<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION REGISTRANT; STATE OF INCORPORATION; I.R.S. EMPLOYER
FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO.
- ----------- ----------------------------------- ------------------
1-8503 HAWAIIAN ELECTRIC INDUSTRIES, INC. 99-0208097
(A Hawaii Corporation)
900 Richards Street
Honolulu, Hawaii 96813
Telephone (808) 543-5662
1-4955 HAWAIIAN ELECTRIC COMPANY, INC. 99-0040500
(A Hawaii Corporation)
900 Richards Street
Honolulu, Hawaii 96813
Telephone (808) 543-7771
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
REGISTRANT TITLE OF EACH CLASS ON WHICH REGISTERED
---------- ------------------- ----------------------
Hawaiian Electric Common Stock, Without New York Stock Exchange
Industries, Inc. Par Value Pacific Stock Exchange
Hawaiian Electric First Mortgage Bonds, New York Stock Exchange
Company, Inc. Series S, 7 5/8%
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
REGISTRANT TITLE OF EACH CLASS
---------- -------------------
Hawaiian Electric Industries, Inc. .......... None
Hawaiian Electric Company, Inc. ............. Cumulative Preferred Stock
================================================================================
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X]
===============================================================================
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS
The following financial statements contained in HEI's 1995 Annual Report to
Stockholders and HECO's 1995 Annual Report to Stockholder, portions of which are
filed by HEI as Exhibit 13 and, portions of which are filed by HECO as Exhibit
13, respectively, are incorporated by reference in Part II, Item 8, of this Form
10-K:
<TABLE>
<CAPTION>
1995 Annual Report to
Stockholder(s) (Page/s)
----------------------------
HEI HECO
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Independent Auditors' Report.................................. 37 31
Consolidated Statements of Income, Years ended
December 31, 1995, 1994 and 1993............................ 38 11
Consolidated Statements of Retained Earnings, Years ended
December 31, 1995, 1994 and 1993............................ 38 11
Consolidated Balance Sheets, December 31, 1995 and 1994....... 39 12
Consolidated Statements of Capitalization,
December 31, 1995 and 1994.................................. na 13-14
Consolidated Statements of Cash Flows, Years ended
December 31, 1995, 1994 and 1993............................ 40 15
Notes to Consolidated Financial Statements.................... 41-61 16-30
- ------------------------------------------------------------------------------------------------
</TABLE>
(a)(2) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedules for HEI and HECO are included in
this Report on the pages indicated below:
<TABLE>
<CAPTION>
Page/s in Form 10-K
----------------------------
HEI HECO
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Independent Auditors' Report................................... 54 55
Schedule I Condensed Financial Information of Registrant,
Hawaiian Electric Industries, Inc. (Parent
Company) as of December 31, 1995 and 1994
and Years ended December 31, 1995, 1994 and
1993........................................... 56-58 na
Schedule II Valuation and Qualifying Accounts, Years
ended December 31, 1995, 1994 and 1993......... 59 59
</TABLE>
Certain Schedules, other than those listed, are omitted because they are not
required, or are not applicable, or the required information is shown in the
consolidated financial statements or notes included in HEI's 1995 Annual Report
to Stockholders and HECO's 1995 Annual Report to Stockholder, which financial
statements are incorporated herein by reference.
52
<PAGE>
(A)(3) EXHIBITS
Exhibits for HEI and HECO and their subsidiaries are listed in the "Index to
Exhibits" found on pages 60 through 66 of this Form 10-K. The exhibits listed
for HEI and HECO are listed in the index under the headings "HEI" and "HECO,"
respectively, except that the exhibits listed under "HECO" are also considered
exhibits for HEI.
(B) REPORTS ON FORM 8-K
HEI AND HECO:
During the fourth quarter of 1995, HEI and HECO filed Current Reports,
Forms 8-K, with the SEC dated December 11, 1995 and December 13, 1995. These
reports contained information under Item 5, Other events, regarding HECO's
receipt of a 1995 final rate order (Form 8-K dated December 11, 1995) and
regarding an update of the HELCO power situation and discontinued operations
(Form 8-K dated December 13, 1995).
53
<PAGE>
[KPMG Peat Marwick letterhead]
Independent Auditors' Report
----------------------------
The Board of Directors
and Stockholders
Hawaiian Electric Industries, Inc.:
Under date of January 25, 1996, we reported on the consolidated balance sheets
of Hawaiian Electric Industries, Inc. and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of income, retained earnings
and cash flows for each of the years in the three-year period ended December 31,
1995, as contained in the 1995 annual report to stockholders. These consolidated
financial statements and our report thereon are incorporated by reference in the
annual report on Form 10-K for the year 1995. In connection with our audits of
the aforementioned consolidated financial statements, we also have audited the
related financial statement schedules as listed in the accompanying index. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
Honolulu, Hawaii
January 25, 1996
54
<PAGE>
[KPMG Peat Marwick letterhead]
Independent Auditors' Report
----------------------------
The Board of Directors
and Stockholder
Hawaiian Electric Company, Inc.:
Under date of January 25, 1996, we reported on the consolidated balance sheets
and consolidated statements of capitalization of Hawaiian Electric Company, Inc.
(a wholly owned subsidiary of Hawaiian Electric Industries, Inc.) and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of income, retained earnings and cash flows for each of the years in
the three-year period ended December 31, 1995, as contained in the 1995 annual
report to stockholder. These consolidated financial statements and our report
thereon are incorporated by reference in the annual report on Form 10-K for the
year 1995. In connection with our audits of the aforementioned consolidated
financial statements, we also have audited the related financial statement
schedule as listed in the accompanying index. The financial statement schedule
is the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
Honolulu, Hawaii
January 25, 1996
55
<PAGE>
Hawaiian Electric Industries, Inc.
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
HAWAIIAN ELECTRIC INDUSTRIES, INC. (PARENT COMPANY)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------------------
(in thousands) 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and equivalents................................. $ 673 $ 223
Advances to and notes receivable from subsidiaries... 40,576 27,696
Accounts receivable.................................. 2,404 2,565
Other investments.................................... 810 809
Property, plant and equipment, net................... 2,455 2,460
Other assets......................................... 2,537 5,857
Investment in wholly owned subsidiaries, at equity... 967,437 888,651
------------------------
$1,016,892 $928,261
========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable..................................... $ 7,152 $ 9,246
Advances from subsidiaries........................... -- 2,293
Commercial paper..................................... 45,393 12,750
Long-term debt....................................... 223,500 209,500
Deferred income taxes................................ 3,053 4,301
Unamortized tax credits.............................. 41 29
Other................................................ 8,150 8,053
------------------------
287,289 246,172
------------------------
Stockholders' equity
Common stock......................................... 585,387 546,254
Retained earnings.................................... 144,216 135,835
------------------------
729,603 682,089
------------------------
$1,016,892 $928,261
========================
Note to Balance Sheets
- ----------------------
Long-term debt, consisted of the following:
Promissory notes, 6.3% - 7.6%, due in
various years through 2005.......................... $ 143,000 $113,000
Promissory notes, 8.2% - 9.9%, due in
various years through 2011.......................... 45,500 61,500
Promissory note, variable rate
(6.32% at December 31, 1995) due 1999............... 35,000 35,000
------------------------
$ 223,500 $209,500
========================
</TABLE>
As of December 31, 1995, HEI guaranteed debt of its subsidiaries and affiliates
amounting to $10 million.
The aggregate payments of principal required on long-term debt subsequent to
December 31, 1995 are $42 million in 1996, $51 million in 1997, $1 million in
1998, $41 million in 1999, $10 million in 2000 and $79 million thereafter.
56
<PAGE>
Hawaiian Electric Industries, Inc.
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
HAWAIIAN ELECTRIC INDUSTRIES, INC. (PARENT COMPANY)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------
(in thousands) 1995 1994 1993
- --------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES.................................. $ 2,923 $ 3,318 $ 3,353
Equity in income from continuing
operations of subsidiaries............... 89,198 84,819 74,764
-------------------------------
92,121 88,137 78,117
-------------------------------
EXPENSES:
Operating, administrative and general..... 7,543 7,786 6,897
Taxes, other than income taxes............ 282 292 226
Depreciation and amortization of
property, plant and equipment............ 491 587 569
-------------------------------
8,316 8,665 7,692
-------------------------------
83,805 79,472 70,425
Interest expense.......................... 17,922 15,195 18,355
-------------------------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAX BENEFIT................ 65,883 64,277 52,070
Income tax benefit........................ (11,610) (8,753) (9,614)
-------------------------------
Income from continuing operations......... 77,493 73,030 61,684
Loss from discontinued operations,
net of income tax benefit................ -- -- (13,025)
-------------------------------
NET INCOME................................ $ 77,493 $73,030 $ 48,659
===============================
</TABLE>
57
<PAGE>
Hawaiian Electric Industries, Inc.
SCHEDULE I-- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
HAWAIIAN ELECTRIC INDUSTRIES, INC. (PARENT COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------
(in thousands) 1995 1994 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income from continuing operations.................................. $ 77,493 $ 73,030 $ 61,684
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities
Equity in income from continuing
operations of subsidiaries...................................... (89,198) (84,819) (74,764)
Common stock dividends received
from subsidiaries............................................... 51,435 43,909 53,305
Depreciation and amortization of
property, plant and equipment................................... 491 587 569
Other amortization............................................... 239 209 294
Deferred income taxes and tax credits, net....................... (1,236) 367 232
Changes in assets and liabilities
Decrease (increase) in accounts receivable...................... 161 4,114 (6,211)
Increase (decrease) in accounts payable......................... (2,094) 385 (16,506)
Changes in other assets and liabilities......................... 1,880 (15,485) 34,733
-----------------------------------
39,171 22,297 53,336
Cash flows from discontinued operations............................ -- 36 2,525
-----------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES.......................... 39,171 22,333 55,861
-----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease (increase) in advances to and
notes receivable from subsidiaries................................ (12,880) (16,141) 8,756
Capital expenditures............................................... (486) (177) (193)
Additional investments in subsidiaries............................. (39,610) (25,510) (65,000)
Other.............................................................. (2) -- 50
-----------------------------------
NET CASH USED IN INVESTING ACTIVITIES.............................. (52,978) (41,828) (56,387)
-----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in advances from
subsidiaries with original maturities
of three months or less........................................... (2,293) 2,293 (185)
Repayment of other short-term borrowings........................... -- -- (36,000)
Net increase in commercial paper................................... 32,643 12,750 --
Proceeds from issuance of long-term debt........................... 30,000 35,000 37,000
Repayment of long-term debt........................................ (16,000) (26,000) (22,500)
Net proceeds from issuance of common stock......................... 19,322 13,602 88,658
Common stock dividends............................................. (49,415) (47,676) (42,012)
Other.............................................................. -- (2,634) 1,949
-----------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES................ 14,257 (12,665) 26,910
-----------------------------------
Net increase (decrease) in cash and equivalents................... 450 (32,160) 26,384
Cash and equivalents, beginning of year............................ 223 32,383 5,999
-----------------------------------
CASH AND EQUIVALENTS, END OF YEAR.................................. $ 673 $ 223 $ 32,383
===================================
</TABLE>
Supplemental disclosures of noncash activities:
In 1995 and 1994, $1.3 million and $16.9 million, respectively, of HEI
advances to HEIDI were converted to equity in a noncash transaction.
Common stock dividends reinvested by stockholders in HEI common stock in
noncash transactions amounted to $20 million in 1995, $18 million in 1994 and
$17 million in 1993.
58
<PAGE>
Hawaiian Electric Industries, Inc.
and Hawaiian Electric Company, Inc.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
===================================================================================================================================
Col. A Col. B Col. C Col. D Col. E
- -----------------------------------------------------------------------------------------------------------------------------------
Additions
--------------------------------
Charged to
Balance at costs and Balance at
beginning of other Charged to end of
(in thousands) period expenses accounts Deductions period
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995
----
Allowance for uncollectible
accounts
Hawaiian Electric Company,
Inc. and subsidiaries....... $ 1,136 $ 2,492 $ 1,266 $ 3,793 $ 1,101
Other companies............... 280 400 -- 38 642
--------- --------- --------- --------- ---------
$ 1,416 $ 2,892 $ 1,266(a) $ 3,831(b) $ 1,743
========= ========= ========= ========= =========
Allowance for uncollectible
interest (ASB)................ $ 1,101 $ 172 $ -- $ -- $ 1,273
========= ========= ========= ========= =========
Allowance for losses
for loans receivable (ASB).... $ 8,793 $ 4,887 $ 392(a) $ 1,156(b) $ 12,916
========= ========= ========= ========= =========
1994
----
Allowance for uncollectible
accounts
Hawaiian Electric Company,
Inc. and subsidiaries....... $ 1,357 $ 2,177 $ 674 $ 3,072 $ 1,136
Other companies............... 220 130 2 72 280
--------- --------- --------- --------- ---------
$ 1,577 $ 2,307 $ 676(a) $ 3,144(b) $ 1,416
========= ========= ========= ========= =========
Allowance for uncollectible
interest (ASB)................ $ 341 $ 760 $ -- $ -- $ 1,101
========= ========= ========= ========= =========
Allowance for losses for
loans receivable (ASB)........ $ 5,314 $ 3,983 $ 67(a) $ 571(b) $ 8,793
========= ========= ========= ========= =========
1993
----
Allowance for uncollectible
accounts
Hawaiian Electric Company,
Inc. and subsidiaries...... $ 1,120 $ 1,521 $ 815 $ 2,099 $ 1,357
Other companies............... 172 155 1 108 220
--------- --------- --------- --------- ---------
$ 1,292 $ 1,676 $ 816(a) $ 2,207(b) $ 1,577
========= ========= ========= ========= =========
Allowance for uncollectible
interest (ASB)................ $ 482 $ -- $ -- $ 141 $ 341
========= ========= ========= ========= =========
Allowance for losses for
loans receivable (ASB)........ $ 5,157 $ 779 $ 36(a) $ 658(b) $ 5,314
========= ========= ========= ========= =========
</TABLE>
(a) Primarily bad debts recovered.
(b) Bad debts charged off.
59
<PAGE>
INDEX TO EXHIBITS
The exhibits designated by an asterisk (*) are filed herein. The exhibits not so
designated are incorporated by reference to the indicated filing. A copy of any
exhibit may be obtained upon written request for a $0.20 per page charge from
the HEI Stock Transfer Division, P.O. Box 730, Honolulu, Hawaii 96808-0730.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
HEI:
- ----
3(i).1 HEI's Restated Articles of Incorporation (Exhibit 4(b) to
Registration No. 33-7895).
3(i).2 Articles of Amendment of HEI filed June 30, 1990 (Exhibit 4(b)
to Registration No. 33-40813).
3(ii) HEI's By-Laws (Exhibit 4(c) to Registration No. 33-21761).
4.1 Agreement to provide the SEC with instruments which define the
rights of holders of certain long-term debt of HEI and its
subsidiaries (Exhibit 4.1 to HEI's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992, File No. 1-8503).
4.2 Indenture, dated as of October 15, 1988, between HEI and
Citibank, N.A., as Trustee (Exhibit 4 to Registration No. 33-
25216).
4.3 First Supplemental Indenture dated as of June 1, 1993 between HEI
and Citibank, N.A., as Trustee, to Indenture dated as of October
15, 1988 between HEI and Citibank, N.A., as Trustee (Exhibit 4(a)
to HEI's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993, File No. 1-8503).
4.4 Officers' Certificate dated as of November 9, 1988, pursuant to
Sections 102 and 301 of the Indenture, dated as of October 15,
1988, between HEI and Citibank, N.A., as Trustee, establishing
Medium-Term Notes, Series A (Exhibit 4.2 to HEI's Annual Report
on Form 10-K for the fiscal year ended December 31, 1988, File
No. 1-8503).
4.5 Pricing Supplements Nos. 1 through 11 to the Registration
Statement on Form S-3 of HEI (Registration No. 33-25216) filed in
connection with the sale of Medium-Term Notes, Series A (filed
under Rule 424(b) in connection with Registration No. 33-25216).
4.6 Pricing Supplements Nos. 1 through 9 to the Registration
Statement on Form S-3 of HEI (Registration No. 33-58820) filed in
connection with the sale of Medium-Term Notes, Series B (Exhibit
4(b) to HEI's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993, File No. 1-8503).
4.7 Pricing Supplement No. 10 to Registration Statement on Form S-3
of HEI (Registration No. 33-58820) filed in connection with the
sale of Medium-Term Notes, Series B (Exhibit 4.7 to HEI's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994,
File No. 1-8503).
4.8 Pricing Supplement No. 11 to Registration Statement on Form S-3
of HEI (Registration No. 33-58820) filed on December 1, 1995 in
connection with the sale of Medium-Term Notes, Series B (Exhibit
4.8 to HEI's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, File No. 1-8503).
4.9 Pricing Supplement No. 12 to Registration Statement on Form S-3
of HEI (Registration No. 33-58820) filed on February 12, 1996 in
connection with the sale of Medium-Term Notes, Series B (Exhibit
4.9 to HEI's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, File No. 1-8503).
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
4.10 Purchase Agreement dated March 7, 1991 among HEI and the
Purchasers named therein, together with the Notes issued to such
Purchasers, each dated March 7, 1991, pursuant to the Purchase
Agreement (Exhibit 4.5 to HEI's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990, File No. 1-8503).
4.11 Composite conformed copy of the Note Purchase Agreement dated as
of December 16, 1991 among HEI and the Purchasers named therein
(Exhibit 4.6 to HEI's Annual Report on Form 10-K for the fiscal
year ended December 31, 1991, File No. 1-8503).
10.1 PUC Order Nos. 7070, 7153, 7203 and 7256 in Docket No. 4337,
including copy of "Conditions for the Merger and Corporate
Restructuring of Hawaiian Electric Company, Inc." dated September
23, 1982 (Exhibit 10 to Amendment No. 1 to Form U-1).
10.2 Regulatory Capital Maintenance/Dividend Agreement dated May 26,
1988, between HEI, HEIDI and the Federal Savings and Loan
Insurance Corporation (by the Federal Home Loan Bank of Seattle)
(Exhibit (28)-2 to HEI's Current Report on Form 8-K dated May 26,
1988, File No. 1-8503).
10.2(a) OTS letter regarding release from Part II.B. of the Regulatory
Capital Maintenance/Dividend Agreement dated May 26, 1988
(Exhibit 10.3(a) to HEI's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, File No. 1-8503).
10.3 Executive Incentive Compensation Plan (Exhibit 10(a) to HEI's
Annual Report on Form 10-K for the fiscal year ended December 31,
1987, File No. 1-8503).
10.4 HEI Executive's Deferred Compensation Plan (Exhibit 10.5 to HEI's
Annual Report on Form 10-K for the fiscal year ended December 31,
1990, File No. 1-8503).
10.5 Retirement Benefit Agreement--Andrew T. F. Ing and HEI (Exhibit
10(b) to HEI's Annual Report on Form 10-K for the fiscal year
ended December 31, 1987, File No. 1-8503).
10.6 1987 Stock Option and Incentive Plan of HEI as amended and
restated effective April 21, 1992 (Exhibit A to Proxy Statement
of HEI, dated March 6, 1992, for the Annual Meeting of
Stockholders, File No. 1-8503).
10.7 HEI Long-Term Incentive Plan (Exhibit 10.11 to HEI's Annual
Report on Form 10-K for the fiscal year ended December 31, 1988,
File No. 1-8503).
10.8 HEI Supplemental Executive Retirement Plan effective January 1,
1990 (Exhibit 10.9 to HEI's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990, File No. 1-8503).
10.9 HEI Excess Benefit Plan (Exhibit 10.13 (Exhibit A) to HEI's
Annual Report on Form 10-K for the fiscal year ended December 31,
1989, File No. 1-8503).
10.10 Change-in-Control Agreement (Exhibit 10.14 to HEI's Annual Report
on Form 10-K for the fiscal year ended December 31, 1989, File
No. 1-8503).
10.11 Nonemployee Director Retirement Plan, effective as of October 1,
1989 (Exhibit 10.15 to HEI's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989, File No. 1-8503).
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.12 HEI 1990 Nonemployee Director Stock Plan (Exhibit 10(a) to HEI's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1990, File No. 1-8503).
10.13 HEI Nonemployee Directors' Deferred Compensation Plan (Exhibit
10.14 to HEI's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, File No. 1-8503).
10.14 HEI and HECO Executives' Deferred Compensation Agreement. The
agreement pertains to and is substantially identical for all the
HEI and HECO executive officers (Exhibit 10.15 to HEI's Annual
Report on Form 10-K for the fiscal year ended December 31, 1991,
File No. 1-8503).
10.15 Settlement Agreement and General Release made and entered into on
February 10, 1994, by and between the Insurance Commissioner as
Rehabilitator/Liquidator, HIG and its subsidiaries, the Hawaii
Insurance Guaranty Association, HEI, HEIDI and others. (Exhibit
10.20 to HEI's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, File No. 1-8503).
*11 Computation of Earnings per Share of Common Stock. Filed herein
as page 67.
*12 Computation of Ratio of Earnings to Fixed Charges. Filed herein
as pages 68 and 69.
13 Pages 25 to 62 of HEI's 1995 Annual Report to Stockholders (with
the exception of the data incorporated by reference in Part I,
Part II, Part III and Part IV, no other data appearing in the
1995 Annual Report to Stockholders is to be deemed filed as part
of this Form 10-K Annual Report) (Exhibit 13 to HEI's Current
Report on Form 8-K dated February 21, 1996, File No. 1-8503).
*21 Subsidiaries of HEI. Filed herein as page 71.
*23 Consent of Independent Auditors. Filed herein as page 73.
27.1 HEI and subsidiaries financial data schedule, December 31, 1995
and year ended December 31, 1995 (Exhibit 27.1 to HEI's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995,
File No. 1-8503).
HECO:
- -----
3(i).1 HECO's Certificate of Amendment of Articles of Incorporation
(filed June 30, 1987) (Exhibit 3.1 to HECO's Annual Report on
Form 10-K for the fiscal year ended December 31, 1988, File No.
1-4955).
3(i).2 Statement of Issuance of Shares of Preferred or Special Classes
in Series for HECO Series R Preferred Stock filed December 15,
1989 (Exhibit 3.1(a) to HECO's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989, File No. 1-4955).
3(i).3 Articles of Amendment to HECO's Amended Articles of Incorporation
filed December 21, 1989 (Exhibit 3.1(b) to HECO's Annual Report
on Form 10-K for the fiscal year ended December 31, 1989, File No
1-4955).
3(ii) HECO's By-Laws (Exhibit 3.2 to HECO's Annual Report on Form 10-K
for the fiscal year ended December 31, 1988, File No. 1-4955).
4.1 Agreement to provide the SEC with instruments which define the
rights of holders of certain long-term debt of HECO, HELCO and
MECO (Exhibit 4 to HECO's Annual Report on Form 10-K for the
fiscal year ended December 31, 1988, File No. 1-4955).
4.2 Indenture dated as of December 1, 1993 between HECO and The Bank
of New York, as Trustee (Exhibit 4(a) to Registration No. 33-
51025).
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
4.3 Indenture dated as of December 1, 1993 among MECO, HECO, as
guarantor, and The Bank of New York, as Trustee (Exhibit 4(b) to
Registration No. 33-51025).
4.4 Indenture dated as of December 1, 1993 among HELCO, HECO, as
guarantor, and The Bank of New York, as Trustee (Exhibit 4(c) to
Registration No. 33-51025).
4.5 Officers' Certificate dated as of December 22, 1993, pursuant to
Sections 102 and 301 of the Indenture dated as of December 1,
1993 between HECO and The Bank of New York, as Trustee,
establishing the $20,000,000 Notes, 5.15% Series Due 1996
(Exhibit 4.5 to HECO's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993, File No. 1-4955)
4.6 Officers' Certificate dated as of December 22, 1993, pursuant to
Sections 102 and 301 of the Indenture dated as of December 1,
1993 between HECO and The Bank of New York, as Trustee,
establishing the $30,000,000 Notes, 5.83% Series Due 1998
(Exhibit 4.6 to HECO's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993, File No. 1-4955).
4.7 Officers' Certificate dated as of December 22, 1993, pursuant to
Sections 102 and 301 of the Indenture dated as of December 1,
1993 among MECO, HECO, as guarantor, and The Bank of New York, as
Trustee, establishing the $10,000,000 Notes, 5.15% Series Due
1996 (Exhibit 4.7 to HECO's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, File No. 1-4955).
4.8 Officers' Certificate dated as of December 22, 1993, pursuant to
Sections 102 and 301 of the Indenture dated as of December 1,
1993 among HELCO, HECO, as guarantor, and The Bank of New York,
as Trustee, establishing the $10,000,000 Notes, 4.85% Series Due
1995 (Exhibit 4.8 to HECO's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, File No. 1-4955).
10.1 Power Purchase Agreement between Kalaeloa Partners, L.P., and
HECO dated October 14, 1988 (Exhibit 10(a) to HECO's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1988,
File No. 1-4955).
10.1(a) Amendment No. 1 to Power Purchase Agreement between HECO and
Kalaeloa Partners, L.P., dated June 15, 1989 (Exhibit 10(c) to
HECO's Quarterly Report on Form 10-Q for the quarter ended June
30, 1989, File No. 1-4955).
10.1(b) Lease Agreement between Kalaeloa Partners, L.P., as Lessor, and
HECO, as Lessee, dated February 27, 1989 (Exhibit 10(d) to HECO's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1989, File No. 1-4955).
10.1(c) Restated and Amended Amendment No. 2 to Power Purchase Agreement
between HECO and Kalaeloa Partners, L.P., dated February 9, 1990
(Exhibit 10.2(c) to HECO's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989, File No. 1-4955).
10.1(d) Agreement to Extend the "Cancellation Window" in the Kalaeloa
Power Purchase Agreement dated June 21, 1990 (Exhibit 10(e) to
HECO's Quarterly Report on Form 10-Q for the quarter ended June
30, 1990, File No. 1-4955).
10.1(e) Amendment No. 3 to Power Purchase Agreement between HECO and
Kalaeloa Partners, L.P., dated December 10, 1991 (Exhibit 10.2(e)
to HECO's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991, File No. 1-4955).
</TABLE>
63
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.2 Purchase Power Agreement between AES Barbers Point, Inc. and
HECO, entered into on March 25, 1988 (Exhibit 10(a) to HECO's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1988, File No. 1-4955).
10.2(a) Agreement between HECO and AES Barbers Point, Inc., pursuant to
letters dated May 10, 1988 and April 20, 1988 (Exhibit 10.4 to
HECO's Annual Report on Form 10-K for fiscal year ended December
31, 1988, File No. 1-4955).
10.2(b) Amendment No. 1 to the Purchase Power Agreement between AES
Barbers Point, Inc. and HECO (Exhibit 10 to HECO's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1989,
File No. 1-4955).
10.2(c) HECO's Conditional Notice of Acceptance to AES Barbers Point,
Inc. dated January 15, 1990 (Exhibit 10.3(c) to HECO's Annual
Report on Form 10-K for the fiscal year ended December 31, 1989,
File No. 1-4955).
10.3 Amended and Restated Power Purchase Agreement between Hilo Coast
Processing Company and HELCO dated March 24, 1995 (Exhibit 10 to
HECO's Quarterly Report on Form 10-Q for the quarter ended March
31, 1995, File No. 1-4955).
10.4 Agreement between MECO and Hawaiian Commercial & Sugar Company
pursuant to letters dated November 29, 1988 and November 1, 1988
(Exhibit 10.8 to HECO's Annual Report on Form 10-K for the fiscal
year ended December 31, 1988, File No. 1-4955).
10.4(a) Amended and Restated Power Purchase Agreement by and between A&B-
Hawaii, Inc., through its division, Hawaiian Commercial & Sugar
Company, and MECO, dated November 30, 1989 (Exhibit 10(e) to
HECO's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1990, File No. 1-4955).
10.4(b) First Amendment to Amended and Restated Power Purchase Agreement
by and between A&B-Hawaii, Inc., through its division, Hawaiian
Commercial & Sugar Company, and MECO, dated November 1, 1990,
amending the Amended and Restated Power Purchase Agreement dated
November 30, 1989 (Exhibit 10(f) to HECO's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1990, File No. 1-
4955).
10.5 Purchase Power Contract between HELCO and Thermal Power Company,
dated March 24, 1986 (Exhibit 10(a) to HECO's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1989, File No. 1-4955).
10.5(a) Firm Capacity Amendment between HELCO and Puna Geothermal Venture
(assignee of AMOR VIII, who is the assignee of Thermal Power
Company), dated July 28, 1989, amending Purchase Power Contract
between HELCO and Thermal Power Company, dated March 24, 1986
(Exhibit 10(b) to HECO's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989, File No. 1-4955).
10.5(b) Performance Agreement and Fourth Amendment, dated February 12,
1996, to the Purchase Power Contract dated March 24, 1986 as
Amended between HELCO and Puna Geothermal Venture. (Exhibit
10.5(b) to HECO's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, File No. 1-4955).
10.6 Purchase Power Contract between HECO and the City and County of
Honolulu dated March 10, 1986 (Exhibit 10.9 to HECO's Annual
Report on Form 10-K for the fiscal year ended December 31, 1989,
File No. 1-4955).
</TABLE>
64
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.6(a) Firm Capacity Amendment, dated April 8, 1991, to Purchase Power
Contract, dated March 10, 1986, by and between HECO and the City
& County of Honolulu (Exhibit 10 to HECO's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1991, File No. 1-4955).
10.7 Purchase Power Contract between MECO and Zond Pacific, Inc.,
dated May 24, 1991 (Exhibit 10 to HECO's Quarterly Report on Form
10-Q for the quarter ended June 30, 1991, File No. 1-4955).
*10.8 Low Sulfur Fuel Oil Supply Contract by and between CUSA and HECO
dated as of November 20, 1995.
(Confidential treatment has been requested for portions of this
Exhibit.)
*10.9 Inter-Island Industrial Fuel Oil and Diesel Fuel Contract by and
between CUSA and HECO, MECO, HELCO, HTB and YB dated as of
November 20, 1995.
(Confidential treatment has been requested for portions of this
Exhibit.)
10.10 Facilities and Operating Contract by and between CUSA and HECO
dated as of November 20, 1995. (Exhibit 10.10 to HECO's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995,
File No. 1-4955).
*10.11 Low Sulfur Fuel Oil Supply Contract between BHP and HECO dated
December 5, 1995.
(Confidential treatment has been requested for portions of this
Exhibit.)
*10.12 Inter-Island Industrial Fuel Oil and Diesel Fuel Oil Contract by
and between BHP and HECO, MECO and HELCO dated December 5, 1995.
(Confidential treatment has been requested for portions of this
Exhibit.)
10.13 Low Sulfur Fuel Oil Sale/Purchase Contract between HECO and C.
Itoh & Co. (America), Inc. dated June 7, 1990 (Exhibit 10(c) to
HECO's Quarterly Report on Form 10-Q for the quarter ended June
30, 1990, File No. 1-4955).
10.14 Contract of private carriage by and between HITI and HELCO dated
November 10, 1993 (Exhibit 10.13 to HECO's Annual Report on Form
10-K for the fiscal year ended December 31, 1993, File No. 1-
4955).
10.14(a) Extension, dated December 18, 1995, of the contract of private
carriage by and between HITI and HELCO dated November 10, 1993.
(Exhibit 10.14(a) to HECO's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, File No. 1-4955).
10.15 Contract of private carriage by and between HITI and MECO dated
November 12, 1993 (Exhibit 10.14 to HECO's Annual Report on Form
10-K for the fiscal year ended December 1, 1993, File No. 1-
4955).
10.15(a) Extension, dated December 18, 1995, of the contract of private
carriage by and between HITI and MECO dated November 12, 1993.
(Exhibit 10.15(a) to HECO's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, File No. 1-4955).
10.16 HECO Nonemployee Directors' Deferred Compensation Plan (Exhibit
10.16 to HECO's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, File No. 1-4955).
