENDORS SHOULD BE THE EXCEPTION, NOT THE RULE.
6. SEND SUB-CONTRACTOR INDEMNIFICATION AGREEMENT TO SAFETY/TRAINING. IF
BUSINESS IS DONE ON WEEKEND OR OFF SHIFT TIMES SEND DOCUMENT AT THE START OF
THE NEXT WORK WEEK.
SEE ATTACHMENT #2
NOTE: NORMALLY NO OUTSIDE CONTRACTOR IS TO BE ALLOWED ON THE PREMISES OF
CALENERGY OPERATING COMPANY OR ITS AFFILIATES WITHOUT CERTIFICATE OF
INSURANCE. IF CERTIFICATE OF INSURANCE IS NOT OBTAINABLE DUE TO WEEKEND,
TIME OF DAY OR HOLIDAY, MANAGEMENT MUST BE CONSULTED BEFORE CONTRACTOR CAN
START WORK.
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OUTSIDE CONTRACTOR REGULATIONS
INDEMNIFICATION AGREEMENT
To ____________________, if you and your company are successful bidders
at CalEnergy Company, you and your company will be expected to abide by and
enforce the "Safety Regulations for Contractors."
We are very concerned about the safety and health of all contractor
employees. For this reason, successful general contractor will receive an
indoctrination in both the general safety rules for the site and any specific
rules which are applicable to the plant area in which they will be working. The
contracting firm is responsible for assuring that each of their employees on the
job has received the safety indoctrination and a plant indoctrination BEFORE
beginning work.
CalEnergy's safety representative and/or construction inspectors may at
times be talking with you and your co-workers about the environment in which
they will be working. If you have any questions, at any time, contact our
representative. They will be more than willing to answer any questions you have
and assist you.
The following pages contain the general safety rules required at this site.
WORK SAFELY......
James T. Turner
General Manager
Imperial Valley Operations
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OUTSIDE CONTRACTOR REGULATIONS
ENTRANCE INTO THE PLANT
Each general contractor must provide each subcontractor with a copy of the
"Plant Regulations for Contractors". Each general contractor will be issued a
set of numbered badges for his employees and subcontractors. New employees will
normally be required to attend a site orientation their first morning on the
job.
Contractors approved to work within the plant shall enter through the Main Gate
between _____A.M. and _____A.M.; and exit through the Main Gate between
_____P.M. and _____P.M. The general contractor's superintendent shall notify the
representative, no later than noon of any working day, of weekend or overtime
work so that admittance can be arranged. A parking lot is designated for the use
of contractors. For reasons of safety, the general contractor's personnel will
be denied admittance to areas not necessary for the performance of the job.
Only those persons having a business relationship with the general contractor
will be admitted to the job site. The general contractor's superintendent or his
representative will come to the Guard Office, register the visitor, and take him
to and from the job site. The general contractor's superintendent is responsible
for the visitor while in the plant and the visitor must be under contractor
supervision escort at all times.
When a plant guard office does not exist, the visitor must report to the plant
secretary. The plant secretary will notify the general contractor's
superintendent of the arrival of any visitors. Only those persons having a
business relationship with the general contractor will be admitted to the job
site. The general contractor's superintendent or his representative will come to
the plant secretary's office. Register the visitor and take him\her to and from
the job site. The general contractor's superintendent is responsible for the
visitor while in the plant and the visitor must be under contractor supervisor's
escort at all times.
No firearms, explosives, alcoholic beverages, or unauthorized drug are allowed
in the plant. Pictures may not be taken on property except with Plant
Superintendent's permission.
DEFINITIONS
Visitor - a non CalEnergy (Owner) employee entering into the plant for a short
period of time and usually unfamiliar with the procedures within the plant. A
visitor must be escorted at all times while within the plant by a Owner employee
or by a contractor supervisor approved to work within the plant.
Contractor Employee - a non Owner employee working for a contractor; usually
unescorted by an employee while in the plant. The distinction between a visitor
and a contractor is that the contractor employee works for a general contractor
or subcontractor and has been granted permission to work within the CalEnergy
plant.
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SAFETY INDOCTRINATION AND SAFE WORK PERMITS
The general contractor is responsible for seeing that each contractor employee
on each job has received a safety indoctrination and a plant indoctrination
BEFORE beginning work. Any contractor employees added after the job starts shall
have the same indoctrination. The indoctrination shall be scheduled with the
representative BEFORE putting the new employee on the job. Advance communication
to the representative by the contractor concerning the need for additional
indoctrination may minimize waiting time while the indoctrination are being
scheduled. The indoctrination will normally take minutes and will be presented
in English. If non-English speaking contractor employees require indoctrination,
the contractor is responsible for supplying a translator.
CONTRACTOR SAFETY PROGRAM
General contractors shall submit to the representative a proposal of the safety
program to be in effect which shall include all subcontractors. "Tail-gate"
safety sessions of 15 - 30 minutes duration each week are mandatory for all
contractor employees. The contractor's safety meeting schedule shall be given to
the representative so that he may also attend the meeting if desired. The
assigned construction inspector, plus the plant superintendent, and/or safety
manager may be invited to these meetings to answer questions or discuss a
specific topic. The weekly safety meeting course sign-up sheet must be
completed. The plant superintendent and/or safety supervisor will verify that
the meetings have been conducted.
SAFETY POLICY
All work shall be conducted in accordance with the State of California
Construction Safety Orders as covered in the California Administration Code,
Title 8, Industrial Relations, and United States Department of Labor Code of
Federal Regulations, for Construction and CalEnergy Operating rules, regulations
and policy.
SAFETY EQUIPMENT AND CLOTHING
The general contractor shall be responsible for knowing and enforcing special
owner area or job rules requiring special personnel protection. This information
is usually given with the job specifications as well as in the safety
indoctrination. General contractor shall ensure that each contractor employee
equipped with the required and approved personal protective equipment and shall
enforce its use. Approved shall mean that the equipment is manufactured in
accordance with the appropriate American National Standards Institute (ANSI), or
the National Institute for Occupational Safety and Health (NIOSH) standard.
ALL CONTRACTOR PERSONNEL SHALL WEAR AN APPROVED HARD HAT AND SAFETY GLASSES AS
MINIMUM PERSONAL PROTECTION EQUIPMENT AT ALL TIMES IN AND AROUND THE WORK SITE.
HARD HATS SHALL NOT BE ALTERED FOR ANY PURPOSE.
NOTE: If Contractor personnel don't have minimum personal protection equipment,
it may be supplied by Owner. Such costs will be charged to the contractor.
Approved safety glasses are the minimum eye protection requirement on all
contractor jobs at all times, with exceptions of offices, control rooms, lunch
rooms, cafeterias, or in vehicles with enclosed cabs.
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The wearing of contact lenses is prohibited where eye protection is required
unless specifically approved in writing by the representative. If contact lenses
are approved, chemical goggles shall also be worn as minimum eye protection in
required eye protection areas of the plant.
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Approved chemical goggles are required for working in or entering certain
chemical areas which are posted with signs, or while opening any pipeline
regardless of the material contained in the line. All contractor employees
working in the vicinity of Brine Steam and chemicals must know where the nearest
safety shower and eye bathing facilities are located and how to use these
facilities.
A face shield must be worn over safety glasses or chemical goggles when
chipping, using grinders, buffers, friction cut-off saws, impact chisels, and
steam cleaning. A hood with approved tint lens must be worn whenever welding.
Safety glasses must be worn in addition to the hood. Each contractor employee is
expected to wear personal clothing that is safe and proper for his job.
Contractor employees other than office employees shall wear a minimum of a shirt
with sleeves and long trousers while on the job. Conventional leather, or
equivalent, shoes in good repair are minimum foot wear in plant areas. (CANVAS
SHOES, SNEAKERS, SANDALS, HOUSE SHOES, ETC., DO NOT PROVIDE ADEQUATE PROTECTION
AND THEREFORE ARE PROHIBITED.) NO BARE FEET OR THONGS ARE ALLOWED IN THE PLANT.
Safety shoes are recommended.
Where there is a danger of falling more than four feet from one level to
another, safety belts or harnesses, with lifelines attached, are to be worn by
contractor employees where the use of scaffolds with handrails or ladders is
impractical. Ladders shall be used only in cases where the operation to be
performed does not require excessive force, the person can face the ladder while
doing the job, and the ladder is either held by another person or tied off to
prevent falling over.
REPORTING EMERGENCIES
All emergencies including chemical spills, gas releases, fires, brine spills and
medical should be reported to the plant control operator, safety supervisor and
plant superintendent.
POTENTIAL HAZARDS
The general contractor is responsible for ensuring that Contractor Material
Safety Data Sheets (MSDS) for all materials the employee will be working with
are available at the work site. The general contractor must see to it that all
contractor employees read the MSDS Sheets and are aware of all hazards.
CalEnergy Operating Company will have MSDS available for all materials
contractor is exposed to.
GAS OR LIQUID RELEASE
If a release occurs which could affect personnel, a contractor verbal
notification by a representative or by an announcement over the plant speaker
system will be conducted immediately.
When notified of a release, all contractor employees must immediately stop what
they are doing and shutdown all operating equipment. They should observe the
wind direction then proceed to go cross wind and upwind away from the source of
the release to an assembly area. Workmen will evacuate all vessels and tanks.
The contractor's supervisor is responsible to assure that all contractor
personnel are accounted for and are in secure location.
Personnel in vehicles on the road should proceed with caution to their
evacuation area while being observant for emergency vehicles. They shall then
assemble in the designated assembly area and remain there until the all clear is
given. The representative will determine if work permits must be reissued prior
to start of work. Contractor employees should report any discomfort due to gas
inhalation to your supervisor.
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NOTE: It is possible that contractor personnel may be the first people to
detect a release problem. If plant conditions change and present
potential added risks to the job, pull back to a safe area and ask
questions to check the plant status.
FIRE
In the event of notification of a fire, the contractor's supervisor will be
responsible for assuring that all contractor employees have evacuated in
accordance with the instructions provided in the pre-job safety check. All fires
are to be reported immediately regardless of the size. Notify the control
operator. Stay on the line until the message is understood and confirmed.
Contractors will be expected to furnish fire extinguishers on welding machines.
Fire lanes and hydrants shall be kept free at all times.
TRANSPORTATION WITHIN THE PLANT
The contractor must obey all traffic signs. The maximum speed limit is 15 MPH.
The number of people who may ride in a pickup truck is limited to the number of
installed and operable seat belt systems in the cab of a standard pickup and two
in the cab of a mini pickup plus the number that can be seated on the floor of
the pickup bed, or on "built-in" seats. Seat belts in the cab or car must be
worn at all times within the plant.
HOUSEKEEPING
The contractor is charged with the responsibility of maintaining "good
housekeeping". The work area should be kept as clean as possible during the
course of the job. It is absolutely required that the area be left in a safe
condition when leaving for the day. No un-barricaded excavations will be left
open; hoses left stretched out; welding rod stubs left scattered, etc.
Conditions that can become problems are tripping hazards, pathways blocked,
cords or other items left on stairs, ladders not tied off, and material that can
fall.
MISCELLANEOUS SAFETY RULES
Horse-play in any form must not be engaged in by anyone in the plant.
Running in the plant is forbidden except in the case of an emergency.
All portable containers such as bottles, jugs, or cans must be labeled as to
contents.
Chemicals - solvent, brine, oils must not be dumped into drains, ponds, or on
the ground. Disposal of any material must be done with prior approval of
operations supervisor.
Contractors must not make inoperative safety devices such as relief valves,
deluge valves, electrical and mechanical interlocks, guards, seat belts, etc.,
except for maintenance and testing with approval of the safety representative.
Before working on rotating equipment, electrical services, opening or tying into
pipelines, red danger tagging and lockout procedures must be followed.
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Red danger tags state that the tagged equipment will not be operated. This means
for instance, it is a violation of the standard to try to better close (i.e.
operate) a leaking but closed valve. Correct procedure is to contact the person
responsible for the tag and get the tag removed prior to any operation.
COMPLIANCE OF SAFETY REGULATIONS
All contractor employees shall observe all safety rules required in the area. It
is the general contractor's responsibility to enforce these rules. The general
contractor's responsibility extends to all subcontractors and their work force.
Failure of any contractor employee to fully comply with the safety regulations
above shall constitute sufficient cause for CalEnergy Operating Company to
exclude that contractor employee from the plant site. Upon receipt of
notification from CalEnergy Operating Company of such breach of safety
regulations and its election to exclude the contractor employee, the general
contractor will immediately withdraw the employee from the plant site.
FIRST AID
The following steps should be taken if accident occurs involving injuries.
1. Survey the scene make sure the area is safe for you to enter. Move
victim only if hazards for the victim exist.
2. Check the A,B,C
A. AIRWAY - Check to see if it is blocked.
B. BREATHING - Use artificial respiration.
C. CIRCULATION - Use CPR if necessary.
3. Call E.M.S. (Emergency Medical Service) for help.
A. E.M.S. Phone Number 9-911
B. WHAT HAPPENED and how many are hurt, also be prepared to give
ages and general health of victim if possible.
C. Give E.M.S. location of accident:
VULCAN LEATHERS
7001 GENTRY RD. 342 WEST SINCLAIR RD.
CALIPATRIA, CA 92233 CALIPATRIA, CA 92233
(760) 348-4030 (760) 348-4080
DEL RANCH CENTRAL SERVICES
7029 GENTRY ROAD 480 WEST SINCLAIR ROAD
CALIPATRIA, CA 92233 CALIPATRIA, CA 92233
(760) 348-4055 (760) 348-4000
ELMORE DESERT VALLEY Co.
786 WEST SINCLAIR RD. 3301 WEST HWY 86
CALIPATRIA, CA 92233 BRAWLEY, CA 92227
(760) 348-4070 (760) 339-4010
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UNITS 1&2 UNITS 3 & 4
6920 LACK RD. 6922 CRUMMER RD.
CALIPATRIA, CA 92233 CALIPATRIA, CA 92233
(760) 348-4160 (760) 348-4151
SALTON SEA ADMIN. BLDG.
950 WEST LINDSEY RD.
CALIPATRIA, CA 92233
(760) 348-4000
D. Know phone number of nearest phone (see above). Always be the
last to hang up.
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SAFETY PERMIT FOR WORK REQUIRING SPECIAL PRECAUTIONS
-------------------------------------------------------------------------------
Prior to commencing any work, all precautionary measures shall be completed. The
Control Operator is responsible for completion and issuance of this permit and
indicating all hazards or conditions involved and any protective equipment or
measures needed. If the worker(s) have any questions about the safety of the
job, the Control Operator should be consulted. The Safety Supervisor may be
called for assistance at any time.
PINK COPY MUST BE IN POSSESSION AT JOB SITE
--------------------------------------------------------------------------------
Job Description Hazardous Conditions Time %0(2) %LEL
--------------------------------------------------------------------------------
CALENERGY OPERATING COMPANY
SAFETY DEPARTMENT
PHONE LIST
BOB POTT
MOBILE (760) 337-3509
WORK EXT. (760) 348-4276
HOME (WK DAYS) (760) 337-1936
HOME (WK ENDS) (520) 634-4764
JIM SULLIVAN
HOME (760) 344-8492
WORK (760) 348-4277
BEEPER (619) 968-2567
SAFETY VAN (760) 337-3623
FRED STEELE
HOME (760) 348-9728
WORK (760) 348-4270
BEEPER (619) 968-2562
MOBILE (760) 337-3505
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GEOTHERMAL FILTER CAKE INFORMATION/SAFETY Page 1 of 5
DATA SHEET June 16, 1997
Rev. 3
CalEnergy Operating Company
950 W. Lindsey Rd.
Calipatria, CA 92233
Phone: (760)348-4000
1. GEOTHERMAL FILTER CAKE (including mixture containing filter cake such as
geothermal concrete).
2. COMPOSITION (Average concentrations)
Major Elements Probable Compound (Percent)
--------------------------------------------------------------------------------
Silicon (Amorphous) (SiO2+Silicates) 62
Iron (Fe3O4+FeSiO4) 15
Barium (BaSO4+BaCl2) 4
Calcium (CaSO4+CaCO3) 3
Minor Components Probable Compound (PPM)
--------------------------------------------------------------------------------
Sodium (NaCl) 6000
Strontium (SrSO4) 6000
Manganese (MnSO4) 3500
Potassium (KCl) 1300
Arsenic (AsS2+FeAs2) 300
Copper (CuS) 250
Zinc (ZnS) 130
Trace Components Probable Compound (PPM)
--------------------------------------------------------------------------------
Lead (PbS) 30
Antimony (SbS) 10
Beryllium (BeS) 10
Cobalt (CoS2) 4
Nickel (NiS) 1.5
Chromium (CrS) 1
Silver (AgS) 0.4
Cadmium (CdS) 0.2
Radionuclides
Radium 226 RaSO4 200 pCi/g
Radon 222 Free Rn 40 pCi/g
Lead 210 PbSO4 173 pCi/g
Radium 228 RaSO4 160 pCi/g
Thorium 228 ThSO4 40 pCi/g
3. CHEMICAL AND PHYSICAL PROPERTIES
A. General - Filter cake is generated by a controlled precipitation
process and is removed from the spent brine stream by filter press,
centrifuge or other separation processes. A representative composition
is presented below. Because environmental and industrial hygiene
regulations are compound specific, the probable compounds in the filter
cake are also presented above.
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GEOTHERMAL FILTER CAKE INFORMATION/SAFETY Page 2 of 5
DATA SHEET June 16, 1997
Rev. 3
B. Appearance - A very fine powder-type material, color is light green,
however, the color can range from a light rust color to black. Average
particle size is less than 10 microns.
DENSITY: Average - 2200 lbs/cubic yard
SOLUBILITY IN WATER: Insoluble in water
ODOR: None have been noticed
4. FIRE AND EXPOSITION HAZARD DATA
No hazard due to fire or explosion expected
5. REACTIVITY DATA
STABILITY: Material is stable under ordinary conditions
INCOMPATIBILITY: No incompatibilities have been noticed
HAZARDOUS DECOMPOSITION PRODUCTS: At very high temperatures the
materials may emit sulfur oxide gases and metal fumes.
HAZARDOUS POLYMERIZATION: No polymerization will occur
6. EXPOSURE GUIDELINE
A review of exposure guidelines for all the components of filter cake
was performed. Atmospheric levels should be maintained below the
following exposure standards:
Arsenic: OSHA PEL: TWA 0.01mg(As)/M3
Beryllium: OSHA PEL: TWA 0.002mg(Cd)/M3
Cadmium: OSHA PEL: TWA 0.2mg(Cd)/M3
OSHA is also proposing new limits for Cadmium (FR,
Vol 55, No 25, Feb. 6, 1990, Page 4052)
OSHA PEL: TWA 5ug(Cd)/M3 or
1ug(Cd)/M3
Lead: OSHA PEL: TWA 0.05Mg (Pb)/M3
Nickel: OSHA PEL: TWA 1.0Mg(Ni)/M3 (insoluble salts)
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GEOTHERMAL FILTER CAKE INFORMATION/SAFETY Page 3 of 5
DATA SHEET June 16, 1997
Rev. 3
Radium: California Department of Health Services (CDOHS) has
set air concentration standards, maximum permissible
concentrations (MPC), for Radium (Ra) 226 at 5E-11
uCi/ml of air. A significant daughter product of the
RA 226 decay chain is Lead 210 which has a MPC value
of 1E-10 uCi/ml of air.
In the Ra 228 decay chain the CDOHS has set the MPC
for Ra 228 at 4E-11 uCi/ml of air. A significant
daughter product of the Ra 228 decay chain is Thorium
228 which has a MPC value of 6E-12 uCi/ml of air.
MPC values in the air are based on internal doses due
to inhalation. In addition, CDOHS has established
external dose limits as follows:
Rems per Calendar
Quarter
-----------------
Whole Body 1.25
Hand, forearms, feet and ankles 18.75
Skin of the whole body 7.5
7. HANDLING PRECAUTIONS AND PROTECTIVE EQUIPMENT
These recommended precautions are intended for use during normal
operating conditions. Emergency/upset conditions could require
additional precautions. (For an explanation of the low, moderate and
high potential exposure categories or specific recommendations for your
specific operation, contact the Safety Department.)
EYE
Low - Use Safety glasses
Moderate/High - Use chemical goggles
SKIN
Low - No precautions other than clean body covering clothing
Moderate/High - Use boots and gloves
INHALATION
Low/Moderate/High - Atmospheric levels should be maintained
below the exposure guidelines. Use respiratory protection when
in filter cake handling operations and areas. Clean or dust
clothing, boots and gloves before leaving work area.
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GEOTHERMAL FILTER CAKE INFORMATION/SAFETY Page 4 of 5
DATA SHEET June 16, 1997
Rev. 3
INGESTION
Use good personal hygiene. Do not consume or store food and
drink in the work area. Wash hands before smoking or eating.
Clean body covering clothing, boots, and gloves after
handling.
VENTILATION
Provide general and/or local exhaust ventilation to control
airborne levels below the exposure guidelines.
PROTECTIVE EQUIPMENT INFORMATION
There is no respirator test data available for this material.
Data for related materials indicate that the following should
be effective types of air-purifying respirators: dusts and
radionuclides.
8. EMERGENCY TREATMENT AND MEDICAL NOTES
EYE
Irrigate immediately with water for at least 15
minutes; mechanical effects only
SKIN
Wash off in flowing water or shower
INGESTION
Refer to Physician
INHALATION
Refer to Physician
9. POTENTIAL HEALTH EFFECTS
This section includes possible adverse effects which could occur if
this material is not handled in the recommended manner.
EYE
May cause moderate eye irritation
SKIN
May cause moderate skin irritation
INGESTION
May cause toxic effects
ACUTE INHALATION:
Vapors are unlikely due to physical properties. Excessive
exposure may cause irritation of the eyes, upper respiratory
tract and lungs.
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GEOTHERMAL FILTER CAKE INFORMATION/SAFETY Page 5 of 5
DATA SHEET June 16, 1997
Rev. 3
CHRONIC EFFECTS/CARCINOGENICITY
The following components of filter cake are known to The State
of California to cause cancer: Arsenic, Cadmium, Beryllium,
Nickel, and Radium (decay chain).
TERATOGENIC EFFECTS
There are some positive animal teratogenic tests for several
of the components of filter cake.
REPRODUCTIVE EFFECTS
Lead is known to the State of California to cause reproductive
toxicity.
MUTAGENICITY
There are some positive mutagenicity tests for several of the
components of filter cake.
10. ENVIRONMENTAL AND DISPOSAL INFORMATION
ACTION TO TAKE FOR RELEASES:
Reclaim all the material which was released. For any
filter cake releases refer to CalEnergy Operating Company's
Business Plan for local agency notification. If more than
3,300 lbs. of filter cake have been released to the
environment, then EPA also has to be notified within 24 hours
at 1-800-424-8802 (The National Response Center).
DISPOSAL METHOD:
Filter cake should not be disposed of, but reclaimed
and stored in a safe and proper manner. If filter cake
needs to be disposed of, contact CalEnergy Operating
Company's Environmental Manager.
<PAGE>
EXECUTABLE COPY
PERSONAL PROTECTIVE EQUIPMENT STANDARD (PPE)
These PPE standards are minimum protections only and should not be relied upon
as adequate to safeguard the health and safety of Contractor's employees. These
PPE standards were prepared without detailed knowledge of how Contractor
performs the contracted activities and should be viewed as only a starting point
in Contractor's establishment of appropriate protection standards.
I. GENERAL
A. Open Area Work: Good housekeeping can play an important role in
controlling airborne particulates. Use of designated vacuums with
the proper filters to control dust, watering roads and wetting (or
soil sealing). Filter cake piles can have a dramatic affect on
workers nearby. The use of air should never be used to clean up.
Designated respirator zones require 10X PEL half face respirators
with HEPA filters.
B. Confined Space:
1. Cleaning: The confined space shall be cleaned as much as
possible before entering (tank washing machine,
Butterworth).
2. Ventilation: The confined space shall be ventilated prior
to and during the time of work.
3. Entry Rules: Adhere to all Owner confined space entry
rules.
4. General Respiratory Protection: Respiratory protection in
confined spaces shall be half face 10X PEL HEPA unless
hydroblasting, sandblasting, or welding is in progress.
When in a confined space, all occupants shall conform to the respiratory
requirements of the job that has the highest PEL factor. For example, if
hydroblasting and scaffold building is going on concurrently in the same vessel,
all personnel shall wear the same respiratory equipment as the hydroblasters
(25X HEPA) using supplied breathing air.
II. HYDROBLASTING
A. Open Area Blasting: Both operator and observer shall wear
respiratory protection rated to 25X PEL. Two options meet this
standard:
1. Breath easy helmet and turbo pack with HEPA (AEP 3)
filters.
2. Full face respirators with HEPA filters (Type H for MSA).
B. Confined Space: General ventilation in mandatory. Both operator
and observer shall wear respiratory protection rated to 25X PEL.
Two options meet this standard:
1. Breath easy helmet with supplied breathing air.
2. Full face respirators with supplied breathing air.
<PAGE>
III. SANDBLASTING CONFINED SPACE
General ventilation is mandatory. Operator shall use supplied air hood
of 100X PEL rating. Man watch shall have respiratory protection of at
least 25X PEL (breath easy or full face).
NOTE: The respiratory protection for the man watch can vary depending
on vessel conditions. Consult supervision.
IV. WELDING
A. General: Consult Material Safety Data Sheet (M.S.D.S.) for rod
or wire. Many manufacturers require or recommend respiratory
protection.
B. Open Area Welding/Cutting on Process Pipe:
1. Position designated fans to blow fumes away from welders
breathing zone and use 3M 9970 respirator.
2. Breath easy welding helmet and turbo pack with HEPA (AEP 3)
filters.
C. Confined Space Welding/Cutting:
1. 3M 9970 respirator, general and local ventilation. One
suction vent shall be provided for each welder and
positioned as close as possible to source of fumes. These
vents shall discharge outside the vessel.
2. General ventilation, breath easy welding helmet and turbo
pack with HEPA (AEP 3) filters.
V. SCALE
Minimum protective clothing and respirator protection is to be worn
when working with scale.
A. 3m 9970 or MSA Comfo II with Type H filters.
B. Uniform or Tyvec(Registered Trademark) suits, gloves, and rubber
boots.
<PAGE>
EXECUTABLE COPY
GEOTHERMAL SCALE INFORMATION/SAFETY Page 1 of 4
DATA SHEET June 16, 1997
Rev. 6
CalEnergy Operating Company
950 W. Lindsey Rd.
Calipatria, CA 92233
Phone: (760)348-4000
1. GEOTHERMAL SCALE
2. COMPOSITION (Average concentration)
Major Elements Probable Compounds (Percent)
-------------------------------------------------------------------------
Silicon (Amorphous) (SiO2+Silicates) 50
Iron (Fe3O4+Fe2O3+FeSiO4+Fe+FeCO3) 18
Copper (Cu+CuCl2+CuS) 10
Sodium (NaCl) 5
Calcium (CaSO4+CaCO3) 3
Potassium (KCL) 3
Minor Elements Probable Compounds (PPM)
-------------------------------------------------------------------------
Aluminum (Silicate) 10,000
Manganese (MnS+MnSO4) 10,000
Strontium (SrSO4) 10,000
Magnesium (MgCO3) 7,500
Arsenic (As+FeAs2) 30,000
Barium (BaSO4) 5,000
Bismuth (Bi2S3) 1,500
Lead (PbS) 1,000
Antimony (Sb+SbS) 1,000
Trace Elements Probable Compounds (PPM)
-------------------------------------------------------------------------
Silver (Ag+AgS) 750
Cadmium (Cd+CdS) 500
Chromium (Cr2(SO4)3) 500
Cobalt (CoS2) 500
Zinc (ZnS) 400
Beryllium (Be) 100
Gold (Au) 2
Radium 226 (RaSO4) 60 pCi/g
Radium 228 (RaSO4) 45 pCi/g
Other Metals <100
3. CHEMICAL AND PHYSICAL PROPERTIES
APPEARANCE: Scale is a very heterogenous substance,
composition will vary. Color ranges from light
brown to black with greenish areas.
DENSITY: Average - 2300 lbs./cubic yard
SOLUBILITY IN WATER: Insoluble in water
ODOR: None have been noticed
<PAGE>
EXECUTABLE COPY
GEOTHERMAL SCALE INFORMATION/SAFETY Page 2 of 4
DATA SHEET June 16, 1997
Rev. 6
4. FIRE AND EXPLOSION HAZARD DATA
No hazard due to fire or explosion expected
5. REACTIVITY DATA
STABILITY: Material is stable under ordinary conditions
INCOMPATIBILITY: No incompatibilities have been noticed.
HAZARDOUS DECOMPOSITION PRODUCTS: At very high temperatures the
materials may emit sulfur oxide gases and metal fumes
HAZARDOUS POLYMERIZATION: No polymerization will occur.
6. EXPOSURE GUIDELINE
A review of exposure guidelines for all the components of scale was
performed. Atmospheric levels should be maintained below the following
exposure standards:
Arsenic: OSHA PEL: TWA 0.01mg(As)/M3
Beryllium: OSHA PEL: TWA 0.002mg(Cd)/M3
Cadmium: OSHA PEL: TWA 0.2mg(Cd)/M3
OSHA is also proposing new limits for Cadmium (FR,
Vol 55, No 25, Feb. 6, 1990, Page 4052)
OSHA PEL: TWA 5ug(Cd)/M3 or
1ug(Cd)/M3
Lead: OSHA PEL: TWA 0.05MG(Pb)/M3
Radium: California Department of Health Services (CDOHS) has
set air concentration standards, maximum permissible
concentrations (MPC), for Radium (Ra) 226 at 5E-11
uCi/ml or air. A significant daughter product of the
RA 226 decay chain is Lead 210 which has a MPC value
of 1E-10 uCi/ml of air.
In the Ra 228 decay chain the CDOHS has set the MPC
for Ra 228 at 4E-11 uCi/ml of air. A significant
daughter product of the Ra 228 decay chain is Thorium
228 which has a MPC value of 6E-12 uCi/ml of air.
MPC values in the air are based on internal doses due
to inhalation. In addition, CDOHS has established
external dose limits as follows:
Rems per Calendar
Quarter
-----------------
Whole Body 1.25
Hand, forearms, feet and ankles 18.75
Skin of the whole body 7.5
<PAGE>
EXECUTABLE COPY
GEOTHERMAL SCALE INFORMATION/SAFETY Page 3 of 4
DATA SHEET June 16, 1997
Rev. 6
7. HANDLING PRECAUTIONS AND PROTECTIVE EQUIPMENT
These recommended precautions are intended for use during normal
operating conditions. Emergency/upset conditions could require
additional precautions. (For an explanation of the low, moderate and
high potential exposure categories or specific recommendations for your
specific operation, contact the Safety Department.)
EYE
Low - Use Safety glasses
Moderate/High - Use chemical goggles
SKIN
Low - No precautions other than clean body covering clothing;
Moderate/High - Use boots and gloves
INHALATION
Low/Moderate/High - Atmospheric levels should be maintained
below the exposure guidelines. Use respiratory protection when
in scale handling operations and areas. Clean or dust
clothing, boots and gloves before leaving work area.
INGESTION
Use good personal hygiene. Do not consume or store food and
drink in the work area. Wash hands before smoking or eating.
Clean body covering clothing, boots and gloves after handling.
VENTILATION
Provide general and/or local exhaust ventilation to control
airborne levels below the exposure guidelines.
PROTECTIVE EQUIPMENT INFORMATION
There is no respirator test data available for this material.
Data for related materials indicate that the following should
be effective types of air-purifying respirators: dusts and
radionuclides.
8. EMERGENCY TREATMENT AND MEDICAL NOTES
EYE
Irrigate immediately with water for at least 15 minutes.
SKIN
Wash off in flowing water or shower
INGESTION
Refer to Physician
INHALATION
Refer to Physician
<PAGE>
EXECUTABLE COPY
GEOTHERMAL SCALE INFORMATION/SAFETY Page 4 of 4
DATA SHEET June 16, 1997
Rev. 6
9. POTENTIAL HEALTH EFFECTS
This section includes possible adverse effects which could occur if
this material is not handled in the recommended manner.
EYE
May cause moderate eye irritation
SKIN
May cause moderate skin irritation
INGESTION
May cause toxic effects
ACUTE INHALATION:
Vapors are unlikely due to physical properties. Excessive
exposure may cause irritation of the eyes, upper respiratory
tract and lungs.
CHRONIC EFFECTS/CARCINOGENICITY
The following components of scale are known to the State of
California to cause cancer: Arsenic, Cadmium, Beryllium and
Radium (decay chain).
TERATOGENIC EFFECTS
There are some positive animal teratogenic tests for several
of the components of scale.
REPRODUCTIVE EFFECTS
Lead is known to the State of California to cause reproductive
toxicity.
MUTAGENICITY
There are some positive mutagenicity tests for several of the
components of scale.
10. ENVIRONMENTAL AND DISPOSAL INFORMATION
ACTION TO TAKE FOR RELEASES:
Reclaim all the material which was released. For any Scale
releases refer to the CalEnergy Operating Co. Business Plan
for local agency notification. If more than 200 lbs. of scale
(fine particles) have been released to the environment, then
EPA also has to be notified within 24 hours at 1-800-424-8802
(The National Response Center).
DISPOSAL METHOD:
Scale should not be disposed of, but reclaimed and stored in a
safe and proper manner. If scale needs to be disposed of,
contact CalEnergy Operating Company's Environmental Manager.
<PAGE>
EXECUTABLE COPY
GEOTHERMAL BRINE INFORMATION/SAFETY Page 1 of 4
DATA SHEET June 16, 1997
Rev. 3
CalEnergy Operating Company
950 W. Lindsey Rd
Calipatria, CA 92233
Phone: (760) 348-4000
1. GEOTHERMAL BRINE
2. COMPOSITION (Average concentrations for production brines, injection
brines may be 10-20 percent higher, balance is water.)
Major Elements Probable Compounds (Percent)
-----------------------------------------------------------------
Chloride NaCl 13.5
Sodium NaCl 6
Calcium CaCl2 3
Potassium KCl 1.5
Minor Elements Probable Compounds (PPM)
-----------------------------------------------------------------
Carbon Dioxide CO2 2000
Iron (Ferrous) FeCl2 1000
Manganese MnCl2 930
Strontium SrCl2 430
Ammonia NH3 420
Lithium LiCl 410
Zinc ZnCl2 370
Boron H3BO3 330
Silicon SiO2 250
Barium BaCl2 130
Trace Elements Probable Compounds (PPM)
------------------------------------------------------------------
Lead PbCl2 100
Rubidium RbCl 100
Magnesium MgCl2 40
Arsenic H3AsO4 15
Cesium CsCl 10
Hydrogen Sulfide H2S 7
Copper CuCl2 5
Methane CH4 3.0
Cadmium CdCl2 1.2
Antimony SbCl3 0.9
Aluminum ALCl3 0.7
Silver AgCl3 0.4
Chromium CrCl2 0.2
Tin SnCl3 0.2
Selenium H2SeO3 0.2
Nickel NiCl3 0.2
Bismuth BiCl2 0.07
Beryllium BeCl2 0.02
Radionuclides
Radium 226 --- 0.080 pCi
Radon 222 --- 0.810 pCi
Lead 210 --- 0.064 pCi
Radium 228 --- 0.064 pCi
Thorium 228 --- --
<PAGE>
EXECUTABLE COPY
GEOTHERMAL BRINE INFORMATION/SAFETY Page 2 of 4
DATA SHEET June 16, 1997
Rev. 3
3. CHEMICAL AND PHYSICAL PROPERTIES
APPEARANCE: Brine is a light brown liquid with a fine precipitate (refer
to the Geothermal Filter Cake Information/Safety Data Sheet
for information on the precipitate). Under normal conditions,
brine has a temperature of 500` F to 210` F, and will flash
steam when released to the atmosphere. Brine is a saline
solution, with traces of other substances. Vapors excerpts, in
addition to steam, are carbon dioxide which averages 99% of
the inert gases released , other trace gases include hydrogen
sulfide, ammonia, methane and radon.
DENSITY: 10 lbs/gallon
ODOR: Hydrogen sulfide/ammonia odor
4. FIRE AND EXPLOSION HAZARD DATA
No hazard due to fire or explosion expected.
5. REACTIVITY DATA
STABILITY: Material is stable under ordinary conditions.
INCOMPATIBILITY: The mixing of brine with cooling tower water in high
in nitrites may cause the emissions of nitrogen dioxide. In addition,
the contact of brine with zinc metal may cause the emission of arsine.
HAZARDOUS DECOMPOSITION PRODUCTS: None expected, under ordinary
circumstances.
HAZARDOUS POLYMERIZATION: No polymerization will occur.
6. EXPOSURE GUIDELINE
A review of exposure guidelines for all the components of brine was
performed. Atmospheric levels should be maintained below the following
exposure standards:
Carbon dioxide: OSHA PEL: TWA 18000mg/M3
STEL 54,000mg/M3
Ammonia: OSHA PEL: TWA 35mg/m3
STEL 27mg/M3
Hydrogen sulfide: OSHA PEL: CL 10 ppm
Peak 50 ppm (10 min.)
Boric acid: OSHA PEL: TWA 10mg/M3
Arsenic acid: OSHA PEL: TWA 0.01mg/M3
Radon: DOHS limits Radon to 30 pCi/l
(quarterly average)
<PAGE>
EXECUTABLE COPY
GEOTHERMAL BRINE INFORMATION/SAFETY Page 3 of 4
DATA SHEET June 16, 1997
Rev. 3
7. HANDLING PRECAUTIONS AND PROTECTIVE EQUIPMENT
These recommended precautions are intended for use during normal
operating conditions. Emergency/upset conditions could require
additional precautions. (For an explanation of the low, moderate ad
high potential exposure categories or specific recommendations for your
specific operation, contact the Safety Department.)
EYE
Use faceshield and monogoggles
SKIN
Use heat protective clothing ( rubber gloves, top/bottom
slickers, rubber boots and face shields).
INHALATION
Low/Moderate/High - Atmospheric levels should be maintained
below the exposure guidelines.
INGESTION
Use good personal hygiene. Do not consume or store food and
drink in the work area. Wash hands before smoking or eating.
Clean body covering clothing, boots, and gloves after
handling.
VENTILATION
Provide general and/or local exhaust ventilation to control
vapor levels below the exposure guidelines. Prior to entry of
any vessel, perform a confined space entry procedure.
PROTECTIVE EQUIPMENT INFORMATION
The heat protective clothing supplied should be an effective
type of protection with normal brine temperatures.
8. EMERGENCY TREATMENT AND MEDICAL NOTES
EYE
Irrigate immediately with water for at least 15 minutes;
mechanical effects only.
SKIN
Wash off in flowing water or shower.
INGESTION
Refer to Physician
INHALATION
Refer to Physician
<PAGE>
EXECUTABLE COPY
GEOTHERMAL BRINE INFORMATION/SAFETY Page 4 of 4
DATA SHEET June 16, 1997
Rev. 3
9. POTENTIAL HEALTH EFFECTS
This section includes possible adverse effects which could occur if
this material is not handled in the recommended manner. When hot brine
is being handled, burns will occur if brine comes in contact with the
human body.
EYE
May cause burns or eye irritation.
SKIN
May cause burns or skin irritation.
INGESTION
May cause toxic effects.
ACUTE INHALATION
Excessive exposure may cause irritation of the eyes, upper
respiratory tract and lungs.
CHRONIC EFFECTS/CARCINOGENICITY
The following components of scale are known to the State of
California to cause cancer: Arsenic, Cadmium, Beryllium and
Radium (decay chain).
TERATOGENIC EFFECTS
There are some positive animal teratogenic tests for several
of the components of brine.
REPRODUCTIVE EFFECTS
Lead is known to the State of California to cause reproductive
toxicity.
MUTAGENICITY
There are some positive mutagenicity test for several of the
components of brine.
10. ENVIRONMENTAL AND DISPOSAL INFORMATION
ACTION TO TAKE FOR RELEASES:
Reclaim all the material which was released. For any brine
releases refer to CalEnergy Operating Company's Business Plan
for local agency notification. If more than 8,800 gallons of
brine have been released to the environment, then EPA also has
to be notified within 24 hours at 1-800-424-8802 (The National
Response Center).
DISPOSAL METHOD:
If brine or brine contaminated soil needs to be disposed of,
contact CalEnergy Operating Company's Environmental Manager
for instructions.
<PAGE>
THIS ADMINISTRATIVE SERVICES AGREEMENT (the "Agreement") is made as of
March 3, 1999, by and between CALENERGY COMPANY, INC., a Delaware corporation
("CalEnergy"), and CE GENERATION, LLC, a Delaware limited liability company
("Owner").
RECITALS
--------
A. Owner indirectly owns certain geothermal electric generating
facilities located in the Salton Sea Known Geothermal Resource Area ("SSKGRA")
in Imperial County, California, certain gas-fired electric generating facilities
located in Yuma, Arizona, Big Spring, Texas, North East , Pennsylvania, and
Plattsburg, New York, and certain related facilities (referred to collectively
herein as the "Facilities") all through non-recourse project companies ("Project
Companies") and three (3) holding companies (the "Holding Companies" and
collectively with the Project Companies, the "Companies"), namely Magma Power
Company, California Energy Development Corporation and Falcon Seaboard
Resources, Inc.
B. Owner desires to exploit CalEnergy's administrative and management
resources, and to that end Owner desires to employ, hire or otherwise retain the
administrative and management services of CalEnergy for purposes of
administering the functions of its business, as more fully described herein.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements set forth herein, the parties hereto agree as
follows:
1. Services. In consideration of the payment by Owner to CalEnergy as
provided in Section 3 hereof, CalEnergy agrees to perform during the term of
this Agreement those functions as approved in advance by the Board which are
normally considered part of the day-to-day administrative and management
activities for businesses similar to the businesses undertaken by the Companies
(the "Services"). The Services to be provided hereunder may include, without
limitation, (i) financial accounting, budgeting and tax services (ii) general
legal and financial services, (iii) personnel administration and payroll
services, (iv) cash management services, (v) energy marketing, energy production
oversight and the determination of output levels; (vi) consulting services with
respect to electrical energy production and (vii) assisting Owner in obtaining
any franchises, permits, licenses, easements or rights-of-way necessary for
continued operation of the Facilities.
2. Subcontracting. Without limiting the obligations of CalEnergy to
Owner hereunder, in connection with CalEnergy's providing of the Services
contemplated by this Agreement, CalEnergy may subcontract with or otherwise
retain the services of other Persons including, but not limited to, Affiliates
of CalEnergy (but only at a rate equal to actual costs and expenses of such
Affiliate), with the consent of Owner, which consent shall not be
2
<PAGE>
unreasonably withheld. For purposes of this Agreement, any Services performed by
such Persons shall be deemed to have been performed by CalEnergy.
3. Reimbursement for Services. The following shall be paid:
3.1. In consideration of the provision by CalEnergy to Owner of
the Services, within thirty (30) days after Owner has received an invoice from
CalEnergy specifying the Services rendered to Owner by CalEnergy and the amount
to be paid to CalEnergy for the actual costs and expenses incurred by CalEnergy
in rendering the Services. As used in this Section 3.1, "actual costs and
expenses incurred by CalEnergy" includes, without limitation, (a) the actual
cost to CalEnergy of procuring goods and materials used by CalEnergy in
rendering Services, (b) the fully burdened, pro rata cost to CalEnergy of
personnel providing labor or services in the course of CalEnergy's provision of
Services and (c) the actual cost to CalEnergy of retaining another Person,
whether CalEnergy or another Affiliate of CalEnergy or otherwise, in connection
with the provision of Services. In the event CalEnergy subcontracts with any
Person, including, without limitation, an Affiliate as provided in Section 2
hereof, any payment to CalEnergy under this Section 3.1 on account of the
Services so subcontracted shall be made to CalEnergy only to the extent of the
amount charged CalEnergy by such Person and shall not include any amounts
representing a mark-up by CalEnergy over the amount so charged.
3.2. With respect to any calculation of actual costs and expenses
or any allocation of costs contemplated by Section 3.1 hereof, Owner shall be
bound by CalEnergy's determination thereof so long as such determination is
reached in a manner consistent with GAAP and CalEnergy's existing practices with
respect to the Facilities.
4. Term and Termination.
4.1. Unless terminated as provided in Sections 9, 11 or 13 hereof,
or as hereinafter provided in this Section 4, this Agreement shall remain in
effect until, and shall terminate on the date which is, one (1) year following
the date first written above, and shall automatically renew from year to year
unless one party hereto notifies the other of its intent to terminate at least
60 days prior to the end of the then expiring term.
4.2. In the event of a material default by either party in the
performance of its duties, obligations or undertakings under this Agreement, the
other party shall have the right to give written notice to the defaulting party
advising such party of the specific default involved and, if within thirty (30)
days after such notice the defaulting party shall not have remedied or commenced
diligently to remedy the default, the other party shall have the right, in
addition to any other rights and remedies it may have, to terminate this
Agreement upon ten (10) days' written notice to the defaulting party.
4.3. Notwithstanding any other provision of this Agreement, and in
addition to any other right it may have, CalEnergy shall have the right to
terminate this Agreement, (a) effective immediately, if, at any time, Owner is
adjudged bankrupt or insolvent, or files a petition in bankruptcy or an answer
admitting the material facts recited in such a petition filed by
3
<PAGE>
another, or is put or decides to go into dissolution or liquidation (other than
in connection with a merger, consolidation or amalgamation), or otherwise
discontinues business, makes an assignment for the benefit of its creditors or
any other general arrangement with its creditors, becomes insolvent or unable to
meet its current payments, or has a receiver or other custodian of any kind
appointed to administer any substantial amount of its property, or otherwise
seeks to take advantage of any bankruptcy or insolvency statute now or hereafter
in effect and (b) upon ninety 90 days notice, within twelve (12) months of
foreclosure of the Facilities by the Project Lender, and on each anniversary of
such foreclosure.
4.4. If this Agreement is terminated prior to the expiration of
its terms as provided in Section 4.1 hereof, Owner shall pay CalEnergy all
Administration Fees and other amounts due and payable to CalEnergy under Section
3 hereof as of the date the Agreement is effectively terminated.
5. Standard of Care; Sole Remedy.
5.1 CalEnergy agrees to perform the Services with a standard of
care equal to that it exercises in the administration of its own separate
business activities. CalEnergy does not warrant that the Services will be error
free or accomplish a particular result.
5.2 Except in the case of gross negligence or willful misconduct,
the sole remedy for a breach of the foregoing standard of care shall be
reperformance of the Services.
6. Limitations on Liability.
6.1 Owner agrees that notwithstanding any other provision in this
Agreement to the contrary, neither CalEnergy nor its agents, contractors,
vendors or their employees, shareholders, officers or directors, shall be liable
to Owner for incidental, consequential, punitive or indirect loss or damage,
including, but not limited to, cost of reperformance of services by third
parties, damage to property or injury to person, loss of profit, loss of use,
loss of revenue, loss of opportunity, increased costs, cost of capital, or loss
of goodwill.
6.2 Owner agrees that as between the parties in no event shall the
liability of CalEnergy hereunder for any breach of this Agreement exceed the
total amount payable to CalEnergy under Section 3 hereof for the calendar year
prior to the claim giving rise to such liability, or, if the first calendar year
has not yet been completed, the first 12 months from the effective date of this
Agreement.
7. Indemnification. Except to the extent that such liability, claim,
damage, loss or expense is attributable to the gross negligence or willful
misconduct of CalEnergy, to the maximum extent permitted by law, Owner (i) shall
defend, indemnify and hold CalEnergy and its agents, contractors, vendors and
their employees, shareholders, officers or directors
4
<PAGE>
harmless from and against any and all liabilities, claims, damages, losses and
expenses, including attorneys' fees and costs and expenses of litigation or
arbitration, of every kind and nature payable to third parties to the extent
they arise out of the course of performance of this Agreement by CalEnergy or
from the business of Owner and (ii) shall, upon request of CalEnergy or other
indemnified party, defend all suits arising out of or resulting from the
performance of this Agreement by CalEnergy or the business of Owner. Without
limiting the generality of the foregoing, Owner shall indemnify and hold
CalEnergy and its agents and employees harmless from and against any and all
liabilities, fines and penalties arising under laws or regulations with regard
to protection of the environment or environmental conditions.
8. Survival of Terms. Owner agrees that the limitations on liability,
waivers and disclaimers of liability, indemnities, releases from liability, sole
remedy provisions and in this Agreement shall survive termination or expiration
of this Agreement, and shall apply for the benefit of CalEnergy and its agents,
contractors, vendors and their employees, shareholders, officers or directors,
whether in contract, equity, tort or otherwise, even in the event of the fault,
negligence, including sole negligence, strict liability, or breach of warranty.