10.17 HEI and HECO Executives' Deferred Compensation Agreement. The
agreement pertains to and is substantially identical for all the
HEI and HECO executive officers (Exhibit 10.15 to HEI's Annual
Report on Form 10-K for the fiscal year ended December 31, 1991,
File No. 1-8503).
11 Computation of Earnings Per Share of Common Stock. See note on
page 2 of HECO's 1995 Annual Report to Stockholder (HECO Exhibit
13).
*12 Computation of Ratio of Earnings to Fixed Charges. Filed herein
as page 70.
</TABLE>
65
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
13 Pages 2 to 31 and 33 of HECO's 1995 Annual Report to Stockholder
(with the exception of the data incorporated by reference in Part
I, Part II, Part III and Part IV, no other data appearing in the
1995 Annual Report to Stockholder is to be deemed filed as part
of this Form 10-K Annual Report) (Exhibit 13 to HECO's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995,
File No. 1-4955).
*21 Subsidiaries of HECO. Filed herein as page 72.
27.2 HECO and subsidiaries financial data schedule, December 31, 1995
and year ended December 31, 1995 (Exhibit 27.2 to HECO's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995,
File No. 1-4955).
*99 Reconciliation of electric utility operating income per HEI and
HECO Consolidated Statements of Income. Filed herein as page 74.
</TABLE>
66
<PAGE>
HEI Exhibit 11
Hawaiian Electric Industries, Inc.
COMPUTATION OF EARNINGS PER SHARE
OF COMMON STOCK
Years ended December 31, 1995, 1994, 1993, 1992 and 1991
<TABLE>
<CAPTION>
(in thousands,
except per share amounts) 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET INCOME (LOSS)
Continuing operations.................. $77,493 $73,030 $ 61,684 $ 61,715 $55,620
Discontinued operations................ -- -- (13,025) (73,297) (794)
------- ------- -------- -------- -------
$77,493 $73,030 $ 48,659 $(11,582) $54,826
======= ======= ======== ======== =======
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING.................... 29,187 28,137 25,938 24,275 22,882
======= ======= ======== ======== =======
EARNINGS (LOSS) PER COMMON SHARE
Continuing operations.................. $ 2.66 $ 2.60 $ 2.38 $ 2.54 $ 2.43
Discontinued operations................ -- -- (0.50) (3.02) (0.03)
------- ------- -------- -------- -------
$ 2.66 $ 2.60 $ 1.88 $ (0.48) $ 2.40
======= ======= ======== ======== =======
</TABLE>
Note: The dilutive effect of stock options is not material.
67
<PAGE>
HEI Exhibit 12 (page 1 of 2)
Hawaiian Electric Industries, Inc.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Years ended December 31, 1995, 1994, 1993, 1992 and 1991
<TABLE>
<CAPTION>
1995 1994 1993
------------------------ -------------------- -------------------
(dollars in thousands) (1) (2) (1) (2) (1) (2)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FIXED CHARGES
Total interest charges
The Company (3)................. $117,494 $206,790 $ 82,306 $158,815 $ 68,254 $145,905
Proportionate share of
fifty-percent-owned persons... 867 867 539 539 564 564
Interest component of rentals.... 3,857 3,857 3,819 3,819 3,944 3,944
Pretax preferred stock dividend
requirements of subsidiaries.... 11,433 11,433 11,899 11,899 11,018 11,018
-------- -------- -------- -------- -------- --------
TOTAL FIXED CHARGES.............. $133,651 $222,947 $ 98,563 $175,072 $ 83,780 $161,431
======== ======== ======== ======== ======== ========
EARNINGS
Pretax income from continuing
operations...................... $133,233 $133,233 $126,049 $126,049 $108,770 $108,770
Fixed charges, as shown.......... 133,651 222,947 98,563 175,072 83,780 161,431
Interest capitalized
The Company..................... (6,337) (6,337) (4,924) (4,924) (3,881) (3,881)
Proportionate share of
fifty-percent-owned persons.... (867) (867) (539) (539) (408) (408)
-------- -------- -------- -------- -------- --------
EARNINGS AVAILABLE FOR FIXED
CHARGES......................... $259,680 $348,976 $219,149 $295,658 $188,261 $265,912
======== ======== ======== ======== ======== ========
RATIO OF EARNINGS TO FIXED CHARGES 1.94 1.57 2.22 1.69 2.25 1.65
======== ======== ======== ======== ======== ========
</TABLE>
(1) Excluding interest on ASB deposits.
(2) Including interest on ASB deposits.
(3) Total interest charges exclude interest on nonrecourse debt from leveraged
leases which is not included in interest expense in HEI's consolidated
statements of income.
68
<PAGE>
HEI Exhibit 12 (page 2 of 2)
Hawaiian Electric Industries, Inc.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Years ended December 31, 1995, 1994, 1993, 1992 and 1991--Continued
<TABLE>
<CAPTION>
1992 1991
-------------------- ------------------------
(dollars in thousands) (1) (2) (1) (2)
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIXED CHARGES
Total interest charges
The Company (3)................... $ 67,559 $161,756 $ 69,957 $168,691
Proportionate share of
fifty-percent-owned persons..... 1,051 1,051 1,875 1,875
Interest component of rentals...... 3,254 3,254 2,231 2,231
Pretax preferred stock dividend
requirements of subsidiaries...... 9,606 9,606 10,449 10,449
-------- -------- -------- --------
TOTAL FIXED CHARGES................ $ 81,470 $175,667 $ 84,512 $183,246
======== ======== ======== ========
EARNINGS
Pretax income from continuing
operations........................ $ 91,244 $ 91,244 $ 87,953 $ 87,953
Undistributed earnings from less
than fifty-percent-owned persons.. (244) (244) (278) (278)
Fixed charges, as shown............ 81,470 175,667 84,512 183,246
Interest capitalized
The Company....................... (2,104) (2,104) (1,945) (1,945)
Proportionate share of
fifty-percent-owned persons...... (803) (803) (1,875) (1,875)
-------- -------- -------- --------
EARNINGS AVAILABLE FOR FIXED
CHARGES........................... $169,563 $263,760 $168,367 $267,101
======== ======== ======== ========
RATIO OF EARNINGS TO FIXED CHARGES. 2.08 1.50 1.99 1.46
======== ======== ======== ========
</TABLE>
(1) Excluding interest on ASB deposits.
(2) Including interest on ASB deposits.
(3) Total interest charges exclude interest on nonrecourse debt from leveraged
leases which is not included in interest expense in HEI's consolidated
statements of income.
69
<PAGE>
HECO Exhibit 12
Hawaiian Electric Company, Inc.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Years ended December 31, 1995, 1994, 1993, 1992 and 1991
<TABLE>
<CAPTION>
(dollars in thousands) 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FIXED CHARGES
Total interest charges................. $ 44,377 $ 37,340 $ 35,287 $ 33,011 $ 33,248
Interest component of rentals.......... 672 808 970 1,070 1,130
Pretax preferred stock dividend
requirements of subsidiaries......... 4,494 4,651 3,425 3,117 3,409
-----------------------------------------------------------
TOTAL FIXED CHARGES.................... $ 49,543 $ 42,799 $ 39,682 $ 37,198 $ 37,787
===========================================================
EARNINGS
Income before preferred stock
dividends of HECO.................... $ 77,023 $ 65,961 $ 56,126 $ 53,678 $ 46,210
Fixed charges, as shown................ 49,543 42,799 39,682 37,198 37,787
Income taxes (see note below).......... 50,198 43,588 36,897 23,843 23,816
Allowance for borrowed funds used
during construction.................. (5,112) (4,043) (3,869) (2,095) (1,307)
-----------------------------------------------------------
EARNINGS AVAILABLE FOR FIXED CHARGES... $171,652 $148,305 $128,836 $112,624 $106,506
===========================================================
RATIO OF EARNINGS TO FIXED CHARGES..... 3.46 3.47 3.25 3.03 2.82
===========================================================
NOTE:
Income taxes is comprised of the
following
Income tax expense relating to
operating income for regulatory
purposes.......................... $ 50,719 $ 43,820 $ 37,007 $ 26,254 $ 24,137
Income tax benefit relating to
nonoperating loss................. (521) (232) (110) (2,411) (321)
-----------------------------------------------------------
$ 50,198 $ 43,588 $ 36,897 $ 23,843 $ 23,816
===========================================================
</TABLE>
70
<PAGE>
HEI Exhibit 21
Hawaiian Electric Industries, Inc.
SUBSIDIARIES OF THE REGISTRANT
The following is a list of all subsidiary corporations of the registrant as of
March 19, 1996:
<TABLE>
<CAPTION>
Name Place of incorporation
- --------------------------------------------------------------------------------
<S> <C>
Hawaiian Electric Company,
Inc., including subsidiaries Maui Electric
Company, Limited and Hawaii Electric
Light Company, Inc. ......................... State of Hawaii
HEI Investment Corp. ......................... State of Hawaii
Lalamilo Ventures, Inc. ...................... State of Hawaii
Malama Pacific Corp., including subsidiaries
Malama Waterfront Corp., Malama Property
Investment Corp., Malama Development
Corp., Malama Realty Corp., Malama Elua
Corp., TMG Service Corp., Malama Hoaloha
Corp., Malama Mohala Corp. and Baldwin*Malama
(a limited partnership in which Malama
Development Corp. is the sole general
partner)..................................... State of Hawaii
Hawaiian Tug & Barge
Corp., including subsidiary Young Brothers,
Limited...................................... State of Hawaii
HEI Diversified, Inc.,
including subsidiary American Savings Bank,
F.S.B. and its subsidiaries, American State of Hawaii (except
Savings Investment Services Corp., ASB American Savings Bank,
Service Corporation, AdCommunications, Inc. F.S.B., which is federally
and Associated Mortgage, Inc. ............... chartered)
Pacific Energy Conservation Services, Inc. ... State of Hawaii
HEI Power Corp. .............................. State of Hawaii
</TABLE>
71
<PAGE>
HECO Exhibit 21
Hawaiian Electric Company, Inc.
SUBSIDIARIES OF THE REGISTRANT
The following is a list of all subsidiary corporations of the registrant as of
March 19, 1996:
<TABLE>
<CAPTION>
Name Place of incorporation
- --------------------------------------------------------------------------------
<S> <C>
Maui Electric Company, Limited................ State of Hawaii
Hawaii Electric Light Company, Inc. .......... State of Hawaii
</TABLE>
72
<PAGE>
[KPMG Peat Marwick letterhead]
HEI Exhibit 23
The Board of Directors
Hawaiian Electric Industries, Inc.:
We consent to incorporation by reference in Registration Statement Nos. 33-56561
and 33-58820 on Form S-3 and in Registration Statement Nos. 33-65234 and 33-
52911 on Form S-8 of Hawaiian Electric Industries, Inc. of our report dated
January 25, 1996, relating to the consolidated balance sheets of Hawaiian
Electric Industries, Inc. and subsidiaries as of December 31, 1995 and 1994, and
the related consolidated statements of income, retained earnings and cash flows
for each of the years in the three-year period ended December 31, 1995, which
report is incorporated by reference in the 1995 annual report on Form 10-K of
Hawaiian Electric Industries, Inc. We also consent to incorporation by reference
of our report dated January 25, 1996 relating to the financial statement
schedules of Hawaiian Electric Industries, Inc. in the aforementioned 1995
annual report on Form 10-K, which report is included in said Form 10-K.
/s/ KPMG Peat Marwick LLP
Honolulu, Hawaii
March 19, 1996
73
<PAGE>
HECO Exhibit 99
Hawaiian Electric Company, Inc.
RECONCILIATION OF ELECTRIC UTILITY OPERATING
INCOME PER HEI AND HECO CONSOLIDATED
STATEMENTS OF INCOME
Years ended December 31,
-----------------------------------
(in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------
[S] [C] [C] [C]
Operating income from regulated
and nonregulated activities
before income taxes (per HEI
Consolidated Statements of Income).... $159,043 $136,628 $119,565
Deduct:
Income taxes on regulated activities.. (50,719) (43,820) (37,007)
Revenues from nonregulated activities. (6,732) (6,411) (5,100)
Add:
Expenses from nonregulated activities. 1,130 915 627
-----------------------------------
Operating income from regulated
activities after income taxes
(per HECO Consolidated Statements
of Income)............................ $102,722 $ 87,312 $ 78,085
===================================
74
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrants have duly caused this report to be signed on their
behalf by the undersigned, thereunto duly authorized. The signatures of the
undersigned companies shall be deemed to relate only to matters having reference
to such companies and any subsidiaries thereof.
HAWAIIAN ELECTRIC INDUSTRIES, INC. HAWAIIAN ELECTRIC COMPANY, INC.
(Registrant) (Registrant)
By /s/ Curtis Y. Harada By /s/ Paul Oyer
---------------------- ---------------------
Curtis Y. Harada Paul A. Oyer
Financial Vice President,
Controller of HEI Treasurer and Director of HECO
(Principal Accounting Officer (Principal Financial Officer
of HEI) of HECO)
Date: April 30, 1996 Date: April 30, 1996
75
<PAGE>
HECO Exhibit 10.8
LOW SULFUR FUEL OIL SUPPLY CONTRACT
by and between
CHEVRON U.S.A. INC.
and
HAWAIIAN ELECTRIC COMPANY, INC.
* * * * * * * * *
<PAGE>
LOW SULFUR FUEL OIL SUPPLY CONTRACT
BY AND BETWEEN CHEVRON U.S.A. INC. AND
HAWAIIAN ELECTRIC COMPANY, INC.
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1: Definitions.................................... 1
ARTICLE 2: Term of Contract............................... 1
ARTICLE 3: Purchase Volumes and Delivery Rates............ 1
Section 3.1: Purchase Volumes..................................... 1
Section 3.2: Delivery Rates....................................... 1
ARTICLE 4: Quality........................................ 2
ARTICLE 5: Price.......................................... 3
Section 5.1: Price Per Physical Barrel............................ 3
Section 5.2: Flexibility in Supply Source......................... 4
Section 5.3: Fees, Taxes, Assessments, Levies, etc................ 4
Section 5.4: Rounding of Index Averages........................... 4
ARTICLE 6: [INTENTIONALLY OMITTED]........................ 4
ARTICLE 7: Pipeline Delivery.............................. 5
Section 7.1: LSFO Delivery........................................ 5
Section 7.2: Determination of Quality............................. 5
Section 7.3: Measurement of Quantity.............................. 5
Section 7.4: Disputes of Quality and Quantity..................... 5
ARTICLE 8: Marine Delivery................................ 6
Section 8.1: Notification of Use of HECO's Barbers Point Tankage.. 6
Section 8.2: Delivery of Marine Cargo............................. 6
Section 8.3: Determination of Quantity and Quality................ 6
Section 8.4: Delayed Invoicing.................................... 6
ARTICLE 9: Line Displacement Stock and Blend Stock........ 6
Section 9.1: Line Displacement Stock.............................. 6
Section 9.2: Blend Stock.......................................... 6
ARTICLE 10: Invoicing and Payment.......................... 7
Section 10.1: Invoices............................................ 7
Section 10.2: Payments............................................ 7
Section 10.3: Method of Payment................................... 7
ARTICLE 11: Contingencies.................................. 7
Section 11.1: Definition of Contingency........................... 7
Section 11.2: Obligations to Sell................................. 8
Section 11.3: Obligations to Purchase............................. 8
Section 11.4: Price Effectiveness................................. 8
Section 11.5: Combustion Specifications........................... 8
Section 11.6: Effective Date...................................... 9
Section 11.7: Refining and/or Delivery Operations Ownership....... 9
ARTICLE 12: Effect of Suspension or Reduction.............. 9
Section 12.1: Notice of Suspension or Reduction................... 9
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 12.2: Option to Terminate................................. 9
Section 12.3: Prompt Notices...................................... 9
Section 12.4: U.S. Currency....................................... 9
Section 12.5: Substitute Suppliers................................ 9
ARTICLE 13: Waiver and Non-Assignability........................... 10
Section 13.1: Waiver.............................................. 10
Section 13.2: Non-Assignability................................... 10
Section 13.3: Definitions......................................... 10
ARTICLE 14: Default................................................ 10
ARTICLE 15: Conflict of Interest................................... 10
ARTICLE 16: Applicable Law......................................... 11
ARTICLE 17: Public Utility Commission Approval..................... 11
ARTICLE 18: Miscellaneous.......................................... 11
Section 18.1: Headings............................................ 11
Section 18.2: Entire Agreement.................................... 11
Section 18.3: Contract is Not an Asset............................ 11
Section 18.4: Notices............................................. 11
Section 18.5: Unenforceable Terms................................. 11
Section 18.6: Successors and Assigns.............................. 11
Section 18.7: Termination of Prior Agreement...................... 12
</TABLE>
ADDENDUM No. 1: Sample Price Calculation
ADDENDUM No. 2: Quality Adjustments
ADDENDUM No. 3: Recovery of Worldscale Fixed Differential For Oil Pollution
Liability Insurance
<PAGE>
LOW SULFUR FUEL OIL SUPPLY CONTRACT
THIS CONTRACT dated as of November 20, 1995, by and between CHEVRON U.S.A. INC.,
a Pennsylvania corporation, ("Chevron") and HAWAIIAN ELECTRIC COMPANY, INC., a
Hawaii corporation, ("HECO"), with the purpose for the sale and purchase of Low
Sulfur Fuel Oil ("LSFO") and other petroleum products.
WHEREAS, Chevron is a supplier of petroleum fuels with terminal and refinery
facilities in Hawaii.
WHEREAS, HECO is a utility engaged in the generation and sale of electricity,
with terminal facilities, in Hawaii.
NOW THEREFORE, the parties agree as follows:
ARTICLE 1: Definitions
Except where otherwise indicated, the following definitions shall apply
throughout this contract:
1. "LSFO" means Chevron Low Sulfur Fuel Oil No. 6 per Section
4.1.
2. "physical barrel" means 42 American bulk gallons at 60 degrees
F.
3. "year" means a calendar year.
ARTICLE 2: Term of Contract
The term of this Contract shall be from January 1, 1996 (the "Effective Date"),
through December 31, 1997, and shall continue thereafter for additional 12-month
periods (each 12-month period being an "Extension") beginning each successive
January 1, unless HECO or Chevron gives written notice of termination at least
120 days before the beginning of an Extension.
ARTICLE 3: Purchase Volumes and Delivery Rates
Section 3.1: Purchase Volumes
Chevron shall sell and deliver to HECO and HECO shall purchase and receive from
Chevron, LSFO at a reasonably uniform rate during each month. This monthly
volume shall equate to an average daily rate in physical barrels per day which
is no less than the Tier 1 minimums nor more than the Tier 2 maximums as set out
below:
<TABLE>
<CAPTION>
Tier 1 Tier 2
------ ------
Year Minimum Maximum Minimum Maximum
- ---- ------- ------- ------- -------
<S> <C> <C> <C> <C>
1996
1997
Extension
</TABLE>
Pursuant to Section 5.1, the Tier 1 maximum, when multiplied by the number of
days in each month, designates the maximum purchase volume during that month
which shall occur at Tier 1 pricing.
The minimum annual volume of LSFO to be delivered is . The maximum
----------
annual volume of LSFO to be delivered is . In the event of an
----------
extension which falls during a leap year (1996), minimum and maximum LSFO
volumes are and respectively.
---------- ----------
Section 3.2: Delivery Rates
(a) HECO shall advise Chevron of its nominated rate of delivery for each
month seventy-five days prior to the beginning of that month.
(b) Except to the extent that marine deliveries which are required by
Chevron to meet the delivery requirement are prevented by the
unavailability of HECO's Barbers Point tankage, beginning the 5th day
of each month, at all times
Page 1
<PAGE>
during that month, Chevron's actual LSFO delivery rate, expressed in
barrels per day, shall not fall below 85% of HECO's nominated volume
to be delivered in the month of nomination as computed on a month-to-
date ratable basis, found by multiplying the month of nomination's
date by the nominated rate of delivery for that month, without the
express prior agreement of HECO.
(c) Chevron and HECO shall make best efforts to coordinate their separate
LSFO marine and pipeline deliveries into and out of HECO's storage
tanks at Barbers Point to minimize operational difficulties and
costs, including but not limited to tankage availability and vessel
demurrage.
(d) Unless waived by HECO, Chevron's marine deliveries of LSFO shall be
limited to 250,000 barrels, during:
(i) any ten day period, and
(ii) any calendar month, except during months when Chevron's LSFO
production facilities at Barbers Point are not operating.
(e) Unless waived by HECO, Chevron's actual LSFO deliveries during any
month shall be limited to 200,000 barrels above HECO's nomination for
that month.
(f) Unless waived by HECO, Chevron shall not deliver LSFO from its
Barbers Point Refinery into HECO's storage tanks at Barbers Point
during the fifteen (l5) days immediately preceding the scheduled
delivery of a marine cargo from a vessel chartered by HECO or HECO's
representative pursuant to the Facilities and Operating Contract
between Chevron and HECO, as long as Chevron's LSFO can be delivered
directly to HECO's storage tanks at Kahe, Waiau or Iwilei.
ARTICLE 4: Quality
The LSFO delivered hereunder shall comply with the following specifications:
<TABLE>
<CAPTION>
LSFO ASTM Test Specification
Specification Method Units Limits
- ------------- --------- ----- -------------
<S> <C> <C> <C>
API Gravity D4052 Deg 12 min
24 max
Sulfur D4292 Wt % 0.50 max
Flash Point (1) D93 Deg F 150 min
Pour Point D97 Deg F 125 max
Viscosity D445 SSU at l00 min
210 Deg F 450 max
Ash D482 Wt % 0.05 max
Gross Heating D240 MM BTU/Bbl 6.000 min
Value
Nitrogen D4629 Wt % 0.50
Water & Sediment D1796 Wt % 0.50
</TABLE>
Note: (1) Flash point shall be at least 50 degress F above the pour point or 150
degrees F, whichever is greater.
Page 2
<PAGE>
CHEVRON MAKES NO WARRANTY, EXPRESSED OR IMPLIED IN FACT OR BY LAW, AS TO THE
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE CONCERNING THE LSFO OTHER
THAN IT SHALL COMPLY WITH THE QUALITY HEREIN SPECIFIED, AND THAT IT SHALL BE
SUITABLE FOR USE AS A BOILER FUEL.
ARTICLE 5: Price
Section 5.1: Price Per Physical Barrel
For the monthly cumulative volume which is at or below the Tier 1 maximum limit
of Section 3.1 multiplied by the number of days in the month, the price of LSFO
delivered to meet the nominated commitment of a calendar month shall be
determined as follows:
- ------------------------
For the monthly cumulative volume which exceeds the Tier 1 maximum limit of
Section 3.1 multiplied by the number of days in the month, the price of LSFO
delivered to meet the nominated commitment of a calendar month shall be
determined as follows:
- ------------------------
where:
P1= Billing price per physical barrel of LSFO delivered to meet that
portion of the nominated commitment of a calendar month that falls at or
below the Tier 1 maximum regardless of the actual delivery date, in U.S.
dollars.
P2= Billing price per physical barrel of LSFO delivered to meet that
portion of the nominated commitment of a calendar month that exceeds the
Tier 1 maximum, regardless of the actual delivery date, in U.S. dollars.
LSWR = a market index for low sulfur fuel oil, defined as the average of
the Friday high and low prices per barrel published by Platt's Oilgram
Price Report for 0.3% Sulfur Low Sulfur Waxy Resid Mixed/Cracked sold in
Singapore, during the period beginning the 21st of the second month
immediately preceding the nominated month of delivery and ending the 20th
day of the month immediately preceding the nominated month of delivery,
plus the government fees pursuant to Section 5.3 except the Hawaii General
Excise Tax and any other taxes imposed on the sale of LSFO. If Platt's
Oilgram does not publish a high and low price for a particular Friday
during the relevant period, the high and low prices for the closest
preceding day for which a Report is published will be used.
FREIGHT = a market index for freight, defined for each calendar quarter as
the multiplication product of (a) and (b) below, plus the fixed rate
differential described in (c) below:
(a) the simple average of the Average Freight Rate Assessment ("AFRA")
Worldscale Points for the average of Large Range 1 vessels, as
published monthly by London Tanker Brokers Panel Limited for the three
monthly publications in the calendar quarter immediately preceding the
calendar quarter of the nominated month of delivery. Monthly
publications show rates of vessel voyages which occurred during the
last half of the second month immediately preceding that publication
and the first half of the month immediately preceding that
publication, and
(b) the Worldscale 100 rate for voyages between Singapore and Barbers
Point, Hawaii, applicable to the year of the quarter defined in (a)
above; expressed in New Worldscale rates, as published by Worldscale
Associates (London Limited) in its New Worldwide Nominal Freight Scale
(Worldscale); plus
(c) There shall be added to the multiplication product of (a) and (b)
above, a fixed rate differential, if and as provided by Worldscale,
with respect to the Additional Insurance Premiums for Basic ($500
Million) and Excess ($200 Million) coverage of Oil Pollution Liability
Insurance on vessels carrying persistent oils to and from the U.S.A.,
consistent with a typical vessel as derived in Addendum No. 3 attached
to this Contract.
The FREIGHT rate will be expressed in U.S. dollars per barrel, using a
conversion factor of 6.75 barrels per metric ton.
Page 3
<PAGE>
LA BUNKER = a market index for industrial fuel oil, defined as the simple
average of the Tuesday high and low prices of the Los Angeles Bunker C fuel
as reported by the Platt's Bunkerwire during the period beginning the 21st
of the second month immediately preceding the nominated month of delivery
and ending the 20th day of the month immediately preceding the nominated
month of delivery. If Platt's Bunkerwire does not publish a high and low
price for a particular Tuesday during the relevant period, the high and low
prices for the closest preceding day for which a Bunkerwire is published
will be used. The rate will be expressed in U.S. dollars per barrel, using
a conversion factor of 6.368 barrels per metric ton.
BTU = the actual gross heat content of each LSFO delivery, pursuant to
Section 7.2, expressed in million BTU's per barrel and rounded to three
decimal places.
T = the Hawaii General Excise Tax, the Hawaii Environmental Response Tax,
and any other tax imposed on the sale of LSFO.
The price for LSFO delivered shall be based on the price for the month of
delivery originally nominated by HECO, regardless of the month in which the
quantity of LSFO nominated is actually delivered.
Addendum No. 1 hereto contains an illustrative schedule of prices calculated
pursuant to this Section 5.1, including a copy of the monthly London Tanker
Brokers Panel Limited publication.
Section 5.2: Flexibility in Supply Source
To provide the flexibility needed by Chevron to meet its obligations to HECO,
the source and type of crude oil and other raw material, the place of
manufacture, and the manufacturer of LSFO for delivery to HECO hereunder shall
be determined solely by Chevron. The price of all LSFO delivered by Chevron to
HECO hereunder shall be determined in accordance with the terms of this Contract
regardless of where, how and by whom such LSFO is manufactured and regardless of
the type or source of crude oil or other raw materials used in its manufacture.
Section 5.3: Fees, Taxes, Assessments, Levies, etc.
In addition to all other amounts payable by HECO under this Contract, HECO shall
reimburse Chevron for all taxes, assessments, levies and imposts of whatsoever
kind or nature imposed on Chevron by any governmental or quasi-governmental
body, including without limitation the Hawaii General Excise Tax, the Hawaii
Environmental Response Tax, the Customs User Fee, the Federal Superfund Act and
oil spill liability fees, with respect to the sale of product under this
Contract or the receipt by Chevron of payments hereunder. Notwithstanding the
foregoing, HECO shall not be required to reimburse Chevron for any tax measured
by or based on the net income of Chevron or for real property taxes. To avoid
duplication of recovery, HECO shall not be required to reimburse Chevron under
this Section 5.3 for any item expressly mentioned by Platt's Oilgram Price
Report or Bunkerwire, or confirmed by Platt's in writing upon inquiry by either
Chevron or HECO, as being included in a price used to compute the billing price
under Section 5.1.
As of the effective date of this Contract, the governmental fees, etc. which are
currently in effect are the Hawaii General Excise Tax (4.167%), the Superfund
Petroleum fee ($0.097 per barrel), the Customs User Fee ($0.002 per barrel), and
the Hawaii Environmental Response Tax ($0.05 per barrel). The Hawaii General
Excise Tax and the Hawaii Environmental Response Tax will be added to the
invoiced price. The Superfund Petroleum fee and the Customs User fee will be
added to the LSWR Index of Section 5.1, since Platt's is not currently including
them in their published prices; these fees will not be added to the LA Bunker
index since Platt's is currently including them in their published prices.
Section 5.4: Rounding of Index Averages
All prices, index averages, adjustments thereto and other sums payable hereunder
shall be stated in the nearest thousandth of a dollar.
ARTICLE 6
[INTENTIONALLY OMITTED]
Page 4
<PAGE>
ARTICLE 7: Pipeline Delivery
Section 7:1: LSFO Delivery
Delivery of LSFO by pipeline shall be by one of the following methods.
(a) Chevron may deliver LSFO by pipeline from Chevron's Refinery into
HECO's storage tanks at Barbers Point. Title and risk of loss of
LSFO so delivered shall pass to HECO at the discharge flanges of
Chevron's main pipeline feeder/blender pumps, P2027 and P2027A,
where Chevron's piping systems a connect to HECO's LSFO delivery
line leading to its storage tanks.
(b) Pursuant to the Facilities and Operating Contract between Chevron
and HECO, Chevron may deliver LSFO by pipeline from Barbers Point
(either Chevron's refinery or HECO's storage tanks) into HECO's
storage tanks at Kahe, Waiau and Iwilei. Title and risk of loss
of LSFO delivered from Chevron's refinery shall pass to HECO at
the discharge flanges of the main pipeline booster pumps at
Chevron's refinery. Title and risk of loss of the LSFO delivered
from HECO's storage tanks shall remain with HECO at all times.
HECO agrees to pay a per barrel pipeline pumping fee for the LSFO delivered
under Section 7.1 (b). The pipeline pumping fees and the measurement of the
pumped quantities are described in the Facilities and Operating Contract between
Chevron and HECO.
Section 7.2: Determination of Quality
The quality of LSFO delivered to HECO shall be determined on the basis of
samples drawn by Chevron in such a manner as to be representative of each
individual delivery. Samples shall be drawn from Chevron's tanks prior to
delivery to HECO and shall be divided into four parts. Separate parts shall be
provided to both HECO and Chevron to determine quality. The remaining parts
shall be sealed and retained separately by Chevron and HECO.
The official heat content determination shall be based upon an average of
Chevron's and HECO's test results, provided that such results fall within the
ASTM reproducibility standard (currently 50,000 BTU per barrel) for Test D-240.
Chevron and HECO will make best efforts to evaluate heat content and exchange
results within 3 working days. In the event of an unresolvable difference
between HECO and Chevron, HECO's sealed part shall be provided to an independent
laboratory for an official determination, which shall be final. In cases of
disagreement or excessive delays in HECO's determination of heat content,
Chevron shall have the right to invoice the sale using a provisional heat
content of 6.2 MM BTU per barrel, with any required adjustments made after final
agreement is reached. Chevron and HECO shall share equally the cost of
independent tests and determinations.
Section 7.3: Measurement of Quantity
Quantities of LSFO and line displacement stock delivered hereunder shall be
determined at the time of delivery by gauging Chevron's tanks before and after
pumping. Measurements shall be taken by Chevron or Chevron's agent and
witnessed by HECO or HECO's agent. However, at HECO's option, measurements may
be taken by a mutually agreed upon independent inspector at both Chevron's
refinery and HECO's receiving facilities. If a mutually agreed upon independent
inspector is used, Chevron and HECO shall share equally the cost of such
independent inspections. Volumes delivered hereunder shall be converted to 60
degrees F, using the latest revision of ASTM Table 6.