9. Non-Waiver of Breach. Either party hereto may specifically waive any
breach of this Agreement by the other party, but no such waiver shall be deemed
to have been given unless such waiver is in writing, signed by the waiving party
and specifically designates the breach waived, nor shall any such waiver
constitute a continuing waiver of similar or other breaches.
10. Arbitration. All disputes arising under this Agreement shall be
settled by binding arbitration in accordance with the Commercial Arbitration
Rules of the AAA then pertaining, unless the parties mutually agree otherwise.
The party desiring such arbitration shall give written notice to that effect to
the other party and in such notice shall appoint as an arbitrator a
disinterested person of recognized competence in the area at issue. Within
fifteen (15) days thereafter, the other party shall, by written notice to the
originating party, appoint a second person similarly qualified as the second
arbitrator. The arbitrators thus appointed shall appoint a third person
similarly qualified as the third arbitrator, and such three arbitrators shall as
promptly as possible determine such matter with the parties, each being entitled
to present evidence and argument to the arbitrators; provided, however, that:
(i) if the second arbitrator shall not have been appointed as
aforesaid, the first arbitrator shall determine such matter; and
(ii) if the two arbitrators appointed by the party shall be unable
to agree upon the appointment of a third arbitrator within fifteen (15) days
after the appointment of the second arbitrator, they shall give written
notice of such failure to agree to the parties, and, if the parties fail to
agree upon the selection of such third arbitrator within fifteen (15) days
thereafter, then within ten (10) days thereafter, either of the parties
upon written notice to
5
<PAGE>
the other party may apply for such appointment to the Federal District Court
or District Court in Omaha, Nebraska.
The arbitrator or arbitrators shall only interpret and apply the terms
and provisions of this Agreement and shall not change any such terms or
provisions or deprive either party of any right or remedy expressly or impliedly
provided for in this Agreement.
The determination of the majority of the arbitrators or the sole
arbitrator, as the case may be, shall, to the extent permitted by law, be
conclusive upon the parties. The arbitrator or arbitrators shall give written
notice to the parties stating their determination, and shall furnish to each a
copy of such determination signed by them. In the event of the failure, refusal
or inability of any arbitrator to act, a new arbitrator shall be appointed in
his stead, which appointment shall be made in the same manner as hereinbefore
provided for the appointment of the arbitrator so failing, refusing or unable to
act.
11. Attorney Fees. If either party hereto commences litigation or
arbitration for the judicial or other interpretation, enforcement, termination,
cancellation or rescission hereof, or for damages for the breach hereof, the
prevailing party in any such action, trial, arbitration or appeal thereon shall
be entitled to its reasonable attorneys' fees and court, arbitration and other
costs incurred, to be paid by the losing party as fixed by the court or
arbitrator in the same or a separate suit, and whether or not such action is
pursued to decision or judgment.
12. Force Majeure. .
12.1. Neither Owner nor CalEnergy shall be liable in damages to
the other for any act, omission or circumstance ("Event of Force Majeure")
occasioned by or in consequence of any acts of God, acts of the public enemy,
wars, blockades, insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, storms, floods, civil disturbances, explosions, sabotage,
the binding order of any court or governmental authority which has been resisted
in good faith by all reasonable legal means, Federal, State or local laws, or
other event or circumstance not within the control of such party preventing such
party from performing its obligations hereunder, whether caused or occasioned
by, or happening on account of, the act or omission of one of the parties, not
within the control of the party claiming suspension and which by the exercise of
due diligence such party is unable to prevent or overcome.
12.2. Such Events of Force Majeure shall not relieve Owner or
CalEnergy of liability in the event of either party's concurring negligence or
in the event of either party's 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 Events of Force Majeure relieve either party of
liability unless such party shall give notice and full particulars of the same
in writing to the other party within ten (10) days of the occurrence relied on.
In no event, however, shall an Event of Force Majeure relieve Owner from the
obligation of making payments due under this Agreement at the time of such
occurrence. The parties agree that should any Event of Force Majeure remain in
existence for a period of six (6) months, this Agreement may be terminated by
the party not
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claiming suspension of the Agreement under such Event of Force Majeure upon the
giving of written notice by such party to the other; provided, however, that
such six (6) month period shall be extended for a reasonable time so long as
throughout such six (6) month period the party claiming suspension of this
Agreement under the Event of Force Majeure has diligently proceeded to terminate
the Event of Force Majeure and continues to do so throughout such extension.
13. Invalid Provision.
13.1. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted; provided, however, that if any of the
provisions of Section 1 hereof are held invalid or unenforceable by any court or
other relevant authority, Owner and CalEnergy shall hold consultations over a
period of ninety (90) days, commencing immediately, in an effort to work out
satisfactory terms for continuation of this Agreement. If Owner and CalEnergy do
not reach agreement within this period, CalEnergy shall have the right to
terminate this Agreement, effective immediately.
13.2. In the event that any provision, term, condition or object
of this Agreement may be in conflict with any law, measure, ruling, court
judgment (by consent or otherwise), or regulation of the government of the
United States of America, and the legal counsel of either party shall advise
that in their considered opinion such conflict, or a reasonable possibility of
such conflict, exists, then either party may propose to the other appropriate
modifications of this Agreement to avoid such conflict. In such case, if an
agreement of modification is not reached within ninety (90) days from such
proposal, the party making such proposal, after sixty (60) days' written notice
to the other party, may terminate the agreement in its entirety as of a date
subsequent to such sixty (60) days, and which shall be specified in such notice.
14. Assignment. Subject to Section 2, neither Owner nor CalEnergy shall
grant, assign or otherwise convey any of their respective rights or delegate any
of their respective obligations under this Agreement without the prior written
consent of the other party which consent shall not be unreasonably withheld.
15. Governing Law. The existence, validity, construction, operation and
effect of this Agreement shall be determined in accordance with and governed by
the laws of the State of New York. This Agreement shall be construed equally as
against the parties hereto, and shall not be construed against the party
responsible for its drafting.
16. Entire Agreement - Amendments. This Agreement constitutes the
entire agreement of the parties and the provisions hereof shall supersede any
and all prior agreements or understandings relating to the same subject matter.
This Agreement may be amended only by a writing signed by a duly authorized
representative of both parties.
17. Communications. All notices, requests, offers and other
communications required or permitted to be made under this Agreement shall be in
writing and
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shall be deemed to have been duly given and received, regardless of when and
whether received, either: (a) on the day of delivery, if delivered
To CalEnergy Company, Inc. at:
CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
Attention: General Counsel
Telephone: (402) 341-4500
Facsimile: (402) 345-9318
To Owner at:
CE Generation, LLC
302 South 36th Street, Suite 400-K
Omaha, Nebraska 68131
Attention: General Counsel
Telephone: (402) 231-1641
Facsimile: (402) 231-1658
or at such other address as either party most recently may have designated in
writing to the other party for such purpose; or (b) on the day sent, when sent
by prepaid telex, telegram, cable or radiogram, and confirmed the same day by
prepaid first-class registered airmail, or when sent by facsimile transmission
with telephone confirmation of receipt, addressed to CalEnergy or Owner, as the
case may be, at their respective addresses aforesaid.
18. Counterparts. This Agreement may be executed in counterparts and
any number of counterparts signed in the aggregate by the parties hereto shall
constitute a single original instrument.
19. Exhibits. All exhibits and schedules attached hereto are hereby
incorporated herein by this reference.
20. Third Party Beneficiaries. The covenants contained herein are made
solely for the benefit of the properties, parties and successors and assigns of
such parties as specified herein, and shall not be construed as having been
intended to benefit any third party not a party to this Agreement.
21. Headings. The headings herein are for reference only and shall not
affect the construction of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers as of the day and year first above
written.
CALENERGY COMPANY, INC.
a Delaware corporation
By: /s/ Steven A. McArthur
----------------------------------
Name: Steven A. McArthur
Title: Executive Vice President
CE GENERATION, LLC,
a Delaware limited liability company
By: /s/ Steven A. McArthur
----------------------------------
Name: Steven A. McArthur
Title: Executive Vice President
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THIS FUEL MANAGEMENT SERVICES AGREEMENT (the "Agreement") is made as of
March ___, 1999, by and between EL PASO ENERGY MARKETING COMPANY, a Delaware
corporation ("El Paso"), and CE GENERATION, LLC, a Delaware limited liability
company ("Owner").
RECITALS
--------
A. Owner indirectly owns certain geothermal electric generating facilities
located in the Salton Sea Known Geothermal Resource Area ("SSKGRA") in
Imperial County, California, certain gas-fired electric generating
facilities located in Yuma, Arizona, Big Spring, Texas, North East,
Pennsylvania, and Plattsburg, New York, and certain related facilities
(referred to collectively herein as the "Facilities") all through
non-recourse project companies ("Project Companies") and three (3)
holding companies (the "Holding Companies" and collectively with the
Project Companies, the "Companies") namely Magma Power Company,
California Energy Development Corporation and Falcon Seaboard
Resources, Inc.
B. Owner desires to exploit El Paso's energy trading, fuels management,
natural gas and fuel oil marketing and risk management resources, and to
that end Owner desires to employ, hire or otherwise retain the energy
trading, fuels management, natural gas and fuel oil marketing and risk
management services of El Paso for purposes of administering the
functions of its business, as more fully described herein.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements set forth herein, the parties hereto agree as
follows:
1. Services. In consideration of the payment by Owner to El Paso as
provided in Section 3 hereof, El Paso agrees to perform during the term of this
Agreement those functions as approved in advance by the Board which are normally
considered part of the day-to-day management, trading, scheduling, dispatching
and marketing for businesses similar to the businesses undertaken by the
Companies (the "Services") The Services to be provided hereunder may include,
without limitation, (i) energy marketing, (ii) the purchase and sale of natural
gas, fuel oil and transportation, (iii) scheduling, dispatch and accounting of
fuel deliveries, (iv) risk management services, (v) consulting services with
respect to fuel supply alternatives and opportunities and (vi) consulting
services with respect to other commercial energy optimization opportunities.
Such Services shall be further described and defined in Attachments to this
Agreement ("Operating Procedures") which will be numbered, dated and signed by
representatives from El Paso and Owner.
2. Subcontracting. Without limiting the obligations of El Paso to
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Owner hereunder, in connection with El Paso's providing of the Services
contemplated by this Agreement, El Paso may subcontract with or otherwise retain
the services of other Persons including, but not limited to, Affiliates of El
Paso (but only at a rate equal to actual costs and expenses of such Affiliate),
with the consent of Owner, which consent shall not be unreasonably withheld. For
purposes of this Agreement, any Services performed by such Persons shall be
deemed to have been performed by El Paso.
3. Reimbursement of Services. The following shall be paid:
3.1 In consideration of the provision by El Paso to Owner of the
Services, within thirty (30) days after Owner has received an invoice from El
Paso specifying the Services rendered to Owner by El Paso and the amount to be
paid to El Paso for the actual costs and expenses incurred by El Paso in
rendering the Services. As used in this Section 3.1, "actual costs and expenses
incurred by El Paso" includes, without limitation, (a) the actual cost to El
Paso of procuring goods and materials used by El Paso in rendering Services, (b)
the fully burdened, pro rata cost to El Paso of personnel providing labor or
services in the course of El Paso's provision of Services and (c) the actual
cost to El Paso of retaining another Person, whether El Paso or another
Affiliate of El Paso or otherwise, in connection with the provision of Services.
In the event El Paso subcontracts with any Person, including, without
limitation, an Affiliate as provided in Section 2 hereof, any payment to El Paso
under this Section 3.1 on account of the Services so subcontracted shall be made
to El Paso only to the extent of the amount charged El Paso by such person and
shall no include any amounts representing a mark-up by El Paso over the amount
so charged.
3.2 With respect to any calculation of actual costs and expenses
or any allocation of costs contemplated by Section 3.1 hereof, Owner shall be
bound by El Paso's determination thereof so long as such determination is
reached in a manner consistent with GAAP and El Paso's existing practices with
respect to the Facilities.
4. Term and Termination.
4.1 Unless terminated as provided in Sections 9, 11 or 13 hereof,
or as hereinafter provided in this Section 4, this Agreement shall remain in
effect until, and shall terminate on the date which is, one year following the
date first written above, and shall automatically renew from year to year unless
one party hereto notifies the other of its intent to terminate at least 60 days
prior to the end of the then expiring term.
4.2 In the event of a material default by either party in the
performance of its duties, obligations or undertakings under this Agreement, the
other party shall have the right to give written notice to the defaulting party
advising such party of the specific default involved and, if within thirty (30)
days after such notice the defaulting party shall not have remedied or commenced
diligently to remedy the default, the other party shall have the right, in
addition to any other rights and remedies it may have, to terminate this
Agreement upon ten (10) days' written notice to the defaulting party.
4.3. Notwithstanding any other provision of this Agreement, and in
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<PAGE>
addition to any other right it may have, El Paso shall have the right to
terminate this Agreement, (a) effective immediately, if, at any time, Owner is
adjudged bankrupt or insolvent, or files a petition in bankruptcy or an answer
admitting the material facts recited in such a petition filed by another, or is
put or decides to go into dissolution or liquidation (other than in connection
with a merger, consolidation or amalgamation), or otherwise discontinues
business, makes an assignment for the benefit of its creditors or any other
general arrangement with its creditors, becomes insolvent or unable to meet its
current payments, or has a receiver or other custodian or any kind appointed to
administer any substantial amount of its property, or otherwise seeks to take
advantage of any bankruptcy or insolvency statue now or hereafter in effect and
(b) upon ninety 90 days notice, within twelve (12) months of foreclosure of the
Facilities by the Project Lender and on each anniversary of such foreclosure.
4.4. If this Agreement is terminated prior to the expiration of
its terms as provided in section 4.1 hereof, Owner shall pay El Paso all Service
Fees and other amounts due and payable to El Paso under Section 3 hereof as of
the date the Agreement is effectively terminated.
5. Standard of Care; Sole Remedy.
5.1 El Paso agrees to perform the Services with a standard of care
equal to that it exercises in the administration of its own separate business
activities. El Paso does not warrant that the Services will be error free or
accomplish a particular result.
5.2 Except in the case of gross negligence or willful misconduct,
the sole remedy for a breach of the foregoing standard of care shall be
reperformance of the Services.
6. Limitations on Liability.
6.1 Owner agrees that notwithstanding any other provision in this
Agreement to the contrary, neither El Paso nor its agents, contractors, vendors
or their employees, shareholder, officers or directors, shall be liable to Owner
for incidental, consequential, punitive or indirect loss or damage, including,
but not limited to, cost of reperformance of services by third parties, damage
to property or injury to person, loss of profit, loss of use, loss of revenue,
loss of opportunity, increased costs, cost of capital, or loss of goodwill.
6.2 Owner agrees that as between the parties in no event shall the
liability of El Paso hereunder for any breach of this agreement exceed the total
amount payable to El Paso under Section 3 hereof for the calendar year prior to
the claim giving rise to such liability, or, if the first calendar year has not
yet been completed, the first 12 months from the effective date of this
Agreement.
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<PAGE>
7. Indemnification. Except to the extent that such liability, claim,
damage, loss or expense is attributable to the gross negligence or willful
misconduct of El Paso, to the maximum extent permitted by law, Owner (i) shall
defend, indemnify and hold El Paso and its agents, contractors, vendors and
their employees, shareholders, officers or directors harmless from and against
any and all liabilities, claims, damages, losses and expenses, including
attorney's fees and costs and expenses of litigation or arbitration, of every
kind and nature payable to third parties to the extent they arise out of the
course of performance of this Agreement by El Paso or from the business of Owner
and (ii) shall, upon request of El Paso or other indemnified party, defend all
suits arises out of or resulting from the performance of this Agreement by El
Paso or the business of Owner. Without limiting the generality of the foregoing,
Owner shall indemnify and hold El Paso and its agents and employees harmless
from and against any and all liabilities, fines and penalties arising under laws
or regulations with regard to protection of the environment conditions.
8. Survival of Terms. Owner agrees that the limitations on liability,
waivers and disclaimers of liability, indemnities, releases from liability, sole
remedy provisions and in this Agreement shall survive termination or expiration
of this Agreement, and shall apply for the benefit of El Paso and its agents,
contractors, vendors and their employees, shareholders, officers or directors,
whether in contract, equity, tort or otherwise, even in the event of the fault,
negligence, including sole negligence, strict liability, or breach of warranty.
9. Non-Waiver of Breach. Either party hereto may specifically waive any
breach of this Agreement by the other party, but no such waiver shall be deemed
to have been given unless such waiver is in writing, signed by the waiving party
and specifically designates the breach waived, nor shall any such waiver
constitute a continuing waiver of similar or other breaches.
10. Arbitration. All disputes arising under this Agreement shall be
settled by binding arbitration in accordance with the Commercial Arbitration
Rules of the AAA then pertaining, unless the parties mutually agree otherwise.
The party desiring such arbitration shall give written notice to that effect to
the other party and in such notice shall appoint as an arbitrator a
disinterested person of recognized competence in the area at issue. Within
fifteen (15) days thereafter, the other party shall, by written notice to the
originating party, appoint a second person similarly qualified as the second
arbitrator, and such three arbitrators shall as promptly as possible determine
such matter with the parties, each being entitled to present evidence and
argument to the arbitrators; provided, however, that:
(i) if the second arbitrator shall not have been appointed as
aforesaid, the first arbitrator shall determine such matter; and
(ii) if the two arbitrators appointed by the party shall be unable
to agree upon the appointment of a third arbitrator within fifteen
(15) days after the appointment of the second arbitrator, they shall
give written notice of such failure
4
<PAGE>
to agree to the parties, and, if the parties fail to agree upon the
selection of such third arbitrator within fifteen (15) days
thereafter, then within ten (10) days thereafter, either of the
parties upon written notice to the other party may apply for such
appointment to the Federal District Court or District Court in Omaha,
Nebraska.
The arbitrator or arbitrators shall only interpret and apply the terms
and provisions of this Agreement and shall not change any such terms or
provisions or deprive either party of any right or remedy expressly or impliedly
provided for in this Agreement.
The determination of the majority of the arbitrators or the sole
arbitrator, as the case may be, shall, to the extent permitted by law, be
conclusive upon the parties. The arbitrator or arbitrators shall give written
notice to the parties stating their determination, and shall furnish to each a
copy of such determination signed by them. In the event of the failure, refusal
or inability of any arbitrator to act, a new arbitrator shall be appointed in
his stead, which appointment shall be made in the same manner as hereinbefore
provided for the appointment of the arbitrator so failing, refusing or unable to
act.
11. Attorney Fees. If either party hereto commences litigation or
arbitration for the judicial or other interpretation, enforcement, termination,
cancellation or rescission hereof, or for damages for the breach hereof, the
prevailing party in any such action, trail, arbitration or appeal thereon shall
be entitled to its reasonable attorneys' fees and court, arbitration and other
costs incurred, to be paid by the losing party as fixed by the court or
arbitrator in the same or a separate suit, and whether or not such action is
pursued to decision or judgment.
12. Force Majeure.
12.1 Neither Owner nor El Paso shall be liable in damages to the
other for any act, omission or circumstance ("Event of Force Majeure")
occasioned by or in consequence of any acts of God, act of the public enemy,
wars, blockades, insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, storms floods, civil disturbances, explosions, sabotage, the
binding order of any court or governmental authority which has been resisted in
good faith by all reasonable legal means, Federal, State or local laws, or other
event or circumstance not within the control of such party preventing such party
from performing its obligations hereunder, whether caused or occasioned by, or
happening on account of, the act or omission of one of the parties, not within
the control of the party claiming suspension and which by the exercise of due
diligence such party is unable to prevent or overcome.
12.2 Such Events of Force Majeure shall not relieve Owner or El
Paso of liability in the event of either part's concurring negligence or in the
event of either party's 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 Events of Force Majeure relieve either party of liability unless such
party shall give notice and full particulars of the same in writing to the other
party within ten (10) days of the occurrence
5
<PAGE>
relied on. In no event, however, shall an Event of Force Majeure relieve Owner
from the obligation of making payments due under this Agreement at the time of
such occurrence. The parties agree that should any Event of Force Majeure remain
in existence for a period of six (6) months, this Agreement under such Event of
Force Majeure upon the giving of written notice by such party to the other;
provided, however, that such six (6) month period shall be extended for a
reasonable time so long as throughout such six (6) month period the party
claming suspension of this Agreement under the Event of Force Majeure has
diligently proceeded to terminate the Event of Force Majeure and continues to do
so throughout such extension.
13. Invalid Provision.
13.1 The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted; provided, however, that if any of the
provisions of Section 1 hereof are held invalid or unenforceable by any court or
other relevant authority, Owner and El Paso shall hold consultations over a
period of ninety (90) days, commencing immediately, in an effort to work out
satisfactory terms for continuation of this Agreement. If Owner and El Paso do
not reach agreement within this period, El Paso shall have the right to
terminate this Agreement, effective immediately.
13.2 In the event that any provision, term, condition or object of
this Agreement may be in conflict with any law, measure, ruling, court judgement
(by consent or otherwise), or regulation of the government of the United States
of America, and the legal counsel of either party shall advise that in their
considered opinion such conflict, or a reasonable possibility of such conflict,
exists, then either party may propose to the other appropriate modifications of
this Agreement to avoid such conflict. In such case, if an agreement of
modification is not reached within ninety (90) days from such proposal, the
party making such proposal, after sixty (60) days' written notice to the other
party, may terminate the agreement in its entirety as of a date subsequent to
such sixty (60) days, and which shall be specified in such notice.
14. Assignment. Subject to Section 2, neither Owner nor El Paso shall
grant, assign or otherwise convey any of their respective rights or delegate any
of their respective obligations under this Agreement with the prior written
consent of the other party which consent shall not be unreasonably withheld.
15. Governing Law. The existence, validity, construction, operation and
effect of this Agreement shall be determined in accordance with and governed by
the laws of the State of New York. This Agreement shall be construed equally as
against the parties hereto, and shall not be construed against he party
responsible for its drafting.
16. Entire Agreement - Amendments. This Agreement constitutes the
entire agreement of the parties and the provisions hereof shall supersede any
and all prior agreements or understandings relating to the same subject matter.
This Agreement may be amended only by a writing signed by a duly authorized
representative of both parties.
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17. Communications. All notices, requests, offers and other
communications required or permitted to be made under this Agreement shall be in
writing and shall be deemed to have been duly given and received, regardless of
when and whether received, either: (a) on the day of delivery, if delivered
To El Paso Power Services Company at:
El Paso Power Services Company
1001 Louisiana St., Suite 2700
Houston, TX 77002
Attention: General Counsel
Telephone: (713) 420-4431
Facsimile: (713) 420-4943
To Owner at:
CE Generation, LLC
302 South 36th Street, Suite 400-K
Omaha, Nebraska 68131
Attention: General Counsel
Telephone: (402) 341-1641
Facsimile: (402) 345-1658
or at such other address as either party most recently may have designated in
writing to the other party for such purpose; or (b) on the day sent, when sent
by prepaid telex, telegram, cable or radiogram, and confirmed the same day by
period first-class registered airmail, or when sent by facsimile transmission
with telephone confirmation of receipt, addressed to El Paso or Owner, as the
case may be, at their respective addresses foresaid.
18. Counterparts. This Agreement may be executed in counterparts and
any number of counterparts signed in aggregate by the parties hereto shall
constitute a single original instrument.
19. Exhibits. All exhibits and schedules attached hereto are hereby
incorporated herein by this reference.
20. Third Party Beneficiaries. The covenants contained herein are made
solely for the benefit of the properties, parties and successors and assigns of
such parties as specified herein, and shall not be construed as having been
intended to benefit any third party not a party to the agreement.
21. Headings. The headings herein are for reference only and shall not
affect the construction of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused the Agreement to be
signed by their duly authorized officers as of the day and year first above
written.
EL PASO POWER SERVICES COMPANY
A Delaware Corporation
By: /s/ Larry Kellerman
-----------------------------------------
Name: Larry Kellerman
Title: President
CE GENERATION, LLC.
A Delaware limited liability company
By: /s/ Steven A. McArthur
-----------------------------------------
Name: Steven A. McArthur
Title: Executive Vice President
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<PAGE>
THIS POWER MARKETING SERVICES AGREEMENT (the "Agreement") is made as of
March , 1999, by and between EL PASO POWER SERVICES COMPANY, a Delaware
corporation ("El Paso"), and CE GENERATION, LLC, a Delaware limited liability
company ("Owner").
RECITALS
A. Owner indirectly owns certain geothermal electric generating facilities
located in the Salton Sea Known Geothermal Resource Area ("SSKGRA") in
Imperial County, California, certain gas-fired electric generating
facilities located in Yuma, Arizona, Big Spring, Texas, North East,
Pennsylvania, and Plattsburg, New York, and certain related facilities
(referred to collectively herein as the "Facilities") all through
non-recourse project companies ("Project Companies") and three (3) holding
companies (the "Holding Companies" and collectively with the Project
Companies, the "Companies") namely Magma Power Company, California Energy
Development Corporation and Falcon Seaboard Resources, Inc.
B. Owner desires to exploit El Paso's energy trading, scheduling,
dispatch, marketing and risk management resources, and to that end
Owner desires to employ, hire or otherwise retain the energy trading,
scheduling, dispatch, marketing and risk management services of El Paso
for purposes of administering the functions of its business, as more
fully described herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements set forth herein, the parties hereto agree as
follows:
1. Services. In consideration of the payment by Owner to El Paso as
provided in Section 3 hereof, El Paso agrees to perform during the term of this
Agreement those functions as approved in advance by the Board which are normally
considered part of the day-to-day management, trading, scheduling, dispatching
and marketing for businesses similar to the businesses undertaken by the
Companies (the "Services") The Services to be provided hereunder may include,
without limitation, (i) energy marketing, (ii) the purchase and sale of energy,
capacity, transmission and ancillary services, (iii) bulk power scheduling,
dispatch and accounting, (iv) risk management services, (v) consulting services
with respect to electrical energy production and fuel arbitrage opportunities
and (vi) consulting services with respect to other commercial energy
optimization opportunities. Such Services shall be further described and defined
in Attachments to this Agreement ("Operating Procedures") which will be
numbered, dated and signed by representatives from El Paso and Owner.
2. Subcontracting. Without limiting the obligations of El Paso to Owner
hereunder, in connection with El Paso's providing of the Services contemplated
by this Agreement, El Paso may subcontract with or otherwise retain the services
of other
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Persons including, but not limited to, Affiliates of El Paso (but only at a rate
equal to actual costs and expenses of such Affiliate), with the consent of
Owner, which consent shall not be unreasonably withheld. For purposes of this
Agreement, any Services performed by such Persons shall be deemed to have been
performed by El Paso.
3. Reimbursement of Services. The following shall be paid:
3.1 In consideration of the provision by El Paso to Owner of the
Services, within thirty (30) days after Owner has received an invoice from El
Paso specifying the Services rendered to Owner by El Paso and the amount to be
paid to El Paso for the actual costs and expenses incurred by El Paso in
rendering the Services. As used in this Section 3.1, "actual cost and expenses
incurred by El Paso" includes, without limitation, (a) the actual cost to El
Paso of procuring goods and materials used by El Paso in rendering Services, (b)
the fully burdened, pro rata cost to El Paso of personnel providing labor or
services in the course of El Paso's provision of Services and (c) the actual
cost to El Paso of retaining another Person, whether El Paso or another
Affiliate of El Paso or otherwise, in connection with the provision of Services.
In the event El Paso subcontracts with any Person, including, without
limitation, an Affiliate as provided in Section 2 hereof, any payment to El Paso
under this Section 3.1 on account of the Services so subcontracted shall be made
to El Paso only to the extent of the amount charged El Paso by such person and
shall no include any amounts representing a mark-up by El Paso over the amount
so charged.
3.2 With respect to any calculation of actual costs and expenses or
any allocation of costs contemplated by Section 3.1 hereof, Owner shall be bound
by El Paso's determination thereof so long as such determination is reached in a
manner consistent with GAAP and El Paso's existing practices with respect to the
Facilities.
4. Term and Termination.
4.1 Unless terminated as provided in Section 9, 11 or 13 hereof, or
as hereinafter provided in this Section 4, this Agreement shall remain in effect
until, and shall terminate on the date which is, one year following the date
first written above, and shall automatically renew from year to year unless one
part hereto notifies the other of its intent to terminate at least 60 days prior
to the end of the then expiring term.
4.2 In the event of a material default by either party in the
performance of its duties, obligations or undertakings under this Agreement, the
other party shall have the right to give written notice to the defaulting party
advising such party of the specific default involved and, if within thirty (30)
days after such notice the defaulting party shall not have remedied or commenced
diligently to remedy the default, the other party shall have the right, in
addition to any other rights and remedies it may have, to terminate this
Agreement upon ten (10) days' written notice to the defaulting party.
4.3 Notwithstanding any other provision of this Agreement, and in
addition to any other right it may have, El Paso shall have the right to
terminate this Agreement, (a) effective immediately, if, at any time, Owner is
adjudged bankrupt or
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insolvent, or files a petition in bankruptcy or an answer admitting the
material facts recited in such a petition filed by another, or is put or decides
to go into dissolution or liquidation (other than in connection with a merger,
consolidation or amalgamation), or otherwise discontinues business, makes an
assignment for the benefit of its creditors or any other general arrangement
with its creditors, becomes insolvent or unable to meet its current payments, or
has a receiver or other custodian or any kind appointed to administer any
substantial amount of its property, or otherwise seeks to take advantage of any
bankruptcy or insolvency statue now or hereafter in effect and (b) upon ninety
90 days notice, within twelve (12) months of foreclosure of the Facilities by
the Project Lender and on each anniversary of such foreclosure.
4.4 If this Agreement is terminated prior to the expiration of its
terms as provided in section 4.1 hereof, Owner shall pay El Paso all Service
Fees and other amounts due and payable to El Paso under Section 3 hereof as of
the date the Agreement is effectively terminated.
5. Standard of Care: Sole Remedy.
5.1 El Paso agrees to perform the Services with a standard of care
equal to that it exercises in the administration of its own separate business
activities. El Paso does not warrant that the Services will be error free or
accomplish a particular result.
5.2 Except in the case of gross negligence or willful misconduct,
the sole remedy for a breach of the foregoing standard of care shall be
reperformance of the Services.
6. Limitations on Liability.
6.1 Owner agrees that notwithstanding any other provision in this
Agreement to the contrary, neither El Paso nor its agents, contractors, vendors
or their employees, shareholder, officers or directors, shall be liable to Owner
for incidental, consequential, punitive or indirect loss or damage, including,
but not limited to, cost of reperformance of services by third parties, damage
to property or injury to person, loss of profit, loss of use, loss of revenue,
loss of opportunity, increased costs, cost of capital, or loss of goodwill.
6.2 Owner agrees that as between the parties in no event shall the
liability of El Paso hereunder for any breach of this agreement exceed the total
amount payable to El Paso under Section 3 hereof for the calendar year prior to
the claim giving rise to such liability, or, if the first calendar year has not
yet been completed, the first 12 months from the effective date of the
Agreement.
7. Indemnification. Except to the extent that such liability, claim,
damage, loss or expense is attributable to the gross negligence or willful
misconduct of El Paso, to
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the maximum extent permitted by laws, Owner (i) shall defined, indemnify and
hold El Paso and its agents, contractors, vendors and their employees,
shareholders, officers or diectors harmless from and against any and all
liabilities, claims, damages, losses and expenses, including attorney's fees and
costs and expenses of litigation or arbitration, of every kind and nature
payable to third parties to the extent they arise out of the course of
performance of this Agreement by El Paso or from the business of Owner and (ii)
shall, upon request of El Paso or other indemnified party, defend all suits
arises out of or resulting from the performance of this Agreement by El Paso or
the business of Owner. Without limiting the generality of the foregoing, Owner
shall indemnify and hold El Paso and its agents and employees harmless from and
against any and all liabilities, fines and penalties arising under laws or
regulations with regard to protection of the environment conditions.
8. Survival of Terms. Owner agrees that the limitations on liability,
waivers and disclaimers of liability, indemnities, release from liability, sole
remedy provisions and in this Agreement shall survive termination or expiration
of this Agreement, and shall apply for the benefit of El Paso and its agents,
contractors, vendors and their employees, shareholders, officers or directors,
whether in contract, equity, tort or otherwise, even in the event of the fault,
negligence, including sole negligence, strict liability, or breach of warranty.
9. Non-Waiver of Breach. Either party hereto may specifically waive any
breach of this Agreement by the other party, but no such waiver shall be deemed
to have been given unless such waiver is in writing, signed by the waiving party
and specifically designates the breach waived, nor shall any such waiver
constitute a continuing waiver of similar or other breaches.
10. Arbitration. All disputes arising under this Agreement shall be
settled by binding arbitration in accordance with the Commercial Arbitration
Rules of the AAA then pertaining, unless the parties mutually agree otherwise.
The party desiring such arbitration shall give written notice to that effect to
the other party and in such notice shall appoint as an arbitrator a
disinterested person of recognized competence in the area at issue. Within
fifteen (15) days thereafter, the other party shall, by written notice to the
originating party, appoint a second person similarly qualified as the second
arbitrator, and such three arbitrators shall as promptly as possible determine
such matter with the parties, each being entitled to present evidence and
argument to the arbitrators; provided, however, that:
(i) if the second arbitrator shall not have appointed as aforesaid, the
first arbitrator shall determine such matter; and
(ii) if the two arbitrators appointed by the party shall be unable to
agree upon the appointment of a third arbitrator within fifteen (15) days
after the appointment of the second arbitrator, they shall give written
notice of such failure to agree to the parties, and, if the parties fail
to agree upon the selection of such third arbitrator within fifteen (15)
days thereafter, then within ten (10) days
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thereafter, either of the parties upon written notice to the other party
may apply for such appointment to the Federal District Court or District
Court in Omaha, Nebraska.
The arbitrator or arbitrators shall only interpret and apply terms and
provisions of this Agreement and shall not change any such terms or provisions
or deprive either party of any right or remedy expressly or impliedly provided
for in this Agreement.
The determination of the majority of the arbitrators or the sole
arbitrator, as the case may be, shall, to the extent permitted by law, be
conclusive upon the parties. The arbitrator or arbitrators shall give written
notice to the parties stating their determination, and shall furnish to each a
copy of such determination signed by them. In the event of the failure, refusal
or inability of any arbitrator to act, a new arbitrator shall be appointed in
his stead, which appointment shall be made in the same manner as hereinbefore
provided for the appointment of the arbitrator so failing, refusing or unable to
act.
11. Attorney Fees. If either party hereto commences litigation or
arbitration for the judicial or other interpretation, enforcement, termination,
cancellation or rescission hereof, or for damages for the breach hereof, the
prevailing party in any such action, trail, arbitration or appeal thereon shall
be entitled to its reasonable attorneys' fees and court, arbitrator and other
costs incurred, to be paid by the losing party as fixed by the court or
arbitrator in the same or a separate suit, and whether or not such action is
pursued to decision or judgment.
12. Force Majeure
12.1 Neither Owner nor El Paso shall be liable in damage to the
other for any act, omission or circumstance ("Event of Force Majeure")
occasioned by or in consequence of any acts of God, act of the public enemy,
wars, blockades, insurrections, riots, epidemics, landslides, lighting,
earthquakes, fires, storms floods, civil disturbances, explosions, sabotage, the
binding order of any court or governmental authority which has been resisted in
good faith by all reasonable legal means, Federal, State or local laws, or other
event or circumstance not within the control of such party preventing such party
from performing its obligations hereunder, whether caused or occasioned by, or
happening on account of, the act or omission of one of the parties, not within
the control of the party claiming suspension and which by the exercise of due
diligence such party is unable to prevent or overcome.
12.2 Such Events of Force Majeure shall not relieve Owner or El Paso
of liability in the event of either part's concurring engligence or in the event
of either party's 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 Events of Force Majeure relieve either party of liability unless such
party shall give notice and full particulars of the same in writing to the other
party within ten (10) days of the occurrence relied on. In no event, however,
shall an Event of Force Majeure relieve Owner from the obligation of making
payments due under this Agreement at the time of such occurrence.
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The parties agree that should any Event of Force Majeure remain in existence for
a period of six (6) months, this Agreement under such Event of Force Majeure
upon the giving of written notice by such party to the other; provided, however,
that such six (6) month period shall extended for a reasonable time so long as
throughout such six (6) month period the party claiming suspension of this
Agreement under the Event of Force Majeure has diligently proceeded to terminate
the Event of Force Majeure and continues to do so throughout such extension.
13. Invalid Provision.
13.1 The invalidity or unenforceability of any particular provision
of this Agreement shall not affect the other provisions thereof, and this
Agreement shall be construed in all respects as if such invalid or unenforceable
provisions were omitted; provided, however, that if any of the provisions of
Section 1 hereof are held invalid or unenforceable by any court or other
relevant authority, Owner and El Paso shall hold consultations over a period of
ninety (90) days, commencing immediately, in an effort to work out satisfactory
terms for continuation of this Agreement. If Owner and El Paso do not reach
agreement within this period, El Paso shall have the right to terminate this
Agreement, effective immediately.
13.2 In the event that any provision, term, condition or object of
this Agreement may be in conflict with any law, measure, ruling, court judgement
(by consent or otherwise), or regulation of the government of the United States
of America, and the legal counsel of either party shall advise that in
their considered opinion such conflict, or a reasonable possibility of such
conflict, exists, then either party may propose to the other appropriate
modifications of this Agreement to avoid such conflict. In such case, if an
agreement of modification is not reached within ninety (90) days from such
proposal, the party making such proposal, after sixty (60) days' written notice
to the other party, may terminate the agreement in its entirety as of date
subsequent to such sixty (60) days, and which shall be specified in such notice.
14. Assignment. Subject to Section 2, neither Owner nor El Paso shall
grant, assign or otherwise convey any of their respective rights or delegate any
of their respective obligations under this Agreement with the prior written
consent of the other party which consent shall not be unreasonably withheld.
15. Governing Law. The existence, validity, construction, operation and
effect of this Agreement shall be determined in accordance with and governed by
the laws of the State of New York. This Agreement shall be construed equally as
against the parties hereto, and shall not be construed against he party
responsible for its drafting.
16. Entire Agreement - Amendments. This Agreement constitutes the
entire agreement of the parties and the provisions hereof shall supersede any
and all prior agreements or understandings relating to the same subject matter.
This Agreement may be amended only by a writing signed by a duly authorized
representative of both parties.
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17. Communications. All notices, request, offers and other
communications required or permitted to be made under this Agreement shall be in
writing and shall be deemed to have been duly given and received, regardless of
when and whether received, either:(a) on the day of delivery, if delivered
To El Paso Power Services Company at:
El Paso Power Services Company
1001 Lousiana St., Suite 2700
Houston, TX 77002
Attention: General Counsel
Telephone: (713)420-4431
Facsimile: (713)420-4943
To Owner at:
CE Generation, LLC
302 South 36th Street, Suite 400-K
Omaha, Nebraska 68131
Attention: General Counsel
Telephone: (402)341-1641
Facsimile: (402)345-1658
or at such other address as either party most recently may have designated in
writing to other party for such purpose; or (b) on the day sent, when sent by
prepaid telex, telegram, cable or radiogram, and confirmed the same day by
period first-class registered airmail, or when sent by facsimile transmission
with telephone confirmation of receipt, addressed to El Paso or Owner, as the
case may be, at their respective addresses foresaid.
18. Counterparts. This Agreement may be executed in counterparts and
any number of counterparts signed in aggregate by the parties hereto shall
constitute a single original instrument.
19. Exhibits. All exhibits and schedules attached hereto are hereby
incorporated herein by this reference.
20. Third Party Beneficiaries. The covenants contained herein are made
solely for the benefit of the properties, parties and successors and assigns of
such parties as specified herein, and shall not be construed as having been
intended to benefit any third party not a party to the agreement.
21. Headings. The headings herein are reference only and shall not
affect the construction of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused the Agreement to be
signed by their duly authorized officers as of the day year first above written.
EL PASO POWER SERVICES COMPANY
A Delaware Corporation
BY: /s/ Steven A. McArthur
---------------------------------
Name: Steven A. McArthur
Title: Executive Vice President
CE GENERATION, LLC.
A Delaware limited liability company
BY: /s/ Steven A. McArthur
---------------------------------
Name: Steven A. McArthur
Title: Executive Vice President
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EQUITY PURCHASE AGREEMENT
This EQUITY PURCHASE AGREEMENT (this "Agreement"), dated as of
February 21, 1999, is by and between CalEnergy Company, Inc., a Delaware
corporation ("Seller"), and El Paso Power Holding Company, a Delaware
corporation ("Buyer").
WHEREAS, Seller has contributed to CE Generation, LLC, a Delaware
limited liability company (the "Company"), all of its interests in the entities
listed in Section 3.3 of the Seller Disclosure Schedule, representing indirect
ownership of all Seller's interests in the Projects listed in such Section 3.3
(the "Project Subsidiaries"):
WHEREAS, in consideration of the contribution referred to above,
Seller subscribed for and owns all of the issued and outstanding shares of the
Company's Class A Interests (the "Class A Interests"), representing 50% of the
equity in the Company, and all of the issued and outstanding shares of the
Company's Class B Interests (the "Class B Interests" and together with the Class
A Interests, the "Interests"), representing the remaining 50% of the equity in
the Company; and
WHEREAS, Buyer desires to purchase from Seller, and Seller desires
to sell to Buyer, the Class A Interests, all in accordance with and subject to
the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein contained, Buyer
and Seller hereby agree as follows:
ARTICLE I.
DEFINITIONS
1.1. Definitions. The terms defined in this "Article I", whenever
used herein, shall have the following meanings for all purposes of this
Agreement.
<PAGE>
"Administrative Services Agreement" shall mean that certain
Administrative Services Agreement between Seller and the Company pursuant to
which Seller will provide certain services to the Company.
"Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under the Exchange Act.
"Affiliated Group" has the meaning specified in section 1504(a) of
the Code.
"Agreement" shall have the meaning set forth in the preamble
hereto.
"Agreement Concerning Consideration" shall mean that certain
agreement between Buyer and Seller substantially in the form of Exhibit A.
"Buyer" shall have the meaning set forth in the preamble hereto.
"Buyer Disclosure Schedule" shall have the meaning set forth in
Article IV hereof.
"Buyer Equity Commitment Agreement" shall mean that certain
agreement between Buyer and the Company substantially in the form of Exhibit B
to be delivered at Closing committing Buyer to make, or cause to be made,
certain funds available for the construction of certain facilities in the
Imperial Valley.
"Buyer Indemnified Parties" shall have the meaning set forth in
Section 9.4(a) hereof.
"Buyer Material Adverse Effect" shall have the meaning set forth
in Section 4.1 hereof.
"Buyer's Transaction Taxes" shall mean all Taxes imposed for
Pre-Closing Periods plus one day on the Buyer as a direct result of the
transactions contemplated by, or entered into in contemplation of, this
Agreement; but shall not include (i) any increase in ad valorem taxes
attributable to a re-appraisal of property triggered by the transactions
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contemplated herein and (ii) any taxes imposed under a retroactive change in law
enacted by Congress after the date hereof. Buyer's Transaction Taxes shall not
include any other income taxes imposed on Buyer including, but not limited to,
taxes on dividends or taxes on interest on any escrow account contemplated
herein.
"CalEnergy Guaranty" shall mean the guarantee of certain
construction financing obligations related to the Zinc Recovery Project by
Seller for the benefit of the Company.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"Class A Interests" shall have the meaning set forth in the
recitals hereto.
"Class B Interests" shall have the meaning set forth in the
recitals hereto.
"Closing" shall have the meaning set forth in Section 2.3(a)
hereof.
"Closing Date" shall have the meaning set forth in Section 2.3(a)
hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Combined Financial Statements" shall have the meaning set forth
in Section 3.6 hereof.
"Company" shall have the meaning set forth in the recitals hereto.
"Confidentiality Agreement" shall mean the Confidentiality
Agreement dated as of January 14, 1999 between El Paso Energy Marketing, Inc.
and Seller.
"Damages" shall mean any loss, injury, decline in value,
liabilities, costs (including costs of investigation) or expenses (including,
reasonable attorneys' fees), judgments, fines, penalties, losses, claims,
damages and amounts paid in settlement, except to the extent caused by gross
negligence, willful misconduct or fraud of an Indemnified Party.
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"Deductible Amount" shall have the meaning set forth in Section
9.4(c) hereof.
"Development Agreement" shall mean that certain agreement between
Buyer and Seller and the Company substantially in the form of Exhibit C.
"Electric Utility" shall mean any Person that is an "electric
utility" or an "electric utility holding company" (or a combination thereof)
within the meaning of PURPA, or a Person which would be deemed to be owned in
part by any of the foregoing.
"Encumbrance" shall mean any lien, encumbrance, security interest,
charge, mortgage, option, pledge or restriction on transfer of any nature
whatsoever (except, in the case of the Interests, for restrictions relating to
applicable securities laws, and except for encumbrances pursuant to the Project
Documents, LLC Operating Agreement, IPPCo Debt and Project financing
documents, Zinc Project Documents, and any Permits).
"Environmental Claim" means any claim, action, demand, order, or
written notice by or on behalf of, any Governmental Entity or Person alleging
potential liability based on or resulting from the violation of any
Environmental Law or environmental permit.
"Environmental Laws" shall mean all Federal, state, and local Laws
relating to or concerning pollution, the treatment, transportation, removal,
storage, discharge or generation of Hazardous Materials or other hazardous or
toxic materials or waste, or the protection of human health, the environment or
public health and safety.
"Environmental Liability" shall mean a Liability arising out of or
resulting from (i) the treatment, recycling, reclamation, use, management,
Release, generation, processing, handling, storage or disposal of, or
contamination by, any Hazardous Materials on or prior to the Closing Date,
whether (A) on the premises on which the business of the Company and the Project
Subsidiaries has been conducted or (B) off such premises and relating to the
operations of such business or any activities by the Company or any Project
Subsidiary, or (ii) the noncompliance by any Project Subsidiary or the Company
prior to the Closing Date, to the extent such Liability under (i) or (ii) of
this definition arises out of or results under any
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applicable Environmental Law or environmental Permit as in effect on or before
the Closing Date.
"ERISA" shall have the meaning set forth in Section 3.12(a)
hereof.
"Escrow Agreement" shall mean the agreement substantially in the
form of Exhibit D.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Excluded Assets" shall have the meaning set forth in Section 2.2
hereof.
"Excluded Liabilities" shall have the meaning set forth in Section
2.2 hereof.
"FERC" shall mean the Federal Energy Regulatory Commission, or any
successor agency.
"Final Order" shall mean an order by the applicable agency that is
no longer subject to a request for rehearing, appeal or similar procedures.
"GAAP" shall mean United States generally accepted accounting
principles as in effect on the date or for the period with respect to which such
principles are applied.
"Governmental Entity" shall have the meaning set forth in Section
3.5 hereof.
"Good Utility Practice" means with respect to a specific Project
those engineering and operating practices, procedures and policies that are used
by electric utility and generating companies and are reasonably calculated to
result in safe, reliable and efficient operations and the delivery of electric
capacity and energy. At a minimum, Good Utility Practice includes conforming to
all regulatory mandates and adhering to the guidelines and policies of the North
American Electric Reliability Council. Good Utility Practice does not mean that
the practices, procedures and policies must necessarily produce the optimum
result, so long as the result is in conformance with standards expressed in the
first two sentences of this definition.
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"Hazardous Materials" shall mean any substance, chemical, waste or
other material which is or may be listed, defined or otherwise identified as
hazardous, toxic or dangerous under any applicable law, as well as any asbestos,
polychlorinated biphenyls ("PCBs"), petroleum, petroleum product or by-product,
crude oil, natural gas, natural gas liquids, liquefied natural gas, or synthetic
gas usable for fuel, geothermal materials and radioactive materials.
"Indemnified Party" shall have the meaning set forth in Section
9.4(g) hereof.
"Indemnity Agreement" shall mean that certain agreement between
Seller, Buyer and the Company in substantially in the form of Exhibit E.
"Indemnifying Party" shall have the meaning set forth in Section
9.4(g) hereof.
"Insurance Policies" shall have the meaning set forth in Section
3.15 hereof.
"Interests" shall have the meaning set forth in the preamble
hereto.
"IPPCo Debt" shall mean the non-recourse indebtedness of the
Company issued prior to the Closing in an aggregate principal amount not to
exceed $400 million and on substantially the terms set forth in Exhibit F
hereto.