Section 7.4: Disputes of Quality and Quantity
If Chevron or HECO has reason to believe that the quality or quantity of product
stated for a particular delivery per Sections 7.2 or 7.3 is incorrect, that
party shall within sixty days of the delivery date, present the other party with
documentation supporting such determination and the parties will confer, in good
faith, on the causes for the discrepancy and shall proceed to correct such
causes and adjust the quality and quantity, if justified, for the deliveries in
question.
Page 5
<PAGE>
ARTICLE 8: Marine Delivery
Section 8.1: Notification of Use of HECO's Barbers Point Tankage
Chevron shall provide HECO at least sixty days advanced notice of its planned
use of a specified volume of no more than 300,000 barrels of HECO's storage
capacity at Barbers Point and HECO shall set aside the requested storage
capacity for the purpose of accepting Chevron's marine delivery. Chevron shall
then provide HECO with weekly updates on the anticipated arrival date of the
marine cargo. If Chevron is unable to provide sixty days advance notice, HECO
will make all commercially reasonable efforts to provide Chevron with up to
300,000 barrels of storage capacity at Barbers Point.
Section 8.2: Delivery of Marine Cargo
Chevron may deliver the volume of LSFO specified in Section 8.1 from Chevron's
vessel directly into HECO's storage tanks at Barbers Point. Chevron shall not
deliver more than the specified volume without prior written approval from HECO.
Chevron may not deliver LSFO from Chevron's vessels directly into HECO's
storage tanks at Kahe, at Waiau or at Iwilei, without HECO's prior written
approval. Such approval may be given during unusual circumstances, such as
pipeline maintenance. Title and risk of loss of LSFO shall pass to HECO at the
flanges where Chevron's piping systems connect to HECO's piping systems for
HECO's tankage at Barbers Point, Kahe, Waiau or Iwilei.
Section 8.3: Determination of Quantity and Quality
The quantity and quality of LSFO delivered by marine vessel shall be determined
in the manner specified in Sections 7.2, 7.3 and 7.4 of this Contract, except as
follows:
(a) all measurements and samples shall be made and drawn by or under the
supervision of an independent inspector, and the costs thereof shall be
shared equally by Chevron and HECO.
(b) volume shall be determined by gauging HECO's receiving tank(s) before
and after pumping; and
(c) samples to determine quality shall be drawn after the LSFO is
discharged on Oahu.
Section 8.4: Delayed Invoicing
Invoicing of marine deliveries of LSFO, in any ten day period, shall be limited
to ten times the average daily rate of HECO's nomination for the month against
which the marine delivery applies.
ARTICLE 9: Line Displacement Stock and Blend Stock
Section 9.l: Line Displacement Stock.
HECO shall purchase from Chevron whatever line displacement stock that is
required for Chevron to complete the deliveries of LSFO and that is received
into HECO's tankage at Kahe, Waiau and Iwilei. The price of No. 2 diesel fuel
or No. 6 fuel oil used as line displacement stock shall be the then-current
pricing for the fuel comprising the line displacement stock in Chevron's supply
contract with HECO and HECO's affiliates, if such a supply contract is in
effect; otherwise its price shall be the then-current Honolulu posted price for
such fuel, less normally available discounts, if any, at the time of purchase.
The price of No. 5 fuel oil used as line displacement stock shall be the sum of
40% of the then-current No. 2 diesel fuel pricing and 60% of the then-current
No. 6 fuel oil pricing in Chevron's supply contract with HECO and HECO's
affiliates, if such a supply contract is in effect; otherwise its price shall be
the then-current Honolulu posted price for No. 5 fuel oil, less normally
available discounts, if any, at the time of purchase. HECO's minimum purchase
obligation and Chevron's maximum purchase obligation set forth in Article 3
shall be reduced by each physical barrel of line displacement stock sold.
Section 9.2: Blend Stock
In the event HECO desires to adjust the quality of its LSWR in its Barbers Point
tanks to meet the specifications of Article 4, Chevron shall supply the
necessary blend stock pursuant to Addendum 2.
Page 6
<PAGE>
ARTICLE 10: Invoicing and Payment
Section 10.1: Invoices
Invoices, which will show the price per physical barrel of LSFO, blend stock and
line displacement stock sold will be prepared and dated following delivery and
shall be rendered from time to time each calendar month. The invoices shall
also show as a separate item the estimated amounts of any reimbursements to
which Chevron is entitled pursuant to Section 5.3.
Section 10.2: Payments
Payments of such invoices shall be made in U.S. dollars. Timing of payments for
sales and deliveries received shall be based upon the invoice issue date which
shall be the invoice date or postmarked mailing date of the invoice, whichever
is later, as follows:
(a) Payment for a received invoice dated from the 1st through the 10th of a
month is due on the 20th of the same month.
(b) Payment for a received invoice dated from the 11th through the 20th of
a month is due by the last day of the same month.
(c) Payment for a received invoice dated from the 21st through the last day
of the month is due on the 10th day of the following month.
Due dates are the dates payments are to reach Chevron. If the due date falls on
a Saturday, the payment shall be made on the preceding business day. If such
date falls on a Sunday or a holiday, payment shall be made the following
business day.
Section 10.3: Method of Payment
Payments shall be by bank wire transfer of immediately available funds to:
Chevron U.S.A. Inc.
Account Number 59-51755
First National Bank of Chicago, Chicago, IL
ABA Ref. No. 071000013
For identification purposes, all wires must clearly indicate that payment
is being made by order of HECO and provide the invoice reference number. In
addition, written documentation evidencing specific invoices being paid
shall be immediately forwarded to:
Utility Fuel Receivables/Room 3338
Chevron U.S.A. Inc.
P.O. Box 7006
San Francisco, California 94120-7006
Fax (415) 894-1195
ARTICLE 11: Contingencies
Section 11.1: Definition of Contingency
As used in this Article 11, the term "contingency" means:
(a) any event reasonably beyond the control of the party
affected;
(b) compliance, voluntary or involuntary, with a direction or
request of any government or person purporting to act with
governmental authority; excluding, however, any such
direction or request restricting or otherwise regulating
combustion of the LSFO to be purchased by HECO hereunder,
the effect of which restrictions or regulation upon the
parties' performance shall be governed by Section 11.5 of
this Contract;
(c) total or partial expropriation, nationalization,
confiscation, requisitioning or abrogation or breach of
government contract or concession;
Page 7
<PAGE>
(d) closing of, or restriction on the use of, a port or
pipeline;
(e) maritime peril (including but not limited to, negligence in
navigation or management of vessel, collision, stranding,
destruction, or loss of vessel), storm, earthquake, flood;
(f) accident, fire, explosion;
(g) hostilities or war (declared or undeclared), embargo,
blockage, riot, civil unrest, sabotage, revolution,
insurrection;
(h) strike or other labor difficulty (whomever's employees are
involved), even though the strike or other labor difficulty
could be settled by acceding to the demands of a labor
group; or
(i) loss or shortage of supply, production, manufacturing,
distribution, refining, transportation, delivery facilities,
receiving facilities, equipment, labor, material, power
generation or power distribution caused by circumstances
which the affected party is not able to overcome by the
exercise of reasonable diligence or which the affected party
is able to overcome only at substantial additional expense
in relation to the expected revenue, benefits or rights
related directly to this Contract.
Section 11.2: Obligations to Sell
Chevron shall not be obligated to sell or deliver LSFO to the extent that
performance of this Contract is prevented, restricted or delayed by a
contingency which significantly affects Chevron's ability to supply, manufacture
or transport LSFO to HECO under this Contract from Chevron's U.S. West Coast and
Hawaiian refineries. In such circumstances, deliveries of LSFO to HECO may be
reduced on a basis as equitable to HECO as to Chevron's and its affiliates'
other customers of crude and petroleum products, and Chevron shall not be
obligated to acquire additional crude or LSFO but to the extent that it does
acquire additional crude or LSFO, HECO shall be entitled to an equitable share
of the LSFO acquired or derived from the crude acquired, at a price to be agreed
from time-to-time.
Section 11.3: Obligations to Purchase
HECO shall not be obligated to purchase, receive or use LSFO to the extent that
performance of this Contract in the customary manner is prevented, restricted or
delayed by a contingency. In such circumstances, purchases from Chevron may be
reduced on any basis as equitable to Chevron as to HECO's other suppliers of
LSFO.
Section 11.4: Price Effectiveness
If at any time any price determined under this Contract cannot be given effect
because to do so would violate a direction or request of any government or
person purporting to act with governmental authority, HECO and Chevron shall
attempt to agree on an alternate course of action, but failing agreement within
10 days the party adversely affected may suspend performance with respect to the
quantity of LSFO affected by the direction or request.
Section 11.5: Combustion Specifications
To the extent that any governmental regulation requires combustion of LSFO
meeting more stringent specifications or permits combustion of LSFO meeting less
stringent specifications than those in Article 4, HECO and Chevron shall
negotiate in good faith to agree on an alternative course of action that will
allow HECO to comply with such regulation while purchasing the equivalent of
the full quantity of LSFO it would be required to purchase under Article 3, at a
price and on other terms and conditions that are fair to both parties. Chevron
shall have no obligation to deliver LSFO meeting new specifications if it is not
available for purchase from third parties and Chevron cannot manufacture such
LSFO in existing facilities without new capital investment. If HECO and Chevron
do not agree on such an alternate course of action, then HECO may comply with
such regulation in any reasonable manner it chooses, including the option to
purchase from other sources for its plants located within the area in which such
regulation specifically applies, fuels which will enable HECO to comply with
such regulation. In such case, HECO's minimum purchase obligations and Chevron's
maximum supply obligations under Article 3 shall be reduced accordingly.
Page 8
<PAGE>
To the extent HECO is unable to utilize fuel to be supplied by Chevron under
this Contract, but HECO does not purchase fuel which meets such requirements
from other sources in an amount equal to the amount by which deliveries under
this Contract are reduced, then purchases from Chevron may be reduced on any
basis as equitable to Chevron as to HECO'S other suppliers of similar fuel oil.
Any adjustments in price pursuant to this Section 11.5 shall be governed by
Section 11.6, except that the adjustments shall apply to all LSFO delivered
which meets the new specifications.
Section 11.6: Effective Date
In the event of retroactive adjustments hereunder, the charge or credit to HECO
shall be computed and billed to HECO as soon as practical after the adjustment
is known. In the event of retroactive changes which cause adjustments hereunder
after termination of this Contract, payment shall be made within 15 days after
receipt of written demand therefor by the other party.
Section 11.7: Refining and/or Delivery Operations Ownership
Chevron's obligations under this Contract shall be contingent on Chevron's
continued ownership or operation of its refining or delivery facilities in
Hawaii or the U.S. West Coast. Chevron shall have the right to terminate this
Contract in the event the ownership and operation of its refining and delivery
facilities in Hawaii and the U.S. West Coast are transferred to an entity other
than an affiliate. Chevron shall give HECO 180 days' written notice.
ARTICLE 12: Effect of Suspension or Reduction
Section 12.1: Notice of Suspension or Reduction
In the event of any suspension or reduction of sales and deliveries under
Article 11, Chevron shall not be obligated to sell and HECO shall not be
obligated to buy, after the period of suspension or reduction, the undelivered
quantity of LSFO which normally would have been sold and delivered hereunder
during the period of suspension or reduction.
Section 12.2: Option to Terminate
If sales and deliveries are suspended under Article 11 for more than 180 days,
Chevron or HECO shall have the option while such suspension continues to
terminate its obligations to the other party under this Contract on 30-days'
written notice to the other party.
Section 12.3: Prompt Notices
Any party which relies upon Article 11 shall give the other party prompt notice
thereof specifying the anticipated amount and duration of any suspension or
reduction of deliveries. It shall also give prompt notice when it no longer
expects to rely on Article 11 and deliveries shall be reinstated subject to all
conditions of this Contract, unless this Contract has been terminated previously
under Section 12.2.
Section 12.4: United States Currency
Nothing in Article 11 shall relieve HECO of the obligation to pay in full in
United States currency for the LSFO sold and delivered hereunder and for other
amounts due by HECO to Chevron under this Contract.
Section 12.5: Substitute Suppliers
While deliveries are suspended or reduced by Chevron pursuant to Article 11, it
shall not be a breach of this Contract for HECO to buy from a supplier other
than Chevron the quantities of LSFO which Chevron does not deliver. During this
period of time there will be no minimum volume requirements. After any
suspension or reduction has ended, minimum and maximum volume requirements of
Article 3 for the annual period in which the suspension or reduction occurred
will be reduced in proportion to the ratio of the number of days within the
annual period during which no suspension or reduction was in effect, to the
number of days within the annual period.
Page 9
<PAGE>
ARTICLE 13: Waiver and Non-Assignability
Section 13.1: Waiver
Waiver by one party of the other's breach of any provision of this Contract
shall not be deemed a waiver of any subsequent or continuing breach of such
provisions or of the breach of any other provision or provisions hereof.
Section 13.2: Non-Assignability
This Contract shall not be assignable by either party without the written
consent of the other, which shall not be unreasonably withheld, except that
either party may assign this Contract to any affiliate, provided that any such
assignment shall not release that party from any of its obligations hereunder,
and except that HECO may assign this Contract to the Trustee under its First
Mortgage Bond Indentures. Chevron does not, by agreement to such an assignment,
waive any right it may have to terminate this Contract for any breach hereof
occurring at any time before or after any such assignment or release HECO of any
obligations arising under this Contract after any such assignment. Following
any such assignment, no further assignment may be made without the consent of
Chevron.
Section 13.3: Definitions
In this Article 13 and Sections 11.2 and 11.7, "affiliate" shall mean any
corporation controlling, controlled by or under common control, with either
Chevron or HECO. "Control" of a corporation shall mean ownership, directly or
indirectly, or at least 50% of the voting shares of such corporation.
ARTICLE 14: Default
If HECO or Chevron considers the other party to be in default of any obligation
under this Contract, such party shall give the other party notice thereof. Such
other party shall then have 30 days in which to remedy such default. If the
default is not cured, the other party may, without prejudice to any other right
or remedy of such party in respect of such breach, terminate its obligations
under this Contract, except for HECO's obligation to pay in full in United
States currency for the LSFO sold and delivered hereunder and for other amounts
due by HECO to Chevron under this Contract by 45 days notice to the party in
breach. Any termination shall be without prejudice to accrued rights. All
rights and remedies hereunder are independent of each other and election of one
remedy shall not exclude another.
In no event shall either party be liable for any indirect, consequential,
special or incidental damages of any kind whether based in contract, tort
(including without limitation negligence or strict liability), warranty or
otherwise.
ARTICLE 15: Conflicts of Interest
Conflicts of interest related to this Contract are strictly prohibited. Except
as otherwise expressly provided herein, neither party nor any director, employee
or agent of a party shall give to or receive from any director, employee or
agent of the other party any gift, entertainment or other favor of significant
value, or any commission, fee or rebate. Likewise, neither party nor any
director, employee or agent of a party shall enter into any business arrangement
with any director, employee or agent of the other party (or any affiliate),
unless such person is acting for and on behalf of the other party, without
prior written notification thereof to the other party.
In the event of any violation of this Article 15, including any violation
occurring prior to the date of this Contract which resulted directly or
indirectly in one party's consent to enter into this Contract with the other
party, such party may, at its sole option, terminate this Contract at any time
and, except for obligations to pay in full in United States currency for the
outstanding payment obligations hereunder, shall be relieved of any further
obligation under this Contract.
Both parties agree to immediately notify the other of any known violation of
this Article.
Page 10
<PAGE>
ARTICLE 16: Applicable Law
This Contract shall be construed in accordance with, and all disputes arising
hereunder shall be determined in accordance with, the local law of the State of
Hawaii, U.S.A.
ARTICLE 17: Public Utility Commission Approval
This Contract is required to be filed with the Hawaii Public Utilities
Commission ("PUC") for approval. If in the proceedings initiated as a result of
the filing of this Contract, the PUC disapproves or fails to authorize the
recovery of the fuel costs incurred under this Contract through HECO's "Energy
Cost Adjustment Clause", HECO may terminate this Contract by 30 days written
notice to Chevron.
ARTICLE 18: Miscellaneous
Section 18.1: Headings
Headings of the Articles and Sections are for convenient reference only and are
not to be considered part of this Contract.
Section 18.2: Entire Agreement
This document contains the entire agreement between the parties covering the
subject matter and cancels, as of the effective date hereof, all prior
agreements of any kind between the parties covering such subject matter and any
amendments thereto. There are no other agreements which constitute any part of
the consideration for, or any condition to, either party's compliance with its
obligations under this Contract.
Section 18.3: Contract is Not an Asset
This Contract shall not be deemed to be an asset in, and, at the option of a
party, shall terminate in the event of any voluntary or involuntary
receivership, bankruptcy or insolvency proceedings affecting the other party.
Section 18.4: Notices
Except as otherwise expressly provided herein, all notices shall be given in
writing, by letter, facsimile, telegraph or telex to the following addresses, or
such other address as the parties may designate by notice, and shall be deemed
given upon receipt.
Seller: Manager, Petroleum Coke, Heavy Fuels & Sulfur
Chevron U.S.A. Inc.
P.O. Box 7006
San Francisco, CA 94120-7006
Facsimile: (415) 894-1195
Buyer: Manager, Power Supply Services Department
Hawaiian Electric Company, Inc.
Box 2750
Honolulu, HI 96840-0001
Facsimile: (808) 543-7788
Section 18.5: Unenforceable Terms
If any term or provision, or any part of any term or provision, of this Contract
is held by any court or other competent authority to be illegal or
unenforceable, the remaining terms, provisions, rights and obligations shall not
be affected.
Section 18.6: Successors and Assigns
This Contract shall inure to the benefit of and be binding upon the parties
hereto, their successors and permitted assigns.
Page 11
<PAGE>
Section 18.7: Termination of Prior Agreement
Effective as of the Effective Date of the Term hereunder, this Contract hereby
supersedes that certain Low Sulfur Fuel Oil Supply Contract between the parties
dated May 29, 1990, and all amendments thereto.
IN WITNESS WHEREOF, the parties hereto have executed this Low Sulfur
Fuel Oil Supply Contract as of the day and year first hereinabove written.
CHEVRON U.S.A. INC. HAWAIIAN ELECTRIC
COMPANY, INC.
By /s/ Phillip H. Fisher By /s/ Edward Y. Hirata
Phillip H. Fisher Edward Y. Hirata
(Printed or Typed Name)
Its Manager, Petroleum Coke Its Vice President
Heavy Fuels & Sulfur Regulatory Affairs
By /s/ M. M. Egged
Molly M. Egged
(Printed or Typed Name)
Its Secretary
Page 12
<PAGE>
ADDENDUM No. 1
Sample Price Calculation
July 1995
I. Singapore LSWR Mixed/Cracked
A. Platt's Index Platt's Oilgram Prices-$/Bbl
Low High
May 26, 1995 16.50 16.70
June 2, 1995 15.95 16.15
June 9, 1995 15.40 15.60
June 16, 1995 14.40 14.90
-----
Average 15.70
B. Government Fees -- $/Bbl
Superfund Petroleum fee 0.097
Customs User fee 0.002
-----
Total Government Fees 0.099
C. LSWR Index -- $/Bbl 15.799
II. FREIGHT
FREIGHT = {(Previous Quarter Average AFRA Worldscale LR-1 multiplied by
New Worldscale 100) divided by 100] divided by 6.75} plus (Worldscale Fixed
Differential per barrel as per Addendum No. 3)
A. AFRA Worldscale Large Range 1 average
Publication Date New Worldscale Large Range 1
Points
April 1995 128.2
May 1995 128.3
June 1995 120.3
-----
Average 125.6
B. New Worldscale 100 Rate between Singapore and Barbers Point effective
January 1, 1995 was $9.14 per Metric Ton
C. FREIGHT = {[(125.6*$9.14/MT) / 100] / 6.75Bbls/MT} + ($0.044/Bbl)
= $1.745 / Bbl
III. LA Bunker Platt's Bunkerwire Prices - $/MT
Low High
--- ----
May 23, 1995 103.00 106.00
May 30, 1995 103.00 106.00
June 6, 1995 102.00 104.00
June 13, 1995 103.00 108.00
June 20, 1995 93.00 96.00
Average--$/MT 102.40
$/Bbl $16.080 ($102.40 / 6.368 Bbl/MT)
IV. Taxes
A. Hawaii General Excise Tax is 4.167% of pre-tax price.
B. Hawaii Environmental Response Tax is $0.05 per barrel
V. Monthly Price @ 6.2 MM BTU/Bbl
A. Tier 1 For Nominated Purchases up to 16,000 Bbls per day.
--------------------------------------------------------
B. Tier 2 For Nominated Purchases above 16,000 Bbls per day
--------------------------------------------------------
VI. Price of Individual July-Priced Delivery with Assumed Heat Content Other
Than 6.2MM BTU/Bbl
A. Analysis
Per Chevron 6.280MM BTU/Bbl
Per HECO 6.258MM BTU/Bbl
B. Tolerance
Difference 0.022MM BTU/Bbl
Limit per Section 7.2 0.050MM BTU/Bbl
Results are within tolerance
C. "BTU" is the average of analyses within tolerance
Average 6.269MM BTU/Bbl
D. Tier 1 Price Computation
--------------------------------------------------------
E. Tier 2 Price Computation
--------------------------------------------------------
<PAGE>
Addendum No. 1
LONDON TANKER BROKERS' PANEL LIMITED
Directors: Prince Rupert House
E. F. Shawyer (Chairman) 64 Queen Street
M. G. Johnson LONDON EC4R 1AD
A. G. Burgess
R. W. Park Telephone: 0171-248 4747
P. C. Delaney Telex: 885118 G
C. Waaler Fax: 0171-489 0536
R. W. Porter (Managing)
1st June 1995
Hawaiian Electric Company Inc
P. O. Box 2750
Honolulu HI 96840-0001
Hawaii
Attn: Mr. J. C. Aicken Dir. Fuel Resource
Dear Sirs
AFRA
The results of the monthly average freight rate assessments made over the period
16th April 1995/15th May 1995 are as follows:
MEDIUM RANGE (25,000/ 44,999 (LONG) TONS) WORLDSCALE 161.6
LARGE RANGE 1 (45,000/ 79,999 (LONG) TONS) WORLDSCALE 120.3
LARGE RANGE 2 (80,000/159,999 (LONG) TONS) WORLDSCALE 87.8
VLCC (160,000/319,999 (LONG) TONS) WORLDSCALE 54.9
ULCC (320,000/549,999 (LONG) TONS) WORLDSCALE 43.1
We would remind you that, in accordance with the agreement between us, these
assessments are provided to you on the condition they will not be reproduced,
supplied or disclosed to any other person.
Yours faithfully
LONDON TANKER BROKERS' PANEL LIMITED
/s/ R.W. Porter
R. W. Porter
Managing Director
<PAGE>
ADDENDUM NO. 2
Quality Adjustments
Section 1: Adjustments to Quality of HECO's Oil
In the event HECO desires to adjust the quality of its LSWR in its Barbers Point
tanks to meet the specifications of Article 4 and provided that the LSWR meets
the qualities of Section 2(a), Chevron shall supply the necessary blend stock,
quality analysis and other services necessary to complete the adjustment. HECO
will provide LSWR of the quality generally available in the Singapore market.
Section 2: Quality and Quantity Determination
(a) HECO shall give Chevron 45 days advance notice of the quantity and
quality of any LSWR for which it desires an adjustment. The LSWR
shall meet the following viscosity-sulfur relationship:
<TABLE>
<CAPTION>
LSWR Viscosity -- cs at 122 degrees F
------------------------------------------
Maximum For Pipeline Delivery
LSWR Sulfur -----------------------------
Wt % Minimum To Waiau/Iwilei To Kahe
----------- ------- --------------- -------
<S> <C> <C> <C>
0.100-0.149 12.9 230 1,170
0.150-0.199 14.5 260 1,230
0.200-0.249 15.9 290 1,330
0.250-0.300 17.5 320 1,430
</TABLE>
(b) The specific quality and quantity of the LSWR in HECO's tankage
before adjustment shall be determined in accordance with Sections
7.2, 7.3 and 7.4, except that the samples shall be taken and
gauging shall be done on HECO tanks at Barbers Point prior the
Chevron's adjustment of quality.
(c) The specific quality and quantity of the LSWR in HECO's tankage
after adjustment shall be determined in accordance with Sections
7.2, 7.3 and 7.4, except that the samples shall be taken and
gauging shall be done on HECO tanks at Barbers Point after Chevron
has completed the adjustment of quality.
Section 3: Compensation
(a) HECO shall purchase from Chevron whatever blend stock that is
required for Chevron to complete the adjustment. The price of the
oil used for adjustment shall be the ----------------------------
in -------------------------------------------- if such a supply
contract is in effect; otherwise, its price shall be the
--------------------------------.
(b) HECO shall pay Chevron a processing fee of ---------------
on the total adjusted volume of Section 2(c) above.
Section 4: Invoices
Invoices for the above will be submitted by Chevron and paid by HECO in
accordance with Article 10 of this Contact.
Section 5: Sample Price Calculation
(a) Price of Blend Stock
Basis: 1) ------------------------------ per barrel (from
Addendum No. 1)
2) Tax currently in effect is the Hawaii General
Excise Tax of 4.167% of pre-tax price (from Section 5.3).
<PAGE>
Price of Blend Stock = ----------------------------------
= ----------------------
= ----------------------
= ----------------------
(b) Processing Fee
Basis: 1) HECO provides 250,000 barrels of LSWR
2) Chevron provides 25,000 barrels of Blend Stock
3) LSWR is $15.799 and ---------------- (from Addendum No. 1)
4) Tax currently in effect is the Hawaii General Excise Tax
of 4.167% of pre-tax price (from Section 5.3) and
Hawaii Environmental Response Tax of $9.05 per barrel.
Processing Fee = ---------------------------
= ---------------------------
= ---------------------------
<PAGE>
ADDENDUM NO. 3
Recovery of Worldscale Fixed Differential For Oil Pollution Liability Insurance
The price formula for LSFO in Section 5.1 of the Contract includes the component
"FREIGHT" that refers to a Worldscale 100 rate published in the current edition
of Worldscale which incorporates a Fixed Rate Differential to reflect the cost
of additional premiums for Oil Spill Liability Insurance on vessels carrying
Persistent Oils applicable to voyages having a destination in the U.S.A..
Chevron acknowledges that any vessel used to transport LSFO that is sold and
purchased under the Contract, including its components and the crude oil from
which the LSFO is derived, shall be required to possess oil spill liability
insurance coverage in the amount of $700 million.
The price formula component "FREIGHT" refers to an AFRA rate applicable to a
vessel size classification of LR-1, or Large Range 1. This vessel
classification references tanker vessels ranging in size from 45,000 Long Tons
Deadweight to 79,999 Long tons Deadweight. In order to derive an approximation
of the relationship between Deadweight and Gross Registered Tons for a nominal
vessel consistent with the mathematical average of this vessel size
classification, the average of two vessels that have transported LSFO or its
components to Hawaii in the recent past that are approximately equal to the
midpoint of the LR-1 range were referenced. These vessels are described as
follows:
<TABLE>
<CAPTION>
Name Deadweight Tons (DWT) Gross Registered Tons (GRT)
<S> <C> <C>
M/T London Spirit 62,097 36,865
M/T London Victory 62,156 36,865
Average 62,127 36,865
</TABLE>
The Worldscale 100 rate that is to be included in the computation of FREIGHT is
to be derived in the same manner as the following illustrative example
calculations:
1. The Worldscale 100 rate in effect from February 19, 1995, shall include a
Fixed Rate Differential which shall be the sum of a. and b. and shall be
computed as follows:
a. Fixed Rate Differential with respect to the additional insurance
premiums For Basic $500 million coverage of Oil Pollution Liability
Insurance on vessels carrying Persistent Oils to and from the U.S.A.
Fixed Rate Differential = $0.27/GRT X 36,865 GRT
62,127
= $0.160 per Metric Tonne
For illustrative purposes, this rate may be expressed in U.S. dollars
per barrel as follows:
= $0.160/Metric Tonne
6.75 barrels/Metric Tonne
= $0.024/barrel
b. Fixed Rate Differential with respect to the additional insurance
premiums for Excess $200 million coverage of Oil Pollution Liability
Insurance on vessels carrying Persistent Oils to and from the U.S.A.
Fixed Rate Differential = $0.2225/GRT X 36,865 GRT
62,127
= $0.132 per Metric Tonne
For illustrative purposes, this rate may be expressed in U.S. dollars
per barrel as follows:
= $0.132/Metric Tonne
6.75 barrels/Metric Tonne
<PAGE>
= $0.020/barrel
The sum of which shall equal $0.2920 per Metric Tonne, or $0.044 expressed in
U.S. dollars per barrel.
2. The AFRA Worldscale Points and their related Worldscale 100 rate applicable
for each calendar quarter are based upon an average of the three monthly AFRA
publications in the calendar quarter immediately preceding the calendar quarter
of the nominated month of delivery. Therefore the relevant Fixed Rate
Differentials computed above should be applied as follows:
A. With respect to volumes of LSFO nominated during the three (3) months
of the quarter following a change in the published rate (typically February of
each year), the relevant Fixed Rate Differential to be included in the
computation of the price component "FREIGHT" shall be the sum of:
50/90 multiplied by the Fixed Rate Differential computed prior to the
rate change:
and 40/90 multiplied by the Fixed Rate Differential computed using the
revised rate:
B. With respect to volumes of LSFO nominated for subsequent months,
and continuing for so long as the Fixed Rate Differentials as set forth in
Worldscale Circular shall be applicable, the relevant Fixed Rate Differential to
be included in the computation of the price component "FREIGHT" shall be as
derived in part 1 above.
<PAGE>
HECO Exhibit 10.9
INTER-ISLAND INDUSTRIAL FUEL OIL AND DIESEL FUEL CONTRACT
By and Between
CHEVRON U.S.A. INC.
and
HAWAIIAN ELECTRIC COMPANY, INC.; MAUI ELECTRIC COMPANY, LTD.;
HAWAII ELECTRIC LIGHT CO., INC.; HAWAIIAN TUG & BARGE CORP.;
and YOUNG BROTHERS, LIMITED.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE PAGE
<S> <C> <C>
I. DEFINITIONS............................... 1
II. TERM...................................... 4
III. QUANTITY.................................. 4
IV. QUALITY................................... 8
V. PRICE, BTU DETERMINATION.................. 10
VI. DELIVERIES................................ 14
VII. DETERMINATION OF QUALITY.................. 17
VIII. MEASUREMENT OF QUANTITY................... 18
IX. INVOICING AND PAYMENT.................... 19
X. SELLER'S FACILITIES ON OAHU............... 21
XI. SELLER'S FACILITIES ON MAUI AND HAWAII.... 22
XII. CONTINGENCIES............................. 31
XIII. EFFECT OF SUSPENSION OR REDUCTION......... 33
XIV. WAIVER AND NONASSIGNABILITY............... 35
XV. CONFLICT OF INTEREST...................... 35
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
XVI. DEFAULT................................... 36
XVII. APPLICABLE LAW............................ 37
XVIII. INDEMNITY................................. 37
XIX. PUBLIC UTILITIES COMMISSION............... 39
XX. INSURANCE................................. 40
XXI. SAFETY AND TERMINAL PROTECTION............ 42
XXII. POLLUTION MITIGATION...................... 43
XXIII. MISCELLANEOUS............................. 44
<CAPTION>
ADDENDUMS
<S> <C>
NO. 1 SAMPLE PRICE CALCULATIONS---NOVEMBER, 1995
NO. 2 QUALITY CONTROL SAMPLES 3/4 SUMMARY
AND SCHEMATIC OF SAMPLE LOCATIONS
</TABLE>
<PAGE>
INTER-ISLAND INDUSTRIAL FUEL OIL AND DIESEL FUEL CONTRACT
THIS CONTRACT, dated as of November 20, 1995, by and between CHEVRON
U.S.A. INC., a Pennsylvania corporation ("Seller"), and HAWAIIAN ELECTRIC
COMPANY, INC.; MAUI ELECTRIC COMPANY, LTD.; HAWAII ELECTRIC LIGHT CO., INC.;
HAWAIIAN TUG & BARGE CORP.; and YOUNG BROTHERS, LIMITED, each a Hawaii
corporation (collectively referred to as "Buyers" and individually referred to
as "Buyer" herein unless otherwise indicated).