"Joinder Agreement" shall mean the agreement by which Buyer agrees
to become a Party to the LLC Operating Agreement in substantially the form
attached thereto.
"Law" means any federal, state or local statute, law, ordinance,
regulation, rule, code, order, requirement.
"Liability" shall mean any debt, obligation, duty or liability of
any nature.
"LLC Operating Agreement" shall mean the Limited Liability Company
Operating Agreement for the Company, adopted by Seller and the Company and to be
joined by the Buyer at Closing in the form attached as Exhibit G.
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"Material Adverse Effect" shall mean events, facts or
circumstances which, alone or in the aggregate, have or could reasonably be
expected to have a material adverse effect on the business, condition (financial
or otherwise), assets, properties, or operations of the Company and the Project
Subsidiaries taken as a whole.
"Multiemployer Plan" shall have the meaning set forth in Section
3(37) of ERISA.
"Multiple Employer Plan" shall mean a plan with two or more
contributing sponsors, at least two of which are not under common control,
within the meaning of Section 4063 of ERISA.
"Permits" shall have the meaning set forth in Section 3.8 hereof.
"Person" shall mean any individual, partnership, joint-stock
company, joint venture, corporation, limited liability company, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"Plans" shall have the meaning, set forth in Section 3.12 hereof.
"Power Purchase Agreement" shall mean, with respect to any
Project, the agreement pursuant to which such Project provides electricity to
one or more persons, each of which is listed in Section 3.8 of the Seller
Disclosure Schedule.
"Pre-Closing Period" shall mean all Tax periods ending on or
before the Closing Date and Taxes relating to all activity through the Closing
Date.
"Projects" shall mean those projects and facilities commonly known
as Salton Sea Unit I, Salton Sea Unit II, Salton Sea Unit III, Salton Sea
Unit IV, Salton Sea Unit V, Vulcan, Hoch (Del Ranch), Elmore, Leathers, CE
Turbo, Yuma, PRI, NorCon and Saranac, which are owned by certain Project
Subsidiaries.
"Project Documents" shall mean those certain documents listed in
Section 3.8 of the Seller Disclosure Schedule.
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<PAGE>
"Project Subsidiaries" shall have the meaning set forth in the
recitals hereto.
"Proprietary Rights" shall have the meaning set forth in Section
3.14 hereof.
"Purchase Price" shall have the meaning set forth in Section 2.1
hereof.
"PUHCA" shall mean the Public Utility Holding Company Act of 1935,
as amended, and the rules and regulations promulgated thereunder.
I
"PURPA" shall mean the Public Utility Regulatory Policies Act of
1978, as amended, the regulations promulgated by FERC thereunder, and any
published, final and non-appealable decision of FERC applying or interpreting
such act, rules and regulations.
"Qualifying Facility" shall mean a power plant which has qualified
as a "small power production facility" or a "cogeneration facility" as such
terms are defined in PURPA.
"Release" shall have the meaning set forth in CERCLA.
"Representative" shall mean, with respect to any Person, each of
such Person's directors, officers, employees, representatives and agents, and
each of the heirs, executors and assigns of any of them.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Seller Indemnified Parties" shall have the meaning set forth in
Section 9.4(b) hereof.
"Seller" shall have the meaning set forth in the preamble hereto.
"Seller Disclosure Schedule" shall have the meaning set forth in
Article III hereof.
"Single Employer Plan" shall mean a defined benefit pension plan
which is subject to Title IV of ERISA and which is not a Multiemployer Plan.
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"Software" means any source code, object code, machine code, or
other instructions of any kind or description which is loaded or to be loaded on
any automated system or device of Seller or the Company or used at or in
connection with a Project, including by way of illustration but not limitation,
operating system, BIOS (basic input/output system), compilers, generators,
interpreters, application programs (whether compiled or not, and whether
interpreted or not), instructions stored on Programmable, Read Only Memory
(PROM) chips, instructions stored on Read Only Memory (ROM) chips, or
instructions stored on Erasable, Programmable, Read Only Memory (EPROM) chips.
"SSFC" shall mean the Salton Sea Funding Corporation.
"Subsidiary" shall mean, with respect to any Person, a
corporation, partnership, joint venture, association, limited liability company
or other entity of which such Person owns, directly or indirectly, more than
50% of the outstanding voting stock or other ownership interest.
"System" means any automated or partially automated application,
function or process which utilizes Software and which has an input from or
output to some other System, person or report.
"Tax" (and, with correlative meaning, "Taxes") means any federal.
state, local, or foreign taxes, charges, fees, levies or other assessments,
including, without limitation, any net income tax or franchise tax based on net
income, any alternative or add-on minimum taxes, any gross income, gross
receipts, premium, sales, use, ad valorem, value added, transfer, profits,
license, payroll, employment, withholding, excise, severance, stamp, occupation,
property, environmental (including taxes under section 59A of the Code), capital
stock, social security (or similar), unemployment, disability, registration,
estimated, or windfall profit tax, custom duty or other tax, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest credit or charge, penalty (including any penalty for failure to file a
Tax Return), addition to tax or additional amount imposed by any Governmental
Entity, whether disputed or not.
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"Tax Indemnity Agreement" shall mean that certain agreement
between Seller and the Company substantially in the form of Exhibit H.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Transaction Regulatory Approvals" shall mean all regulatory
approvals required to consummate the transactions contemplated hereby,
including, without limitation, the Final Order of FERC granting separate
recertification to each of the Projects, confirming that each of the Projects
will maintain its Qualifying Facility status following the transactions
contemplated hereby.
"Working Capital payment" shall mean the sum of the Company's (i)
unrestricted cash recorded on the Company's audited combined balance sheet as of
December 31, 1998, (ii) plus accounts receivable from third parties recorded on
the Company's audited combined balance sheet as of December 31, 1998 owed to
the Company or the Project Subsidiaries (excluding Saranac and NorCon) as of
December 3 1, 1998 which are for activity prior to December 1, 1998 and have
been collected prior to Closing (iii) less accounts payable and accrued
liabilities owed by the Company or the Project Subsidiaries (excluding Saranac
and NorCon to third parties as of December 31, 1998 which relate to activity
prior to December 1, 1998 but excluding (a) those accounts payable and accrued
liabilities that have related restricted cash balances (but in any event to the
extent Yuma, Saranac and PRI have combined accrued liabilities associated with
restricted cash balances in excess of the related restricted cash balance, that
amount shall be included as a reduction from the Working Capital Payment), (b)
deferred revenue and (c) certain purchase accounting reserves to the extent they
are not paid by December 30, 1999, but in any event not to exceed $ 1,700,000,
(iv) plus 50% of the Saranac project completion account balance not to exceed
$600,000, (v) less 50% of any cash distributions (net of cash contributions)
from the Company or the Project Subsidiaries to the Seller during the period
between January 1, 1999 and the Closing Date related to revenues and expenses
earned or accrued after November 30, 199S but specifically not to include the
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Company's share of the Saranac scrap sale proceeds and the distributions from
the IPPCo Debt (vi) less 7.6% of the net sum of the items (i) through (v) above,
(vii) plus 38% of 50% of pretax book income of the Company excluding any
recognized income related to (iii)(b) above between January 1, 1999 and the
Closing Date and (viii) plus the Company's receivables relating to the Del Ranch
and Elmore contract energy rate dispute for periods prior to December 1, 1998
which were not collected prior to Closing. It is agreed that all legal and other
third party costs incurred in the collection efforts subsequent to December 31,
1998 shall be shared between the Seller and Company based upon the ratio of the
disputed receivable paid in the Working Capital Payment to the Seller and that
retained by the Company. The Working Capital Payment will be paid to Seller by
Buyer and Seller will hold those funds in escrow. All interest earned on the
actual escrowed funds will accrue to the Buyer. Escrowed funds will be released
from time to time to Seller after Closing at the times and in amounts equal to
the cash as it is allowed to be withdrawn from the Company to Buyer.
Buyer, or its representatives, shall have reasonable access to the
Company's and its Project Subsidiaries' books and records for 90 days subsequent
to the Closing Date to verify the computation of the Working Capital Payment.
Based on such review, should an adjustment be requested by the Buyer or the
Seller, then Buyer and Seller will work together to agree on the adjustment
within 30 days. If the difference between Seller's and Buyer's Working Capital
Payment calculation is less than or equal to $50,000, Buyer and Seller shall
split the difference between the two calculations. If Buyer and Seller cannot
agree within $50,000, then they shall submit the issue to an independent audit
firm (excluding Deloitte & Touche or PriceWaterhouseCoopers) mutually agreeable
to Buyer and Seller, which will be responsible for computing the Working Capital
Payment. Buyer or Seller shall submit reasonable agreed upon procedures language
to be agreed between Buyer and Seller which will define an aggregate materiality
limit for the auditors as $200,000. The conclusion from the audit firm shall be
final and if such final auditors calculation shows an adjustment that is
material and in favor of Buyer, such funds shall be refunded to Buyer within 30
days, and if such final adjustment results in a refund to the Seller, Buyer
shall cause such funds to be paid to Seller, or the Company, within 30 days.
Fees paid to the auditing firm shall be shared equally
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between Buyer and Seller but in no event shall Seller's portion exceed
$10,000. In no event will an audit adjustment be made to the Working Capital
Payment after June 30, 1999. In no event shall the Working Capital Payment
exceed $30,000,000.
"Year 2000 Compliant" means that for the Projects and for any of
Seller's or the Company's financial accounting, management reporting,
telecommunications, environmental, access control or security Systems that will
either continue to interface with any Project or on which Buyer or the Projects
will have a right of processing, will function without interruption or human
intervention with four-digit year processing on all Date Data, including errors
or interruptions from functions which may involve Date Data from more than one
century or leap years, regardless of the date of processing or date of Date Data
(the term "Date Data" shall mean any data, input, or output which includes an
indication of date).
"Zinc Project Documents" shall mean the Agreements listed on
Section I of the Seller Disclosure Schedule.
"Zinc Recovery Project" shall mean that certain zinc extraction
facility located in Imperial Valley, California, owned by CalEnergy minerals LLC
and all future expansions thereof and future minerals extraction or processing
facilities developed in the vicinity of the Projects located in Imperial Valley,
California.
ARTICLE II.
SALE OF INTERESTS
2.1. Purchase and Sale of the Interests and Liabilities. Buyer
and Seller hereby agree that upon the terms and subject to the satisfaction or
waiver, if permissible, of the conditions set forth herein, Seller shall sell,
transfer and deliver to Buyer, and Buyer shall purchase from Seller, free and
clear of all Encumbrances, the Class A Interests for a purchase price equal to
Two Hundred and Twenty Nine Million Six Hundred and Twenty Five Thousand Dollars
($229,625,000) (the "Purchase Price"). The parties hereto acknowledge that the
Purchase Price is based on the assumption that the IPPCO Debt shall be $400
million in aggregate principal amount.
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2.2. Excluded Assets and Liabilities. Seller's contribution to the
Company of the Project Subsidiaries was made after retention by Seller of 100%
of the title to Minerals LLC and certain other rights and interests referenced
in Section 2.2 of the Seller Disclosure Schedule, and, accordingly, the Class A
Interests do not represent or have any right or interest in those assets forming
a part of the Zinc Recovery Project (it being expressly acknowledged and agreed
that any minerals recovery project at the geothermal Projects in Imperial
Valley, including, without limitation, the Zinc Recovery Project does not
constitute a Project hereunder) or those certain rights and interests referenced
in Section 2.2 of the Seller Disclosure Schedule (the "Excluded Assets"). Seller
shall retain, and shall be responsible for paying, performing and discharging
when due, and none of Buyer, the Company or the Project Subsidiaries shall
assume or have any responsibility for, all Liabilities (including, without
limitation, any Liabilities relating to Hazardous Materials or non-compliance
with Environmental Laws) relating to the Excluded Assets (the "Excluded
Liabilities").
2.3. Closing: Closing Date. (a) Subject to the satisfaction or
waiver, if permissible, of the conditions set forth herein, the closing of the
purchase and sale of the Class A Interests and the other transactions
contemplated hereby (the "Closing") shall be held at 10:00 a.m. on March 3, 1999
to be effective as of 11:58 P.M., at the offices of Willkie Farr & Gallagher,
787 Seventh Avenue, New York, New York (or at such other time, date or place as
the parties may mutually agree, hereinafter referred to as the "Closing Date.")
(b) At the Closing, Seller shall deliver the following to Buyer:
(i) Membership certificate(s) with appropriate transfer stamps,
if any, affixed thereto, representing the Class A Interests with
appropriate assignment documents or accompanied by other duly executed
instruments of transfer;
(ii) The certificates contemplated by Section 8.3 hereof;
(iii) The LLC Operating Agreement, duly executed by Seller and
the Company;
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(iv) The Tax Indemnity Agreement;
(v) The Indemnity Agreement;
(vi) The Development Agreement;
(vii) The Administrative Services Agreement;
(viii) The Escrow Agreement;
(ix) All other documents required to be delivered by Seller on
or prior to the Closing Date pursuant to this Agreement.
(c) At the Closing, Buyer shall deliver to Seller:
(i) The amount of the Purchase Price;
(ii) The Working Capital Payment for deposit into the escrow
created by the Escrow Agreement;
(iii) The certificates contemplated by Section 7.3 hereof;
(iv) The Joinder Agreement with respect to the LLC Operating
Agreement, duly executed by Buyer;
(v) The Agreement Concerning Consideration;
(vi) The Buyer Equity Commitment Agreement;
(vii) The Indemnity Agreement;
(viii) The Power Marketing Services Agreement;
(ix) The Fuel Management Services Agreement;
(x) The Development Agreement; and
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(xi) All other documents required to be delivered by Buyer on or
prior to the Closing Date pursuant to this Agreement.
(d) All payments to be made by Buyer pursuant to this Section 2.3
shall be made by wire transfer of immediately available funds to such bank
account or bank accounts designated by Seller.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the Disclosure Schedule delivered by Seller
to Buyer concurrently with the execution and delivery by Seller of this
Agreement (the "Seller Disclosure Schedule"), the parts of which are numbered
according to, and are specifically (unless otherwise manifest on the face of the
Seller Disclosure Schedule) in respect of, the relevant Section of this
Agreement, Seller hereby represents and warrants to Buyer as follows:
3.1. Corporate Organization. Etc. Each of the Company and the
Project Subsidiaries is a corporation, limited liability company or partnership,
as the case may be, duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization and has all requisite
corporate, company or partnership power and authority to conduct its business as
it is now being conducted and to own, lease and operate its property and assets,
except where the failure to be so organized, existing and in good standing or to
have such power or authority will not, in the aggregate, either (i) have a
Material Adverse Effect (ii) impair the ability of Seller to perform its
material obligations under this Agreement. Each of the Company and the Project
Subsidiaries is qualified or licensed to do business as a foreign corporation,
company or partnership, and is in good standing in each jurisdiction in which
ownership of property or the conduct of its business requires such qualification
or license, except where the failure to be so qualified or licensed will not
have a Material Adverse Effect. True and complete copies of the Company's
certificate of formation, as presently in effect, have been heretofore delivered
to Buyer.
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3.2. Capitalization of the Company. (a) The authorized equity
capital of the Company consists of the Class A Interests and the Class B
Interests. All the Interests are issued and outstanding as of the date of this
Agreement. All of the Interests are duly authorized, validly issued, fully paid
and non-assessable and free of any preemptive rights in respect thereto. There
are no outstanding (i) securities convertible into or exchangeable for the
equity capital of the Company, (ii) options, warrants or other rights to
purchase or subscribe for equity capital of the Company or (iii) contracts,
commitments, agreements, understandings or arrangements of any kind relating to
the issuance of any equity capital of the Company, any such convertible or
exchangeable securities or any such options, warrants or rights, pursuant to
which, in any of the foregoing cases, the Company is subject to or bound. Except
for the LLC Operating Agreement, there are no voting trusts, member agreements
or other similar instruments restricting or relating to the rights of the
holders of Interests to vote, transfer or receive dividends with respect to the
Interests.
(b) Upon delivery of the Class A Interests against payment of the
Purchase Price by Buyer in accordance with Section 2 of this Agreement, valid
and marketable title to the Class A Interests, free and clear of any
Encumbrance, will pass to Buyer.
3.3. Project Subsidiaries. Section 3.3 of the Seller Disclosure
Schedule lists each of the Project Subsidiaries (together with its jurisdiction
of organization and the names of the holders of record of the equity interests
in each of the Project Subsidiaries and the type of entity). Except as set forth
in Section 3.3 of the Seller Disclosure Schedule, all issued and outstanding
interests of equity capital of each of the Project Subsidiaries are duly
authorized, validly issued, fully paid and nonassessable, and are owned,
directly or indirectly, by the Company, free and clear of all Encumbrances and
any preemptive rights in respect thereto. Except as set forth in the Project
Documents, there are no outstanding (i) securities convertible into or
exchangeable for the equity capital of the Project Subsidiaries, (ii) options,
warrants or other rights to purchase or subscribe for equity capital of the
Project Subsidiaries or (iii) contracts, commitments, agreements, understandings
or arrangements of any kind relating to the issuance of any equity capital of
the Project Subsidiaries, any such convertible or exchangeable securities or
any such options, warrants or rights, pursuant to which, in any of
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the foregoing cases, the Project Subsidiaries are subject to or bound.
Except for the agreements listed in Section 3.3 of the Seller Disclosure
Schedule, or as otherwise set forth in the Project Documents, there are no
voting trusts, member agreements or other similar instruments restricting or
relating to the rights of the holders of equity interests in the Project
Subsidiaries to vote, transfer or receive dividends with respect to the equity
interests in the Project Subsidiaries. True and complete copies of the
certificate of incorporation and by-laws (or other comparable governing
documents) of each of the Project Subsidiaries have been heretofore delivered to
Buyer. Except for the Project Subsidiaries, there are no other corporations,
partnerships, limited liability companies, joint ventures. associations or other
entities in which the Company owns, of record or beneficially, any direct or
indirect equity or other interest or any right (contingent otherwise) to acquire
the same.
3.4. Authority Relative to this Agreement. Seller has all
requisite corporate authority and power to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by all required corporate action on
the part of Seller and no other corporate proceedings on the part of Seller are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Seller and, assuming this Agreement has been duly authorized,
executed and delivered by Buyer, this Agreement constitutes a valid and binding
agreement of Seller, enforceable against Seller in accordance with its terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally, including the effect of statutory and
other laws regarding fraudulent conveyances and preferential transfers and
subject to the limitations imposed by general equitable principles (regardless
of whether such enforceability is considered in a proceeding at law or in
equity).
3.5. No Conflict or Violation; Consents and Approvals. Neither the
execution and delivery of this Agreement by Seller nor the consummation of the
transactions contemplated hereby, nor the fulfillment of the terms and
compliance with the provisions
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hereof, by Seller will (a) violate any provision of the certificate of
incorporation or by-laws (or other comparable governing documents) of Seller,
the Company or any of the Project Subsidiaries, (b) require the consent,
waiver or approval of any Federal, state, local or foreign government,
or regulatory authority, agency or commission, including courts of competent
jurisdiction, domestic or foreign (a "Governmental Entity"), except for
(i) consents and approvals to be made and obtained before the Closing and
those which have been made and obtained and (ii) such consents and approvals
which, if not made or obtained, will not, in the aggregate, have a Material
Adverse Effect or impair the ability of Seller to consummate the transactions
contemplated by this Agreement, (c) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any right of termination, cancellation or acceleration or any
obligation to repay) under, any of the terms, conditions or provisions of any
indenture, mortgage, note, bond, encumbrance, license, government registration,
contract, lease, franchise, permit, agreement or other instrument or obligation
to which Seller, the Company or any of the Project Subsidiaries is a party or by
which Seller, the Company or any of the Project Subsidiaries or any of their
respective properties or assets may be bound, except such violations, breaches
and defaults which, in the aggregate, will not have a Material Adverse Effect
or (d) violate any order, writ, judgment, injunction, decree, statute,
ordinance, rule or regulation of any Governmental Entity applicable to Seller,
the Company or any of the Project Subsidiaries or by which any of their
respective properties or assets may be bound, except such violations which,
in the aggregate, will not have a Material Adverse Effect.
3.6. Financial Statements. Seller has previously furnished to
Buyer the audited combined financial statements of the Company and the related
audited combined financial statements of operations and cash flows of the
Company (including any related notes) for the fiscal years ending December 31,
1998 (the "Combined Financial Statements"). The balance sheet included in the
Combined Financial Statements, in all material respects, fairly presents the
combined financial position of the Company as of its date, and the other related
statements included in the Combined Financial Statements, in all material
respects, fairly present the
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combined results of operations of the Company for the periods presented
therein, all in conformity with GAAP, applied on a consistent basis.
3.7. Absence of Certain Changes. Since December 31, 1998, the
Company and the Project Subsidiaries taken as a whole have not (a) suffered any
change in its business, operations or financial position, except such changes
which, in the aggregate, are not reasonably likely to have a Material Adverse
Effect, (b) conducted its businesses in any material respect not in the ordinary
and usual course consistent with past practice or (c) except in the ordinary
course of business and consistent with past practice including the IPPCo Debt
and except with respect to the Excluded Assets and the Excluded Liabilities, and
other transactions contemplated by this Agreement, (i) incurred any indebtedness
or issued any debt securities or assumed or guaranteed the obligations of any
other Person, (ii) declared, set aside for payment or paid any dividend or other
distribution (whether in cash, stock, property or any combination thereof) in
respect of the equity of the Company or any of the Project Subsidiaries, or
redeemed or otherwise acquired any interests of equity of the Company or any of
the Project Subsidiaries, (iii) sold, transferred or otherwise disposed of, any
of its material property or assets, (iv) created any material Encumbrance on any
of its material property or assets, (v) increased in any manner the rate or
terms of compensation of any of their directors, officers or other employees,
(vi) paid or agreed to pay any pension, retirement allowance or other employee
benefit not required by any existing Plan or other agreement or arrangement to
any such director, officer or employee, whether past or present, (vii) entered
into or amended any employment, bonus, severance or retirement contract, (viii)
made any change in any method of accounting or accounting practice or policy
used by the Company and the Project Subsidiaries, except as disclosed in Section
3.7(b)(viii) of the Disclosure Schedule, (ix) issued or sold any capital stock
of the Company or any of the Project Subsidiaries, or (x) made any capital
expenditure or commitment for any capital expenditure in excess of $25,000 or
$250,000 in the aggregate other than pursuant to the 1999 annual budgets.
3.8. Material Contracts. (a) Section 3.8(a) of the Seller
Disclosure Schedule lists each of the following material contracts and
agreements (including, without limitation, oral and informal arrangements) of
the Company and the Project Subsidiaries (such contracts
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and agreements, together with all contracts, agreements, leases and
subleases concerning the management or operation of any real property listed
or otherwise disclosed in the Seller Disclosure Schedule to which the
Company or any Project Subsidiary is a party, being "Material Contracts"):
(i) each material contract, agreement and other arrangement,
with the Company or any Project Subsidiary or otherwise related to their
respective properties or assets;
(ii) all Power Purchase Agreements and all other material
agreements relating to the purchase and sale of electricity by the Company
or any of the Project Subsidiaries;
(iii) all Project Documents;
(iv) all material contracts and agreements relating to
indebtedness of the Company and any Project Subsidiary;
(v) all material contracts and agreements with any
Governmental Entity to which the Company or any Project Subsidiary is
a party;
(vi) all material contracts and agreements that limit the
ability of the Company or any Project Subsidiary to compete in any line of
business or with any Person or in any geographic area or during any period
of time;
(vii) all material contracts and agreements between or among
the Company or any Project Subsidiary, on the one hand, and Seller or any
Affiliate of Seller, on the other hand; and
(viii) all other contracts and agreements, whether or not made
in the ordinary course of business, which are material to the Company, any
Project Subsidiary or the absence of which would have a Material Adverse
Effect.
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(b) Except as disclosed in Section 3.8(b) of the Seller Disclosure
Schedule, each Material Contract: (i) is valid and binding on the respective
parties thereto and is in full force and effect and, (ii) upon consummation of
the transactions contemplated by this Agreement, shall continue in full force
and effect without penalty or other adverse consequence. To Seller's knowledge,
neither the Company nor any of the Project Subsidiaries is in breach of, or
default under, any Material Contract.
(c) Except as disclosed in Section 3.8(c) of the Seller Disclosure
Schedule, to the knowledge of Seller, no other party is in breach thereof or
default under any Material Contract.
(d) Except as disclosed in Section 3.8(d) of the Seller Disclosure
Schedule or Project Documents, there is no contract, agreement or other
arrangement granting any Person any preferential right to purchase, other than
in the ordinary course of business consistent with past practice, any of the
material properties or assets of the Company or any Project Subsidiary.
(e) Except for the Zinc Project Documents and Material Contracts
listed on the Seller Disclosure Schedule which were provided to Buyer through
Seller's data room in Houston, documents which have otherwise been provided to
Buyer upon request, documents and contracts contemplated with respect to the
IPPCo Debt, documents referenced in the litigation section of the Seller
Disclosure Schedule or documents otherwise reflected in the proforma's delivered
to Buyer with respect to the Company, there are no contracts or agreements which
would have a Material Adverse Effect.
3.9. Compliance with Law. The business of the Company and its
Subsidiaries is not being conducted in violation of any applicable order, writ,
judgment, injunction, decree, statute, ordinance, rule or regulation of any
Governmental Entity, except such violations which, in the aggregate, will not
have a Material Adverse Effect. Neither the Company nor any of the Project
Subsidiaries is in default or violation (and no event has occurred which with
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notice or the lapse of time or both would constitute a default or violation)
of any term, condition or provision of (a) its certificate of incorporation
or by-laws (or other comparable governing documents) or (b) any order, writ,
judgment, injunction, decree, statute, ordinance, rule or regulation of any
Governmental Entity applicable to the Company and the Project Subsidiaries,
except such defaults and violations which, in the aggregate will not have a
Material Adverse Effect. The Company has all governmental permits, licenses
and authorizations necessary for the conduct of its and the Project
Subsidiaries', businesses as presently conducted (the "Permits") and is in
compliance with the terms of the Permits, except for such Permits the
absence of which would not have a Material Adverse Effect or any non-compliance
with which will not have a Material Adverse Effect.
3.10. Litigation. Except as provided in Section 3.10 of the Seller
Disclosure Schedule, as of the date of this Agreement, there is no action, suit
or proceeding pending, or, to the knowledge of Seller, threatened, against the
Company or the Project Subsidiaries or any properties or rights of the Company
or the Project Subsidiaries, before any Governmental Entity which involves a
claim other than worker's compensation claims, EEOC claims, or similar
employment related claims.
3. 11. Taxes.
(a) Except as disclosed in Section 3.11 of the Seller Disclosure
Schedule:
(i) Each of the Company and the Project Subsidiaries have filed
all material Tax Returns that each was required to be filed as of
Closing Date, and all such Tax Returns were correct and complete in all
material respects.
(ii) All Taxes owed by the Company or any of the Project
Subsidiaries (whether or not shown on any Tax Return) have been paid.
(iii) To the Seller's knowledge, no claim has ever been made by a
Governmental Entity in a jurisdiction where the Company or any of the
Project Subsidiaries does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction.
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(iv) To the Seller's knowledge, there are no Encumbrances with
respect to any of the assets of the Company or any of the Project
Subsidiaries or with respect to the stock of the Company that arose in
connection with any failure (or alleged failure) to pay any Tax.
(v) To the Seller's knowledge, the Company and each of the
Project Subsidiaries have withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third
party.
(vi) None of the Company and the Project Subsidiaries has waived
any statute of limitations in respect of any income Taxes or agreed to
any extension of time with respect to an income Tax assessment or
deficiency for any taxable period.
(vii) None of the Company and the Project Subsidiaries currently is
the beneficiary of any extension of time within which to File any Tax
Return.
(viii) Seller is not a "foreign person" for purposes of
Section 1445 of the Code.
(b) Section 3.11 of the Seller Disclosure Schedule lists the only Tax
periods for which the statute of limitations for Taxes are open for the
Company or any of the Project Subsidiaries.
(c) Except as described in Section 3.11 of the Seller Disclosure
Schedule, none of the Company and the Project Subsidiaries:
(i) has filed a consent under section 341(f) of the Code
concerning collapsible corporations;
(ii) has made any payments, is obligated to make any payments, or
is a party to any agreement that under certain circumstances could
obligate it to make any payments that will not be deductible under
section 28OG of the Code;
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(iii) is a party to any Tax allocation or sharing agreement; and
(iv) has been a member of an Affiliated Group filing a
consolidated federal income Tax Return
(d) Section 3.11 of the Seller Disclosure Schedule lists all federal,
state, local, and foreign income Tax Returns filed with respect to any of
the Company and the Project Subsidiaries for taxable periods ended on or
after December 31, 1997, indicates those Tax Returns that have been audited,
and indicates those Tax Returns that currently are the subject of audit.
(e) The Sellers have delivered to the Buyer true and complete copies of
all federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by any of the Company and the
Project Subsidiaries for the tax years ended December 31, 1996 and 1997.
(f) For federal income tax purposes, the transaction will be treated as
a purchase and sale of 50% of California Energy Development Corporation,
Magma Power Company and Falcon Seaboard Resources, Inc. Further, the Company
will elect (and Buyer and Seller will consent) to be treated as an
association for federal income tax purposes pursuant to an election under
Reg. 301.7701-3(c) to be effective at the beginning of the day following
the Closing Date. For federal income tax purposes, the effect of these
transactions will be treated as an asset sale on the Closing Date followed
by a contribution, directly or indirectly, by the Buyer and Seller under
Code Section 351 to a newly formed corporation, that comes into existence as
of the beginning of the day immediately following the Closing Date. Buyer
and Seller agree to treat the transaction accordingly, and agree to take all
steps (including the execution of all forms) necessary to effectuate this
treatment.
3.12. Employee Benefit Plans; ERISA. (a) Section 3.12(a) of the
Seller Disclosure Schedule sets forth a complete and correct list of all
"employee benefit plans," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), maintained by
the Company or any of the Project Subsidiaries or to which the
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Company or any of the Project Subsidiaries has any obligation or liability,
contingent or otherwise; and all bonus or other incentive compensation, deferred
compensation, salary continuation, disability, stock award, stock option, stock
purchase, severance, parachute or other material employee benefit policies or
arrangements which the Company or any of the Project Subsidiaries maintains or
to which the Company or any of the Project Subsidiaries has any obligation or
liability (contingent or otherwise) (collectively referred to as the "Plans").
(b) None of the Plans is a Multiemployer Plan or a Multiple
Employer Plan. Neither the Company nor any of the Project Subsidiaries has any
material liability due to a complete or partial withdrawal from a Multiemployer
Plan or Multiple Employer Plan or due to the termination or reorganization of a
Multiemployer Plan, and no events have occurred and no circumstances exist that
could reasonably be expected to result in any such Liability to the Company or
any of the Project Subsidiaries.
(c) None of the Plans is a Single Employer Plan and none of
the Company or any of the Project Subsidiaries has any material Liability under
Section 4062 of ERISA to the Pension Benefit Guaranty Corporation ("PBGC") or to
a trustee appointed under Section 4042 of ERISA, and no events have occurred and
no circumstances exist that could reasonably be expected to result in any such
Liability to the Company or any of the Project Subsidiaries.
(d) Each Plan that is intended to qualify under Section
401(a) of the Code, and the trust maintained pursuant thereto, has been
determined to be so qualified and exempt from taxation under Section 501(a) of
the Code, and nothing has occurred with respect to the operation of any such
Plan that could reasonably be expected to adversely affect such qualification or
tax-exempt status.
(e) There has been no violation of ERISA or the Code with
respect to the filing of applicable reports, documents or notices regarding the
Plans with any governmental authority or the furnishing of required reports,
documents or notices to the participants or beneficiaries of the Plans, except
for such violations as would not result in a Material Adverse Effect.
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3.13. Title to Properties. The Company and the Project
Subsidiaries have good and valid title to all of the assets and properties (real
and personal) which they own and which are reflected on the Combined Financial
Statements (except for assets and properties sold, consumed or otherwise
disposed of by them in the ordinary course of business since December 31, 1998),
and such assets and properties are owned free and clear of all Encumbrances,
except for (i) Encumbrances to secure indebtedness reflected on the Combined
Financial Statements or indebtedness incurred in the ordinary course of business
and consistent with past practice after the date thereof, (ii) mechanics',
materialmens' and other Encumbrances which have arisen in the ordinary course of
business, (iii) Encumbrances set forth in the Seller Disclosure Schedule and
(iv) Encumbrances which, in the aggregate, are not reasonably likely to impair,
in any material respect, the continued use of such asset or property.
3.14. Intellectual Property. (a) Section 3.14 of the Seller
Disclosure Schedule sets forth all intellectual property assets that are owned
by or licensed to the Company or any Project Subsidiary, or that are otherwise
used in connection with the Company's or any Project Subsidiary's business (each
individually a "Proprietary Asset"). The Proprietary Assets represent all of
the intellectual property necessary to conduct the business of the Company and
the Project Subsidiaries as it is currently being conducted. The Company and
each of the Project Subsidiaries has taken reasonable measures and precautions
necessary to protect the confidentiality and value of each Proprietary Asset
identified or required to be identified in Section 3.14 of the Seller Disclosure
Schedule.
(b) Except as would not have a Material Adverse Effect, to
the knowledge of Seller neither the Company nor any Project Subsidiary is
infringing or has at any time infringed or received any notice or other
communication (in writing or otherwise) of any actual, alleged, possible or
potential infringement of any Proprietary Asset owned or used by any other
Person. To the knowledge of Seller, no Person is infringing, and no Proprietary
Asset owned or used by any other Person infringes or conflicts with, any
Proprietary Asset owned or used by the Company or any Project Subsidiary.
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(c) To the knowledge of Seller, all licenses or sublicenses
pursuant to which the Company uses any Proprietary Asset are legal, validly
binding, and enforceable and in full force and effect and will continue to be so
in the same form as in effect on the date hereof after the consummation of the
transactions contemplated by this Agreement; and the consummation of the
transactions contemplated by this Agreement will not constitute an event of
default under any such license or sublicense.
3.15. Insurance. The Company and the Project Subsidiaries, in the
ordinary course of business, maintain policies of fire and casualty, liability
and other forms of insurance in such amounts, with such, premiums, deductibles
and covering such risks and losses as are reasonable and customary for their
business, assets and properties. All material insurance policies (the "Insurance
Policies") with respect to the property, assets, operations and business of the
Company and the Project Subsidiaries are and, to Seller's knowledge after the
Closing will continue to be, in full force and effect and all premiums due and
payable thereon have been paid in full, and no notice of cancellation or
termination has been received with respect to any such policy which has not been
replaced on substantially similar terms prior to the date of such cancellation.
There are no pending material claims under the Insurance Policies by the Company
as to which the insurers have denied liability.
3.16. Environmental Matters. To the knowledge of Seller, the
Company and the Project Subsidiaries are in compliance in all material respects
with all Environmental Laws. To the knowledge of Seller, the Company and the
Project Subsidiaries have all the necessary permits required under Environmental
Laws for the operation of their respective businesses, and are not in violation
of any of the terms and conditions of any of such permits. Neither the Company
nor any of the Project Subsidiaries has received any notice or other
communication (in writing or otherwise) from a governmental agency that alleges
that the Company or any of the Project Subsidiaries is not presently in
compliance with any Environmental Law. Except as set forth in Section 3.16 of
the Seller Disclosure Schedule, neither the Company nor any of the Project
Subsidiaries has generated, manufactured, produced, transported, imported, used,
treated, refined, processed, handled, stored, discharged, released, or disposed
of any Hazardous Materials (whether lawfully or unlawfully) at any of the
property occupied or
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controlled by the Company or any of the Project Subsidiaries on or at any time
prior to the Closing Date. To the knowledge of Seller, there are not and have
not been any Releases or threatened Releases of any Hazardous Materials at, on,
or from any of the real property owned or leased by the Company of any of the
Project Subsidiaries. To the knowledge of Seller, there are no circumstances
that may prevent or interfere with the Company's or any of the Project
Subsidiaries' compliance in all material respects with any Environmental Law.
3.17. Employee and Labor Matters. Except as set forth in Section
3.17 of the Seller Disclosure Schedule, as of the date hereof: (a) Neither the
Company nor any of the Project Subsidiaries is a party to any collective
bargaining or other labor union contract applicable to persons employed by
them; (b) (i) the Company and the Project Subsidiaries are in compliance in all
material respects with all applicable laws relating to employment and employment
practices, wages, hours, and terms and conditions of employment, (ii) there are
no material charges with respect to or relating to the Company or any of the
Project Subsidiaries pending before the Equal Employment Opportunity Commission
or any state, local or foreign agency responsible for the prevention of unlawful
employment practices and (iii) there is no labor dispute, strike or work
stoppage against the Company or the Project Subsidiaries, pending or, to the
knowledge of Seller, threatened which may interfere with the business activities
of the Company or the Project Subsidiaries, except where such non-compliance,
charge, dispute, strike or work stoppage would not have a Material Adverse
Effect, and (c) neither the Company nor any of the Project Subsidiaries nor
their respective employees has committed any unfair labor practices in
connection with the operation of the business of the Company and the Project
Subsidiaries, and there is no charge or complaint against the Company or the
Project Subsidiaries, by the National Labor Relations Board or any comparable
state agency pending, to the knowledge of Seller, or threatened in writing,
except where such unfair labor practice, charge or complaint would not have a
Material Adverse Effect.
3.18. Electric Utility Status. As of the date of this Agreement,
Seller is not an Electric Utility.
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3.19. OF Status. Each Project that has commenced commercial
operation has met at all times since such commencement of operations all of the
requirements to hold qualifying facility status under PURPA or has been granted
a waiver of such requirements by FERC covering all periods when such
requirements were not met. Each Project has been certified by, or to, FERC as a
qualifying facility.
3.20. Brokers and Finders. No broker, finder or investment banker
(other than Credit Suisse First Boston Corporation and Lehman Brothers Inc. and
Seller shall be solely responsible for their fees) is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Seller or the Company or any of their Affiliates.
3.21. Operations. At all times, Seller has caused the Projects to
be operated in conformance with Good Utility Practices and will continue to do
so through the Closing.
3.22. Year 2000 Representations. As its sole and exclusive
representation made herein with respect to Y2K compliance (the "Year 2000
Representation") Seller hereby represents the following:
With respect to each Project on the Closing Date, the Company
has begun a commercially reasonable process of causing such Project to be
substantially Year 2000 Compliant prior to August 31, 1999. In the event that
any Project is not, as of the Closing Date, Year 2000 Compliant, then Seller
represents that it has dedicated commercially reasonable resources necessary to
fully change, test and implement all Software to be Year 2000 Compliant by
August 31, 1999, or that it has made the determination, after commercially
reasonable investigation, that the failure of any item of Software to be Year
2000 Compliant will not affect any material aspect of any Project's output,
safety or environmental component, or the ability to account for revenues from
or costs incurred by each such Project.
To the extent any other representation made otherwise in this
Agreement may be in conflict with the foregoing paragraph, then the preceding
Year 2000 Representation shall prevail.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth in the Disclosure Schedule delivered by Buyer
to Seller concurrently with the execution and delivery by Buyer of this
Agreement (the "Buyer Disclosure Schedule") the parts of which are numbered
according to, and are specifically (unless otherwise manifest on the face of the
Buyer Disclosure Schedule) in respect of, the relevant Section of this
Agreement, Buyer represents and warrants to Seller as follows:
4.1. Corporate Organization; Etc. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite corporate power and
authority to conduct its business as it is now being conducted and to own, lease
and operate its property and assets except where the failure to be so organized,
existing and in good standing or to have such power or authority would not, in
the aggregate, either (i) have a material adverse effect on the business,
results of operations, assets or financial condition of Buyer or (ii) impair,
hinder or adversely affect the ability of Buyer to perform material obligations
under this Agreement or to consummate the transactions contemplated hereby
(either of such effects, a "Buyer Material Adverse Effect").
4.2. Authority Relative to this Agreement. Buyer has all requisite
corporate authority and power to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by all required corporate or company action on
the part of Buyer and no other corporate or company proceedings on the part of
Buyer are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Buyer and, assuming this Agreement has been duly
authorized, executed and delivered by Seller, this Agreement constitutes a valid
and binding, agreement of Buyer, enforceable against Buyer in accordance with
its terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally, including the effect of
statutory and
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other laws regarding fraudulent conveyances and preferential transfers and
subject to the limitations imposed by general equitable principles (regardless
of whether such enforceability is considered in a proceeding at law or in
equity).
4.3. No Conflict or Violation; Consents and Approvals. Neither the
execution and delivery of this Agreement by Buyer nor the consummation of the
transactions contemplated hereby by Buyer will (a) violate any provision of the
certificate of incorporation or by-laws (or other comparable governing
documents) of Buyer, (b) require the consent or approval of any Governmental
Entity, except for (i) consents and approvals to be made and obtained before the
Closing and those which have been made and obtained and (ii) such consents and
approvals, which, if not made or obtained, will not, in the aggregate, have a
Buyer Material Adverse Effect or (c) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any right of termination, cancellation or acceleration or any
obligation to repay) under, any of the terms, conditions or provisions of any
indenture, mortgage, note, bond, encumbrance, license, government registration,
contract, lease, franchise, permit, agreement or other instrument or obligation
to which Buyer is a party or by which Buyer or any of its properties or assets
may be bound, except such violations, breaches and defaults which, in the
aggregate, will not have a Buyer Material Adverse Effect or (d) violate any
order, writ, judgment, injunction, decree, statute, ordinance, rule or
regulation of any Governmental Entity applicable to Buyer or by which any of its
properties or assets may be bound, except such violations which, in the
aggregate, will not have a Buyer Material Adverse Effect.
4.4. Investment Intent. Buyer is acquiring the Class A Interests
for its own account for investment and not with a view towards the resale,
transfer or distribution thereof, nor with any present intention of distributing
the Class A Interests in violation of the Securities Act, other applicable
Federal or state securities laws, and the rules and regulations promulgated
thereunder. Buyer understands that the Class A Interests have not been
registered under the Securities Act or other applicable Federal or state
securities laws, and the rules and regulations promulgated thereunder, by reason
of the contemplated sale of the Class A Interests in a transaction exempt from
the registration requirements of the Securities Act and state
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securities laws, and the rules and regulations promulgated thereunder. Buyer
represents that it is fully informed as to the applicable limitations upon any
distribution or resale of the Class A Interests under the Securities Act and
other applicable Federal and state securities laws, and the rules and
regulations promulgated thereunder, and Buyer agrees that it will refrain from
transferring, distributing or otherwise disposing of the Class A Interests, or
any interest therein, in such manner as to violate the registration requirements
of the Securities Act or of any applicable Federal or state securities law, and
the rules and regulations promulgated thereunder. Buyer is an "accredited
investor" as defined in Rule 501(a) of Regulation D promulgated under the
Securities Act.
4.5. Due Diligence. Buyer has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of its investment in the Company as contemplated by this Agreement, and is
able to bear the economic risk of such investment for an indefinite period of
time. Buyer has been furnished access to such information and documents as it
has requested and has been afforded an opportunity to ask questions of and
receive answers from representatives of the Company concerning the Company, the
Projects, the terms and conditions of this Agreement and the purchase of the
Class A Interests contemplated hereby.
4.6. Available Funds. As of the date of this Agreement, and as of
the Closing Date, Buyer has, and will have, sufficient funds available to
satisfy the obligation of Buyer to pay the Purchase Price and to pay all fees
and expenses of Buyer related to the transaction contemplated hereby without the
need to obtain additional financing.
4.7. Electric Utility Status. Buyer is not an Electric Utility.
4.8. Brokers and Finders. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Buyer.
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ARTICLE V.
COVENANTS
5.1. Conduct of the Business Pending the Closing. Except as
contemplated by this Agreement, as set forth in the Seller Disclosure Schedule
or with the prior written consent of Buyer, during the period from the date of
this Agreement to the Closing, Seller will cause the Company to: conduct its
businesses and operations according to its ordinary and usual course of business
consistent with past practice and will use all reasonable efforts consistent
therewith to preserve intact its properties, assets and business organizations,
keep available the services of the officers and employees of the Company and the
Project Subsidiaries, preserve generally the present relationships with persons
having business dealings with the Company or the Project Subsidiaries and
maintain satisfactory relationships with customers, suppliers, distributors and
others having commercially beneficial business relationships with the Company,
in each case in the ordinary course of business consistent with past practice,
and Seller shall be permitted to incur the IPPCo Debt and distribute the
proceeds thereof directly to Seller or otherwise repay or refund capital
advances to the Project Subsidiaries from Seller and distribute the Excluded
Assets and assume the Excluded Liabilities. Seller will not, and will not permit
the Company or any Project Subsidiary to, take any action with the purpose of
causing any of the conditions to Buyer's obligations set forth in Article VIII
hereof to not be satisfied.
5.2. Capital Contributions. Buyer shall provide fifty percent
(50%) of all equity capital contributions required for the construction of the
Projects commonly known as Salton Sea Unit V and CE Turbo payable in accordance
with the Buyer Equity Commitment Agreement.
5.3. Restructuring/Development. Seller and Buyer contemplate
that after the Closing, Buyer shall develop and propose certain restructuring
and marketing plans ("Restructuring Proposals") which the parties shall review
and, if agreed, establish target outcomes related to any opportunities. Seller
and Buyer agree to cooperate in the proposal
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and development of power plant repowering, expansion and development
opportunities at the Project sites pursuant to the Development Agreement.
5.4. Consents and Approvals. (a) Each of the parties hereto shall
use its reasonable best efforts to (i) obtain as promptly as practicable all
consents, authorizations, approvals and waivers required in connection with the
consummation of the transactions contemplated by this Agreement under any
Federal, state, local or foreign law or regulation, (including, without
limitation, all of the Transaction Regulatory Approvals), (ii) promptly lift or
rescind any injunction or restraining order or other order adversely affecting
the ability of the parties hereto to consummate the transactions contemplated
hereby and (iii) promptly effect all necessary registrations and filings
(including, without limitation, filings under the HSR Act, if necessary, and
filings with Governmental Entities necessary to obtain all of the Transaction
Regulatory Approvals) and submissions of information requested by any
Governmental Entity. The parties hereto further covenant and agree, with
respect to any threatened or pending preliminary or permanent injunction or
other order, decree or ruling or statute, rule, regulation or executive order
that would adversely affect the ability of the parties hereto to consummate the
transactions contemplated hereby, to respectively use their reasonable best
efforts to prevent the entry, enactment or promulgation thereof, as the case may
be.
(b) Each party hereto shall promptly inform the other of any
material communication from the FERC or any other Governmental Entity regarding
any of the transactions contemplated hereby. If any party hereto or any
Affiliate thereof receives a request for additional information or documentary
material from any such Governmental Entity with respect to the transactions
contemplated hereby, then such party shall endeavor in good faith to make, or
cause to be made, as soon as reasonably practicable and after consultation with
the other party, an appropriate response in compliance with such request. Seller
and Buyer shall advise each other promptly in respect of any understandings,
undertakings or agreements (oral or written) that Seller or Buyer, as the case
may be, proposes to make or enter into with the FERC or any other Governmental
Entity in connection with the transactions contemplated hereby.
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5.5. Filings. Promptly after the execution of this Agreement, each
of the parties hereto shall prepare and make or cause to be made any required
filings, submissions and notifications under the laws of any domestic or foreign
jurisdiction to the extent that such filings are necessary to consummate the
transactions contemplated hereby and will use its reasonable best efforts to
take all other actions necessary to consummate the transactions contemplated
hereby by the Closing Date in a manner consistent with applicable law. Each of
the parties hereto will furnish to the other party such necessary information
and reasonable assistance as such other party may reasonably request in
connection with the foregoing.
5.6. Covenant to Satisfy Conditions. Seller and Buyer will each
respectively use all reasonable efforts to ensure that the conditions set forth
herein are satisfied, insofar as such matters are within the control of such
party.
5.7. Further Assurances. Upon the terms and subject to the
conditions herein provided, each of the parties hereto agrees to use its
reasonable best efforts to take or cause to be taken all action, to do or cause
to be done, and to assist and cooperate with the other party hereto in doing,
all things necessary, proper or advisable under applicable laws and regulations
to consummate and make effective, in the most expeditious manner practicable,
the transactions contemplated by this Agreement, including, but not limited to,
(a) the satisfaction of the conditions precedent to the obligations of any of
the parties hereto, (b) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the performance of the obligations hereunder or thereunder and (c) the execution
and delivery of such instruments, and the taking of such other actions as the
other party hereto may reasonably require in order to carry out the intent of
this Agreement.