WHEREAS, Seller is a supplier of petroleum fuels with terminal and
refinery facilities in Hawaii.
WHEREAS, Buyers are engaged in various business activities: HECO,
HELCO, and MECO are utilities engaged in the generation, purchase and sale of
electricity in Hawaii; HT&B is a tug and barge company; YB is a barge company
engaged in general marine transportation.
NOW, therefore, the parties agree as follows:
ARTICLE I
DEFINITIONS
Except where otherwise indicated, the following definitions shall
apply throughout this Contract:
1. "CIFO" means Chevron Industrial Fuel Oil No. 6 per Section 4.1.
2. "Fuel Oil" means either Chevron Industrial Fuel Oil No. 6 or
third party industrial fuel oil similar to Chevron Industrial Fuel Oil No. 6.
3. "Diesel" means Chevron Diesel Fuel No. 2 per Section 4.2.
Page 1
<PAGE>
4. "diesel" means either Chevron Diesel Fuel No. 2 or a third party
diesel fuel similar to Chevron Diesel Fuel No. 2.
5. "Jet" means Chevron Jet Fuel per Section 4.3.
6. "jet" means either Chevron Jet Fuel or a third party jet fuel
similar to Chevron Jet Fuel.
7. "Oil" means either Chevron Industrial Fuel Oil No. 6 or Chevron
Diesel Fuel No. 2.
8. "oil" means Chevron Industrial Fuel Oil No. 6, Chevron Diesel
Fuel No. 2, a third party industrial fuel oil similar to Chevron Industrial Fuel
Oil No. 6, or a third party diesel fuel similar to Chevron Diesel Fuel Oil No.
2.
9. "HECO" means Hawaiian Electric Company, Inc., which has
electrical generating facilities on the island of Oahu.
10. "MECO" means Maui Electric Company, Ltd., which has electrical
generating facilities on the islands of Maui, Lanai and Molokai. For the
purposes of this Contract "MECO" refers to the operations on the island of Maui
only.
11. "MECO-Molokai" means the Molokai Division of Maui Electric
Company, Ltd., which has electrical generation facilities on the island of
Molokai.
12. "HELCO" means Hawaii Electric Light Co., Inc., which has
electrical generating facilities on the island of Hawaii.
13. "HT&B" means Hawaiian Tug & Barge Corp., which operates a tug and
barge fleet.
14. "YB" means Young Brothers, Limited, which operates a general
marine transportation business.
Page 2
<PAGE>
15. "HMT" means Seller's Honolulu Marine Terminal at Honolulu Harbor
Piers 30 and 31.
16. "HDT" means Seller's Honolulu Distribution Terminal at Honolulu
Harbor Pier 35.
17. "Kaunakakai Terminal" means a third party Marine Terminal at
Kaunakakai Harbor, Molokai.
18. "Oahu P/L" means Seller's Light product distribution pipeline
between Seller's Barbers Point oil refinery and HECO's Waiau electric generating
station.
19. "affiliate", except where otherwise expressly provided, means a
corporation controlling, controlled by or under common control with Seller or
Buyer, as the case may be.
20. "Carrier" means Buyer's nominated barge or designated trucking
company.
21. "gallon" means a United States gallon of 231 cubic inches at 60
degrees F.
22. "physical barrel" means 42 American bulk gallons at 60 degrees F.
23. "year" means a calendar year.
24. "Deliver, Delivery, Deliveries or Delivered" refers to the Oil or
Jet sold by Seller and purchased by Buyer.
25. "Loaded", when used in conjunction with Oil or Jet, refers to
Buyer's Delivered Oil or Jet mixed with any cargo retains within Buyer's
nominated barge.
26. "loaded", when used in conjunction with Oil or Jet, refers to
Buyer's Delivered Oil or Jet or a third party's delivered oil or jet mixed with
any cargo retains within Buyer's nominated barge.
Page 3
<PAGE>
27. "Received", when used in conjunction with Oil or Jet, refers to
Buyer's Oil or Jet to be received by Seller into its terminals on Maui and
Hawaii. "Received", when used in conjunction with oil, means a third party
industrial fuel oil similar to Chevron Industrial Fuel Oil No. 6 or a third
party diesel fuel similar to Chevron Diesel Fuel Oil No. 2 received by Seller
into its terminals on Maui and Hawaii from Buyer's nominated barge.
28. "Returned", when used in conjunction with Oil, oil or Jet, refers
to the Oil, oil or Jet returned by Seller from its terminals on Maui and Hawaii
to Buyer for Buyer's use in Buyer's electrical generating facilities.
ARTICLE II
TERM
The term of this Contract shall be from January 1, 1996 (the "Effective Date"),
through December 31, 1997, and shall continue thereafter for additional 12-month
periods (each 12-month period being an "Extension") beginning each successive
January 1, unless Buyer or Seller gives written notice of termination at least
120 days before the beginning of an Extension.
ARTICLE III
QUANTITY
Section 3.1 Seller shall sell and deliver to Buyer, and Buyer shall
-----------
purchase and receive from Seller no less than the minimum nor more than the
maximum annual quantity of CIFO, Diesel and Jet as set out below for each Buyer
and described in Article IV, from the HMT, the HDT, the Oahu P/L, or a
Chevron-nominated barge at the Kaunakakai Terminal, as described in Article VI.
The purchase of CIFO and Diesel shall be at a reasonably uniform rate.
All quantities shall be stated in annual physical barrels.
Page 4
<PAGE>
i. CIFO
1996 Minimum Maximum
---- ------- -------
HELCO ----- -----
MECO ----- -----
TOTAL ----- -----
1997 Minimum Maximum
---- ------- -------
HELCO ----- -----
MECO ----- -----
TOTAL ----- -----
ii. Disel
1996 Minimum Maximum
---- ------- -------
HECO ----- -----
HELCO ----- -----
MECO ----- -----
MECO-Molokai 80,000 100,000
HT&B and YB 80,000 125,000
TOTAL
1997 Minimum Maximum
---- ------- -------
HECO ----- -----
HELCO ----- -----
MECO ----- -----
MECO-Molokai 80,000 100,000
HT&B and YB 80,000 125,000
TOTAL ----- -----
Page 5
<PAGE>
iii. Jet
1996 Minimum Maximum
---- ------- -------
HELCO 5,000
MECO 5,000
TOTAL 10,000
1997 Minimum Maximum
---- ------- -------
HELCO 5,000
MECO 5,000
TOTAL 10,000
The volumes of CIFO, Diesel and Jet shown for 1997 shall also apply to any
Extensions, unless otherwise revised.
Section 3.2 Prior to the 15th day of each month, HECO shall give Seller a
forecast of each Buyer's monthly lifting of Diesel, CIFO and Jet from each
supply point for each of the coming three months. Each Buyer recognizes the
importance to Seller of reasonably accurate lifting forecasts because of
Seller's need to plan production and shipments.
Section 3.3 Buyers' purchases and Seller's Deliveries of CIFO and Diesel
will occur in a ratable fashion throughout the year. At the end of each
calendar year, Buyers' CIFO and Diesel purchase performance will each be
reviewed by Seller for ratability.
i. If upon review Buyers' volumes in any calendar quarter were less than
15% of the total minimum annual liftings for either CIFO or Diesel, a premium of
$0.42/barrel will be charged to Buyer for the difference between 15% of total
minimum annual liftings of that product and Buyers' actual liftings of that
product.
ii. If upon review Buyers' volumes in any calendar quarter were greater
than 35% of the total maximum annual liftings for either CIFO or Diesel, a
premium of $0.42/barrel will be
Page 6
<PAGE>
charged to Buyer for the difference between Buyers' actual liftings of that
product and 35% of total maximum annual liftings of that product.
iii. Seller understands Buyers' jet fuel purchases will occur in a non-
ratable fashion and no ratability premiums will be applied to jet fuel
purchases.
Section 3.4 ...HELCO's anticipated demands for CIFO or Diesel results in
Buyers' aggregate anticipated demand on an annual basis during any calendar year
during the term of this Contract for CIFO or Diesel to...then Buyers shall give
written notice to Seller of Buyers' request that Seller accept...Seller shall
have 15 days within which to...or...and/or the...If Seller either accepts
Buyers'...or fails to give any notice of acceptance or rejection within said 15
day period, then Buyers'...shall be deemed to have been accepted by Seller and
shall become effective upon the expiration of said 15 day period. Should Seller
reject Buyers' request for the...then, within 60 days following the date of any
such rejection notice,...or...in a manner mutually satisfactory to both Seller
and HELCO, then Seller, upon 30 days written notice, may...Until
Buyers'...(i) is...(ii) a...or (iii)
Page 7
<PAGE>
- --------------- in accordance with this Section 3.4, the terms and conditions of
this Contract -------------------
ARTICLE IV
QUALITY
Section 4.1 The CIFO to be supplied hereunder shall be Seller's regular
commercial grade of Chevron Industrial Fuel Oil No. 6, having the following
specifications:
<TABLE>
<CAPTION>
ASTM
Item Specifications Test Method
<S> <C> <C>
Gravity, API 6.5 min. D1298 or D4052-86
Flash, degrees F 150 min. D93
Viscosity, SSF @ 122 degrees F 179 min., 226 max. D445/D2161
Pour Point, degrees F 55 max. D97
Sulfur, % Wt. 2.0 max. D1552, D2622 or D4294
Sediment & Water, % Vol. 0.5 max. D1796
Heat Value, Gross** 6.0 D240
</TABLE>
MM BTU/BBL
** Typical Value is 6.3.
Section 4.2 The Diesel to be supplied hereunder shall be similar to
Seller's regular commercial grade of Chevron Diesel Fuel No. 2 and have the
following specifications:
<TABLE>
<CAPTION>
Specification Test
Item Units Limits Method
<S> <C> <C> <C>
Gravity @ 60 degrees F degrees API 30.0 min. D1298 or D4052-86
Specific 0.88 max.
Viscosity @ 100 degrees F SSU 32.3 - 40.0
</TABLE>
Page 8
<PAGE>
<TABLE>
<CAPTION>
Specification Test
Item Units Limits Method
<S> <C> <C> <C>
Heat Value, Gross** MM BTU/BBL 5.84 Calculated or D240
Flash Point, PM degrees F 150 min. D93
Pout Point** degrees F 35 D97
Ash PPM, wt. 100 max. D482
Cetane Index 40 min. D4737
Carbon Residue,
10% Residuum %, wt. 0.35 max. D524
Sediment & Water %, vol. 0.05 max. D1796
Sulfur %, wt. 0.40 max. D1552, D2622 or D4294
Distillation
90% Recovered degrees F 540 - 650 D86
Sodium + Potassium PPM, wt. 0.5 max. D3605
</TABLE>
** Chevron does not provide specifications on these items. Values are
typical; they are not guaranteed.
Section 4.3 The Jet to be supplied hereunder shall be similar to Seller's
regular commercial grade of Chevron Jet Fuel; provided, however, Buyer agrees
that the Jet shall be used exclusively as stationary combustion turbine start-up
fuel. Any other use, including without limitation its use for aviation
purposes, shall constitute unforeseeable misuse.
Section 4.4 SELLER MAKES NO WARRANTY, EXPRESSED OR IMPLIED IN FACT OR BY
LAW, AS TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE concerning the
Oil other than it shall comply with the quality herein specified, that the
Diesel shall be suitable for use as a fuel, the CIFO shall be suitable for use
as a boiler fuel, and the Jet shall be suitable for use as stationary combustion
turbine start-up fuel.
Page 9
<PAGE>
ARTICLE V
PRICE, BTU DETERMINATION
Section 5.1
i. NO. 2 DIESEL FUEL
a. For HECO, MECO, HELCO, HT&B or YB:
where: Total Diesel purchases per Section 3.1(ii) are as follows:
b. For MECO-Molokai:
where:
PD1 = Price per physical gallon for the calendar month of delivery for
No. 2 Diesel Fuel purchased by HELCO, MECO, HELCO, HT&B or YB, in $/gallon.
PD2 = Price per physical gallon for the calendar month of delivery for
No. 2 Diesel purchased by MECO-Molokai, in $/gallon.
DI = Index for No. 2 Diesel Fuel, which shall be the average of the
Thursday high and low Pacific Northwest spot 0.5% No. 2 prices for Diesel
Fuel, as reported by Oil Price Information Service ("OPIS") from the 21st
day of the second preceding month to the 20th day of the month preceding
delivery, expressed, in $/gallon.
If OPIS is not published or does not publish a high and low price for a
particular Thursday during the relevant period, the high and low prices for
the closest preceding day for which OPIS publishes a price report will be
used.
Page 10
<PAGE>
TD1/TD2 = The Hawaii General Excise Tax and any other tax imposed on the
sale of Diesel Fuel.
ii. CIFO
where:
PF = Price per physical barrel for the calendar month of delivery for CIFO
in $/gallon.
FI = Current Index for CIFO which shall be the simple average of the low and
high prices of the Los Angeles Bunker Fuel Oil market as reported by
the Platt's Bunkerwire for all dates of publication from the 21st day
of the second preceding month to 20th day of the month preceding
delivery. API gravity 11.5 degrees F for a conversion factor of 6.368
BBL/MT.
If Bunkerwire is not published or does not publish a high or a low
price for a particular week during the relevant period, the high and
low prices for the closest preceding day for which Bunkerwire publishes
a price report will be used.
TF = The Hawaii General Excise Tax and any other tax imposed on the sale of
Fuel Oil.
iii. Jet.
PJ = JI + $0.079/gallon + TJ
where:
PJ = price per physical barrel for the calendar month of delivery for Jet, in
$/gallon.
JI = Current Index for jet fuel which shall be the average West Coast Spot
Pipeline price for jet fuel in Los Angeles in the month preceding
delivery, as reported
Page 11
<PAGE>
by the Platt's Oilgram Price Report from the 21st of the second
preceding month to the 20th day of the month preceding delivery.
If Platt's is not published or does not publish a high and low price
for a particular Friday during the relevant period, the high and low
prices for the closest preceding day for which Platt's publishes a
price report will used.
TJ = The Hawaii General Excise Tax and any other tax imposed on the sale of
Jet Fuel.
Addendum 1 hereto contains an illustrative schedule of prices calculated
pursuant to this Section 5.1
The pricing of CIFO, Diesel and Jet includes applicable Superfund and Oil Spill
Liability Trust Fund charges.
Section 5.2 To provide the flexibility needed by Seller to meet its
obligations to Buyer, the source and type of crude oil and other raw material,
the place of manufacture, and the manufacturer of Oil for delivery to Buyer
hereunder shall be determined solely by Seller. The price of all Oil Delivered
by Seller to Buyer hereunder shall be determined in accordance with the terms of
this Contract regardless of where, how and by whom such Oil is manufactured and
regardless of the type or source of crude oil or other raw materials used in its
manufacture.
Section 5.3 In addition to all other amounts payable by Buyer under this
Contract, Buyer shall reimburse Seller for all taxes, assessments, levies and
imposts of whatsoever kind or nature imposed on Seller by any governmental or
quasi-governmental body, including without limitation the Hawaii General Excise
(Gross Income) Tax, the Hawaii Environmental Response Tax and Hawaii Liquid Fuel
Tax, where applicable, with respect to the execution or performance of this
Contract or the receipt by Seller of payments hereunder. Notwithstanding the
foregoing, Buyer shall not be required to reimburse Seller for any tax measured
by or based on the net income of Seller or for real property taxes. To avoid
duplication of recovery, Buyer shall not be required to reimburse Seller under
this Section 5.3
Page 12
<PAGE>
for any item expressly mentioned by Platt's or Bunkerwire, or confirmed by
Platt's or Bunkerwire in writing upon inquiry by either Buyer or Seller, as
being included in a price used to compute PD1, PD2, PF or PJ under Section 5.1.
As of the Contract execution date, the Superfund Petroleum fee of the Superfund
Revenue Act of 1986 is the only tax, assessment, levy or impost implicitly
reimbursed to Seller through inclusion in the Platt's listings within DI, FI and
JI of Section 5.1.
Section 5.4 Seller will draw representative samples of all Diesel Delivered
to buyer to determine the BTU content per Section 7.1. If the BTU content per
gallon of the representative sample falls within the range of 137,000 to
141,000, no price adjustment will be made. If the BTU content per gallon is
below 137,000, or above 141,000, the price charged for the Diesel Delivered to
Buyer shall be adjusted by multiplying the price determined in Article V, by the
ratio of the actual heat content to 139,000 BTU. Seller shall credit Buyer's
account for overpayments and Buyer shall pay Seller for underpayments resulting
from the BTU adjustments as soon as possible after the close of each month, but
in no event later than 60 days after the close of a month. Such adjustments to
either Buyer or Seller will be handled as separate credits or invoices and each
individual invoice drawn during the month will not be corrected and reissued.
Section 5.5 Seller will draw representative samples of each CIFO Delivery,
which will be used to determine the CIFO BTU content per Section 7.1. If the
weighted average BTU content of the CIFO Delivered to Buyer during any half of
any annual period is less than 6.2 MM BTU per physical barrel, the price of such
CIFO delivered to Buyer during each month of that semiannual period shall be
adjusted by multiplying the CIFO price as determined by Section 5.1.ii. for each
month by a ratio of actual average heat content to 6.2 MM BTU and Seller shall
issue Buyer a credit for the difference between such aggregate and the adjusted
price.
Section 5.6 All prices, adjustments thereto and other sums payable
hereunder shall be stated in the nearest thousandth of a dollar.
Page 13
<PAGE>
ARTICLE VI
DELIVERIES
Section 6.1
i. Seller agrees to Deliver and MECO and HELCO agree to receive their Oil
into their nominated barge, F.O.B. the HMT. The delivery rate on
Diesel shall be 3,000 BPH minimum. The delivery rate on CIFO shall be
1,600 BPH minimum. Seller agrees to make its best, reasonable efforts
in operating its current CIFO delivery systems to Deliver CIFO into
the nominated barge at a temperature above 120(degrees)F. Buyer
acknowledges that the CIFO delivery temperature is determined by
Seller's and HECO's scheduling of other fuels in Seller's pipeline,
and hence cannot be guaranteed.
ii. When mutually agreed to, Seller may Deliver and MECO and HELCO may
receive their Diesel into their nominated barge, F.O.B. Honolulu
Harbor Piers 31 or 32. The delivery rate shall be 2,000 BPH minimum.
iii. When mutually agreed to, Seller may Deliver and MECO and HELCO may
receive their Oil into their nominated barge, F.O.B. Barbers Point
Piers 5 or 6. The delivery rate shall be 4,000 BHP minimum.
iv Seller and Buyer's agent or a mutually agreed upon independent
inspector shall inspect the receiving barge cargo tanks to ensure that
they contain only minimal remains of the previous cargo, before Seller
will Deliver Oil to be terminaled per Article XI. Remains exceeding
common commercial practice shall be removed by Buyer to protect the
quality of the Delivered Oil. Buyer or Buyer's agent may remove the
remains by any legal method at their disposal, including pumping the
remains into Seller's slop tank at the HMT, if convenient to Seller.
Seller shall have the right to charge Buyer for accepting remains if
the quantity to be removed from any barge or the number of barges
Page 14
<PAGE>
requiring remains to be removed becomes excessive. Seller shall have
the right to flush the receiving barge cargo tanks with a small
quantity of Seller's Oil before loading the Delivered Oil.
v. Seller and Buyer's agent or a mutually agreed upon independent
inspector shall take a representative sample of the oil in the barge
cargo tanks, after Seller has delivered Oil into MECO's and HELCO's
nominated barges. See Addendum 2 hereto for an overview on all
sampling. This sample will be divided into two parts and dated. One
part shall be labeled "Seller's Loaded Sample." One part shall be
sealed and labeled "Buyer's Loaded Retain." These samples shall
indicate the quality of the mixture of Delivered Oil and the previous
cargo remains and will provide an early warning of any quality
problems with the Received Oil as described in Section 11.3.
Section 6.2 Seller agrees to Deliver and HT&B and YB agree to receive their
Diesel into their nominated vessel F.O.B. the HMT, Pier 31 or 32. The delivery
rate shall be 175 BPH minimum.
Section 6.3 Seller agrees to Deliver and HECO agrees to receive its Diesel
under either of the options below.
i. Seller will Deliver Diesel from the HDT into HECO's nominated tank
truck at a delivery rate of 190 BPH minimum.
ii. Seller will Deliver Diesel from the Oahu P/L into HECO's storage at
HECO's Waiau Power Plant, at a delivery rate of 1,000 BPH minimum.
Section 6.4 Seller agrees to deliver and MECO and HELCO agree to receive
Jet at MECO's or HELCO's respective power plant truck unloading rack.
Section 6.5 Seller agrees to Deliver and MECO-Molokai agrees to receive its
Oil into its nominated marine terminal at Kaunakakai Harbor, Molokai. The
delivery rate shall be 1,000 BPH minimum. Buyer will provide discharge
facilities through an independent third party; Seller has no responsibility to
procure discharge facilities on the island of Molokai.
Page 15
<PAGE>
Section 6.6
i. For the Delivered Oil under Sections 6.1 and 6.2, care, custody,
control, title and risk of loss shall pass to Buyer as the Oil passes
the flange connecting the cargo hose of the Buyer's nominated barge or
vessel and Seller's pipeline.
ii. For the Delivered Diesel under Section 6.3.i., care, custody, control,
title and risk of loss shall pass to Buyer as the Oil passes the
flange connecting the cargo hose of the Buyer's nominated tank truck
or vessel and Sellers' truck loading rack.
iii. For the Delivered Diesel under Section 6.3.ii., care, custody,
control, title and risk of loss shall pass to Buyer as the Oil passes
the flange connecting Buyer's pipeline at the Waiau Power Plant to the
Oahu P/L.
iv. For the Delivered Diesel under Section 6.5, care, custody, control,
title and risk of loss shall pass to Buyer as the Oil passes the
flange connecting the cargo hose of the Seller's nominated barge or
vessel and the Buyer's designated pipeline.
v. For the delivered Jet under section 6.4, care, custody, control, title
and risk of loss shall pass to Buyer as the jet passes the flange
connecting the cargo hose of the Seller's tank truck and Buyer's truck
unloading rack at HELCO's and MECO's respective power plant.
Section 6.7 Buyer agrees to provide Seller with five (5) days advance
written notice of Oil to be Delivered under Section 6.1, 6.3.ii. or 6.4, and
telephone notification for Diesel to be Delivered under Section 6.2 or 6.3.i.
Seller shall make all reasonable effort to comply with this notice and advise
Buyer promptly if the delivery time cannot be met.
Page 16
<PAGE>
ARTICLE VII
DETERMINATION OF QUALITY
Section 7.1 The quality of the Oil purchased by HECO and the quality of Jet
purchased by HELCO and MECO shall be determined on the basis of composite
samples drawn by Seller in such a manner as to be representative of each
Delivery. The quality of the Oil purchased by MECO or HELCO, i.e., barge
cargos, shall be determined on the basis of composite samples drawn by Seller,
collected at a point prior to entry into each barge, in such a manner as to be
representative of each barge cargo. The quality of the Oil purchased by MECO-
Molokai shall be determined on the basis of composite samples drawn by Seller
from receiving tanks at the Kaunakakai Terminal after each delivery. The heat
content of the Oil shall be determined on a monthly weighted average basis for
each Buyer from the same composite samples drawn by Seller at the time and place
described above. See Addendum 2 hereto for an overview on all sampling. Such
samples shall be divided into three (3) parts and dated.
1. One part shall be used by Seller to determine the heat content (gross
BTU) per physical gallon and, if needed, the other qualities of Article
IV ("Seller's Delivered Sample").
2. One part shall be provided to Buyer for the purpose of verifying Seller's
determinations ("Buyer's Delivered Sample").
3. One sealed part shall be provided to Buyer ("Buyer's Delivered Retain").
Section 7.2 Within sixty (60) days after the end of each month, Buyer shall
give Seller notice of any disagreement with Seller's quality or heat content
determination for Delivered Oil and Delivered Jet during such month. In the
event that such disagreement is not resolved within thirty (30) days, Buyer's
Delivered Retain shall be submitted to a mutually agreed upon independent
laboratory for inspection, whose determination shall be final and binding on
both parties. Seller and Buyer shall share equally the cost of such independent
inspections.
Page 17
<PAGE>
Section 7.3 If Buyer and Seller agree or the independent inspector
determines that the quality of Delivered Oil and Delivered Jet did not equal the
qualities described in Article IV (regardless if such Oil and Jet passed tests
of conditional acceptance), the Buyer and Seller shall attempt to minimize the
impact. This may include specification waiver especially if use of Oil and Jet
will not harm Buyer or Seller, or delivering higher quality Oil and Jet in a
timely manner to produce a specification quality blend in Seller's terminal. If
all such, or similar efforts fail to resolve the quality problem, then Seller at
Seller's expense, shall exchange the non-specification Oil and Jet and other oil
downgraded by commingling with Seller's Oil and Jet, with Oil and Jet meeting
the qualities of Article IV. However, in no event shall Seller be liable for
any indirect, consequential, special or incidental damages of any kind whether
based in contract, tort (including without limitation negligence or strict
liability), warranty or otherwise allegedly caused by or based upon the
qualities of the Oil and Jet.
ARTICLE VIII
MEASUREMENT OF QUANTITY
Section 8.1 Quantities of the Oil sold and purchased under this Contract at
the HMT shall be determined at the time of each Delivery by gauging the HMT
tanks before and after pumping. Diesel sold and purchased under this Contract
from the Oahu P/L shall be determined at the time of each Delivery by gauging
Seller's tanks at its Barbers Point Refinery before and after pumping. Diesel
sold and purchased under this Contract at the Kaunakakai Terminal shall be
determined at the time of each Delivery by gauging Buyers' tanks at Kaunakakai
before and after pumping. Volumes Delivered hereunder shall be converted to
60(degrees)F, using the latest revision of Table 6 of ASTM IP Petroleum
Measurement Tables, American Edition, ASTM Designation D-1250. Measurements
shall be taken by Seller and witnessed by Buyer or Buyer's agent. However, at
Buyer's option, such measurements shall be taken by a mutually agreed upon
independent inspector. Seller and Buyer shall share equally the
Page 18
<PAGE>
cost of independent inspections. Seller reserves the right to install meters
on the Oahu P/L and to determine quantity as in Section 8.2.
Section 8.2 Diesel sold and purchased under this Contract at the HDT and
Jet sold and purchased by HELCO and MECO shall be determined at the time of each
Delivery by reading calibrated meters, corrected in each instance to volume at
60(degrees)F in accordance with the latest issue of Table 6 of ASTM IP Petroleum
Measurement Tables, American Edition, ASTM Designation D-1250. The meters used
at the HDT and Seller's terminals on Hawaii and Maui shall be Seller's meters.
Both Buyer and Seller shall have the right to review each other's routine
certification documents.
Section 8.3 If Buyer or Seller has reason to believe that the quantity of
Oil and Jet stated for a particular Delivery per Sections 8.1 or 8.2 is
incorrect, the party shall within sixty (60) days of the Delivery date, present
the other party with documentation supporting such determination and the parties
will confer, in good faith, on the causes for the discrepancy and shall proceed
to correct such causes and adjust the quantity, if justified, for the deliveries
in question.
ARTICLE IX
INVOICING AND PAYMENT
Section 9.1 Invoices for the sale of CIFO, Diesel, and Jet and for the
services provided by Seller as outlined in Article XI shall be rendered promptly
to Buyer, upon receipt of all required information.
Section 9.2 Payments shall be made in U.S. dollars. Timing of payments of
invoices shall be as follows:
i. Invoices to HECO, MECO, MECO-Molokai and HELCO:
Page 19
<PAGE>
a. Payment for Deliveries and services from the first through the
tenth calendar day of a month for which invoices have been received
is due on the twentieth day of the month.
b. Payment for Deliveries and services from the eleventh through the
twentieth calendar day of a month for which invoices have been
received is due on the last day of the month.
c. Payment for Deliveries and services from the twenty-first through
the last calendar day of a month for which invoices have been
received is due on the tenth day of the following month.
Due dates are dates payments are to reach Seller. If the due date falls
on a Saturday, the payment shall be due on the preceding business day.
If such date falls on a Sunday or a holiday, payment shall be due the
following business day.
ii. Payment for Deliveries to HT&B and YB for which invoices have been
received shall be paid within thirty (30) days of the Delivery date.
Section 9.3 Method of payment shall be as follows:
i. Payments of HECO, MECO, MECO-Molokai, and HELCO shall be by bank wire
transfer of immediately available funds to:
First National Bank of Chicago, Chicago, Illinois 60607
Attention: GFTS
for credit to the following accounts, depending on which Buyer is
making a payment:
a. HECO Chevron U.S.A. Inc. - Section #632
Account No. 1184762
Page 20
<PAGE>
b. HELCO Chevron U.S.A. Inc. - Section #632
Account No. 1237632
c. MECO Chevron U.S.A. Inc. - Section #632
Account No. 1237636
d. MECO-Molokai Chevron U.S.A. Inc. - Section #632
Account No. 6049549
For identification purposes, all wires must clearly indicate that
payment is being made by order of Buyer and indicate the invoice reference
number. In addition, written documentation evidencing specific invoices being
paid shall be immediately forwarded to:
Chevron U.S.A. Inc
P.O. Box R
Concord, California 94524
ii. Payment by HT&B and YB shall be mailed to:
Chevron U.S.A.
c/o First Interstate Bank
Dept. 7351
Los Angeles, CA 90088
Payment shall include written documentation evidencing specific invoices being
paid.
ARTICLE X
SELLER'S FACILITIES ON OAHU
Seller agrees to provide the use of its Oahu P/L for the Diesel Delivered to
HECO's Waiau Power Plant per Section 6.3.ii.
Page 21
<PAGE>
ARTICLE XI
SELLER'S FACILITIES ON MAUI AND HAWAII
As used in this Article XI, "Buyer" will refer only to MECO or HELCO.
Section 11.1
i. Seller agrees to provide MECO the use of its storage and handling
facilities for Diesel Received at Kahului, Maui, and to provide HELCO
the use of its storage and handling facilities for Diesel and CIFO
Received at Hilo, Hawaii; for the Delivered Oil under Article VI and
the third party oil purchased as a result of the force majeure
conditions of Article XIII, on the terms and conditions described in
this Article XI. To provide operating flexibility to a valued, long-
term customer, Seller shall grant HELCO the non-exclusive right to
terminal oil purchased from third parties at Seller's facility at Hilo,
Hawaii up to a maximum quantity per calendar year of ------ of diesel
and ------of fuel oil, which meet the specifications set out herein.
Buyer agrees to schedule its deliveries such that they contain a
minimum of ------ of oil such that they arrive at regular intervals.
For the same reasons, Seller shall grant MECO the non-exclusive right
to terminal No. 2 diesel fuel purchased from third parties at Seller's
facility on Maui up to a maximum quantity of ------ per calendar year,
which meets the specifications set out herein. Buyer agrees to schedule
its deliveries such that they contain a ------ of diesel fuel and that
they arrive at regular intervals.
ii. Whenever Buyer purchases third party oil which is to be terminaled in
Seller's facilities, Buyer shall obtain a sample representative of the
oil in the barge cargo tanks, after the third party supplier has
completed the loading of such oil into Buyer's nominated barge. See
Addendum 2 hereto for an overview on all sampling. This sample shall be
divided into three parts and dated. One part shall be labeled
"Supplier's loaded sample" and delivered to Seller's representative as
soon as possible. One part shall be labeled "Buyer's loaded sample."