5.8. Allocation of Purchase Price. Buyer, Company and the Seller
agree that the Purchase Price and the liabilities of the Company will be
allocated to the shares held directly by the Company for all purposes (including
Tax and financial accounting) as shown on a schedule to be mutually agreed by
the Seller and Buyer within 90 days following the Closing Date. Buyer, the
Company, the Project Subsidiaries, and the Seller will file all Tax Returns
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(including amended returns and claims for refund) and information reports in a
manner consistent with such allocation.
ARTICLE VI.
CONDITIONS TO EACH PARTY'S OBLIGATIONS
The obligation of each party to effect the transactions
contemplated hereby shall be subject to the fulfillment, or written waiver by
each of the parties, at or prior to the Closing of each of the following
conditions:
6.1. Debt Financing. The Company shall have issued the IPPCo Debt
and distributed the entire gross proceeds thereof to Seller consistent with
the use of proceeds described in the preliminary offering circular dated as of
February 18, 1999 with respect to the IPPCO Debt, provided that the discount to
initial purchasers and transaction costs and fees shall be paid directly by the
Company on behalf of the Seller and deducted from the proceeds distributed to
Seller.
6.2. Regulatory Approvals. All of the Transaction Regulatory
Approvals shall have been obtained.
6.3. Consent of Creditors. The consents required under the
existing indebtedness of Seller and certain Subsidiaries of Seller necessary to
consummate the transactions contemplated hereby shall have been obtained.
6.4. Zinc Project Documents. The Company and the appropriate
Project Subsidiaries, as appropriate, and Seller or its affiliate, as
appropriate, shall have executed and delivered the Zinc Project Documents.
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ARTICLE VII.
CONDITIONS TO THE SELLER'S OBLIGATIONS
The obligations of Seller to effect the transactions contemplated
hereby shall be subject to the fulfillment, or written waiver by Seller, at or
prior to the Closing, of each of the following conditions:
7.1. Representations and Warranties True. The representations and
warranties of Buyer contained herein qualified as to materiality shall be true
and correct and those not so qualified shall be true and correct in all material
respects as of the date hereof and at and as of the Closing Date as though such
representations and warranties were made at and as of such date unless limited
by their terms to a prior date.
7.2. Performance. Buyer shall have performed and complied in all
material respects with all agreements, obligations, covenants and conditions
required by this Agreement to be performed or complied with by Buyer on or prior
to the Closing.
7.3. Certificates. Buyer shall have furnished Seller with such
certificates to evidence its compliance with the conditions set forth in
Sections 7.1 and 7.2 hereof as Seller may reasonably request.
7.4. No Injunction or Proceeding. No statute, rule, regulation,
executive order, decree, preliminary or permanent injunction or restraining,
order shall have been enacted, entered, promulgated or enforced by any
Governmental Entity which prohibits or restricts the consummation of the
transactions contemplated hereby.
7.5. Buyer Equity Commitment Agreement. Buyer and Seller shall
have executed and delivered to Seller the Buyer Equity Commitment Agreement.
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ARTICLE VIII.
CONDITIONS TO BUYER'S OBLIGATIONS
The obligation of Buyer to effect the transactions contemplated
hereby shall be subject to the fulfillment, or written waiver by Buyer, at or
prior to the Closing of each of the following conditions:
8.1. Representations and Warranties of Seller True. The
representations and warranties of Seller contained herein qualified as to
materiality shall be true and correct and those not so qualified shall be true
and correct in all material respects as of the date hereof and at and as of the
Closing Date as though such representations and warranties were made at and as
of such date unless limited by their terms to a prior date.
8.2. Performance by Seller. Seller shall have performed and
compiled in all material respects with all agreements, obligations, covenants
and conditions required by this Agreement to be performed or complied with by
Seller on or prior to the Closing.
8.3. Certificates. Seller shall have furnished Buyer with such
certificates to evidence its compliance with the conditions set forth in
Sections 8.1 and 8.2 hereof as Buyer may reasonably request.
8.4. No injunction or Proceeding. No statute, rule, regulation,
executive order, decree, preliminary or permanent injunction or restraining,
order shall have been enacted, entered, promulgated or enforced by any
Governmental Entity which prohibits or restricts the consummation of the
transactions contemplated hereby.
8.5. Materiality of Conditions. Nothing herein shall restrict the
ability of Seller to provide a supplemental disclosure schedule pursuant to
Section 8.3 hereof that sets forth therein exceptions as to matters, events or
conditions that occur or first become discoverable (and could not have
previously been known by the exercise of reasonable diligence) to Seller
subsequent to the date of this Agreement, and the existence of any exceptions in
the supplemental disclosure schedule shall not be deemed a failure to meet the
condition set forth in Section 8.3 hereof; provided that the existence of the
events described
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therein, to the extent that such new exceptions would have a Material Adverse
Effect, may result in the failure to satisfy the conditions set forth in Section
8.1 or 8.2 hereof.
ARTICLE IX.
TERMINATION AND ABANDONMENT; INDEMNIFICATION
9.1. Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual consent of Buyer and Seller;
(b) by Buyer or Seller if the Closing shall not have occurred on
or before May 30, 1999, except that Buyer and Seller shall have the right, in
their mutual discretion, to extend the time period in this Section 9.1(b) an
additional 45 days; provided that the right to terminate this Agreement pursuant
to this Section 9.1(b) shall not be available to a party whose failure to
perform any of its obligations under this Agreement results in the failure of
the Closing to be consummated by such date; or
(c) by Buyer or Seller, if any Governmental Entity shall have
issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting any of the transactions contemplated hereby
and such order, decree, ruling or other action shall have become final and
nonappealable.
9.2. Procedure and Effect of Termination, Termination Fee. In the
event of termination of this Agreement pursuant to Section 9.1 hereof, by one
party, written notice thereof shall forthwith be given to the other party, and,
except as set forth below, this Agreement shall terminate and be void and have
no effect and the transactions contemplated hereby shall be abandoned.
(a) If this Agreement is terminated as provided herein:
(i) all information received by Buyer with respect to the
business, operations, assets or financial condition of the Company or the
Project Subsidiaries shall remain subject to
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the Confidentiality Agreement and Buyer shall, and shall cause its agents to,
return or destroy such information as provided for therein; and
(ii) except as otherwise expressly set forth herein, no party to
this Agreement shall have any liability hereunder to any other party, except (i)
for any breach by such party of the terms and provisions of this Agreement, and
(ii) as provided in the Confidentiality Agreement.
(b) If this Agreement is terminated pursuant to Section 9.1 as a
result of the non-satisfaction of Sections 7.1 or 7.2 or the Buyer otherwise is
unable or unwilling to close and Seller is willing to close, and all of the
conditions in Article VI and VIII have been satisfied, on the Closing Date (or
the first business day thereafter on which all such conditions have been
satisfied), then Buyer shall pay to Seller an amount equal to $15 million in
immediately available funds on such date, and provided Buyer has not acted in
bad faith, such payment shall be Seller's sole remedy hereunder with respect to
Buyer's failure to close.
(c) If this Agreement is terminated pursuant to Section 9.1 as a
result of the non-satisfaction of Sections 8.1 or 8.2 or the Seller otherwise is
unable or unwilling to close and Buyer is willing to close, and all of the
conditions in Article VI and VII have been satisfied, on the Closing Date (or
the first business day thereafter on which all such conditions have been
satisfied), then Seller shall pay to Buyer an amount equal to $15 million in
immediately available funds on such date, and provided Seller has not acted in
bad faith, such payment shall be Buyer's sole remedy hereunder with respect to
Seller's failure to close.
9.3. Survival of Representations, Warranties and Covenants.) (a)
The representations and warranties contained in Section 3.2(b) (title to the
Class A Interests) shall survive the Closing and remain in full force and effect
indefinitely. The representations made in Section 3.11 (Tax Matters) shall be
subject to the terms of the Tax Indemnity Agreement. All other representations
and warranties contained herein, except as specifically provided for in such
representation or warranty, shall survive the Closing and remain in full force
and effect until March 3, 2002, at which time they shall terminate.
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(b) All covenants and agreements contained herein shall survive
the Closing and remain in full force and effect until the first anniversary of
the Closing Date, at which time they shall terminate except that those
covenants and agreements that by their terms are to be performed in whole or in
part subsequent to the Closing, shall survive the Closing in accordance with
their terms and that claims for indemnification for Environmental Liabilities
shall remain in full force and effect for a period of 5 years after the Closing
Date; provided that the foregoing shall not be deemed to limit the survival
periods set forth in Section 9.3(a) hereof.
(c) From and after the Closing, the sole and exclusive remedy for
any breach of any representation, warranty, covenant or agreement shall be
pursuant to Section 9.4 hereof, except in the case of fraud and except that with
respect to matters indemnified for pursuant to the Tax Indemnity Agreement and
Indemnity Agreement such agreements shall provide for the sole and exclusive
remedy with respect to such matters. Under no circumstances shall Seller be
liable to Buyer for consequential, incidental or punitive damages, except to the
extent asserted in a third-party claim.
9.4. Indemnification. (a) From and after the Closing, Seller shall
indemnify and hold harmless Buyer and its Affiliates and Representatives
(collectively, "Buyer Indemnified Parties") from and against any Damages arising
from or in connection with (i) any inaccuracy in any representation or the
breach of any warranty of Seller under this Agreement, (ii) the failure of
Seller to duly perform or observe any term, provision, covenant or agreement to
be performed or observed by Seller pursuant to this Agreement, (iii) the
Excluded Liabilities, (iv) any Environmental Liabilities (v) any Buyer's
Transaction Taxes (which indemnification shall be on a fully grossed-up basis)
or (vi)(A) any qualified and non-qualified benefit Plans sponsored by Seller,
(B) any ERISA welfare plans sponsored by Seller, (C) all other employment
compensation obligations of Seller which shall include without limitation
payments with respect to accrued vacation and all severance costs incurred as a
result of the consummation of the transactions contemplated by this Agreement,
(D) Federal and state payroll tax reporting and payment obligations of Seller,
and (E) any of the predecessor benefit plans resulting from Seller's past
acquisitions, in each of the cases (vi)(A)-(E), without giving
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effect to any supplement to the Seller Disclosure Schedule.
(b) From and after the Closing, Buyer shall indemnify and hold
harmless Seller and its Affiliates and Representatives (collectively, the
"Seller Indemnified Parties") from and against any Damages to the extent they
are the result of (i) any inaccuracy in any representation or the breach of any
warranty of Buyer under this Agreement or (ii) the failure of Buyer to duly
perform or observe any term, provision, covenant or agreement to be performed or
observed by Buyer pursuant to this Agreement.
(c) Notwithstanding anything herein to the contrary, except as set
forth in Section 9.4(e) hereof, no indemnification shall be available to Buyer
Indemnified Parties under Section 9.4(a) hereof or to Seller Indemnified Parties
under Section 9.4(b) hereof unless and until the aggregate amount of Damages
that would otherwise be subject to indemnification, exceeds $4,592,500, the
"Deductible Amount"), in which case the party entitled to such indemnification
shall be entitled to receive only the amounts in excess of the Deductible
Amount. For purposes of determining whether such Deductible Amount has been
achieved, any amounts subject to indemnification pursuant to this Agreement and
the Tax Indemnity Agreement shall be included without duplication.
(d) Notwithstanding anything herein to the contrary, except as set
forth in Section 9.4(e) hereof, the maximum aggregate liability of Seller to
Buyer Indemnified Parties and Company under this Agreement and the Tax Indemnity
Agreement taken together shall not exceed $114,812,500; and when taken together
with any other liability of Seller pursuant to the Indemnity Agreement the
maximum liability of Seller to Buyer Indemnified Parties and the Company shall
not exceed $229,625,000.
(e) The limitations on indemnifications set forth in Section
9.4(c) and (d) shall not apply to any Damages suffered by Buyer Indemnified
Parties arising from or in connection with Seller's breach of Sections 3.2 and
3.20 hereof.
(f) Notwithstanding anything herein to the contrary, except as
otherwise provided in the Tax Indemnity Agreement and Indemnity Agreement, none
of the Buyer
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Indemnified Parties shall be entitled to indemnification by Seller for any
Damages arising from any matter of which Buyer had knowledge at or prior to
Closing, by reason of Seller having delivered written notice thereof, in the
Seller Disclosure Schedule or supplemental disclosure schedule delivered in
accordance with Section 8.5.
(g) Any calculation of Damages for purposes of this Section 9.4
shall be (i) net of any insurance recovery made by the Indemnified Party
(whether paid directly to such Indemnified Party or assigned by the Indemnifying
Party to such Indemnified Party) and (ii) reduced to take account of any net Tax
benefit realized by the Indemnified Party arising from the deductibility of any
such Damages or Tax. Any indemnification payment hereunder shall Initially be
made without regard to this paragraph and shall be reduced to reflect any such
net Tax benefit only after the Indemnified Party has actually realized such
benefit. For purposes of this Agreement, an Indemnified Party shall be deemed to
have "actually realized" a net Tax benefit to the extent that, and at such time
as, the amount of Taxes payable by such Indemnified Party is reduced below the
amount of Taxes that such Indemnified Party would have been required to pay but
for deductibility of such Damages. The amount of any reduction hereunder shall
be adjusted to reflect any final determination (which shall include the
execution of Form 870-AD or successor form) with respect to the Indemnified
Party's liability for Taxes and, if necessary, Seller or Buyer, as the case may
be, shall make payments to the other to reflect such adjustment. Any indemnity
payment under this Agreement shall be treated as an adjustment to the Purchase
Price for Tax purposes, unless a final determination (which shall include the
execution of a Form 870-AD or successor form) with respect to the Indemnified
Party or any of its Affiliates causes any such payment not to be treated as an
adjustment to the Purchase Price for U.S. Federal income Tax purposes.
(h) Seller acknowledges and agrees that if there is any breach of
any representation, warranty or other agreement by Seller, then Buyer itself
without duplication shall be deemed by virtue of its ownership of the Class A
Interest, to have incurred Damages, if any, as a result of such breach, and
Buyer shall be entitled without duplication to such indemnification as may be
available pursuant to the terms of this Section 9.4.
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(i) No action, claim or setoff for Damages subject to
indemnification under this Section 9.4 shall be brought or made with respect to
claims for Damages resulting from a breach of any covenant or agreement
contained in this Agreement after the date on which such representation,
warranty, covenant or agreement shall terminate pursuant to Section 9.3 hereof;
provided, however, that any claim made with reasonable specificity by the party
hereto or its Affiliates or Representatives seeking, indemnification (the
"Indemnified Party") to the party from which indemnification is sought (the
"Indemnifying Party") within the time periods set forth above shall survive (and
be subject to indemnification) until it is finally and fully resolved.
(j) An Indemnified Party shall give notice to an Indemnifying
Party within sixty days, after such Indemnified Party has actual knowledge of
any claim which would give rise to a claim for Damages; provided, however, that
the failure to provide such notice shall not release the Indemnifying Party from
any of its obligations under this Article IX except to the extent the
Indemnifying Party is materially prejudiced by such failure and shall not
relieve the Indemnifying Party from any other obligation or liability that it
may have to any Indemnified Party otherwise than under this Article IX, and
shall permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom; provided that the Indemnified Party may
participate in such defense at its own expense (unless the Indemnified Party
shall have reasonably concluded, based upon a written opinion of outside
counsel, that there is a reasonable likelihood of a conflict of interest between
the Indemnifying Party and the Indemnified Party in such action, in which case
the fees and expenses of one separate firm of counsel shall be at the expense of
the Indemnifying Party). An Indemnifying Party, in the defense of any such claim
or litigation shall not, except with the consent of the Indemnified Party (which
consent shall not unreasonably be withheld), consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
full and unconditional release from all liability in respect to such claim or
litigation. An Indemnified Party shall furnish such information regarding itself
or the claim in question as such Indemnifying Party may
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reasonably request in writing and as shall be reasonably required in connection
with the defense of such claim and litigation resulting therefrom.
(k) Any calculation of Damages for purposes of this Section 9.4
shall be adjusted to account for the Tax benefit or Tax detriment of such
Damages and of the Indemnification payment which relates to such Damages, as
follows:
(i) If, under applicable Tax Law, a given amount of Damages is
deductible by the Indemnified Party, then the Indemnification payment
relating to such Damages that is otherwise due under this Section 9.4,
shall be reduced by an amount equal to the Tax Benefit so that the sum
of the Indemnification payment (as so reduced) and the Tax Benefit shall
be equal to the Indemnification amount chat would be required to be paid
without regard to this Section 9.4(j). For these purposes, the amount of
the "Tax Benefit" attributable to Damages relating to a given
Indemnification payment shall be equal to the excess (if any) of (I) the
amount of Taxes such Party would pay, assuming for the purposes of such
computation that such Damages were not deductible, over (II) the amount
of Taxes such Party would pay after deducting the indemnifiable portion
of such Damages (i.e., the portion of such Damages for which an
Indemnification payment would be required without regard to this Section
9.4(j)), but only if and to the extent that, under applicable Tax Law,
the Indemnified Party is permitted to deduct the indemnifiable portion
of such Damages.
(ii) This paragraph 9.4(k)(ii) provides procedural rules
applicable to the adjustments provided for in this section 9.4(k). If
one party has a dispute with another party or parties as to whether,
under this Section 9.4(k), an adjustment is required to be made, the
amount of such adjustment, or the timing of such adjustment, the
complaining party shall notify the other party(s) of such claim in
writing. Such notice must include the particular details which
constitute the basis for the dispute. If the dispute is not resolved by
the parties within ninety (90) days of the date notice is given, the
dispute shall be referred to an accounting firm (tile "Auditor") which
is mutually acceptable to the parties for resolution. The Auditor shall
issue a written report which sets forth a final decision
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with respect to the disputed issued. Fees and expenses of the Auditor
shall be shared half by the complaining party and half by the parties
receiving notice of the claim. If an adjustment required to be paid
under this Section 9.4(k) by one party to the other has not been
received by the other party within the later of fifteen, (15) days
after any determination or any properly delivered notice by one party
to the other that payment is due, any unpaid amounts shall bear
interest from the prescribed payment date, compounded quarterly at the
Applicable Federal Short-Term Rate in effect from time to time while
such amount remains unpaid. The "Applicable Federal Short-Term Rate"
shall be the rate provided in section 1274(d) of the Code, and the
Treasury Regulations and administrative releases thereunder.
(iii) Buyer and any Affiliate of Buyer shall not agree to settle
any administrative or judicial proceeding claim or action with respect
to any item which may be the subject of indemnification for Buyer's
Transaction Taxes, without prior written notice to and review by Seller.
(iv) For the purposes of this Section 9.4 any reference to "Tax
detriment" shall include only a Tax detriment resulting from the
inclusion in the Indemnified Party's taxable income of an
Indemnification amount for Buyer's Transaction Taxes and shall not
include a Tax detriment for any other Indemnification.
ARTICLE X.
MISCELLANEOUS
10.1. Amendment and Modifications. This Agreement may be amended,
modified or supplemented at any time by the parties hereto. This Agreement may
be amended only by an instrument in writing duly executed by Seller and Buyer.
10.2. Extension; Waiver. At any time prior to the Closing, the
parties hereto entitled to the benefits of the respective term or provision may
(i) extend the time for the
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performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document, certificate or writing delivered pursuant hereto or
(iii) waive compliance with any obligation, covenant, agreement or condition
contained herein. Any agreement on the part of any party to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of the parties entitled to the benefits of such extended or waived term
or provision.
10.3. Representations and Warranties: Etc. Buyer hereby
acknowledges and agrees that Seller is not making any representation or warranty
whatsoever, express or implied, including, without limitation, in respect of the
Company, the Project Subsidiaries or their respective assets, liabilities and
businesses, except those representations and warranties of Seller explicitly set
forth in this Agreement or in the Seller Disclosure Schedule or supplement
thereto or in any certificate contemplated hereby and delivered by Seller in
connection herewith (notwithstanding the delivery or disclosure to Buyer or its
Representatives of any other documents or information).
(b) Notwithstanding any other provisions in this Agreement or any
Exhibit to the contrary, each of Buyer and Seller agrees that on and after the
Closing Date (i) none of the respective officers, directors, partners,
employees, Affiliates, Representatives or agents, as the case may be, of Seller
(collectively, the "Selling Affiliates"), nor (ii) except as expressly set forth
in the indemnification provisions of Section 9.4 hereof, the Tax Indemnity
Agreement or Indemnity Agreement, the Seller: shall have any liability or
responsibility to any Person, including, without limitation, Buyer or the
Company, for (and each of them unconditionally releases the Seller and Selling
Affiliates from) any liability or obligation of, or arising out of, or relating
to, the Company or Buyer of whatever kind or nature, whether contingent or
absolute, whether arising prior to, on or after, and whether determined or
indeterminable on, the Closing Date, and whether or not specifically referred to
in this Agreement, including without limitation, liabilities and obligations (i)
relating to this Agreement and the transactions contemplated hereby, (ii)
arising out of or due to any inaccuracy of any representation or warranty or the
breach of any covenant, undertaking or other agreement of Seller contained in
this Agreement, Seller Disclosure Schedule or in any certificate contemplated
hereby and
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delivered by Seller in connection herewith and (iii) relating to any information
(whether written or oral), documents or materials furnished by Seller or any of
its Affiliates or any of their respective Representatives, including the
Confidential Descriptive Memorandum Sale of an Investment in IPPCo dated January
1999 prepared by Credit Suisse First Boston Corporation and Lehman Brothers Inc.
and any information, documents or material made available to Buyer in "data
rooms," management presentations or any other form in expectation of the
transactions contemplated by this Agreement.
10.4. Entire Agreement; Assignment. This Agreement (including all
Exhibits hereto) (a) constitutes the entire agreement among the parties with
respect to the subject matter hereof and supersedes all other prior agreements
and understanding both written and oral, among the parties or any of them with
respect to the subject matter hereof (other than the Confidentiality Agreement)
(b) may not be assigned by a party hereto without the consent of the other
party, and (c) shall be binding upon such parties successors and permitted
assigns.
10.5. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, each of which shall remain in full force
and effect.
10.6. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile or similar writing)
and shall be given:
(a) if to Seller, to:
CalEnergy Company, Inc.
302 South 36th Street
Suite 400
Omaha, Nebraska 68131
Attention: President
Facsimile: (402) 345-9318
Telephone: (402) 341-4500
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
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New York, New York 10019
Attention: Peter J. Hanlon, Esq.
Facsimile: (212) 728-8111
Telephone: (212) 728-8000
(b) if to Buyer, to:
El Paso Power Holding Company
350 Indiana Street
Suite 300
Golden, CO 80401
Attention: President
Facsimile: 303-215-5450
Telephone: 303-278-3400
with a copy to:
El Paso Energy
1001 Louisiana
Suite 2754B
Houston, Texas 77002
Attention: Gregory W. Jones, Esq.
Facsimile: 713-420-4943
Telephone: 713-420-4431
King & Spalding
1185 Avenue of the Americas
New York, New York 10036
Attention: Stephen M. Wiseman, Esq.
Facsimile: 212-556-2222
Telephone: 212-556-2100
or such other address or facsimile number as a party may hereafter
specify by like notice to the other party. Each such notice, request or other
communication shall be effective (i) if given by facsimile, when such facsimile
is transmitted to the facsimile number specified herein and the appropriate
confirmation is provided, (ii) if given via United States mail, three days after
such notice is deposited in the mail in a postage pre-paid envelope or (iii) if
given by any other means, when delivered at the address specified herein.
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10.7. 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.
Publicity. Except as otherwise required by Law or the listing requirements
of any national securities exchange or over-the-counter market, for so long as
this Agreement is in effect, none of Seller, Buyer or the Company shall issue or
cause the publication of any press release or other public announcement with
respect to the transactions contemplated by this Agreement without the express
prior written approval of the other parties.
10.9. Jurisdiction: Forum. (a) By the execution and delivery of this
Agreement, Buyer submits to the personal jurisdiction of any state or Federal
court in the State of New York in any suit or proceeding arising out of or
relating to this Agreement.
(b) The parties hereto agree that the appropriate and exclusive forum for
any disputes between any of the parties hereto arising out of this Agreement or
the transactions contemplated hereby shall be in any state or Federal court in
the State of New York. The parties hereto further agree that the parties will
not bring suit with respect to any disputes arising out of this Agreement or the
transactions contemplated hereby in any court or jurisdiction other than the
above specified courts; provided, however, that the foregoing shall not limit
the rights of the parties to obtain execution of judgment in any other
jurisdiction. The parties hereto further agree, to the extent permitted by law,
that final and unappealable judgment against a party in any action or proceeding
contemplated above shall be conclusive and may be enforced in any other
jurisdiction within or outside the United States by suit on the judgment, a
certified or exemplified copy of which shall be conclusive evidence of the fact
and amount of such judgment.
10.10. Descriptive Headings. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
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10.11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
10.12. Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, and except as otherwise expressly set forth herein,
all legal and other costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses. The parties agree that none of the costs and expenses of the
transactions contemplated by this Agreement through the Closing Date shall be
borne by the Company.
10.13. Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and, except as expressly set forth in
Section 9.4 hereof, nothing in this Agreement, express or implied, is intended
by or shall confer upon any other Person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement. Any Person who is a
beneficiary of Section 9.4 shall be entitled to enforce his rights thereunder:
provided, however, that, prior to the Closing, no action to enforce such rights
may be commenced by any such Person without the prior written consent of Seller.
10.14. Interpretation. No reference in this Agreement to "reasonable best
efforts" or "all reasonable efforts" shall require a Person obligated to use
such efforts to incur out-of-pocket expenses or indebtedness or, except as
expressly provided herein, to institute litigation or to consent generally to
service of process in any jurisdiction where it is not already subject.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
CALENERGY COMPANY, INC.
By: /s/ Steven A. McArthur
-----------------------------------
Name: Steven A. McArthur
Title: Executive Vice President
EL PASO POWER HOLDING COMPANY
By: /s/ Larry Kellerman
-----------------------------------
Name: Larry Kellerman
Title: President
GUARANTEE
El Paso Energy Corporation, the ultimate parent company of Buyer, hereby
(i) unconditionally and irrevocably guarantees the performance by Buyer, when
due, pursuant to the foregoing Equity Purchase Agreement, LLC Operating
Agreement and all agreements attached as Exhibits hereto, (ii) agrees to be
bound by the terms thereof, (iii) waives all defenses as a surety including
notice, (iv) agrees that its obligations under the guarantee shall not be
impaired, diminished or discharged by any extension of time granted by Seller,
by any course of dealing between the Seller and the Buyer, by the
unenforceability of any provision of the Agreement for any reason whatsoever, or
by any event or circumstance which might operate to discharge a guarantor, and
(v) covenant to take any and all actions and execute any further documents
reasonably requested by Seller to implement and enforce such Equity Purchase
Agreement.
El Paso Energy Corporation
BY: /s/ H. Brent Austin
-----------------------------------
Name: H. Brent Austin
Title: Executive Vice President
<PAGE>
EXHIBIT B
EQUITY COMMITMENT AGREEMENT
EQUITY COMMITMENT AGREEMENT, dated as of March 3, 1999, among El Paso
Power Holding Company, a Delaware corporation ("El Paso") and CalEnergy Company,
Inc., a Delaware corporation ("CalEnergy").
RECITALS
WHEREAS, an Equity Commitment Agreement ("Initial Commitment
Agreement") dated as of October 13, 1998 was entered into among CalEnergy,
Salton Sea Brine Processing L.P., a California limited partnership ("SSBP"),
Salton Sea Power Generation L.P., a California limited partnership ("SSPG"),
Fish Lake Power Company, a Delaware corporation ("Fish Lake"), Salton Sea Power
L.L.C., a Delaware limited liability company ("Power LLC" and, collectively with
SSBP, SSPG and Fish Lake, the "Salton Sea Guarantors"), Vulcan Power Company, a
Nevada corporation ("VPC"), CalEnergy Operating Corporation, a Delaware
corporation ("CEOC"), BN Geothermal, Inc., a Nevada corporation ("BN
Geothermal"), San Felipe Energy Company, a California corporation ("San
Felipe"), Conejo Energy Company, a California corporation ("Conejo"), Niguel
Energy Company, a California corporation ("Niguel"), Vulcan/BN Geothermal Power
Company, a Nevada general partnership ("Vulcan"), Del Ranch, L.P., a California
limited partnership ("Del Ranch"), Elmore, L.P., a California limited
partnership ("Elmore"), Leathers, L.P., a California limited partnership
("Leathers"), and CE Turbo LLC, a Delaware limited liability company ("Turbo
LLC" and, collectively with VPC, CEOC, BN Geothermal, San Felipe, Conejo,
Niguel, Vulcan, Del Ranch, Elmore and Leathers, the "Partnership Guarantors"),
Salton Sea Royalty Company, a Delaware corporation (the "Royalty Guarantor" and,
collectively with the Salton Sea Guarantors and the Partnership Guarantors, the
"Guarantors"), CalEnergy Minerals LLC, a Delaware limited liability company
("Minerals LLC"), Chase Manhattan Bank and Trust Company, National Association,
in its capacity as collateral agent (together with its successors and permitted
assigns in such capacity, the "Collateral Agent") for the Secured Parties
pursuant to the Intercreditor Agreement (as defined in the Indenture referred to
below), and Chase Manhattan Bank and Trust Company, National Association, in its
capacity as depositary agent (together with its successors and permitted assigns
in such capacity, the "Depositary Agent") for the Secured Parties pursuant to
the Depositary Agreement (as defined in the Indenture referred to below).
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WHEREAS, the Funding Corporation was formed for the sole purpose of
issuing its bonds, debentures, promissory notes or other evidences of
indebtedness under the Trust Indenture dated as of July 21, 1995 (the "Original
Indenture") (as amended and supplemented by the First Supplemental Indenture
dated as of October 18, 1995, the Second Supplemental Indenture dated as of June
20, 1996 (the "Second Supplemental Indenture"), the Third Supplemental Indenture
dated as of July 29, 1996 and the Fourth Supplemental Indenture dated as of
October 13, 1998 (the "Fourth Supplemental Indenture"), and the Fifth
Supplemental Indenture dated as of February 16, 1999 (the "Fifth Supplemental
Indenture"), and as further amended, supplemented or otherwise modified from
time to time, the "Indenture"), between the Funding Corporation and Chase
Manhattan Bank and Trust Company, National Association, as trustee (the
"Trustee");
WHEREAS, the Funding Corporation has issued $285,000,000 of its 7.475%
Senior Secured Series F Bonds Due 2018 (the "Series F Securities") pursuant to
the Fourth Supplemental Indenture;
WHEREAS, the Funding Corporation will use the net proceeds of the
Series F Securities to (i) make a loan to the Salton Sea Guarantors pursuant to
the Salton Sea Credit Agreement (the "Salton Sea Project Loan") and (ii) make a
loan to the Partnership Guarantors pursuant to the Partnership Credit Agreement
(the "Partnership Project Loan");
WHEREAS, the Salton Sea Guarantors will use the proceeds of the Salton
Sea Project Loan to pay costs associated with the development, construction,
start-up and operation and maintenance during start-up of Salton Sea Unit V;
WHEREAS, the Partnership Guarantors will use the proceeds of the
Partnership Project Loan to pay (i) costs associated with the development,
construction, start-up and operation and maintenance during start-up of the Zinc
Project and the Region 2/Turbo Project and (ii) costs associated with the making
of Permitted Capital Expenditures to the Partnership Projects and the Salton Sea
Projects;
WHEREAS, as a condition to the Secured Parties entering into the
Financing Documents and the purchase by the Holders of the Series F Securities,
CalEnergy previously agreed to execute and deliver the Initial Commitment
Agreement in favor of the Guarantors and the Collateral Agent;
WHEREAS, El Paso is acquiring an indirect 50% interest in certain of
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the Guarantors pursuant to that Certain Purchase Agreement (the "Purchase
Agreement") between El Paso and CalEnergy dated as of February 21, 1999.
AGREEMENT
NOW THEREFORE, in consideration of CalEnergy entering into the Purchase
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto hereby agree as
follows as follows:
Section 1. Definitions. Unless otherwise defined herein, terms defined
in the Initial Commitment Agreement (including the defined terms incorporated
therein from Depositary Agreement or the Indenture) shall have such defined
meanings when used herein.
Section 2. Equity Contributions.
(a) Salton Sea Unit V Equity Contributions. El Paso shall contribute or
cause to be contributed to Power LLC from time to time until Final Completion of
Salton Sea Unit V, for the benefit of the Secured Parties, not later than one
(1) business day prior to the date specified in the Construction Requisition
attached to the Equity Requisition Certificate delivered by Power LLC to
CalEnergy with copies redelivered by CalEnergy to El Paso pursuant to the
Initial Commitment Agreement, in an amount equal to one half of the amount of
such Construction Requisition; provided, however, the aggregate amount of such
Equity Contribution together with the amount of all previous Equity
Contributions made by El Paso pursuant to this Section 2(a) shall not exceed
one-half of the Unit V Construction Amount.
(b) Region 2/Turbo Equity Contributions. El Paso shall contribute or
cause to be contributed to Turbo LLC, Vulcan or Del Ranch from time to time
until Final Completion of the Region 2/Turbo Project, for the benefit of the
Secured Parties not later than one (1) business day prior to the date specified
in the Construction Requisition attached to the Equity Requisition Certificate
delivered by Turbo LLC, Vulcan, Del Ranch, as the case may be, to CalEnergy with
copies redelivered by CalEnergy to El Paso pursuant to the Initial Commitment
Agreement, in an amount equal to one half of the amount of such Construction
Requisition;
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provided, however, the aggregate amount of such Equity Contribution together
with the amount of all previous Equity Contributions made pursuant to this
Section 2(b) shall not exceed one-half of the Region 2/Turbo Construction
Amount.
(c) Capital Expenditure Contributions. El Paso shall contribute or
cause to contributed to any Guarantor from time to time, for the benefit of the
Secured Parties not later than one (1) business day prior to the date specified
in the Capital Expenditure Requisition attached to the Equity Requisition
Certificate delivered by such Guarantor to CalEnergy with copies redelivered by
CalEnergy to El Paso pursuant to the Initial Commitment Agreement, in an amount
equal to one half of the amount of such Construction Requisition; provided,
however, the aggregate amount of such Equity Contribution together with the
amount of all previous Equity Contributions made by El Paso pursuant to this
Section 2(c) shall not exceed one-half of the Capital Expenditure Construction
Amount.
(d) Additional Equity Amount. El Paso shall contribute or cause to
contributed to the Guarantors from time to time, for the benefit of the Secured
Parties not later than one (1) business day prior to the date, an Equity
Contribution in the amount of any payment of Construction Debt Service;
provided, however, that the aggregate amount of such Equity Contribution,
together with the amount of all previous Equity Contributions made by El Paso
pursuant to this Section 2(d), shall not exceed one-half of the Additional
Equity Amount.
(e) Contributions. Unless the parties otherwise agree, the Equity
Contributions made by El Paso under this Equity Commitment Agreement and the
Equity Contributions (as defined in the Initial Commitment Agreement) made by
CalEnergy under the Initial Commitment Agreement shall be treated as
subordinated loans (to the extent permitted and in accordance with the financing
documents to which CE Generation is a party) to CE Generation and to its
applicable subsidiaries, it being the intent of the parties that (1) CalEnergy
and El Paso will each make half of the payments contemplated by the Initial
Commitment Agreement with respect to Equity Contributions for Salton Sea Unit 5,
the Region 2/Turbo Project and the Capital Expenditures and the Construction
Debt Service applicable to such foregoing projects and (2) that such payments be
treated as equity contributions. If CalEnergy has prefunded such Equity
Contributions, El Paso agrees that one-half of the Capital Expenditure Structure
Amount and Additional Equity Amount shall be released directly to CalEnergy
prior to Closing.
3. Transfer of Equity Commitment Obligations. Other than
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successors to El Paso by merger or otherwise by operation of law, El Paso shall
not transfer any portion of its obligations under this Agreement.
4. Obligations Unconditional; Waivers. (a) The obligations of El Paso
under Section 2 shall be absolute, unconditional and irrevocable under any and
all circumstances, and shall be performed by El Paso regardless of, and to the
fullest extent permitted by applicable law:
(i) the existence of any indebtedness owing by CalEnergy, the
Guarantors or any Affiliate thereof to El Paso or of any setoff,
abatement, counterclaim, recoupment, defense or other right or claim
which El Paso may have against the Guarantors, any Affiliate thereof or
any other Person;
(ii) the occurrence of a Bankruptcy Event of the Guarantors,
any Affiliate thereof or any other Person or the pendency against the
Guarantors, any Affiliate thereof or any other Person of any case, suit
or proceeding under the Federal Bankruptcy Code;
(iii) the invalidity, irregularity or unenforceability of or
any change in or amendment to any Transaction Document;
(iv) the institution or absence of any action to enforce any
Transaction Document or the waiver or consent by El Paso or any Secured
Party with respect to the provisions thereof, the obtaining of any
judgment against the Guarantors or any Affiliate thereof, or any action
to enforce such judgment, or the inability to recover from the
Guarantors or any Affiliate thereof because of any statute of
limitations, laches or otherwise; or
(v) the failure to complete (except as provided in the
definition of Final Completion) or the destruction of any New Project
or any Permitted Capital Expenditures or any other circumstance which
might otherwise constitute a legal or equitable discharge of or a
defense to El Paso's undertakings hereunder; or
(vi) any other circumstances whatsoever which might otherwise
constitute an excuse for nonperformance of the obligations of El Paso
under Section 2, whether similar or dissimilar to any of the
circumstances herein specified.
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(b) The obligation of El Paso to make or cause to be made an Equity
Contribution as provided in Section 2 (as such obligation may be reduced
pursuant to a transfer made in accordance with Section 3) shall not be affected
by (to the fullest extent permitted by applicable law) any abatement, reduction,
limitation, impairment, termination, setoff, defense, counterclaim or recoupment
whatsoever or any right to any thereof, and shall not be released, discharged or
in any way affected by any reorganization, arrangement, compromise or plan
affecting the Guarantors or any Affiliate thereof.
(c) In respect of the Equity Contributions to be made or caused to be
made by El Paso as provided in Section 2, El Paso hereby unconditionally (to the
fullest extent permitted by applicable law):
(i) waives notice of acceptance hereof, of any action taken or
omitted in reliance hereon and of any defaults by the Guarantors 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 Guarantors or any Affiliate thereof, any
right to require a proceeding first against the Guarantors or any
Affiliate thereof or that the Guarantors or any Affiliate thereof be
joined in any bankruptcy or similar proceeding, any marshalling of
assets of the Guarantors or any Affiliate thereof, the Guarantors' or
any Affiliate thereof 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 El Paso or which might
otherwise operate as a discharge to El Paso;
(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;
(iii) agrees that no failure or delay on the part of the
Guarantors, any 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 El Paso on the one hand, and
the Guarantors, any Affiliate thereof or any 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
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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
Guarantors, any Affiliate thereof or any Secured Party would otherwise
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 El Paso shall have no right to withhold or set-off
against any payments due for any reason.
5. Representations and Warranties: El Paso hereby represents and
warrants that:
(a) it is a corporation 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
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;
(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 principals 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 incorporation
or bylaws, (ii) conflict with or result in any breach of any of the terms,
covenants, conditions or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, agreement or other material instrument to
which it is a party or by
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which it or any of its material properties or assets is bound, 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 material properties or assets;
(e) no Governmental Approvals or other consents or approvals are
required in connection with the execution, delivery and performance by it of
this Agreement;
(f) it is in compliance with all applicable Laws except to the extent
that the failure to comply therewith could not materially adversely affect its
ability to perform its obligations under this Agreement; and
(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 could reasonably be expected to materially adversely affect its
ability to perform its obligations under this Agreement.
6. Expenses. The Guarantors hereby agree to pay all costs, including
reasonable attorneys' fees, incurred with respect to the enforcement of the
provisions of this Agreement against El Paso, which enforcement costs,
regardless of when incurred, shall be payable on the earlier of (a) the date on
which a final judgment shall be obtained against El Paso with respect to this
Agreement and any and all appeal periods shall have expired and (b) the date on
which El Paso and the Collateral Agent shall have otherwise resolved (including
by way of settlement) any dispute with respect to the enforcement of this
Agreement against El Paso.
7. Notices. All notices, requests and other communications provided for
hereunder shall be in writing and, except as otherwise required by the
provisions of this Agreement, shall be sufficiently given and shall be deemed
given when delivered or mailed by registered or certified mail, postage prepaid,
or sent by overnight delivery, telecopy, telegram or telex, addressed to the
parties as follows:
CalEnergy: CalEnergy Company, Inc.
302 South 36th Street
Suite 400
Omaha, Nebraska 68131
Attention: Chief Financial Officer
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Telephone: (402) 341-4500
Fax: (402) 231-1678
and a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10022
Attention: Peter J. Hanlon, Esq.
Telephone: 212-728-8000
Fax: 212-728-8111
El Paso: El Paso Power Holding Company
350 Indiana Street
Suite 300
Golden, CO 80401
Attention: President
Telephone: (303) 215-5450
Fax: (303) 278-3400
and a copy to:
El Paso Energy Corp.
1001 Louisiana
Houston, TX 77002
Attention: Gregory W. Jones, Esq.
Telephone: (713) 420-4431
Fax: (713) 420-4943
and a copy to:
King & Spalding
1185 Avenue of the Americas
New York, New York 10036
Attention: Stephen M. Wiseman, Esq.
Telephone: (212) 556-2100
Fax: (212) 556-2222
9
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8. Amendments. No waiver, amendment, modification or termination of any
provision of this Agreement, or consent to any departure by El Paso therefrom,
shall in any event be effective without the prior written consent of CalEnergy.
Any such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
9. Successors and Assigns. This Agreement shall be binding upon El Paso
and its successors and permitted assigns and shall inure to the benefit of
CalEnergy and its respective successors and assigns. Other than successors to El
Paso by merger or otherwise by operation of law, El Paso may not assign or
otherwise transfer any of its rights or obligations under this Agreement without
the written consent of CalEnergy.
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.
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.
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.
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.
14. Consent to Jurisdiction. Any legal action or proceeding by or
against El Paso 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
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Southern District of New York. By execution and delivery of this Agreement, El
Paso 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, El Paso agrees to appoint a new agent satisfactory to
CalEnergy 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. El Paso hereby waives any right to stay or dismiss any action or
proceeding under or in connection with this Agreement or any other Transaction
Document brought before the foregoing courts on the basis of forum
non-conveniens or improper venue.
15. Waiver of Jury Trial. EACH OF THE PARTIES 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 TO ENTER INTO
THIS AGREEMENT.
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.
17. Third Party Beneficiaries. Nothing herein contained shall confer
any right upon any Person other than the parties hereto.
18. Limitation of Liability. Notwithstanding anything else in this
Agreement, El Paso's liability in respect of this Agreement is limited to $25.85
million. Neither El Paso nor any shareholder, officer, employee, controlling
Person, executive, director, agent or Affiliate of El Paso (hereinafter referred
to as "operatives") shall be liable for payments or other obligations due by
CalEnergy, the
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Funding Corporation or any of the Guarantors under the Securities, the
Indenture, the Guarantees or the other Financing Documents and, except for the
obligations of El Paso under this Agreement, the obligations of El Paso and its
operatives under this Agreement and the other Financing Documents shall be
limited to the extent of each party's right, title and interest in, to and under
any collateral pledged by El Paso or such operatives under this Agreement or the
other Financing Documents.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first written above.
--------------------------------------- ----------------------------------------
EL PASO POWER HOLDING COMPANY CALENERGY COMPANY, INC.
By: /s/ Larry Kellerman By: /s/ Steven A. McArthur
------------------------------ ------------------------------
Name: Larry Kellerman Name: Steven A. McArthur
Title: President Title: Executive Vice President
--------------------------------------- ----------------------------------------
--------------------------------------- ----------------------------------------
By signing below, the entities set forth below agree that Equity
Contributions made by El Paso pursuant to this Agreement shall each constitute
an Equity Contribution (as defined in the Initial Commitment Agreement) that
CalEnergy has caused to be contributed in fulfillment of its obligations
pursuant to the Initial Commitment Agreement. Subject to the foregoing,
CalEnergy agrees that (i) this Agreement does not relieve CalEnergy of any of
its obligations under the Initial Commitment Agreement to the extent El Paso
breaches its obligations hereunder and (ii) CalEnergy remains responsible under
the Initial Commitment Agreement to the extent that El Paso breaches its
obligations hereunder or fails to make any Equity Contributions required
hereunder.
SALTON SEA POWER GENERATION L.P. SALTON SEA POWER L.L.C.
By: SALTON SEA POWER COMPANY, By: CE SALTON SEA INC.,
As its general partner as its manager
By: /s/ Steven A. McArthur By: /s/ Steven A. McArthur
---------------------------------- ----------------------------------
Name: Steven A. McArthur Name: Steven A. McArthur
Title: Executive Vice President Title: Executive Vice President
SALTON SEA BRINE PROCESSING L.P. VULCAN POWER COMPANY
By: SALTON SEA POWER COMPANY, By: /s/ Steven A. McArthur
as its general partner ----------------------------------
Name: Steven A. McArthur
Title: Executive Vice President
By: /s/ Steven A. McArthur
----------------------------------
Name: Steven A. McArthur
Title: Executive Vice President
<PAGE>
FISH LAKE POWER LLC CALENERGY OPERATING CORPORATION
By: /s/ Steven A. McArthur By: /s/ Steven A. McArthur
---------------------------------- ----------------------------------
Name: Steven A. McArthur Name: Steven A. McArthur
Title: Executive Vice President Title: Executive Vice President
VPC GEOTHERMAL LLC
By: /s/ Steven A. McArthur
----------------------------------
Name: Steven A. McArthur
Title: Executive Vice President
VULCAN/BN GEOTHERMAL POWER COMPANY SAN FELIPE ENERGY COMPANY
By: VULCAN POWER COMPANY, By: /s/ Steven A. McArthur
as its general partner ----------------------------------
Name: Steven A. McArthur
Title: Executive Vice President
By: /s/ Steven A. McArthur
----------------------------------
Name: Steven A. McArthur
Title: Executive Vice President
LEATHERS, L.P. CONEJO ENERGY COMPANY
By: /s/ Steven A. McArthur By: /s/ Steven A. McArthur
---------------------------------- ----------------------------------
Name: Steven A. McArthur Name: Steven A. McArthur
Title: Executive Vice President Title: Executive Vice President
<PAGE>
DEL RANCH, L.P. ELMORE, L.P.
By: CALENERGY OPERATION CORPORATION, By: CALENERGY OPERATION CORPORATION,
as its general partner as its general partner
By: /s/ Steven A. McArthur By: /s/ Steven A. McArthur
---------------------------------- ----------------------------------
Name: Steven A. McArthur Name: Steven A. McArthur
Title: Executive Vice President Title: Executive Vice President
NIGUEL ENERGY COMPANY
By: /s/ Steven A. McArthur
----------------------------------
Name: Steven A. McArthur
Title: Executive Vice President
CE TURBO LLC
By: MAGMA POWER COMPANY
as its manager
By: /s/ Steven A. McArthur
----------------------------------
Name: Steven A. McArthur
Title: Executive Vice President
SALTON SEA ROYALTY LLC
By: /s/ Steven A. McArthur
----------------------------------
Name: Steven A. McArthur
Title: Executive Vice President
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No. 333-
89521 of CE Generation, LLC of our report dated January 28, 1999 (February 22,
1999 as to the first paragraph in Note 1 and March 3, 1999 as to Note 15),
appearing in the Prospectus, which is part of this Registration Statement and to
the reference to us under the heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
November 29, 1999
<PAGE>
EXHIBIT 23.7
[Letterhead of C.C. Pace Consulting, L.L.C.]
November 29, 1999
CE Generation, LLC
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
This letter is furnished relating to the exchange of $400,000,000
principal amount of unregistered 7.416% Senior Secured Bonds Due December 15,
2018 (the "Old Securities") for $400,000,000 principal amount of registered
7.416% Senior Secured Bonds Due December 15, 2018 (the "New Securities").
We consent to the references to us in (1) the "CE Generation
Consolidated Proforma Analysis" by Fluor Daniel, Inc., which is attached as
Appendix A to the Prospectus included in the Registration Statement being
filed by CE Generation, LLC in respect of the New Securities (the "Prospectus"),
and (2) the "Independent Engineer's Report--CE Generation LLC Natural Gas
Projects," by R.W. Beck, Inc., which is attached as Appendix B to the
Prospectus.
C.C. PACE CONSULTING L.L.C.
By: /s/ Daniel E. White
----------------------------
Name: Daniel E. White
Title: Senior Vice President