One part shall be sealed and labeled "Buyer's loaded retain." These
samples shall indicate the quality of this mixture of purchased oil and
the previous
Page 22
<PAGE>
cargo remains. To provide an early warning of any quality problems
with the Received oil, Buyer agrees to perform a preliminary analysis on the
Buyer's loaded sample consisting of API gravity, appearance and, in the case of
diesel fuel, flash point, at the time such third party oil is loaded for
transport. Buyer also agrees to deliver one copy of such preliminary analysis
promptly to Seller's representative at the Honolulu Marine Terminal and to carry
a second copy on board Buyer's nominated barge for delivery to Seller's
representative upon arrival at the appropriate outer island terminal. Buyer
further agrees that the cost of any additives which may be required to eliminate
compatibility problems between third party oil and Seller's Oil at the outer
island terminal shall be solely for Buyer's account.
Section 11.2 Buyer shall provide Seller with estimated arrival times of
the barge transporting the oil for which Buyer desires to use Seller's
facilities on Maui or Hawaii. Buyer or Buyer's agent shall provide radio or
phone notification to Seller's representative at each unloading location at
least seven days prior to a third-party supplied oil delivery and at least 24
hours prior to a Seller supplied oil delivery. Buyer or Buyer's agent shall
also provide the Captain of the Port with radio or phone notification at least
24 hours prior to any delivery. Should the estimated time of arrival change by
two or more hours following the 24 hour arrival report, Buyer or Buyer's agent
shall promptly report the change to Seller's representative and the Captain of
the Port at the place of planned arrival.
Section 11.3
i. Seller shall analyze Seller's Loaded sample of Section 6.1.iv and
Buyer's supplied results from any Buyer's loaded sample of Section
11.1.ii for conditional acceptance for receiving the oil, and if
warranted, analyze Seller's Loaded sample of Section 6.1.iv and
Supplier's loaded sample of Section 11.1.ii for all the qualities
described in Article IV, while Buyer's nominated barge is enroute to
Maui or Hawaii, to reduce the risk of contaminating Seller's terminal
inventories. See Addendum 2 hereto for an overview of
Page 23
<PAGE>
all sampling. If the loaded sample fails conditional acceptance, Seller
shall promptly notify Buyer of any quality problems with the loaded oil.
Both Buyer and Seller shall attempt to minimize the impact of any
quality problem by specifications waiver especially if use of the loaded
oil will not harm either Buyer or Seller, or by Buyer or Seller
delivering higher quality oil in a timely manner to produce a
specification quality blend at Seller's terminal. If all such, and
similar, efforts fail to resolve the quality problem, then Buyer's
loaded oil shall not be unloaded into Seller's terminal tanks.
Buyer may return nonspecification Loaded Oil to Seller's Barbers Point
refinery, in which case Seller shall replace the non-specification
Loaded Oil by delivering an equal volume of Oil into Buyer's nominated
barge at the HMT, in a timely manner.
ii. All costs and expenses, including transportation, re-refining and
handling costs incurred in returning and replacing non-specification
loaded oil and Loaded Oil shall be paid by the party responsible for the
contamination. Responsibility shall be determined by analyzing the
Delivered Oil samples of Section 7.1 and the loaded oil samples of
Section 6.1.iii and Section 11.1.ii. If Buyer and Seller cannot agree
whether the Delivered Oil or the loaded oil meet the qualities specified
in Article IV, then the sealed retain of the oil in question, Buyer's
Delivered retain, Buyer's Loaded retain or Buyer's loaded retain shall
be submitted to a mutually agreed upon independent laboratory, whose
determination shall be final and binding on both parties. Seller shall
have the responsibility for Buyer's transportation and handling costs
for its own re-refining cost if it is determined that the qualities
described in Article IV are not met by the Delivered Oil. Otherwise,
Buyer shall be responsible for Seller's handling and re-refining cost
and its own transportation and handling costs. The responsible party
shall reimburse the other party for such costs and expenses within sixty
(60) days of the delivery date of the non-specification loaded oil.
However, in no event shall such party be responsible for any indirect,
consequential, special or incidental damages of any kind whether based
in contract, tort (including without limitation negligence or strict
liability), warranty or otherwise
Page 24
<PAGE>
allegedly caused by or based upon the quality of the non-specification
loaded oil. Seller and Buyer shall share equally the cost of any
independent inspections.
Section 11.4 Buyer shall be responsible for meeting all Coast Guard dock
watch requirements at Hilo, Hawaii and Kahului, Maui. Charges levied by any
governmental agency for the use of their facilities at Hilo, Hawaii or Kahului,
Maui, including but not limited to the State of Hawaii's wharf and pipeline
fees, shall be for Buyer's account.
Section 11.5 Seller will take care, custody and control of Received oil
having conditionally acceptable quality per Section 11.6 at the flange
connecting Seller's independently owned pipeline at each location to the
multiparty diesel pipeline at Kahului Harbor, Maui and the multiparty diesel and
fuel oil pipelines at Hilo Harbor, Hawaii. Title and risk of loss shall remain
with Buyer. Seller shall not be responsible for any type of loss of the oil
while it is in Seller's custody except when loss or damage is caused by Seller's
failure to use reasonable care in receiving, handling, storing, or delivering
such oil. Received oil will be commingled with Seller's Oil in Seller's tankage
at Seller's Kahului, Maui or Hilo, Hawaii terminals.
Section 11.6
i. Quality of Received oil at the unloading location shall be determined
by testing representative samples taken from Carrier's barge tanks.
See Addendum 2 hereto for an overview of all sampling. Seller, or a
mutually agreed third party, shall perform the sampling and testing as
prescribed in the latest API-ASTM laboratory testing standards.
Samples will be divided into four parts and dated. One part shall be
tested promptly per Section 11.6.ii. One part shall be labeled
"Seller's Received Sample," one part shall be sealed and labeled
"Seller's Received Retain" and one part shall be labeled "Buyer's
Received Sample" and provided to Buyer.
ii. To facilitate Buyer's barge turnaround, one part of the sample taken
in Section 11.6.i will be promptly tested for its API gravity,
appearance and in the case of Diesel also for its
Page 25
<PAGE>
flash point. Received Oil will be considered conditionally acceptable
if its API gravity is within 0.3 degrees of its gravity delivered to
Buyer under Article VI. Received oil will be considered acceptable if
its API gravity is within 0.3 degrees of the Supplier's loaded sample
gravity as determined in Section 11.1.ii, and for diesel cargos, if
its Flash point is above its 150 (degrees)F specification of Section
4.2.
iii. Notwithstanding the above conditional acceptance, Seller may use
Seller's Received Sample to determine all the qualities described in
Article IV for Received oil. Within thirty (30) days after each oil
cargo unloading, Seller shall give Buyer notice of any claim of
contamination of Seller's Oil from commingling with Received oil. In
the event that such claim is not resolved within thirty (30) days of
the original claim, Seller's Received Retain shall be submitted to a
mutually agreed upon independent laboratory for inspection, whose
determination shall be final and binding on both parties. Seller and
Buyer shall share equally the cost of such independent inspections.
iv. If Buyer and Seller agree or the independent inspector determines that
the quality of the Received oil did not meet the qualities described
in Article IV, and the most recent Delivered Oil did meet the quality
described in Article IV, both Buyer and Seller shall attempt to
minimize the impact of any quality problem on Buyer by waiver of
Buyer's requirement to meet specifications especially if Seller's use
of the oil will not significantly harm Seller, or by Buyer or Seller
delivering higher quality oil in a timely manner to produce a
specification quality blend at Seller's terminal. If all such, and
similar, efforts fail to resolve the quality problem, then Buyer will
reimburse Seller the transportation, handling and re-refining costs of
exchanging Buyer's and Seller's oil, with oil meeting the qualities
described in Article IV. Such reimbursement shall occur within 60 days
of Seller's original claim. However, in no event shall Buyer be liable
for any indirect, consequential, special or incidental damages of any
kind whether based in contract, tort (including without limitation
negligence or strict liability), warranty or otherwise allegedly
caused by or based upon the quality of the Received oil.
Page 26
<PAGE>
Section 11.7 The quantity of Received oil and Received Oil over which
Seller takes custody shall be determined at the time of each barge cargo
unloading by gauging Seller's terminal tank before and after pumping. Free water
shall be drawn off prior to each level measurement. Volumes delivered hereunder
shall be converted to 60(degrees)F, using the latest revision of Table 6 of ASTM
IP Petroleum Measurement Tables, American Edition, ASTM Designation D-1250.
Measurements shall be taken by Seller and witnessed by Buyer or Buyer's agent.
However, at Buyer's option, such measurement shall be taken by a mutually agreed
upon independent inspector. Buyer and Seller shall share equally the cost of
independent inspections.
Section 11.8 In the event that Buyer and Seller have agreed to commingle
their oil in a barge or vessel compartment to reduce freight costs, and there
are discrepancies between either the quantities of oil loaded per Section 6.1
and unloaded per Section 11.7 or the qualities of oil loaded per Section 7.1 and
unloaded per Section 11.6, then Buyer and Seller shall share the benefits or
losses of the discrepancy proportionally to the loaded volumes.
Section 11.9 Buyer will provide Seller's terminal representative, during
normal working hours, at least 24-hour notice of any transfers required from
Seller's facilities in Kahului or Hilo.
Section 11.10 Buyer shall regain care, custody and control of Returned Fuel
Oil at the flange connecting Seller's Hilo terminal pipeline to Buyer's
pipeline.
i. The quantity of Fuel Oil over which Seller returns custody shall be
determined at the time of each transfer by gauging Seller's terminal
tanks before and after pumping. Volumes Returned hereunder shall be
converted to 60(degrees)F, using the latest revision of Table 6 of
ASTM IP Petroleum Measurement Tables, American Edition, ASTM
Designation D-1250. Measurements shall be taken by Seller and
witnessed by Buyer or Buyer's agent. However, at Buyer option, such
measurements shall be taken by a mutually agreed upon
Page 27
<PAGE>
independent inspector. Buyer and Seller shall share equally the cost
of independent inspections.
ii. Buyer and Seller agree that Buyer shall maintain a positive inventory
of Fuel Oil at Seller's Hilo terminal for Buyer's use, but
acknowledge that a small negative inventory may occasionally result
after Fuel Oil custody transfers from Seller to Buyer. Seller shall
maintain a record of Buyer's net Fuel Oil inventory stored in its
Hilo terminal based on receipts as determined in Section 11.7 and
returns as determined in Section 11.10.i. Seller will provide book
inventory records once each week, convenient to Seller's normal
weekly inventory period. If at the end of any annual period, the net
Fuel Oil inventory is negative, Seller will invoice Buyer and Buyer
will pay Seller an amount equal to the net negative inventory in
barrels multiplied by the sum of the December CIFO sales price at the
end of the annual period per Section 5.1 and the December commercial
freight rate charged by HELCO's carrier for a minimum cargo size of
38,000 barrels to Seller at the end of the annual period for CIFO
transport between Honolulu Harbor, Oahu and Hilo Harbor, Hawaii.
Section 11.11 Buyer shall regain care, custody and control of Returned
diesel at the end of the fill pipe connecting Seller's terminal pipelines to
Carrier's tank trucks. Transfers will be made in minimum 5,000 gallons per
delivery load.
i. The quantity of diesel over which Seller returns custody shall be
determined at the time of each transfer by reading Seller's calibrated
meters corrected in each instance to volume at 60(degrees)F using the
latest revision of Table 6 of ASTM IP Petroleum Measurement Tables,
American Edition, ASTM Designation D-1250. If Buyer or Seller have
reason to believe that the quantity of Returned diesel stated for a
particular transfer is incorrect, that party shall within fifteen days
of the transfer date, present the other party with documentation
supporting such determination and the parties will confer, in good
faith, on the causes for the discrepancy and shall proceed to correct
such causes and adjust the quantity, if justified, for the transfers
in question.
Page 28
<PAGE>
ii. Seller shall maintain records of Buyer's net diesel inventories stored
at each of its Kahului, Maui and Hilo, Hawaii terminals, based on
receipts as determined in Section 11.7 and returns as determined in
Section 11.11.i. Seller will provide book inventory records once each
week, convenient to Seller's normal weekly inventory period.
iii. Seller will periodically reconcile meter measurements with tank
gaugings. Buyer may review Seller's reconciliation calculations.
However, there will be no retroactive adjustments to the volumes
delivered or received as a result of this procedure.
Section 11.12 Seller shall be under no obligation to provide Buyer
quantities of Returned oil greater than Buyer's current net oil inventory.
However, Seller will attempt to meet Buyer's unanticipated needs, after
considering the needs of its other customers and its own available inventory.
Section 11.13
i. Returned oil transferred by Seller shall meet the qualities described
in Article IV. Seller shall verify the quality of the Returned oil by
taking a representative sample of the oil in Seller's tanks on Maui
and Hawaii after each receipt of Buyer's or Seller's oil. See Addendum
2 hereto for an overview of all sampling. This sample shall be
promptly tested by Seller for its API gravity, appearance and in the
case of diesel also for its flash point. Buyer and Seller agree that
successful passage of the prompt test on this sample is sufficient
evidence for Seller to return oil to Buyer, without limiting Buyer's
rights within Section 11.13.ii. Seller shall also take samples
representative of the Returned oil after each receipt of Buyer's or
Seller's oil into Seller's terminal. These samples will be divided
into three parts and dated. One part shall be labeled "Seller's
Returned Sample." One part shall be sealed and labeled "Buyer's
Returned Retain" and one part shall be labeled "Buyer's Returned
Sample." Both shall be provided to Buyer.
ii. Notwithstanding the above conditional acceptance, Buyer may use
Buyer's Returned Sample to determine all the qualities described in
Article IV for the Returned oil. Within
Page 29
<PAGE>
thirty (30) days after each oil delivery, Buyer shall give Seller
notice of any claim of contamination and of resulting losses. In the
event that such claim is not resolved within thirty (30) days of the
original claim, Buyer's Returned Retain shall be submitted to a
mutually agreed upon independent laboratory for inspection, whose
determination shall be final and binding on both parties. Seller and
Buyer share equally the cost of such independent inspections.
iii. If Buyer and Seller agree or the independent inspector determines that
the quality of the Returned oil did not meet the qualities described
in Article IV and that the most recent Received Oil and Received oil
did meet the qualities described in Article IV, both Buyer and Seller
shall attempt to minimize the impact of any quality problem on Seller
by waiver of Seller's requirement to meet specifications, especially
if Buyer's use of the oil will not significantly harm Buyer, or by
Seller returning higher quality oil to produce a specification quality
blend at Buyer's plants. If all such, and similar, efforts fail to
resolve the quality problem, then Seller will, at Seller's expense,
exchange Buyer's Returned oil and, if appropriate, any of Buyer's
other similar oil which has been downgraded by commingling with the
Returned oil, with oil meeting the qualities described in Article IV.
Seller shall make its best, reasonable effort to replace Buyer's oil
in a timely manner. However, in no event shall Seller be liable for
any indirect, consequential, special or incidental damages of any kind
whether based in contract, tort (including without limitation
negligence or strict liability), warranty or otherwise allegedly
caused by or based upon the quality of the Returned oil.
Section 11.14 Seller will invoice Buyer and Buyer will pay Seller per
-------------
Article IX, terminating and handling fees based on the quantities of oil
determined in Section 11.7 at the rates listed below.
i. At Kahului, Maui, the terminating and handling fee shall be
- --------------
Page 30
<PAGE>
ii. At Hilo, Hawaii, the terminaling and handling fee shall be ---------
For the purpose of invoicing, the terminaling and handling services shall be
considered received by Buyer when Seller first takes custody of Buyer's oil
per Section 11.5.
ARTICLE XII
CONTINGENCIES
Section 12.1 As used in this Article XII, the term "contingency" means:
(a) any event reasonably beyond the control of the party affected;
(b) compliance, voluntary or involuntary, with a direction or request of any
government or person purporting to act with governmental authority; excluding,
however, any such direction or request restricting or otherwise regulating
combustion of the oil to be purchased by Buyer hereunder, the effect of which
restrictions or regulation upon the parties' performance shall be governed by
Section 12.5 of this Contract;
(c) total or partial expropriation, nationalization, confiscation,
requisitioning or abrogation or breach of a government contract or concession;
(d) closing of, or restriction on the use of, a port or pipeline;
(e) maritime peril (including but not limited to, negligence in navigation
or management of vessel, collision, stranding, destruction, or loss of vessel),
storm, earthquake, flood;
(f) accident, fire, explosion;
(g) hostilities or war (declared or undeclared), embargo, blockage, riot,
civil unrest, sabotage, revolution, insurrection;
(h) strike or other labor difficulty (whomever's employees are involved),
even though the strike or other labor difficulty could be settled by acceding to
the demands of a labor group; or,
(i) loss or shortage of supply, production, manufacturing, distribution,
refining, transportation, delivery facilities, receiving facilities, equipment,
labor, material, power
Page 31
<PAGE>
generation or power distribution caused by circumstances which the affected
party is not able to overcome by the exercise of reasonable diligence or which
the affected party is able to overcome only at substantial additional expense in
relation to the expected revenue, benefits or rights related directly to this
Contract.
Section 12.2 Seller shall not be obligated to sell or deliver Oil or Jet
to the extent that performance of this Contract is prevented, restricted or
delayed by a contingency which significantly affects Seller's ability to supply,
manufacture or transport Oil or Jet to Buyer under this Contract from Seller's
U.S. West Coast and Hawaiian refineries. In such circumstances, Deliveries of
Oil or Jet to Buyer may be reduced on a basis as equitable to Buyer as to
Seller's and its affiliates' other customers of crude and petroleum products,
and Seller shall not be obligated to acquire additional crude, oil or jet but to
the extent that it does acquire additional crude, oil or jet, Buyer shall be
entitled to an equitable share of the oil or jet acquired or derived from the
crude acquired, at a price to be agreed from time to time.
Section 12.3 Buyer shall not be obligated to purchase, receive or use Oil
or Jet to the extent that performance of this Contract in the customary manner
is prevented, restricted or delayed by a contingency. In such circumstances,
purchases from Seller may be reduced on any basis as equitable to Seller as to
Buyer's other suppliers of oil or jet.
Section 12.4 If at any time any price determined under this Contract
cannot be given effect because to do so would violate a direction or request of
any government or person purporting to act with governmental authority, Buyer
and Seller shall attempt to agree on an alternate course of action but failing
agreement within 10 days the party adversely affected may suspend performance
with respect to the quantity of Oil or Jet affected by the direction or request.
Page 32
<PAGE>
Section 12.5 To the extent that any governmental regulation requires
combustion of oil or jet meeting specifications other than those in Article IV,
Buyer and Seller shall negotiate in good faith to agree on an alternative course
of action that will allow Buyer to comply with such regulation while purchasing
the equivalent of the full quantity of oil or jet it would be required to
purchase under Article III, at a price and on other terms and conditions that
are fair to both parties. Seller shall have no obligation to deliver oil or jet
meeting new specifications if it is not available for purchase from third
parties and Seller cannot manufacture such oil or jet in existing facilities
without new capital investment.
If Buyer and Seller do not agree on such an alternative course of action, then
Buyer may comply with such regulation in any reasonable manner it chooses,
including the option to purchase from other sources for its plant located within
the area in which such regulation specifically applies, fuels which will enable
Buyer to comply with such regulation. In such case, Buyer's minimum purchase
requirement under Article III shall be reduced accordingly.
Section 12.6 Seller's obligations under this Contract shall be contingent
on Seller's continued ownership or operation of its refining or delivery
facilities in Hawaii or the U.S. West Coast. Seller shall have the right to
terminate this Contract in the event the ownership and operation of its refining
and delivery facilities in Hawaii and the U.S. West Coast are transferred to an
entity other than an affiliate. Seller shall give Buyer 180 days' written
notice.
ARTICLE XIII
EFFECT OF SUSPENSION OR REDUCTION
Section 13.1 In the event of any suspension of sales and Deliveries under
Article XII, Seller shall not be obligated to sell and Buyer shall not be
obligated to buy, after the period of suspension or reduction, the undelivered
quantity of Oil or Jet which normally would have been sold and delivered
hereunder during the period of suspension or reduction.
Page 33
<PAGE>
Section 13.2 If sales and Deliveries are suspended under Article XII for
more than 180 days, Seller or Buyer shall then have the option while such
suspension continues to terminate its obligations to the other party under this
Contract on 30 days' written notice to the other party.
Section 13.3 Any party which relies upon Article XII shall give the other
party prompt notice thereof specifying the anticipated amount and duration of
any suspension or reduction of Deliveries. It shall also give prompt notice when
it no longer expects to rely on Article XII and Deliveries shall be reinstated
subject to all conditions of this Contract, unless this Contract has been
terminated previously under Section 13.2.
Section 13.4 Nothing in Article XII shall relieve Buyer of the obligations
to pay in full in United States currency for the Oil or Jet sold and Delivered
hereunder and for other amounts due to Buyer to Seller under this Contract, nor
relieve Seller of the obligation to return to Buyer the net positive inventory
of Buyer's oil stored in Seller's Hilo, Hawaii and Kahului, Maui terminals.
Section 13.5 While Deliveries are suspended or reduced by Seller pursuant
to Article XII, it shall not be a breach of this Contract for Buyer to buy from
a supplier other than Seller the quantities of Oil or Jet which Seller does not
Deliver. During this period of time, there will be no minimum volume
requirements. After any suspension or reduction has ended, minimum and maximum
volume requirements for the semiannual period in which the suspension or
reduction occurred will be reduced in proportion to the ratio of the number of
days within the semiannual period during which no suspension or reduction was in
effect, to the number of days within the semiannual period.
Page 34
<PAGE>
ARTICLE XIV
WAIVER AND NONASSIGNABILITY
Section 14.1 Waiver by one party of the other's breach of any provision of
this Contract shall not be deemed a waiver of any subsequent or continuing
breach of such provisions or of the breach of any other provision or provisions
hereof.
Section 14.2 This Contract shall not be assignable by either party without
the written consent of the other, which shall not be unreasonably withheld,
except that Seller may assign this Contract to any affiliate, provided that any
such assignment shall not release Seller from any of its obligations hereunder,
and except that HECO, MECO, MECO-Molokai, and HELCO may assign their interests
in the Contract to the Trustee under their respective First Mortgage Bond
Indentures. Seller does not, by agreement to such an assignment, waive any right
it may have to terminate this Contract for any breach hereof occurring at any
time before or after any such assignment or release Buyer of any obligations
arising under this Contract after any such assignment. Following any such
assignment, no further assignment may be made without the consent of Seller.
ARTICLE XV
CONFLICT OF INTEREST
Conflicts of interest related to this Contract are strictly prohibited.
Except as otherwise expressly provided herein, neither party nor any director,
employee or agent of a party shall give to or receive from any director,
employee or agent of the other party any gift, entertainment or other favor of
significant value, or any commission, fee or rebate. Likewise, neither party nor
any director, employee or agent of a party shall enter into any business
arrangement with any director, employee or agent of the other party (or any
affiliate), unless such person is acting for and on behalf of the other party,
without prior written notification thereof to the other party. In the event of
any violation of this paragraph, including any violation occurring prior to the
date of this Contract which resulted directly or indirectly in one party's
consent to enter into this
Page 35
<PAGE>
Contract with the other party, such party may, at its sole option, terminate
this Contract at any time and, except for Buyer's obligation to pay in full in
United States currency for the Oil sold and Delivered hereunder and for other
amounts due by Buyer to Seller under this Contract, and for Seller's obligation
to return to Buyer the net positive inventory of Buyer's oil stored in Seller's
Hilo, Hawaii and Kahului, Maui terminals, shall be relieved of any further
obligation under this Contract.
Both parties agree to immediately notify the other of any known violation of
this Article.
ARTICLE XVI
DEFAULT
If Buyer or Seller considers the other party to be in default of any
obligation under this Contract, such party shall give the other party notice
thereof. Such other party shall then have 30 days in which to remedy such
default. If the default is not cured, the other party may, without prejudice to
any other right or remedy of such party in respect of such breach, terminate its
obligations under this Contract, except for Buyer's obligation to pay in full in
United States currency for the Oil or Jet sold and delivered hereunder and for
other amounts due by Buyer to Seller under this Contract, and for Seller's
obligation to return to Buyer the net positive inventory of Buyer's oil stored
in Seller's Hilo, Hawaii and Kahului, Maui terminals, by 45 days' written notice
to the party in breach. Any termination shall be without prejudice to accrued
rights. All rights and remedies hereunder are independent of each other and
election of one remedy shall not exclude another.
Except as provided under Sections 18.2 and 18.4, in no event shall either party
be liable for any indirect, consequential, special or incidental damages of any
kind whether based in contract, tort (including without limitation negligence or
strict liability), warranty or otherwise.
Seller's termination of its obligations to a Buyer in this Contract due to
default by that Buyer shall not terminate Seller's obligations to the remaining
Buyers not in default of this Contract.
Page 36
<PAGE>
ARTICLE XVII
APPLICABLE LAW
This Contract shall be construed in accordance with, and all disputes
arising hereunder shall be determined in accordance with, the local law of the
State of Hawaii, U.S.A.
ARTICLE XVIII
INDEMNITY
Section 18.1 Seller shall indemnify, defend and hold harmless Buyer, its
directors, officers, employees and agents (including but not limited to
affiliates and contractors and their employees) from and against all
liabilities, damages, losses, penalties, claims, demands, suits, costs, expenses
(including reasonable attorneys' fees), and proceedings of any nature whatsoever
for personal injury (including death), or property damage, including but not
limited to Buyer's facilities (collectively "Injury or Damage"), that results
from non-specification or contaminated Delivered Oil or Jet, or that arises out
of or is in any manner connected with the Delivery or Receipt of Oil or Jet
related to this Contract at Seller's facilities when in the custody of Seller or
the transportation of Oil or Jet related to this Contract when in the custody of
Seller, except to the extent that such Injury or Damage may be attributable to
the negligence or willful action of Buyer. This Section 18.1 shall not include
any indirect, consequential, special or incidental damages of any kind whether
based in contract, tort (including without limitation negligence or strict
liability), warranty or otherwise.
Section 18.2 Without limiting the generality of Section 18.1, Seller shall
indemnify, defend and hold harmless Buyer, its directors, officers, employees
and agents (including but not limited to affiliates and contractors and their
employees) from and against all liabilities, damages, losses, penalties, claims,
demands, suits, costs, expenses, and proceedings of any nature whatsoever
directly or indirectly arising out of or attributable to the release, threatened
release, discharge, disposal or presence of Oil, Jet or hazardous material
related to this Contract when in the custody of Seller, or of MECO-Molokai
Diesel related to this Contract when in the custody
Page 37
<PAGE>
of any carrier, except to the extent that such release, threatened release,
discharge, disposal or presence of Oil, Jet or hazardous material may be
attributable to the negligence or willful action of Buyer, including without
limitation: (1) all foreseeable and unforeseeable consequential damages; (2)
the reasonable costs of any required or necessary repair, cleanup or
detoxification of an area of oil, jet or hazardous material and the preparation
and implementation of any closure, remedial or other required plans; (3) the
reasonable costs of the investigation of any environmental claims by Buyer; (4)
the reasonable costs of Buyer's enforcement of this Contract; and (5) all
reasonable costs and expenses incurred by Buyer in connection with clauses (1),
(2), (3), and (4), including without limitation reasonable attorneys' fees and
court costs.
Section 18.3 Buyer shall indemnify, defend and hold harmless Seller, its
directors, officers, employees and agents (including but not limited to
affiliates and contractors and their employees) from and against all
liabilities, damages, losses, penalties, claims, demands, suits, costs, expenses
(including reasonable attorneys' fees), and proceedings of any nature whatsoever
for personal injury (including death), or property damage, including but not
limited to Seller's facilities (collectively "Injury or Damage"), that results
from non-specification or contaminated Received oil or jet, or that arises out
of or is in any manner connected with the delivery or receipt of oil or jet at
Seller's facilities when in the custody of Buyer, any carrier or subsequent
buyer of oil or jet related to this Contract or the transportation of oil or jet
when in the custody of Buyer, any carrier or subsequent buyer of oil or jet
related to this Contract, except to the extent that such Injury or Damage may be
attributable to the negligence or willful action of Seller. This Section 18.3
shall not include any indirect, consequential, special or incidental damages of
any kind whether based in contract, tort (including without limitation
negligence or strict liability), warranty or otherwise.
Section 18.4 Without limiting the generality of Section 18.3, Buyer shall
indemnify, defend and hold harmless Seller, its directors, officers, employees
and agents (including but not limited to affiliates and contractors and their
employees) from and against all liabilities, damages,
Page 38
<PAGE>
losses, penalties, claims, demands, suits, costs, expenses, and proceedings of
any nature whatsoever directly or indirectly arising out of or attributable to
the release, threatened release, discharge, disposal or presence of oil, jet or
hazardous material related to this Contract when in the custody of Buyer, any
carrier (except any carrier of MECO-Molokai diesel related to this Contract) or
subsequent buyer of oil or jet related to this Contract, except to the extent
that such release, threatened release, discharge, disposal or presence of oil,
jet or hazardous material may be attributable to the negligence or willful
action of Seller, including without limitation: (1) all foreseeable and
unforeseeable consequential damages; (2) the reasonable costs of any required or
necessary repair, cleanup or detoxification of an area of oil, jet or hazardous
material and the preparation and implementation of any closure, remedial or
other required plans; (3) the reasonable costs of the investigation of any
environmental claims by Seller; (4) the reasonable costs of Seller's enforcement
of this Contract; and (5) all reasonable costs and expenses incurred by Seller
in connection with clauses (1), (2), (3), and (4), including without limitation
reasonable attorneys' fees and court costs.
ARTICLE XIX
PUBLIC UTILITIES COMMISSION
Section 19.1 This Contract is required to be filed with the Hawaii Public
Utilities Commission ("PUC") for approval. If in the proceedings initiated as a
result of the filing of this Contract the PUC disapproves or fails to authorize
the recovery of the fuel costs incurred under this Contract through Buyer's
Energy Cost Adjustment Clause, Buyer may terminate this Contract by 30 days'
written notice to Seller.
Section 19.2 In the event that a Decision and Order or other action by a
governmental regulatory body impairs Seller's ability to enforce any terminal
and safety protection or operation provisions under this Contract, Buyer and
Seller shall attempt to agree on an alternate course of action, but failing
agreement within 10 days, the Seller may suspend performance with respect to
Page 39
<PAGE>
the quantity of oil or jet affected by said Decision and Order after giving
Buyer 90 days' written notice.
ARTICLE XX
INSURANCE
Section 20.1 Without in any way limiting Buyer's liability pursuant to
this Contract, Buyer shall maintain and require any carrier or subsequent buyer
of oil or jet related to this Contract to maintain the following insurance and
all insurance that may be required under the applicable laws, ordinances, and
regulations of any governmental authority:
i. Workers' Compensation and Employers' Liability Insurance as prescribed
by applicable law, including insurance covering liability under the
Longshoremen's and Harbor Workers' Act, the Jones Act and the Outer
Continental Shelf Land Act, if applicable.
ii. Commercial General Liability Insurance including Bodily Injury and
Property Damage Insurance with a limit not less than $1,000,000
combined single limit per occurrence.
iii. Automobile Bodily Injury and Property Damage Liability Insurance on
all owned, non-owned and hired vehicles used in receiving oil or jet
from Seller's facilities with a limit not less than $1,000,000
combined single limit per occurrence for bodily injury and property
damage.
iv. Hull and Machinery Insurance including collision liability and tower's
liability on vessels engaged in towage with a limit at least equal to
the actual value of each vessel and barge.
v. Marine Insurance under one of the two following options:
Option One: Protection and Indemnity Insurance including coverage for
injuries to or death of masters, mates and crew and excess collision
liabilities. The limits of such insurance shall not be less than $25
million per occurrence. Vessel pollution liability insurance including
coverage for TOVALOP liabilities and
Page 40
<PAGE>
pollution liabilities imposed by federal and state laws now or
hereafter in effect in an amount not less than $500 million; or,
Option Two: Protection and Indemnity Insurance on a full entry basis
with an International Group P&I Club. Such insurance shall include,
but not be limited to, coverage for injuries to or death of masters,
mates and crew; excess collision liabilities and pollution liabilities
imposed by federal and state laws now or hereafter in effect as well
as TOVALOP liabilities (if applicable). Such insurance shall be
unlimited as per International Group, P&I Club rules except for
pollution liabilities which shall be limited to $500 million or the
maximum pollution limit offered by the P&I Clubs of the International
Group.
Section 20.2 The above insurance shall include a requirement that the
insurer provide Seller with 30 days' written notice prior to the effective date
of any cancellation or material change of the insurance. The insurance
specified in Sections 20.1 (i) and 20.1 (iv) shall contain a waiver of
subrogation against Seller and an assignment of statutory lien, if applicable.
The insurance specified in Sections 20.1 (ii), 20.1 (iii), and 20.1 (v) Option
One Protection and Indemnity Insurance shall name Seller as additional insured.
Section 20.3 Before performance of this Contract, Buyer shall provide Seller
with certificates or other documentary evidence satisfactory to Seller of the
insurance coverages and endorsements.
Section 20.4 Without in any way limiting Seller's liability, Seller shall
obtain from any Seller carrier or subsequent buyer from Seller of oil or jet
related to this Contract the insurance coverages and endorsements set forth in
this Article excepting that both Seller and Buyer be named as additional
insureds.
Page 41
<PAGE>
Section 20.5 The terminaling and handling fees listed in Section 11.14 do
not include any insurance covering loss of Buyer's oil or jet while it is in the
custody of Seller. It is expressly understood and agreed that insurance, if any
is desired by Buyer, shall be carried by Buyer at its own expense.
ARTICLE XXI
SAFETY AND TERMINAL PROTECTION
Section 21.1 Any buyer or carrier of oil or jet related to this Contract
or their agents shall comply with all of the operating and safety regulations of
Seller, as amended from time-to-time, when alongside, upon, or when approaching
the premises of Seller for the purpose of loading oil or jet related to this
Contract or when departing Seller's premises after loading oil or jet related to
this Contract. In particular, all smoking shall be limited to such locations
and occasions as are specifically authorized in writing by Seller. If Seller
determines that an unsafe condition exists, Seller may, at its absolute
discretion, cease the loading or unloading operations and order any buyer or
carrier of oil or jet related to this Contract or their agents to leave its
place of mooring. Any loss or damage incurred by Seller, any buyer or carrier
of oil or jet related to this Contract or their agents due to any violation by
any buyer or carrier of oil or jet related to this Contract or their agents of
Seller's operating and safety regulations shall be for Buyer's or Carrier's
account. Copies of Seller's operating and safety regulations are available upon
request.
Section 21.2 In addition to its rights under Section 21.1, Seller shall
have the right to refuse acceptance of any barge or vessel nominated by Buyer to
load or discharge if in Seller's Terminal's sole opinion such barge or vessel
for any reason is unacceptable. Seller's Terminal's acceptance or rejection of
Buyer's nominated barge or vessel shall be communicated to Buyer within forty-
eight (48) hours after the Terminal's receipt of nomination, and in the event
Buyer's barge nomination is rejected, Seller shall provide Buyer satisfactory
documentation of the basis for the rejection of such nomination. Seller's
Terminal's acceptance or rejection of any barge or
Page 42
<PAGE>
vessel shall not constitute a continuing acceptance or rejection of such barge
or vessel for subsequent loading or discharge. Seller shall not be liable for
any loss, damage or delay caused by its rejection of a vessel nomination
hereunder, nor any loss, damage or delay caused by its rejection of a vessel for
failure to comply pursuant to Section 21.1. In no event shall the acceptance of
a vessel by Seller be construed in any manner as a representation as to the
vessel's operational, environmental or safety status. Neither Buyer nor any
other party shall be entitled to rely on any such acceptance of a vessel by
Seller hereunder.
ARTICLE XXII
POLLUTION MITIGATION
Section 22.1 In the event an escape or discharge of oil or jet occurs from
any barge or vessel carrying oil or jet related to this Contract and causes or
threatens to cause pollution damage, Buyer or carrier will promptly take
whatever measures are necessary to prevent or mitigate such damage. Buyer
hereby authorizes Seller, or its agent, at Seller's option, upon notice to Buyer
or master on the tug, to undertake such measures as are reasonably necessary to
prevent or mitigate the pollution damage. Seller or its agent shall keep Buyer
advised of the nature and results of any such measures taken and, if time
permits, intended to be taken. Any of the aforementioned measures shall be at
Buyer's sole expense (except to the extent that such escape or discharge was
caused by the negligence or willful action of Seller or its agent), provided
that if Buyer considers said measures should be discontinued, Buyer shall so
notify Seller or its agent and thereafter Seller or its agent shall have no
right to continue said measures at Buyer's authority or expense except as
provided in Section 18.4. This provision shall be applicable only between Buyer
and Seller and shall not affect, as between Buyer and Seller, any liability of
Buyer to any third parties, including but not limited to governments.
Section 22.2 In addition to its duties under Section 22.1, Buyer agrees to
cooperate with all efforts and to pay all reasonable costs associated with
preventive booming or other preventive measures that Seller reasonably
determines is advisable on an isolated or routine basis.
Page 43
<PAGE>
ARTICLE XXIII
MISCELLANEOUS
Section 23.1 Headings of the Articles and Sections are for convenient
reference only and are not to be considered part of this Contract.
Section 23.2 This document contains the entire agreement between the
parties covering the subject matter and cancels, as of the effective date
hereof, all prior agreements of any kind between the parties covering such
subject matter and any amendments thereto. There are no other agreements which
constitute any part of the consideration for, or any condition to, either
party's compliance with its obligations under this Contract.
Section 23.3 Except as otherwise expressly provided herein, all notices
shall be given in writing, by letter, facsimile, telegraph or telex to the
following addresses, or such other address as the parties may designate by
notice, and shall be deemed given upon receipt.
Seller: Manager, Petroleum Coke, Heavy Fuels & Sulfur
Chevron U.S.A. Inc.
P.O. Box 7006
San Francisco, CA 94120-7006
FAX: (415) 894-1195
Buyer: Manager, Power Supply Services Department
Hawaiian Electric Company, Inc.
Box 2750
Honolulu, HI 96840-0001
FAX: (808) 543-7788
Page 44
<PAGE>
The Manager, Power Supply Services Department, for Hawaiian Electric
Company, Inc., shall be responsible for forwarding notices to the other parties
to this Contract.
Section 23.4 If any term or provision, or any part of any term or
provision, of this Contract is held by any court or other competent authority to
be illegal or unenforceable, the remaining terms, provisions, rights and
obligations shall not be affected.
Section 23.5 This Contract shall inure to the benefit of and be binding
upon the parties hereto, their successors and permitted assigns.
Section 23.6 Effective as of the Effective Date of the Term hereunder,
this Contract hereby supersedes that certain Inter-Island Industrial Fuel Oil
and Diesel Fuel Contract between the parties dated September 23, 1991, and all
amendments thereto.
IN WITNESS WHEREOF, the parties have caused these presents to become
effective as of the day and year first hereinabove written.
ACCEPTED AND AGREED:
"Seller"
CHEVRON U.S.A. INC.
BY: /s/ Phillip H. Fisher
Phillip H. Fisher
TITLE: Manager, Petroleum Coke, Heavy Fuels & Sulfur
Page 45
<PAGE>
"Buyers"
HAWAIIAN ELECTRIC COMPANY, INC. MAUI ELECTRIC COMPANY, LTD.
BY: /s/ Edward Y. Hirata BY: /s/ Edward Y. Hirata
Edward Y. Hirata Edward Y. Hirata
(Printed or Typed Name) (Printed or Typed Name)
Vice President
TITLE: Regulatory Affairs TITLE: Vice President
BY: /s/ Molly M. Egged BY: /s/ Molly M. Egged
Molly M. Egged Molly M. Egged
(Printed or Typed Name) (Printed or Typed Name)
TITLE: Secretary TITLE: Secretary
HAWAII ELECTRIC LIGHT COMPANY, INC. HAWAIIAN TUG & BARGE CORP.
BY: /s/ Edward Y. Hirata BY: /s/ Glenn K. Y. Hong
Edward Y. Hirata President Glenn K. Y. Hong
(Printed or Typed Name) (Printed or Typed Name)
TITLE: Vice President TITLE: President
BY: /s/ Molly M. Egged BY: /s/ Molly M. Egged
Molly M. Egged Molly M. Egged
(Printed or Typed Name) (Printed or Typed Name)
TITLE: Secretary TITLE: Secretary
Page 46
<PAGE>
YOUNG BROTHERS, LIMITED
BY: /s/ Glenn K. Y. Hong
Glenn K. Y. Hong
(Printed or Typed Name)
TITLE: President
BY: /s/ Molly M. Egged
Molly M. Egged
(Printed or Typed Name)
TITLE: Secretary
Page 47
<PAGE>
ADDENDUM NO. 1
SAMPLE PRICE CALCULATIONS-NOVEMBER, 1995
I. FUEL OIL
A. FI = Current Index for CIFO
<TABLE>
<CAPTION>
Date High Low Average
---- ---- --- -------
<S> <C> <C> <C>
9/26/95 $78.50 $69.50 $74.000
10/3/95 82.00 80.00 81.000
10/10/95 80.00 59.00 69.500
10/17/95 83.00 78.00 80.500
------
$76.250/M TON
</TABLE>
FI =$76.250/6.368 Bbl/M Ton
=$11.974 per barrel
B. TF - Hawaii General Excise Tax at 4.167% + Hawaii
Environmental Response Tax at $0.05/barrel
-- = --------------------------------
= -------------------------
C. PF - Price per physical barrel
PF = ------------------
PF = --------------------------------
= ------------------
HEAT CONTENT ADJUSTMENT CALCULATION:
LAB ANALYSIS: 6.150 MMBtu/BBL
ADJUSTED TO: 6.200 MMBtu/BBL
ADJUSTED PRICE = (6.150/6.200) x -----
= ---------------
<PAGE>
II. DIESEL FUEL NO. 2
A. DI = Current Index for No. 2 Diesel Fuel
<TABLE>
<CAPTION>
Date Superfund High Low Average Superfund
- ---- --------- ---- --- -----------------
<S> <C> <C> <C> <C>
9/21/95 $0.0023 $0.5850 $0.5800 $0.5848
9/28/95 0.0023 0.5950 0.5900 0.5948
10/5/95 0.0023 0.5900 0.5850 0.5898
10/12/95 0.0023 0.5900 0.5800 0.5873
10/19/95 0.0023 0.5800 0.5750 0.5798
$0.5873/gal
</TABLE>
DI = $0.5873 per gallon
B. ---------------------------------------------
------
= -------------------------------------------
TD - Hawaii General Excise Tax at 4.167%
For calculation of PD1:
TD1 = ---------------------------------------
= ---------------------------------------
For calculation of PD2:
TD2 = ----------------------------------------
= ----------------------------------------
C. PD1 - Price per physical gallon for Diesel Fuel No. 2 purchased
by HECO, MECO, HELCO, HT&B, or YB.
PD1 = -----------------------------------------
= -----------------------------------------
= -----------------------------------------
HEAT CONTENT ADJUSTMENT CALCULATION:
LAB ANALYSIS: 136,000 Btu/Gal
ADJUSTED TO: 139,000 Btu/Gal
ADJUSTED PRICE = (136,000/139,000) x -----------
= -------------------------------
<PAGE>
D. PD2 - Price per physical gallon for Diesel Fuel No. 2 purchased
by MECO - Molokai
PD2 = ------------------------------
PD2 = ------------------------------
= ------------------------------
HEAT CONTENT ADJUSTMENT CALCULATION:
LAB ANALYSIS: 136,000 Btu/Gal
ADJUSTED TO: 139,000 Btu/Gal
ADJUSTED PRICE = (136,000/139,000) x ------------
= ---------------------------------
III. JET FUEL
A. JI - Current Index for Jet Fuel
<TABLE>
<CAPTION>
Date High Low Average
- ---- ---- --- -------
<S> <C> <C> <C>
9/22/95 $0.5750 $0.5650 $0.5700
9/29/95 0.5900 0.5800 0.5850
10/6/95 0.5750 0.5675 0.5713
10/13/95 0.5850 0.5750 0.5800
10/20/95 0.5750 0.5675 0.5713
-------
$0.5755/gal
</TABLE>
JI = $0.5755 per gallon
B. TJ - Hawaii General Excise Tax at 4.167%
TJ = ($0.5755 + $0.0790) x 0.04167
= $0.0273 per gallon
C. PJ - Price per physical barrel of jet
PJ = JI + $0.0790 + TJ
= $0.5755 + $0.0790 + $0.0273
= $0.6818 per gallon
<PAGE>
ADDENDUM NO. 2
QUALITY CONTROL SAMPLES
SUMMARY
<TABLE>
<CAPTION>
Frequency
Sample Sample Method &
Type Label Tanking Analysis Location
<S> <C> <C> <C> <C>
1. Refinery Production --- After Each Tank Receipt After Each Receipt Composite from Refinery
Tank
2. HMT Inventory --- After Each Tank Receipt After Each Receipt Composite from HMT Tank
3. Delivered A. Buyer's During Each Barge Loading Only if Necessary Drip From Loading Line at
Sample or Monthly HMT or Composite from
B. Seller's Seller's Tanks at Barbers
Sample Point
C. Buyer's Retain
4. Loaded A. Seller's After Each Barge Loading A. After Each Loading Composite from Barge Tank
Sample B. Only if Necessary at HMT
B. Buyer's Retain
5. Loaded (Third- A. Buyer's After Each Barge Loading of A. After Each Loading Composite from Barge
Party) Sample Third-Party Oil B. (Only if Necessary Tanks at Third-Party
B. Supplier's C. ( Supplier's Dock
Sample
C. Buyer's Retain
6. Received A. Prompt Before Each Barge A. Before Each Unloading Composite from Barge
B. Buyer's Unloading Whether Buyer's B. (Only if Necessary Tanks at Hilo or Kahului
Sample or Seller's C. ( Harbor
C. Seller's D. (
Sample
D. Seller's Retain
7. Returned A. Prompt After Each Barge Unloading A. After Each Barge Composite from Seller's
B. Buyer's Whether Buyer's or Seller's Unloading Tanks at Hilo or Kahului
Sample B. (Only if Necessary Terminals
C. Seller's C. (
Sample
D. Buyer's Retain
Applicable Contract Selection
Sample Sample Action on
Type Taking Analysis Failure
<S>
1. Refinery Production N/A N/A N/A
2. HMT Inventory N/A N/A N/A
3. Delivered 7.1 7.2 7.3
4. Loaded 6.1iii 11.3i 11.3i & 11.3ii
5. Loaded (Third- 11.1ii 11.3i 11.3i & 11.3ii
Party)
6. Received A. (11.6i 11.6ii 11.6iv
B. (11.6i 11.6iii 11.6iv
C. (
D. (
7. Returned A. 11.13i 11.13i 11.13iii
B. (11.13i 11.13ii 11.13iii
C. (
D. (
</TABLE>
<PAGE>
Description of Addendum No. 2 to the Inter-Island Industrial Fuel and Diesel
Fuel Contract by and between Chevron U.S.A. Inc. and Hawaiian Electric Company,
Inc., Maui Electric Company, Ltd., Hawaii Electric Light Company, Inc., Hawaiian
Tug & Barge Corp. and Young Brothers, Ltd. dated November 20, 1995 (the
"Interisland Contract"):
Page 2:
Page two of Addendum No. 2 consists of one page entitled "ADDENDUM NO. 2 -
QUALITY CONTROL SAMPLES SCHEMATIC" which in addition to the printed text,
includes a diagram of the flow of 'DIESEL FUEL" and "INDUSTRIAL FUEL OIL" from
refinery or third-party source to purchasers' locations, then to supplier's
marine terminal where fuel is to be loaded into a vessel, then to the harbor
where the vessel is to be discharged, through a multi-party pipeline, to the
supplier's, purchaser's or a third-party terminal at the purchaser's destination
island, and then to the purchaser. At numerous points in the flow of fuel sold,
shipped and stored under the Interisland Contract, there are letters referencing
11 notes which are located at the bottom of the form and which provide a sample
name, description, point of custody transfer, type of analysis to be performed
or description of an inspection step.
<PAGE>
HECO EXHIBIT 10.11
LOW SULFUR FUEL OIL SUPPLY CONTRACT
BETWEEN
BHP PETROLEUM AMERICAS REFINING INC.
AND
HAWAIIAN ELECTRIC COMPANY, INC.
This Contract is made by and between BHP PETROLEUM AMERICAS REFINING INC.,
a corporation duly incorporated under the laws of the State of Hawaii, having
its principal place of business at 733 Bishop Street, Honolulu, Hawaii 96813,
(hereinafter called "SELLER"), and HAWAIIAN ELECTRIC COMPANY, INC., a
corporation duly incorporated and authorized to do business under the laws of
the State of Hawaii, having its principal place of business at 900 Richards
Street, Honolulu, Hawaii, (hereinafter called "BUYER").
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
AGREEMENT
SELLER shall sell and deliver or cause to be delivered, and BUYER shall
buy, receive and pay for Low Sulfur Fuel Oil suitable for use as a boiler fuel
of the specifications provided herein (the "Product") and in the quantity
described herein.
1
<PAGE>
ARTICLE II
TERM
The term of this Contract shall be for a two (2) year period commencing
January 1, 1996, at 12:01 a.m. through December 31, 1997, at 12:00 midnight,
Hawaiian time, subject to the provisions and conditions contained herein.
ARTICLE III
PRODUCT & QUALITY
SELLER shall sell and deliver and BUYER shall receive and pay for Product
that shall comply with the specifications as shown in Exhibit A attached hereto
and incorporated herein by reference.
ARTICLE IV
QUANTITY
4.1 Quantity. During each calendar year that this Contract is in effect,
--------
SELLER shall sell and deliver to BUYER and BUYER shall purchase and receive from
SELLER, Product at a reasonably uniform rate during each month. Except as
otherwise expressly provided herein, this monthly volume shall equate to an
average daily rate in physical barrels per day of no less than ------ barrels
per day nor more than --------- barrels per day. The minimum annual volume of
Product to be nominated, sold and purchased under this Contract during calendar
year 1996 is
2
<PAGE>
- -------------------------------------------------------------------------------
The maximum annual volume of Product to nominated, sold and purchased under this
Contract during calendar year 1996 is ------------------------- . The minimum
annual volume of Product to be nominated, sold and purchased under this
Contract during calendar year 1997 is ----------------------. The maximum annual
volume of Product to be nominated, sold and purchased under this Contract during
calendar year 1997 is -------------- barrels. The term "barrel" as used in this
Contract means 42 United States Gallons at 60 degrees F.
4.2 Optional Purchases. The BUYER will provide the SELLER a notice of
------------------
product requirements in excess of Section 4.1. This notice will be provided to
SELLER at least ninety (90) days prior to the first day of the month in which
optional purchases are proposed to be delivered. SELLER will respond within
fifteen (15) days of BUYER's notice stating the quantity of additional product
that is available at SELLER's option. If the notice of available quantities
is different from BUYER's original notice of product requirements, acceptance of
new quantities shall be subject to BUYER's approval, with BUYER notifying SELLER
five (5) days after BUYER receives SELLER's response. The price of the optional
purchases under this Contract shall be determined monthly based on the following
formula:
-------------------------------------
Where:
3
<PAGE>
-- = ---------------
F1 = A factor for quality differential of Product delivered as defined
in Article V of this Contract.
F2 = The actual gross heat content of each Product Delivery as defined in
Article V of this Contract.
F3 = A factor for tanker freight as defined in Article V of this
Contract.
-- = ---------------
T = Taxes imposed upon the sale of Product as defined in Article V of
this Contract.
A sample calculation of the formula for determining the price for optional
purchases is included in Exhibit B, part II.
Platt's Oilgram Price Report, Platt's Bunkerwire and --- shall include
any successor publication(s) and, in the event of
4
<PAGE>
4.3 Reallocation of Deliveries. If during any 15 calendar day period,
deliveries of LSFO by SELLER to Kalaeloa Partners, L.P. ("Kalaeloa") are less
than 20,000 barrels due to an unanticipated equipment outage at the oil-fired
combined cycle facility owned by Kalaeloa at Campbell Industrial Park, SELLER
and BUYER shall agree to reallocate deliveries of LSFO by SELLER, to the extent
required by BUYER and not required by Kalaeloa, to BUYER. The reallocated LSFO
shall be priced on the same basis as optional purchases as provided for in
Section 4.2.
ARTICLE V
PRICE
The Product Price in U.S. Dollars ("USD") per barrel shall be determined
monthly based on the following price formula:
--------------------------------
Where:
P = Product Price in U.S. Dollar per barrel for the calendar month of
delivery.
S1 = Base price which shall consist of Platt's assessed value of
Singapore Cargoes 0.3% sulfur LSWR Mixed/Cracked. The price per
barrel shall be the simple average of Friday's high and low prices
for all dates of publication of Platt's during the period beginning
the 21st of the second month immediately preceding the nominated
month of delivery and ending the 20th of the month immediately
preceding the nominated month of
5
<PAGE>
delivery. If Platt's does not publish a high and low prices for a
particular Friday during the relevant period, the high and low prices
for the closest preceding day for which a Platt's Oilgram Price report
is published will be used.
S2 = The simple average of the high and low prices for Los Angeles Bunker C
fuel as reported by the Platt's Bunkerwire for all dates of publication
during the period beginning the 21st day of the second month
immediately preceding the nominated month of delivery and ending the
20th day of the month immediately preceding the nominated month of
delivery, expressed in USD per barrel using a conversion factor of
6.368 barrels per metric ton.
F1 = A factor for quality differential of Product delivered such as sulfur
content
where F1 = 0.10 x (S2 - S1).
F2 = The actual gross hear content of each Product Delivery pursuant to
Section 6.3 and Exhibit A, expressed in million BTUs per barrel with
three significant figures to the right of the decimal point.
F3 = A factor for tanker freight defined as follows:
F3 = F5 + FRD1 + FRD2
Where F3 is a market index for freight, defined for each calendar
quarter as the sum of:
F5 = The simple average of the Average Freight Rate Assessment ("AFRA")
Worldscale Points for the average of Large Range 1 vessels, as
published monthly by London Tanker Brokers Panel Limited for the three
monthly publications in the calendar quarter immediately preceding the
calendar quarter of the nominated month of delivery, multiplied by the
Worldscale 100 rate for voyages between Singapore and Barbers Point,
Hawaii, applicable to the year of the quarter of the applicable AFRA
data, expressed in New Worldscale rates, as published by Worldscale
Associates (London Limited) in its New Worldscale Nominal Freight Scale
(Worldscale). Monthly AFRA publications show rates of vessel voyages
which occurred during the period beginning the 16th day of the second
month immediately preceding that publication and ending the 15th day of
6
<PAGE>
the month immediately preceding the publication. Exhibit B includes an
illustrative computation; plus,
FRD1 = A fixed rate differential, if and as provided by Worldscale, with
respect to the Additional Insurance Premium for Basic ($500 Million)
coverage of Oil Pollution Liability Insurance on vessels carrying
persistent oils to and from the U.S.A., consistent with a typical
vessel derived in Exhibit C attached to this Contract, plus.
FRD2 = A fixed rate differential, if and as provided by Worldscale, with
respect to the Additional Insurance Premium for Excess ($200 Million)
coverage of Oil Pollution Liability Insurance on vessels carrying
persistent oils to and from the U.S.A., consistent with a typical
vessel derived in Exhibit C attached to this Contract.
This market index for freight will be expressed in USD per barrel, using a
conversion factor of 6.75 barrels per metric ton.
T = The Hawaii General Excise Tax, the Hawaii Environmental Response Tax,
the Federal Superfund Petroleum Fee, the Federal Oil Spill Liability
Trust Fund Fee, if and when applicable, and any other tax imposed on
the sale of Product.
A sample calculation of the formula for determining the Product Price is
included in Exhibit B, part I.
Platt's Oilgram Price Report and Platt's Bunkerwire shall include any
successor publication(s) and, in the event of discontinuance of these
publications, or the publications referred to in the freight adjustment Exhibit
C, the parties shall mutually agree upon the use of a similar reporting service.
7
<PAGE>
The price for Product delivered shall be based on the price for the month of
delivery originally nominated by the BUYER, regardless of the month in which the
quantity of Product nominated is actually delivered. A Delivery is defined as
beginning with the initiation of pumping from SELLER's refinery tank, nominated
issuing tank or vessel to BUYER's Barbers Point Tank Farm and ending with the
subsequent cessation of continuous pumping of Product in such amount as is
determined by the independent inspector's Certificate of Quantity.
All prices, price components, price component elements, including their
averages and factors, adjustments thereto and other sums payable hereunder in
this Contract shall be stated in the nearest thousandth of a dollar unless
specifically stated otherwise.
ARTICLE VI
DELIVERY
6.1 Notification and Product Delivery. Subject to the minimum and maximum
amounts specified in Section 4.1, BUYER will provide SELLER notice
("Nomination") of the amount to be sold and delivered by SELLER and bought and
received by BUYER for each calendar month no later than seventy-five (75) days
prior to the first day of said month ("Nomination Month"). The Nomination shall
specify both the quantities of Product and the delivery timing for the amount to
be sold for the first and second half of the Nomination Month, respectively. No
later than 10 days prior to the beginning of each calendar month, SELLER will
provide BUYER a schedule of deliveries to be made for the following two months.
The delivery
8
<PAGE>
schedule shall specify the approximate quantity, the approximate date and a
characterization of the approximate viscosity, either low, 100 - 200 SSU at 210
DF, medium, 201 - 350 SSU at 210 DF or high, over 350 SSU at 210 DF of each
separate delivery. SELLER shall notify BUYER of a change to said delivery
schedule because of one of the following causes with respect to each individual
delivery when it shall become known to SELLER:
a) A change in volume, if such change is in excess of 10% of the
previously advised delivery volume; or
b) A change in date, if such change is greater than 2 days from the
previously advised date; or
c) A change in the previously advised viscosity characterization.
BUYER shall not be required to take Delivery, and SELLER shall not be
required to make Delivery of more than fifty percent of a monthly nomination in
any ten consecutive day period. The minimum and maximum amounts specified in
Section 4.1 to be delivered in any given month may be further modified upon
mutual agreement of the parties.
If for reasons other than Force Majeure, BUYER's anticipated demand for
LSFO on an annual basis during any calendar year during the term of this
Contract declines below the BUYER's minimum annual quantity set forth in Section
4.1 (the difference between BUYER's anticipated demand and BUYER's minimum
annual quantity being a "Purchase Deficit Position"), then BUYER shall give
prompt written notice to SELLER.
9
<PAGE>
If for reasons other than Force Majeure, SELLER shall have delivered
Product for the Nomination Month such that the delivery rate, expressed in
barrels per day, is below 85% of the nominated volume as computed on a month-to-
date ratable basis, found by multiplying the day of the Nomination Month by the
nominated rate of delivery for that month ("Failure to Supply Position"), then
SELLER shall give prompt written notice to BUYER.
6.2 Title and Risk of Loss. Title to Product and the risk of loss of
Product shall pass to BUYER at the connection between the flange of SELLER's
pipeline and BUYER's tank farm pipeline at Barber's Point.
6.3 Determination of Quality. The quality and heat content of the Product
shall be determined on the basis of a composite sample(s) drawn by a mutually
agreed upon independent inspector from SELLER's issuing tank(s) in such a manner
as to be representative of each individual Delivery. SELLER and BUYER shall
share equally the cost of independent inspections. If the Delivery of Product
is from more than one issuing tank, the specifications of the total Delivery of
Product shall be determined on a volumetric weighted average from the
representative samples drawn by the independent inspector. The representative
samples drawn from SELLER's tank(s) shall be divided into a minimum of three (3)
parts:
1. One part shall be used by for an analysis by SELLER's laboratory to
determine quality and heat content (gross Btu) per barrel.
2. One part shall be provided to BUYER for the purpose of verifying
SELLER's determinations.
10
<PAGE>
3. At least one part shall be sealed and provided to BUYER, or to the
independent inspector, to be retained.
SELLER agrees to provide BUYER a copy of SELLER's laboratory analyses of
the tank final samples, or a preliminary laboratory analyses if the analyses of
the tank final samples is not available, showing sulfur content, flash point and
sediment and water content prior to commencing delivery of the Product,
provided, however, that SELLER shall provide BUYER the complete Certificate of
Quality no later than two working days after the completion of the Delivery.
BUYER shall have the right to perform laboratory analyses in order to verify the
results of SELLER's laboratory analyses. The official determination of gross
heat content shall be based upon SELLER's laboratory results provided that the
arithmetic difference between SELLER's and BUYER's laboratory results is equal
or less than the then existing reproducibility standard (currently 0.40 MJ/kg)
for ASTM test D-240. If the difference between SELLER's and BUYER's laboratory
results is greater than this ASTM reproducibility standard, the parties will
confer, in good faith, to resolve the difference. In the event of an
unresolvable difference between BUYER and SELLER, BUYER's sealed sample will be
provided to an independent laboratory for an official determination, which shall
be binding upon the parties. SELLER and BUYER shall share equally the costs of
independent tests and determinations.
The Product received by BUYER in a Delivery may include some amount of
pipeline displacement stock ("Pipeline Fill"). The specification of the Pipeline
Fill shall be determined by the SELLER on the basis of SELLER's representative
sample of the storage tank from the which
11
<PAGE>
the Pipeline Fill was issued. SELLER agrees to provide BUYER a copy of a
laboratory analysis of the Pipeline Fill's specifications prior to shipment.
To provide an early warning of any quality problems with the Product,
SELLER agrees to perform a pre-shipment computer simulation blend ("Blend") of
LSFO from each issuing tank and Pipeline Fill on a volumetric weighted average
basis. The computer simulation shall provide confirmation of the Blend's API
gravity, viscosity and percent by weight sulfur content. SELLER agrees to inform
BUYER or BUYER's representative of the Blend results prior to shipment.
SELLER agrees that under no circumstances shall it deliver Product to BUYER
should the percent by weight of sulfur content of the Blend, determined by
computing the weighted average by volume of LSFO issued from the SELLER's
tank(s) and the Pipeline Fill volume, be greater than 0.50%, without BUYER's
express written permission.
If SELLER or BUYER has reason to believe that the quality or quantity of
Product stated for a specific Delivery per Section 6.3 or Section 6.4 is
incorrect, that party shall within thirty (30) days after the later of the date
of the complete Certificate of Quality or the date of the final determination of
gross heat content, present the other party with documents supporting such
determination and the parties will confer, in good faith, on the causes for the
discrepancy and shall proceed to correct such causes and adjust the quality and
quantity, if justified, for the Delivery in question. In the event of an
unresolvable difference between SELLER and BUYER, the sealed part of the
representative sample in the possession of BUYER or the independent
12
<PAGE>
inspector shall be provided to an independent laboratory for an official
determination, which shall be final. SELLER and BUYER shall share equally the
cost for such independent laboratory determination.
If the quality of the Product received by BUYER fails to conform to the
requirements of Article III of this Contract, both BUYER and SELLER shall
attempt to minimize the impact of any quality problem by specification waiver if
the use of the Product will not unreasonably cause harm to BUYER, or by SELLER
delivering higher quality oil in a timely manner to produce a specification
quality blend in BUYER's storage tank(s). If all such, and similar, efforts
fail to resolve the quality problem, then BUYER may return non-specification
Product to SELLER, in which case SELLER shall replace the non-specification
Product to BUYER in a timely manner. All reasonable costs and expenses,
including BUYER's handling costs incurred in returning and replacing non-
specification Product, shall be paid by SELLER.
6.4 Determination of Quantity. Quantities of the Product delivered
hereunder shall be determined at the time of each Delivery by gauging SELLER's
tank(s) immediately before and after pumping. Volumes delivered hereunder shall
be converted to 60 [degrees] F, using the latest revision of ASTM Table 6B.
Measurements shall be taken jointly by representatives of SELLER and BUYER or by
a mutually agreed upon independent inspector. SELLER and BUYER shall share
equally the cost of independent inspections.
6.5 Purchase Deficit. So long as the BUYER is in a Purchase Deficit
Position as defined in Section 6.1.
13
<PAGE>
- -----------------------
- -----------------------
provided that SELLER can supply the balance of BUYER's Product requirements
within the month nominated. The Purchase Deficit position shall terminate when
total cumulative purchases under this Contract exceed the minimum annual
quantities prorated on a monthly basis. Nothing in this Section 6.5 shall be
construed as a waiver or limitation of any rights or remedies SELLER may have
with respect to BUYER's failure to comply with Section 4.1.
6.6 Failure to Supply. In the event that the SELLER is in a Failure To
Supply Position, both BUYER and SELLER shall attempt to minimize the impact of
any Failure To Supply Position such that it not impose an unreasonable risk to
BUYER. If the amount of deficient Product is such that SELLER's Delivery of
Product to BUYER in the Nomination Month at the nominated volume, as computed on
a month-to-date ratable basis, is deficient in aggregate by 50,000 barrels,
BUYER may, at its option, purchase the undelivered Product elsewhere at the then
prevailing market rates. The BUYER will invoice, and the SELLER shall pay, the
cost difference between purchased Product and cost of Product if it had been
delivered by SELLER. If the BUYER elects to purchase Product from other sources
under this Section 6.6, the annual purchase requirement referenced in Section
4.1 and Section 6.1 shall be reduced correspondingly.
14
<PAGE>
ARTICLE VII
PAYMENT
7.1 Method of Payment. Invoices shall be prepared by SELLER after a
Delivery has been completed. Invoices shall be accompanied by full
documentation, acceptable to the BUYER, including quality certificates, quantity
documentation, and price calculation. Payment shall be made without discount in
USD within 7 business days from the receipt of invoice by wire transfer of
immediately available funds to:
Citibank, New York
ABA # 021000089
BHP Petroleum Americas Refining Inc.
Account #4064332
7.2 Payments. If SELLER's final laboratory result for gross heat content
is unavailable or if said laboratory result is disputed by BUYER pursuant to
Section 6.3, SELLER may issue a provisional invoice calculated on the basis of
the heat-content standard of 6.2 million BTU per barrel. BUYER shall make
payment for such provisional invoice in accordance with Section 7.1. If an
invoice incorporating an item other than a heat rate adjustment which is
disputed has been sent to BUYER, then BUYER shall make payment in accordance
with Section 7.1 for such invoice items or that portion of the invoiced delivery
which is not disputed by BUYER and in which case BUYER shall make such
adjustment to taxes and other value-dependent items as are reasonable under the
circumstances. The provisional invoice or invoice incorporating items in
dispute shall be adjusted in accordance with the terms of Article V by
subsequent invoicing or by issuing a credit or debit with respect to the
original invoice within 7
15
<PAGE>
business days of receipt of the independent laboratory determination pursuant to
Section 6.3 or other resolution of the issue in dispute. BUYER shall make
payment for such subsequent invoices or debits in accordance with Section 7.1.
BUYER shall have the option to apply such credit against payments to be made
subsequent to the receipt of the credit, or if such payments are not expected to
be made within 7 business days, BUYER shall be able to receive said credit in
immediately available funds within 3 business days of SELLER's receipt of
BUYER's written instructions.
7.3 Interest. Interest will accrue on all amounts not paid within 7
business days of receipt of provisional or final invoice at the then existing
London Inter-Bank Offered Rate (LIBOR).
ARTICLE VIII
NOTICES
Any notice to be given hereunder shall be in writing unless specified
otherwise and shall be deemed to have been duly given when sent or personally
delivered to the other party at the address noted below:
BUYER: HAWAIIAN ELECTRIC COMPANY, INC.
P. O. Box 2750
Honolulu, Hawaii 96840
Attn: Vice President, Power Supply
Facsimile: (808) 543-7707
16
<PAGE>
SELLER: BHP PETROLEUM AMERICAS REFINING INC.
P.O. Box 3379
Honolulu, Hawaii 96842
Attn: Vice President-Marketing
Facsimile: (808) 547-3796
Notices may be by first class mail, postage prepaid, by elctronic
transmission (facsimile or telex) or by personal delivery. The parites may
substitute other addresses upon the giving of proper notice from time to time in
the manner provided above.
ARTICLE IX
RENEGOTIATION
It is understood and agreed that both parties entered into this Contract in
reliance on governmental laws, rules, decrees, orders, regulations, and
interpretations or implementation thereof in effect on the date of execution of
this Contract or any subsequent amendments hereto, to the extent that they
directly or indirectly affect the Product sold hereunder. If at any time any of
the said laws, rules, regulations, implementations or interpretations thereof
are changed or if new laws, rules, regulations or new interpretations and
implementations thereof become effective, and such change or new laws, rules,
regulations, interpretations or implementations thereof have a significant
adverse economic effect upon either party, such that performance of this
Contract would be inequitable or cause financial hardship to the affected party,
then the affected party shall have the option to call for renegotiation of the
Product Price or any other provision of this Contract the performance of which
by the affected party would be inequitable or cause financial
17
<PAGE>
hardship. Such option shall be exercised by the affected party at any time
after such a change or new law, rule, regulation, interpretation or
implementation thereof is effective, by giving notice to the other party of the
call to renegotiate. Within ten (10) calendar days after the date of such
notice, the parties shall enter into negotiations and in the event that the
parties do not agree upon a new Product Price or other provision satisfactory to
both parties within forty (40) calendar days after the date of such notice, the
affected party shall have the right to terminate this Contract effective thirty
(30) days after giving notice of termination to the other party within thirty
(30) days immediately following the forty (40) day negotiation period. Until a
mutually satisfactory new Product Price or other provision has been agreed upon,
or until this Contract is terminated as provided herein, the Product Price or
other provision that was in effect when the request for renegotiation was made
shall continue in full force and effect.
ARTICLE X
TAXES, ASSESSMENTS, LEVIES AND IMPOSTS
BUYER shall reimburse SELLER for all taxes, assessments, levies and imposts
of whatsoever kind or nature imposed on SELLER by any governmental or quasi-
governmental body (including without limitation the Hawaii Gross Excise Tax)
with respect to the sale of Product under this Contract. Notwithstanding the
foregoing, BUYER shall not be required to reimburse SELLER for any tax measured
by or based on the net income of SELLER or for real
18
<PAGE>
property taxes or to duplicate any item of expense of SELLER which is included
in the Product Price as provided for in Section 4.2 and Article V of this
Contract.
ARTICLE XI
FORCE MAJEURE
11.1 Force Majeure. As used in this contract, an event or act of "force
majeure" is defined as follows: acts of God, wars, riots, strikes, labor
disputes, lockouts, blockades, insurrections, inability to secure materials or
labor by reason of allocations promulgated by governmental agencies,
unavailability of shipping of crude oil supplies, epidemics, landslides,
lightning, earthquakes, fires, floods, tidal waves, volcanic eruptions,
explosions, failure of machinery or pipelines, or any other causes not within
the control of the affected party.
11.2 Obligations Suspended. BUYER's obligation to purchase or receive
Product, or SELLER's obligation to sell or delivery Product, shall be suspended
to the extent performance is prevented by an event or act of force majeure for
any period in which such event or act exists as to the party claiming force
majeure; and so long as such party is exercising its good faith efforts to
overcome such force majeure event. However, nothing in this Article excuses
BUYER from its obligation to make payments of money due SELLER for Product
already delivered to BUYER.
11.3 Notice of Force Majeure. The party claiming force majeure agrees to
give the other party prompt written notice of an act or event of force majeure.
The party claiming force majeure shall use due diligence to cure any act or
event of force majeure, and shall give the other
19
<PAGE>
party prompt notice after the act or event of force majeure has terminated.
This Article shall not require any party to settle or compromise any strike or
labor dispute.
11.4 No Make-Up Requirement. After the act or event of force majeure has
terminated, SELLER shall not be obligated to sell and deliver and BUYER shall
not be obligated to purchase and receive the undelivered quantity of Product
that normally would have been sold and delivered during the period of force
majeure.
ARTICLE XII
PRICE AND ALLOCATION CONTROLS
12.1 Regulatory Price Suspension. If SELLER is precluded by statute, or
by regulation, rule, interpretation or order implementing such statute from
obtaining any increase in Product Price, as determined pursuant to this
Contract, the increase shall be suspended until said law, regulation, rule,
interpretation or order permits the increase in whole or in part. In the event
the law, regulation, rule, interpretation or order is terminated or is later
modified to permit the increase, in whole or in part, the Product Price shall be
increased for deliveries of the Product made thereafter to the level permitted
under this Contract without further action by the parties.
12.2 Government Regulations. If the delivery or supply of Product
pursuant to this Contract conflicts with or is limited or prohibited by any
federal, state or local regulations, then to the extent of such conflict,
limitation or prohibition, SELLER shall have no obligation to deliver or supply
BUYER with the Product under this Contract and BUYER shall have no
20
<PAGE>
obligation to purchase or receive the Product under this Contract. BUYER, in
BUYER's discretion, may elect to complete and file any and all required Federal
or state regulatory forms to permit, facilitate, or enable the supply of Product
to BUYER under this Contract. SELLER shall fully cooperate with BUYER in the
completion and filing of the foregoing forms.
ARTICLE XIII
ASSIGNMENT
This Contract shall not be assigned by either party without prior written
consent of the other party, and any assignment without such written consent,
shall be void; provided, however, BUYER may assign this Contract to the Trustee
under BUYER's First Mortgage Indenture dated December 1, 1938.
ARTICLE XIV
APPLICABLE LAW
This Contract shall be deemed to be a Contract made under and shall be
governed by and construed in accordance with the laws of the State of Hawaii.
The parties hereby consent to the personal jurisdiction of the federal and state
courts in the State of Hawaii.
21
<PAGE>
ARTICLE XV
PUBLIC UTILITIES COMMISSION
This Contract is required to be filed with the Hawaii Public Utility
Commission (PUC) for approval. If in the proceedings initiated as a result of
the filing of this Contract, the PUC disapproves or fails to authorize the
recovery of the fuel cost incurred under this Contract through the BUYER's
Energy Cost Adjustment Clause, BUYER may terminate this Contract at any time
within 90 days of disapproval by giving 60 days written notice to the SELLER.
ARTICLE XVI
ENTIRE AGREEMENT, WAIVER AND ILLEGALITY
This Contract incorporates the entire agreement between the parties with
reference to the subject matter and cancels and supersedes as of the date of
execution hereof all prior oral or written understandings, or agreements,
between the parties with respect to the subject matter and may only be modified
by written instrument executed by duly authorized representatives of the
parties. There are no other agreements which constitute any part of the
consideration for, or any condition to, either party's compliance with its
obligations under this Contract. Failure to insist upon strict performance of
any provision shall not constitute a waiver of the right to require such
performance, nor shall a waiver in one case constitute a waiver with respect to
a later breach, whether of a similar nature or otherwise. If any term or
provision of this Contract is held by any Court to be illegal or unenforceable,
the remaining terms, provisions, rights and obligations shall
22
<PAGE>
not be affected. The headings or captions are for convenience only and have
no force or effect on legal meaning in the construction or enforcement of the
Contract. Time shall be of the essence in this Contract.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
thereby, have caused this Contract to be executed in duplicate originals by
their duly authorized officers.
HAWAIIAN ELECTRIC COMPANY, INC.
By /s/ Edward Y. Hirata
Its Vice President, Regulatory Affairs
By /s/ Molly M. Egged
Its Secretary
BUYER
Date: December 5, 1995
BHP PETROLEUM AMERICAS REFINING INC.
By /s/ Faye W. Kurren
Its Vice President
SELLER
Date: December 5, 1995
23
<PAGE>
EXHIBIT A
PRODUCT SPECIFICATIONS
LSFO Specification - Test Item Measurement Unit Limits ASTM Method
GRAVITY @ 60 DEGREES F. Degrees API 12.0 Min. D-4052
24.0 Max.
VISCOSITY SSU At 210 DF 100 Min. D-445
450 Max. or D-2161
HEAT VALUE, GROSS MM BTU/BBL 6.0 million D-240
Min. or D-4868
* FLASH POINT Degrees F. 150 Min. D-93
POUR POINT Degrees F. 125 Max. D-97
ASH Percent, Weight 0.05 Max. D-482
SEDIMENT & WATER Percent, Weight 0.50 Max. D-1796
SULFUR Percent, Weight 0.50 Max. D-4292
NITROGEN Percent, Weight 0.50 Max. D-3431,
D-4629
* Flash point shall be at least 50 DF above the pour point or 150 DF, whichever
is greater.
24
<PAGE>
EXHIBIT B
EXAMPLE PRICE CALCULATION
Illustrative Product Price Calculation for August, 1995
I. Determination Of Product Price Under Article V on Nominated Product
The Product Price in U.S. Dollars ("USD") per barrel shall be determined
monthly on the following price formula:
S1 = Platt's Oilgram Price Report 0.3% Singapore LSWR Mixed/Cracked
- -------------------------------------------------------------------
Date of Price Prices in USD per barrel
Low High
----- ------
6/23/95 $13.50 $14.00
6/30/95 $12.80 $13.30
7/07/95 $12.30 $12.80
7/14/95 $12.10 $12.60
Average of mean in USD per barrel: S1 = $12.925 per barrel
S2 = Platt's Bunkerwire Los Angeles Bunker C
- --------------------------------------------
Date of Price Prices in USD per barrel
Low High
----- ------
6/22/95 $93.00 $96.00
6/27/95 $91.00 $94.00
6/29/95 $93.00 $96.00
7/06/95 $91.00 $93.00
7/11/95 $89.00 $92.00
7/13/95 $89.00 $91.00
7/18/95 $85.00 $89.50
Average of mean in USD per metric ton: $91.607
Expressed in USD per Bbl: S2 = $14.386 per barrel
(= $91.607/MT / 6.368 Bbl/MT)
25
<PAGE>
F1 = 0.10 x (S2 - S1)
= 0.10 x (14.386 - 12.925)
= $0.146 per barrel
F5 = base tanker freight from Singapore to Barbers Point
- --------------------------------------------------------
a. AFRA Worldscale Large Range 1 Average
Date of Publication: New Worldscale Large Range 1
"Points" (percentage of
Worldscale 100 Rate)
April 1995 128.2
May 1995 128.3
June 1995 120.3
Average: 125.6
b. New Worldscale 100 Rate between Singapore and BHP SBM Barbers Point
effective January 1, 1995 was $9.25 per Metric Ton
F5 = [($9.25/MT * (125.6/100)]/6.75
= $1.72 per barrel
FRD1 = tanker freight fixed rate differential for oil spill liability insurance
- -------------------------------------------------------------------------------
FRD1 = $.020 per barrel, derived as illustrated in Exhibit C attached hereto.
FRD2 = tanker freight fixed rate differential for oil spill liability insurance
- -------------------------------------------------------------------------------
FRD2 = $.016 per barrel, derived as illustrated in Exhibit C attached hereto.
F3 = F5 + FRD1 + FRD2
26
<PAGE>
= $1.72/Bbl + $.020/Bbl + $.016/Bbl
= $1.756 per barrel
=
T = Taxes applicable to sale of Product
- ---------------------------------------
Taxes before application of Hawaii General Excise Tax (HGET):
Federal Superfund Petroleum Fee = $0.097 per barrel
HGET = 4.167% of pre-HGET price
Hawaii Environmental Response Tax applied after HGET = $0.05 per barrel
=
=
=
=
Product Price For Delivery with Assumed Gross Heat Content Other than Standard
6.2 MM Btu per barrel
Assumed gross heat content is 6.275 MM Btu per barrel
=
=
=
=
27
<PAGE>
EXPLANATION OF TAXES:
Taxes in the Product Price currently in effect include Superfund Tax of $0.097
per barrel and the Hawaii Environmental Response Tax of $0.050 per barrel. Also,
Hawaii State General Excise Tax of 4.167% will be paid on all components of the
Product Price, except the Hawaii Environmental Response Tax.
28
<PAGE>
II. Determination Of Price Of Optional Purchases Under Article IV
The price of the optional purchases under this Contract shall be determined
monthly based on the following formula:
-----------------------------
- -----------------------------------------------------------------
Determination of Mean of Platt's Singapore LSWR Mixed/Cracked
<TABLE>
<CAPTION>
Date of Price Price in USD per barrel
Low High Mid
--- ---- ---
<S> <C> <C> <C>
21-Jun-95 $14.00 $14.50 $14.25
22-Jun-95 $13.75 $14.25 $14.00
23-Jun-95 $13.50 $14.00 $13.75
26-Jun-95 $13.00 $13.50 $13.25
27-Jun-95 $13.30 $13.70 $13.50
28-Jun-95 $13.30 $13.70 $13.50
29-Jun-95 $13.10 $13.60 $13.35
30-Jun-95 $12.80 $13.30 $13.05
3-Jul-95 $12.70 $13.00 $12.85
4-Jul-95 $12.70 $13.00 $12.85
5-Jul-95 $12.50 $13.00 $12.75
6-Jul-95 $12.30 $12.80 $12.55
7-Jul-95 $12.30 $12.80 $12.55
10-Jul-95 $12.30 $12.80 $12.55
11-Jul-95 $12.30 $12.80 $12.55
12-Jul-95 $12.30 $12.80 $12.55
13-Jul-95 $12.10 $12.60 $12.35
14-Jul-95 $12.10 $12.60 $12.35
17-Jul-95 $12.20 $12.70 $12.45
18-Jul-95 $12.20 $12.70 $12.45
19-Jul-95 $12.40 $12.90 $12.65
20-Jul-95 $12.40 $12.90 $12.65
AVERAGE $12.943
</TABLE>
29
<PAGE>
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------- ------------------------
---------------- ---------------- ----------------
<S> <C> <C> <C>
- -------------------- $ ---------------- $ ---------------- $ ----------------
- -------------------- $ ---------------- $ ---------------- $ ----------------
- -------------------- $ ---------------- $ ---------------- $ ----------------
- -------------------- $ ---------------- $ ---------------- $ ----------------
- -------------------- $ ---------------- $ ---------------- $ ----------------
- -------------------- $ ---------------- $ ---------------- $ ----------------
- -------------------- $ ---------------- $ ---------------- $ ----------------
- -------------------- $ ---------------- $ ---------------- $ ----------------
- -------------------- $ ---------------- $ ---------------- $ ----------------
- -------------------- $ ---------------- $ ---------------- $ ----------------
- -------------------- $ ---------------- $ ---------------- $ ----------------
- -------------------- $ ---------------- $ ---------------- $ ----------------
- -------------------- $ ---------------- $ ---------------- $ ----------------
- -------------------- $ ---------------- $ ---------------- $ ----------------
- -------------------- $ ---------------- $ - $ ----------------
- -------------------- $ ---------------- $ - $ ----------------
- -------------------- $ ---------------- $ - $ ----------------
- -------------------- $ ---------------- $ - $ ----------------
- -------------------- $ ---------------- $ - $ ----------------
- -------------------- $ ---------------- $ ---------------- $ ----------------
- -------------------- $ ---------------- $ ---------------- $ ----------------
- -------------------- $ ---------------- $ ---------------- $ ----------------
-----------------------------
</TABLE>
- --------------
- ------------------------
- ----------------------------
S2 = Platt's Bunkerwire Los Angeles Bunker C
- --------------------------------------------
Date of Price Price in USD per barrel
Low High
------ ------
6/22/95 $93.00 $96.00
30
<PAGE>
6/27/95 $91.00 $94.00
6/29/95 $93.00 $96.00
7/06/95 $91.00 $93.00
7/11/95 $89.00 $92.00
7/13/95 $89.00 $91.00
7/18/95 $85.00 $89.50
Average of mean in USD per metric ton: $91.607
Expressed in USD per Bbl: S2 = $14.386 per barrel
(= $91.607/MT/6.368 Bbl/MT)
F1 = 0.10 x (S2 - S1)
= 0.10 x (14.386 - ------------------
= --------------
F5 = base tanker freight from Singapore to Barbers Point
- --------------------------------------------------------
a. AFRA Worldscale Large Range 1 Average
Date of Publication: New Worldscale Large Range 1
"Points" (percentage of
Worldscale 100 Rate)
April 1995 128.2
May 1995 128.3
June 1995 120.3
Average: 125.6
b. New Worldscale 100 Rate between Singapore and BHP SBM Barbers Point
effective January 1, 1995 was $9.25 per Metric Ton
F5 = [($9.25/MT * (125.6/100)]/6.75
= $1.72 per barrel
FRD1 = tanker freight fixed rate differential for oil spill liability insurance
- -------------------------------------------------------------------------------
31
<PAGE>
FRD1 = $.020 per barrel, derived as illustrated in Exhibit C attached
hereto.
FRD2 = tanker freight fixed rate differential for oil spill liability
---------------------------------------------------------------------
insurance
---------
FRD2 = $.016 per barrel, derived as illustrated in Exhibit C attached
hereto.
F3 = F5 + FRD1 + FRD2
= $1.72/Bbl + $.020/Bbl + $.016/Bbl
= $1.756 per barrel
-------------------------
T = Taxes applicable to sale of Product
---------------------------------------
Taxes before application of Hawaii General Excise Tax (HGET):
Federal Superfund Petroleum Fee = $0.097 per barrel
HGET = 4.167 % of pre-HGET price
Hawaii Environmental Response Tax applied after HGET = $0.05 per
barrel
-------------------------------------------------
= ----------------------------------------
= -------------------------------
= ----------------------------------------
= --------------------
Product Price For Delivery with Assumed Gross Heat Content Other than
Standard 6.2 MM Btu per barrel
32
<PAGE>
Assumed gross heat content is 6.275 MM Btu per barrel
=
----------------------------------------------------
=
----------------------------------------------------
=
----------------------------------------------------
=
---------------------------------------------------
EXPLANATION OF TAXES:
Taxes in the price of optional purchases currently in effect include Superfund
Tax of $0.097 per barrel and the Hawaii Environmental Response Tax of $0.050 per
barrel. Also, Hawaii State General Excise Tax of 4.167% will be paid on all
components of the Product Price, except the Hawaii Environmental Response Tax.
33
<PAGE>
EXHIBIT C
EXAMPLE DETERMINATION OF FREIGHT COMPONENTS
PURSUANT TO ARTICLE IV AND ARTICLE V
Article IV and Article V of this Contract provide for the determination of the
price per physical barrel of LSFO; which price determination includes the use of
a tanker freight component which references the Worldscale 100 rate for voyages
between Singapore and Barbers Point, Hawaii, expressed in New Worldscale rates,
as published by Worldscape Associates (London) Limited in its New Worldwide
Nominal Freight Scale ("Worldscale"). The current edition of Worldscale
incorporates a Fixed Rate Differential to reflect the cost of additional
insurance premiums for Oil Spill Liability Insurance on vessels carrying
Persistent Oils applicable to voyages having a destination in the U.S.A. SELLER
acknowledges that any vessel used to transport LSFO that is sold and purchased
under this Contract, including its components and the crude oil from which the
LSFO is derived, shall be required to possess oil spill liability insurance
coverage in the amount of $700 million.
The price formula component "F5" refers to an AFRA rate applicable to a vessel
size classification of LR-1, or Large Range 1. This vessel classification
references tanker vessels ranging in size from 45,000 Long Tons Deadweight to
79,999 Long Tons Deadweight. In order to derive an approximation of the
relationship between Deadweight and Gross Registered Tons for a nominal vessel
consistent with this vessel size classification, the average size
characteristics of two vessels that have transported LSFO or crude oil to Hawaii
are used as reference data. These vessels are described as follows:
<TABLE>
<CAPTION>
Name Deadweight Tons(DWT) Gross Registered Tons(GRT)
---- -------------------- --------------------------
<S> <C> <C>
S/T ARCO Prudhoe Bay 71,342 35,646
S/T ARCO Sag River 71,342 35,646
------ ------
Average 71,342 35,646
</TABLE>
The Worldscale rate data that is to be included in the computation of tanker
freight price formula components "FRD1" and "FRD2," consistent with the
computation of "F5," is to be derived in the same manner as the following
illustrative example calculations.
34
<PAGE>
1. Worldscale 100 rate in effect from February 20, 1995, onwards shall include
Fixed Rate Differentials a. and b. below and shall be computed as follows:
a. Fixed Rate Differential with respect to the additional insurance
premiums for Basic $500 million coverage of Oil Pollution
Liability Insurance on vessels carrying Persistent Oils to and
from the U.S.A., "FRD1" is derived:
FRD1 = $0.27/GRT X 35,646 GRT
----------------------
71,342
= $0.135 per Metric Ton
For illustrative purposes, this rate may be expressed in U.S.
dollars per barrel as follows:
= $0.135/Metric Ton
-----------------
6.75 barrels/Metric Ton
= $0.020/barrel
b. Fixed Rate Differential with respect to the additional insurance
premiums for Excess $200 million coverage of Oil Pollution
Liability Insurance on vessels carrying Persistent Oils to and
from the U.S.A., "FRD2" is derived:
FRD2 = $0.2225/GRT X 35,646 GRT
------------------------
71,342
For illustrative purposes, this rate may be expressed in U.S.
dollars per barrel as follows:
= $0.111/Metric Ton
-----------------
6.75 barrels/Metric Ton
= $0.016/barrel
35
<PAGE>
For informational purposes, the total applicable Fixed Rate Differential is
equal to $0.246 per Metric Ton, or $0.036 per barrel.
2. The AFRA Worldscale Points and their related Worldscale 100 rate applicable
for each calendar quarter are based upon an average of the three monthly AFRA
publications in the calendar quarter immediately preceding the calendar quarter
of the nominated month of delivery. Therefore the relevant Fixed Rate
Differentials computed above may properly be prorated for certain quarterly
periods. Such proration may be computed as follows:
A. With respect to volumes of LSFO nominated during the three (3) months
of the calendar quarter following a change in the published Worldscale
rate (typically February of each year), the relevant Fixed Rate
Differentials to be included in the computation of the tanker freight
price formula component shall be prorated for illustrative purposes as
follows:
50/90 multiplied by the Fixed Rate Differential computed prior to the
rate change.
and 40/90 multiplied by the Fixed Rate computed using the revised
rate.
B. With respect to volumes of LSFO nominated for subsequent months, and
continuing for so long as the Fixed Rate Differentials as set forth
in Worldscale Circular shall be applicable, the relevant Fixed Rate
Differentials to be included in the computation of the price
components "FRD1" and "FRD2" shall be as derived as in part 1 above.
36
<PAGE>
HECO Exhibit 10.12
INTER-ISLAND INDUSTRIAL FUEL OIL
AND DIESEL FUEL OIL CONTRACT
This Contract is made and entered into this 5th day of December, 1995, by
and between BHP PETROLEUM AMERICAS REFINING INC., a Hawaii corporation,
(hereinafter called "SELLER"), and HAWAIIAN ELECTRIC COMPANY, INC., and its
wholly-owned subsidiaries Maui Electric Company, Ltd. and Hawaii Electric Light
Company, Inc., Hawaii corporations, (hereinafter collectively called "BUYER").
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1
Except where otherwise indicated, the following definitions shall apply
throughout this Contract:
1. "Fuel Oil" means Industrial Fuel Oil No. 6 in accordance with Article
IV and Exhibit A.
2. "Diesel" means Diesel Fuel Oil No. 2 in accordance with Article IV and
Exhibit B.
3. "Product" means both Fuel Oil and Diesel.
4. "HECO" means Hawaiian Electric Company, Inc.
5. "HELCO" means Hawaii Electric Light Company, Inc.
<PAGE>
6. "MECO" means Maui Electric Company, Ltd.
7. "gallon" means a United States gallon of 231 cubic inches at 60
degrees Fahrenheit.
8. "barrel" or "Bbl" means 42 United States gallons at 60 degrees
Fahrenheit.
9. "SELLER's Loading Pier" means Piers 5 or 6 located at the Barbers
Point Harbor, Oahu, Hawaii, and connected by pipeline to SELLER's
Refinery at Barber's Point, Oahu, Hawaii.
10. "SELLER's SPM" means SELLER's offshore Single Point Mooring at Barbers
Point, Oahu, Hawaii.
11. "LIBOR" means the simple average of London Inter-Bank Offered Rates
for one month as published in the Wall Street Journal during past due
period.
SECTION 1.2
As to any purchase of Product by MECO, the term "BUYER" shall exclude
HELCO, and as to any purchase of product by HELCO, the term "BUYER" shall
exclude MECO. Furthermore, for purposes of this Contract (excluding any
payments due from, and liabilities and indemnities attributable to, a BUYER) the
term "BUYER" shall be deemed to mean MECO or HELCO, as applicable, and its
authorized agent(s) for this purpose, unless otherwise specified or clearly
inappropriate in the context.
2
<PAGE>
ARTICLE II
TERM
The term of this Contract shall be from January 1, 1996 through December
31, 1997 (the "Original Term") and shall continue thereafter for additional
successive 12-month periods (the "Additional Terms") beginning January 1, 1998,
unless BUYER or SELLER gives written notice of termination at least seventy-five
(75) days prior to the expiration of any previous term, including the Original
Term.
ARTICLE III
QUANTITY
SELLER shall sell to BUYER, and BUYER shall purchase and receive from
SELLER in the manner set forth in Section 7.1 the annual quantities of Product
as set out below:
Fuel Oil
Diesel
Subject to availability SELLER will sell and BUYER purchase and receive such
additional volumes as are mutually agreed.
ARTICLE IV
QUALITY
The quality of the Fuel Oil and Diesel shall be as set forth in the
attached Exhibits A and B, respectively.
3
<PAGE>
ARTICLE V
PRICE
SECTION 5.1
- -----------
Effective January 1, 1996, or upon initial purchase and monthly thereafter,
the price of the Fuel Oil shall be the simple average of the high and low
quotations for the Los Angeles Bunker C Fuel Oil as reported by the Platt's
Bunkerwire on all dates of publication during the period beginning the 21st day
of the second month preceding the month of delivery and ending the 20th day of
the month preceding the month of delivery, expressed in U.S. dollars ("USD") per
barrel, converting to barrels from metric tons by dividing by 6.368, ----
All prices, price formula, including their averages and factors,
adjustments thereto and other sums payable with respect to Fuel Oil hereunder
shall be stated in the nearest thousandth of a dollar unless specifically stated
otherwise.
A sample calculation for the determination of the price of Fuel Oil as
defined in this Section 5.1 is included in this Contract as Exhibit C.
SECTION 5.2
- -----------
The price of Diesel during a calendar month shall be the simple average of
the Average Weekly Prices for all Pricing Weeks the Thursday date (or, in the
event the Thursday price is not reported, the last reported date) of which fall
during the period beginning the 21st day of the second month preceding the month
of delivery and ending the 20th day of the month preceding the month of
delivery, expressed in USD per gallon, -------- The simple average of the high
and low Pacific Northwest Spot prices for No. 2 Diesel with a maximum
4
<PAGE>
sulfur content of 0.5% by weight as assessed by Oil Price Information Service
("OPIS") for Monday, Tuesday, Wednesday and Thursday of each week ("Pricing
Week") shall comprise the "Average Weekly Price."
If OPIS is not published or does not publish a high and low price for a
particular Monday, Tuesday, Wednesday or Thursday during any particular week,
the high and low prices for those days in the week for which OPIS does publish a
high and low price will be used in the calculation of the Average Weekly Price.
All prices, price formula, including their averages and factors,
adjustments thereto and other sums payable with respect to Diesel hereunder
shall be stated in the nearest ten-thousandth of a dollar unless specifically
stated otherwise.
A sample calculation for the determination of the price of Diesel as
defined in this Section 5.2 is included in this Contract as Exhibit D.
SECTION 5.3
- -----------
In addition to all other amounts payable by BUYER under this Contract,
BUYER shall reimburse SELLER for all taxes, assessments, levies, and imposts of
whatsoever kind or nature imposed on SELLER by any governmental or
quasi-governmental body, including without limitation the Hawaii General Excise
Tax, with respect to the execution or performance of this Contract or the
receipt by SELLER of payments hereunder. Notwithstanding the foregoing, BUYER
shall not be required to reimburse SELLER for any tax measured by or based on
the net income of SELLER or for real property taxes, or to duplicate any item of
expense of SELLER which is recovered by SELLER under the Product prices provided
for in Sections 5.1 and 5.2. At
5
<PAGE>
the execution of this contract, the taxes, etc. which are currently in effect
include the Hawaii General Excise Tax (4.167%), the Superfund Petroleum Fee
($0.097 per barrel or $0.0023 per gallon), the Hawaii Environmental Response Tax
($0.05 per barrel or $0.0012 per gallon) and Hawaii Liquid Fuel Tax ($0.0100 per
gallon). The Federal Oil Spill Liability Trust Fund Fee ($0.05 per barrel or
$0.0012 per gallon) is expected to go into effect January 1, 1996. The Hawaii
Environmental Response Tax and Hawaii Liquid Fuel Tax are not subject to Hawaii
General Excise Tax.
SECTION 5.4
- -----------
OPIS and Platt's Bunkerwire shall include any successor publication(s) and,
in the event of discontinuance of these publications or assessments for No. 2
Diesel having a maximum sulfur content of 0.5% by weight or Bunker C Fuel Oil,
respectively, the parties shall agree upon the use of a similar reporting
service.
SECTION 5.5
- -----------
Should the gross heat content ("BTU content") per barrel of the
representative sample of Fuel Oil drawn in accordance with the procedures set
forth in Article VIII fall within the range of 6.2 Million ("MM") BTU per Bbl to
6.45 MM BTU per Bbl, no price adjustment will be made. If the BTU content per
barrel is below 6.2 MM BTU per Bbl, or above 6.45 MM BTU per Bbl, the price
charged for the Fuel Oil delivered to BUYER shall be adjusted by multiplying the
price determined in Section 5.1, by the ratio of the actual heat content to
6.325 MM BTU per Bbl. A sample calculation for the determination of the price
adjustment for Fuel Oil as defined in this Section 5.5 is included in Exhibit C
of this Contract.
6
<PAGE>
Should the BTU content per gallon of the representative sample of Diesel
drawn in accordance with the procedures set forth in Article VIII fall within
the range of 137,000 to 141,000, no price adjustment will be made. If the BTU
content per gallon is below 137,000, or above 141,000, the price charged for the
Diesel delivered to BUYER shall be adjusted by multiplying the price determined
in Section 5.2, by the ratio of the actual heat content to 139,000 BTU. A sample
calculation for the determination of the price adjustment for Diesel as defined
in this Section 5.5 is included in Exhibit D of this Contract.
The official heat content determination shall be based upon SELLER's
laboratory results provided that the arithmetic difference between SELLER's and
BUYER's laboratory results is equal to or less than the then existing ASTM
reproducibility standard (currently 0.40 MJ/kg) for test D-240. If the
difference between SELLER's and BUYER's laboratory results for measured gross
heat content should be greater than the reproducibility standard for ASTM test
D-240, the parties will confer, in good faith, to resolve the difference. In the
event of an unresolvable difference between BUYER and SELLER, BUYER's sealed
Barge Tank Samples (as defined in Section 8.3), and also BUYER's sealed Retain
Samples (as defined in Section 8.3) if relevant in the opinion of the
Independent Inspector, will be provided to an independent laboratory for a final
determination, which shall be binding upon the parties. SELLER and BUYER shall
share equally the costs of independent tests determinations.
7
<PAGE>
ARTICLE VI
PAYMENT
SECTION 6.1
Invoices shall be prepared by SELLER and dated after a Delivery has been
completed. A copy of the invoice will be sent to BUYER by facsimile. SELLER
will transmit an original of the invoice to the BUYER on the same date by mail
to the addresses set forth in Section 6.2. Original invoices shall be
accompanied by full documentation, acceptable to the BUYER, including quality
certificates, quantity documentation, and price calculation.
Payment shall be made by BUYER within fifteen (15) calendar days from date
of SELLER's invoice by bank wire transfer of immediately available funds to:
Citibank, New York
ABA # 021000089
BHP Petroleum Americas Refining Inc.
Account #4064332
If SELLER's final laboratory result for gross heat content is unavailable
or if said laboratory result is disputed by BUYER pursuant to Article VIII,
SELLER may issue a provisional invoice calculated on the basis of the Diesel and
Fuel Oil heat-content standards pursuant to Article V. BUYER shall make payment
for such provisional invoice in accordance with the instructions of this Section
6.1. If an invoice incorporating an item other than a heat rate adjustment
which is disputed has been sent to BUYER, then BUYER shall make payment in
accordance with the instructions in this Section 6.1 for such invoice items or
that portion of the invoiced Delivery which is not disputed by BUYER and in
which case BUYER shall make such adjustment to taxes and other value-dependent
items as are reasonable under the circumstances.
8
<PAGE>
The provisional invoice or invoice incorporating items in dispute shall be
adjusted in accordance with the terms of Article V by subsequent invoicing or by
issuing a credit or debit with respect to the original invoice within 7 business
days of receipt of the independent laboratory determination pursuant to Article
VIII or other resolution of the issue in dispute. BUYER shall make payment for
such subsequent invoices or debits in accordance with the instructions in this
Section 6.1. BUYER shall have the option to apply such credit against payments
to be made subsequent to the receipt of the credit, or if such payments are not
expected to be made within 15 calendar days, BUYER shall be able to receive said
credit in immediately available funds within 3 business days of SELLER's receipt
of BUYER's written instructions.
At SELLER's option and election, interest will accrue on all amounts not
paid within 15 days of the date of the invoice at the then existing LIBOR.
SECTION 6.2
Invoices which have been prepared in accordance with Section 6.1 shall be
sent to the respective BUYER at the following address:
MECO - Maui Electric Company, Ltd.
P. O. Box 398
Kahului, Hawaii 96732
Attention: Production Department
HELCO - Hawaii Electric Light Co., Inc.
P. O. Box 1027
Hilo, Hawaii 96720
Attention: Purchasing Division
Certificates of quality and quantity, reports of the independent petroleum
inspector and other documents having to do with the quantity, quality, loading
of Product onto BUYER's nominated
9
<PAGE>
vessel or otherwise with the Product sold and purchased hereunder if directed to
BUYER's agent, are to be sent in accordance with the provisions of Section 15.2
of this Contract.
ARTICLE VII
DELIVERIES, TITLE AND RISK OF LOSS
SECTION 7.1
- -----------
SELLER agrees to deliver and BUYER agrees to receive Product into BUYER'S
nominated barge, at SELLER's Loading Pier, third-party pier or wharf or other
place of loading nominated by SELLER ("Third-Party Pier") or at SELLER's SPM
pursuant to Section 7.4. Title and risk of loss of the Product shall pass to
BUYER at the receiving flange of BUYER's nominated barge or the receiving hoses
of BUYER's nominated barge. The delivery rate and barge receiving capability
on Fuel Oil shall be ----------------The delivery rate and barge receiving
capability on Diesel shall be ------------- SELLER agrees to make its best,
reasonable effort to load two products concurrently; provided, however, that
BUYER's nominated barge is capable of receiving same. Fuel Oil will be
delivered into BUYER's nominated barge at a temperature above --------Delivery
volumes will be subject to a ---------- to a ----------------- of Fuel Oil and
to a -------------to a --------------------- however, BUYER may receive a
quantity in excess of said maximum delivery volumes of Fuel Oil and Diesel as
may be mutually agreed by BUYER and SELLER; and provided further that SELLER
shall have no obligation to deliver to BUYER an amount of Diesel in excess of
- -----------during any calendar month. There will
10
<PAGE>
be at least --------- between ---------------------------------- of Diesel.
- ----------------------------------------------------------------------
SELLER shall deliver, and BUYER shall receive, at least 15% and no more
than 35% of the total annual volume of Fuel Oil and Diesel each calendar
quarter.
SECTION 7.2
Prior to the 20th day of each month, BUYER shall give SELLER a forecast of
liftings of Diesel and Fuel Oil for each of the next two months. BUYER shall be
responsible for scheduling dock space at SELLER's Loading Pier for the barge
with the State Harbors Division, and provide SELLER 48 hour notice of the
proposed loading time. BUYER shall also provide 24 hours notice to SELLER
during SELLER's regular business hours Monday through Friday (excluding
holidays) of the final quantity to be loaded, subject to a +10% loading
-
tolerance; provided, however, that in the event of a loading on Monday, or on
Tuesday, if Monday is a holiday, BUYER shall provide SELLER notice of the final
quantity to be loaded, subject to a +10% loading tolerance, by 12 noon the
-
previous Friday, or by 12 noon the previous Thursday if Friday is a holiday.
The final quantity notice must also be within 5,000 barrels of the 20th day
forecast volumes.
SECTION 7.3
BUYER's nominated barge shall comply with all applicable federal, state and
local laws, rules and regulations, and SELLER's vessel acceptance standards,
such as that portion of the "BHP Transport Petroleum Tanker Inspection
Checklist" as may be applicable to unmanned petroleum tank barges, and shall be
fit in every way to receive and carry Product. SELLER shall
11
<PAGE>
provide BUYER its Operations Manual, other safety and operations procedures and
vessel acceptance standards, and any amendments thereto, during the term of this
Contract. While at SELLER's Loading Pier, BUYER's nominated barge shall operate
in compliance with SELLER's Operations Manual as approved by the U.S. Coast
Guard. In addition, a minimum of two qualified tankermen shall be provided by
BUYER's barge during all loading operations at SELLER's Loading Pier or Third-
Party Pier.
BUYER's nominated barge shall vacate SELLER's Loading Pier or Third-Party
Pier as soon as loading is completed, except if such delay is caused by any
event or acts beyond the reasonable control of BUYER, including but not limited
to acts of God, fire, governmental acts or labor disturbances.
Dues and other charges on the barge (whether or not such dues or charges
are based on the quantity of Product loaded or on the freight and without regard
from whom such dues or charges are withheld) shall be paid by BUYER. Any taxes
on freight shall be borne by BUYER. BUYER shall be responsible for any State
fee imposed for use of SELLER's Loading Pier or Third-Party Pier in the nature
of wharfage or pipeline toll. BUYER shall employ and also be responsible for
costs of any support vessels, pilots, mooring masters, or line handlers supplied
by SELLER or otherwise required at SELLER's Loading Pier, SPM, or Third-Party
Pier, all of which shall become borrowed servants of BUYER.
Neither SELLER, nor any of its associated or affiliated companies, nor any
of the employees, servants, representatives and agents of any of the foregoing,
shall be responsible for any losses, damages, delays or liabilities resulting
from any negligence, incompetence or
12
<PAGE>
incapacity of any pilot, line handler, mooring master required at SELLER's
Loading Pier, SPM or Third-Party Pier or employed by BUYER or otherwise
assisting BUYER at the express authorization of BUYER or BUYER's agent or the
personnel of any tug(s) or other support vessels or arising from any
unseaworthiness or any insufficiency of any tug or other support vessel employed
by BUYER or otherwise assisting BUYER at the express authorization of BUYER or
BUYER's agent and BUYER agrees to indemnify and hold SELLER harmless from and
against any and all such losses, damages, delays or liabilities.
At SELLER's Loading Pier or Third-Party Pier, laytime shall commence six
hours after Notice of Readiness is tendered or three hours after BUYER's
nominated barge is all secure at pier, whichever shall first occur. Allowable
laytime shall be 14 hours; provided, however, that in the event that a part
cargo or part cargoes belonging to a third party or third parties is/are loaded
onto BUYER's nominated barge, allowable laytime shall be prorated and BUYER's
allowable laytime shall be calculated on the basis of the ratio of the bill of
lading volume of BUYER's cargo to the total bill of lading volume of the entire
cargo loaded onto BUYER's nominated barge or vessel. Laytime shall cease when
the hoses are disconnected; however, in the event part cargoes are loaded for
BUYER and a third party or parties, BUYER's laytime shall commence as provided
above if BUYER's cargo is loaded first, or shall commence upon commencement of
loading of BUYER's cargo if BUYER's cargo is not the first to be loaded, and
shall cease upon completion of loading of BUYER's cargo. Laytime is allotted
and calculated using the barge currently named NOHO HELE (having approximately a
56,000 Bbl capacity). In the event that BUYER's nominated tank vessel is other
than the NOHO HELE, laytime shall be the capacity of
13
<PAGE>
the substitute tank vessel divided by 4,000 Bbl per hour; e.g., a 40,000 Bbl
barge shall have an allocable laytime of 10 hours.
Demurrage shall be payable at a rate equal to BUYER'S actual cost of tug
and tow per hour for each hour used and prorated for each portion of an hour
used in excess of allowable laytime. In the event the condition of Buyer's
nominated barge renders it incapable of receiving cargo at the minimum delivery
rate, such that the time spent loading BUYER's nominated barge (all cargoes) is
in excess of nineteen (19) hours, SELLER shall have the right to suspend loading
operations and order BUYER's nominated barge to vacate SELLER's Loading Pier or
Third-Party Pier. SELLER shall not be liable for demurrage to the extent that
allowed laytime is exceeded due to the condition of BUYER's nominated barge or
tug, or is due to events or acts beyond SELLER's reasonable control.
SECTION 7.4
While it is the intention of the parties to make deliveries of Product at
SELLER's Loading Pier or Third-Party Pier, subject to mutual agreement,
deliveries may be made at SELLER's SPM. In addition to those provisions of this
Article VII not specific to SELLER's Loading Pier or Third-Party Pier, the
following additional provisions will also apply to these SPM deliveries.
SELLER agrees to make best, reasonable effort to deliver Fuel Oil into the
BUYER's nominated barge at a temperature above 110 deg. F. BUYER's nominated
barge shall operate in compliance with SELLER's Operations Manual approved by
the U.S. Coast Guard and shall also comply with SELLER's current requirements
for loading at its SPM as amended from time to time. SELLER may refuse to berth
or load BUYER's nominated barge at SELLER's SPM for
14
<PAGE>
failure to comply with SELLER's Operations Manual or requirements as aforesaid
and shall not be liable for any resulting delays or expenses of BUYER.
An accepted delivery day shall be determined in respect of each SPM loading
pursuant to the provisions of this section. BUYER shall provide SELLER a
proposed 3-day delivery window upon no less than seven (7) days' notice from the
first proposed delivery day. The notice shall also specify the amount of the
Product to be delivered, subject to a variation of plus or minus ten (10)
percent at BUYER's option. The delivery window shall be narrowed to two (2)
days upon no less than three (3) days' notice from the first proposed delivery
day and one (1) day upon no less than two (2) days' notice from the first
proposed delivery day. A final 24 hour accepted delivery day will be set by
mutual agreement upon receipt of the two (2) day notice. SELLER may reject the
final proposed delivery day upon providing BUYER 24 hours notice, with an
alternate delivery day being set within one (1) day of BUYER's proposed delivery
day. Notices may be given by telex, facsimile, radio or telephone.
When BUYER's nominated barge is ready to load, the master of the barge's
tug shall provide SELLER notice of readiness (NOR), and laytime shall commence
six (6) running hours after receipt of the NOR, or upon the barge's arrival in
berth (all fast), whichever first occurs. SELLER shall be allowed 24 hours
laytime for loading the entire cargo requested in the seven (7) days' notice.
BUYER's nominated barge shall vacate the SPM as soon as loading is
completed. BUYER shall be responsible for any actual loss or damage incurred by
SELLER as a direct result of the failure of BUYER's nominated barge to promptly
vacate the SPM except if such delay is
15
<PAGE>
caused by any event or acts beyond the reasonable control of BUYER, including
but not limited to acts of God, fire, governmental acts or labor disturbances.
In no event shall either party be responsible for prospective profits, or
consequential damages allegedly caused by or based upon failure of BUYER's
nominated barge to promptly vacate the SPM.
SECTION 7.5
When an escape or discharge of oil or any polluting substance occurs in
connection with or is caused by BUYER's nominated barge or its tow, or occurs
from or is caused by loading operations, BUYER or its agents shall promptly take
whatever measures are necessary or reasonable to prevent or mitigate
environmental damage, without regard to whether or not said escape or discharge
was caused by a negligent act or omission of BUYER's nominated barge or SELLER
or BUYER or others. Failing such action by BUYER or its agents, SELLER, upon
notice to BUYER and on BUYER's behalf, may promptly take whatever measures are
reasonably necessary to prevent or mitigate pollution damage. Each party shall
keep the other advised of the nature and results of the measures taken, and if
time permits, the nature of the measures intended to be taken. Each party shall
provide notice to the other pursuant to Section 15.2 or as otherwise provided
in writing from time to time during the term of this Contract. The cost of all
such measures taken shall be borne by BUYER except to the extent such escape or
discharge was caused or contributed to by SELLER, and prompt reimbursement shall
be made as appropriate; provided, however, that should BUYER or its agents give
notice to SELLER to discontinue said measures (and to the extent government
authorities allow SELLER to discontinue said measures) the continuance of
SELLER's actions will no longer be deemed to
16
<PAGE>
have been taken pursuant to the provisions of this clause. Notwithstanding any
other provision in this Contract, the foregoing provisions shall be applicable
only between BUYER and SELLER and shall not affect, as between BUYER and SELLER,
any liability of BUYER to any third parties, including the State of Hawaii and
the U.S. Government, if BUYER shall have such liability.
Should SELLER incur any liability under Chapter 128D of the Hawaii Revised
Statutes as a result of a spill from BUYER's nominated barge during transport,
BUYER shall indemnify and hold SELLER harmless to the extent not caused by
SELLER's negligence.
BUYER warrants that any vessel used to load Product purchased from SELLER
shall have in place Primary and Excess full Form Protection and Indemnity
insurance including cover for Oil Pollution Clean-Up Liability and Liability for
Oil Pollution Damage with a policy limit of $700,000,000, or the maximum
available, as reflected by the coverage carried by other vessels calling at
SELLER's SPM.
ARTICLE VIII
MEASUREMENT, SAMPLING AND TESTING
SECTION 8.1
A mutually agreed upon independent petroleum inspector (Independent
Inspector) shall attend every Product Delivery. A Delivery is defined as
beginning with the initiation of pumping of each of Diesel or Fuel Oil from
SELLER's refinery tank or nominated issuing tank to BUYER's nominated vessel and
ending with the subsequent cessation of continuous pumping of Diesel or
17
<PAGE>
Fuel Oil in such amount as is determined by the Independent Inspector's
Certificate of Quantity. Reasonable charges rendered by the Independent
Inspector shall be borne equally by BUYER and SELLER.
SECTION 8.2
Quantity determination will be made by the Independent Inspector gauging
SELLER's Product shore tanks before and after delivery. BUYER may verify
SELLER's tank strapping tables at BUYER's election and sole expense.
All measurements shall be made on the basis of net standard volumes in
barrels corrected to 60 degrees Fahrenheit using the applicable ASTM-IP volume
correction factor tables and should state whether such volumes are measured in
air or in vacuum, with conversion in accordance with the most recent ASTM-IP
Petroleum Measurement Tables (IP200) issued at the date of loading and otherwise
by manual measurements such as ASTM-IP, Chapter 17 Procedures.
The Independent Inspector shall (1) prepare and sign a certificate stating
the quantity of the load, such certificate to utilize ASTM-IP standards,
including measurement of sediment and water and API specific gravity, (2)
furnish BUYER and SELLER each with a copy of such certificate; and (3) cable or
advise by facsimile the quantity loaded to BUYER and SELLER. The data in the
inspector's certificate of quantity prepared as provided herein shall, absent
fraud or errors and omissions, be binding and conclusive upon both parties, and
shall be used for verification of the invoice and Bill of Lading.
18
<PAGE>
SECTION 8.3
Unless otherwise specifically provided herein, quality and heat content
determination shall be based upon composite samples drawn from SELLER's issuing
tanks and pipeline in accordance with ASTM sampling procedures in such a manner
as to be representative of each individual Delivery of Fuel Oil and Diesel,
respectively. If a Delivery of Diesel or Fuel Oil is from more than one issuing
tank, the specifications of the total Delivery of Diesel or Fuel Oil shall be
determined on a volumetric weighted average basis.
The Independent Inspector shall draw (a) composite samples of diesel and
fuel oil retain ("Retain Samples") prior to the loading of BUYER's nominated
barge, if such diesel and fuel oil retain is accessible to standard sampling
equipment, and (b) barge tank composite samples ("Barge Tank Samples") at the
completion of loading the Diesel and at the completion of loading the Fuel Oil
onto BUYER's nominated barge, in such a manner as to be representative of the
total volume of diesel and fuel oil retain and of each individual Delivery,
respectively. The samples described in subsections (a) and (b) herein shall be
divided into a minimum of three (3) parts:
1. One part shall be retained by SELLER's laboratory for a period of three
(3) months.
2. One part shall be provided to BUYER for the purpose of verifying
SELLER's determinations.
3. At least one part shall be sealed and provided to BUYER, or to the
Independent Inspector, to be retained.
19
<PAGE>
SELLER agrees to provide BUYER a copy of SELLER's laboratory analyses of
the issuing tank and pipeline samples showing API gravity, sulfur content, flash
point and sediment and water content prior to commencing Delivery. SELLER shall
provide BUYER the complete Certificate of Quality of the Diesel and the Fuel Oil
no later than two working days after the completion of the Delivery. BUYER
shall have the right to perform laboratory analyses in order to verify the
results of SELLER's laboratory analyses.
If SELLER or BUYER has reason to believe that the quality or quantity of
Product stated for a specific Delivery is incorrect, including a dispute as to
the test results of BUYER's samples and SELLER's shore tank and pipeline
samples, then that party shall within thirty (30) days after the later of the
date of the complete Certificate of Quality or the date of the final
determination of gross heat content, present the other party with documents
supporting such determination and the parties will confer, in good faith, on the
causes for the discrepancy and shall proceed to correct such causes and adjust
the quality and quantity, if justified, for the Delivery in question. In the
event of an unresolvable difference between SELLER and BUYER, BUYER's sealed
Barge Tank Samples, and also BUYER's sealed Retain Samples if relevant in the
opinion of the Independent Inspector, shall be provided to an independent
laboratory for a final determination, which shall be binding on the parties.
SELLER and BUYER shall share equally the cost for such independent laboratory
determination.
In the event of any quality problems occurring, both SELLER and BUYER shall
attempt to minimize the impact of any such quality problems. If efforts to
resolve the quality problem fail, BUYER may return off-specification loaded
Product to the SELLER's Barbers Point
20
<PAGE>
refinery, in which case SELLER shall replace the off-specification Product by
delivering an equal volume of Product into BUYER's nominated barge in a timely
manner.
All reasonable costs and expenses, including testing, transportation,
re-refining, and handling costs incurred in returning and replacing off-
specification Product shall be paid by the responsible party, as determined by
the independent laboratory test results and any other applicable evidence. In
no event shall either party be responsible for prospective profits, or
consequential damages allegedly caused by or based upon any quality problem with
the Product.
ARTICLE IX
RENEGOTIATION
It is understood and agreed that both parties entered into this Contract in
reliance on governmental laws, rules, decrees, orders, regulations, and
interpretations or implementation thereof in effect on the date of execution of
this Contract or any subsequent amendments hereto, to the extent that they
directly or indirectly affect the Product sold or purchased hereunder. If at
any time any of the said laws, rules, regulations, implementations or
interpretations thereof are changed or if new laws, rules, regulations or new
interpretations and implementations thereof become effective, and such change or
new laws, rules, regulations, interpretations or implementations thereof have a
significant adverse economic effect upon either party such that performance of
this Contract would be inequitable or cause substantial financial hardship to
the affected party, then the affected party shall have the option to call for
renegotiation of the price of the Product or any other provision of this
Contract the performance of which by the affected
21
<PAGE>
party would be inequitable or cause substantial financial hardship. Such option
shall be exercised by the affected party at any time after such a change or new
law, rule, regulation, interpretation or implementation thereof is effective, by
giving written notice to the other party of the call to renegotiate. Within ten
(10) calendar days after the date of such notice, the parties shall enter into
negotiations and in the event that the parties do not agree upon a new price for
the Product or other provision satisfactory to both parties within forty (40)
calendar days after the date of such notice, the affected party shall have the
right to terminate this Contract effective thirty (30) days after giving notice
of termination to the other party. Said notice of termination shall be given
within thirty (30) days immediately following the forty (40) day negotiation
period. Until a mutually satisfactory new price for the Product or other
provision has been agreed upon, or until this Contract is terminated as provided
herein, the price for the Product or other provision which was in effect when
the request for renegotiation was made shall continue in full force and effect.
ARTICLE X
FORCE MAJEURE
SECTION 10.1
Force Majeure. As used in this contract, an event or act of "force
majeure" is defined as follows: acts of God, wars, riots, strikes, labor
disputes, lockouts, blockades, insurrections, inability to secure materials or
labor by reason of allocations promulgated by governmental
22
<PAGE>
agencies, epidemics, landslides, lightning, earthquakes, fires, floods, tidal
waves, volcanic eruptions, explosions, or any other causes not within the
control of the affected party.
SECTION 10.2
Obligations Suspended. BUYER's obligation to purchase or receive Product,
or SELLER's obligation to sell or deliver Product, shall be suspended to the
extent performance is prevented by an event or act of force majeure for any
period in which such event or act exists as to the party claiming force majeure;
and so long as such party is exercising its good faith efforts to overcome such
force majeure event. However, nothing in this Article excuses BUYER from its
obligation to make payments of money due SELLER for Product already delivered to
BUYER.
SECTION 10.3
Notice of Force Majeure. The party claiming force majeure agrees to give
the other party prompt written notice of an act or event of force majeure. The
party claiming force majeure shall use due diligence to cure any act or event of
force majeure, and shall give the other party prompt notice after the act or
event of force majeure has terminated. This Article shall not require any party
to settle or compromise any strike or labor dispute.
SECTION 10.4
No Make-Up Requirement. After the act or event of force majeure has
terminated, SELLER shall not be obligated to sell and deliver and BUYER shall
not be obligated to purchase and receive the undelivered quantity of Product
which normally would have been sold and delivered during the period of force
majeure.
23
<PAGE>
ARTICLE XI
PRICE AND ALLOCATION CONTROLS
SECTION 11.1
Regulatory Price Suspension. If SELLER is precluded by statute, or by
regulation, rule, interpretation or order implementing such statute from
obtaining any increase in Product Price, as determined pursuant to this
Contract, the increase shall be suspended until said law, regulation, rule,
interpretation or order permits the increase in whole or in part. In the event
the law, regulation, rule, interpretation or order is terminated or is later
modified to permit the increase, in whole or in part, the Product Price shall be
increased for deliveries of the Product made thereafter to the level permitted
under this Contract without further action by the parties.
SECTION 11.2
Government Regulations. If the delivery or supply of Product pursuant to
this Contract conflicts with or is limited or prohibited by any federal, state
or local regulations, then to the extent of such conflict, limitation or
prohibition, SELLER shall have no obligation to deliver or supply BUYER with the
Product under this Contract and BUYER shall have no obligation to purchase or
receive the Product under this Contract. BUYER, in BUYER's discretion, may
elect to complete and file any and all required Federal or state regulatory
forms to permit, facilitate, or enable the supply of Product to BUYER under this
Contract. SELLER shall fully cooperate with BUYER in the completion and filing
of the foregoing forms. If purchase and receipt of Product pursuant to this
contract conflicts with or is limited or prohibited by any
24
<PAGE>
Federal, State, or local regulations, then to the extent of such conflict,
limitation, or prohibition, BUYER shall have no obligation to purchase and
receive the Product under this Contract.
ARTICLE XII
ASSIGNMENT
This Contract shall not be assigned by either party without prior written
consent of the other party, and any assignment without such written consent
shall be void; provided, however, HECO, HELCO, and MECO may assign their
interests in this Contract to the Trustee under their respective First Mortgage
Indentures.
ARTICLE XIII
APPLICABLE LAW
This Contract shall be deemed to be a Contract made under and shall be
governed by and construed in accordance with the laws of the State of Hawaii.
The parties hereby consent to the personal jurisdiction of the federal and state
courts in the State of Hawaii.
ARTICLE XIV
PUBLIC UTILITIES COMMISSION APPROVAL
This Contract is required to be filed with the Hawaii Public Utilities
Commission for approval. If in proceedings initiated as a result of the filing
of this Contract, the Public Utilities Commission disapproves or fails to
authorize the recovery of fuel costs incurred under this
25
<PAGE>
Contract through the BUYER's Energy Cost Adjustment Clause, BUYER may terminate
this Contract at any time within ninety (90) days of disapproval by giving sixty
(60) days written notice to the SELLER.
ARTICLE XV
ENTIRE AGREEMENT, WAIVER AND ILLEGALITY
SECTION 15.1
This Contract incorporates the entire agreement between the parties with
reference to the subject matter and cancels and supersedes as of the date of
execution hereof all prior oral or written understandings, or agreements,
between the parties with respect to the subject matter and may only be modified
by written instrument executed by duly authorized representatives of the
parties. There are no other agreements which constitute any part of the
consideration for, or any condition to, either party's compliance with its
obligations under this Contract. Failure to insist upon strict performance of
any provision shall not constitute a waiver of the right to require such
performance, nor shall a waiver in one case constitute a waiver with respect to
a later breach, whether of a similar nature or otherwise. If any term or
provision of this Contract is held by any Court to be illegal or unenforceable,
the remaining terms, provisions, rights and obligations shall not be affected.
The headings or captions are for convenience only and have no force or
effect on legal meaning in the construction or enforcement of the Contract.
Time shall be of the essence in this Contract.
26
<PAGE>
SECTION 15.2
Except as otherwise expressly provided herein, all notices shall be given
in writing, by letter, telegram, or telex to the following addresses, or such
other addresses as the parties may designate by notice, and shall be deemed
given upon receipt.
SELLER: Vice President - Marketing
BHP Petroleum Americas Refining Inc.
733 Bishop Street
Honolulu, Hawaii 96813
Facsimile: (808) 547-3796
BUYER: Hawaiian Electric Company, Inc.
P.O. Box 2750
Honolulu, Hawaii 96840
Attn: Manager, Power Supply Services Department
Facsimile: (808) 543-7788
The Manager, Power Supply Services Department, for Hawaiian Electric Company,
Inc. shall be responsible for forwarding notices to the other parties to this
Contract.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
thereby, have caused this Contract to be executed in duplicate originals by
their duly authorized officers.
HAWAIIAN ELECTRIC BHP PETROLEUM AMERICAS
COMPANY, INC. REFINING INC.
By /s/ Edward Y. Hirata By /s/ Faye W. Kurren
Its Vice President Its Vice President
Regulatory Affairs SELLER
By /s/ Molly M. Egged
Its Secretary
HAWAII ELECTRIC LIGHT
COMPANY, INC.
By /s/ Edward Y. Hirata
Its Vice President
By /s/ Molly M. Egged
Its Secretary
BUYER
MAUI ELECTRIC COMPANY, LTD.
By /s/ Edward Y. Hirata
Its Vice President
By /s/ Molly M. Egged
Its Secretary
BUYER
28
<PAGE>
EXHIBIT A
NO. 6 INDUSTRIAL FUEL OIL SPECIFICATIONS
<TABLE>
<CAPTION>
Specification - Test Item Measurement Unit Limits ASTM Method
<S> <C> <C> <C>
GRAVITY @ 60 DEGREES F. Degrees API 6.5 Min. D-1298,
D-4052-86
FLASH POINT Degrees F. 150 Min. D-93
VISCOSITY SSF At 77 DF - - - D-445,
D-2161
VISCOSITY SSF At 122 DF 179 Min. D-445,
226 Max. D-2161
POUR POINT Degrees F. 55 Max. D-97
SULFUR Percent, Weight 2.00 Max. D-1552,
D-2622,
D-4294
SEDIMENT & WATER Percent, Volume 0.5 Max. D-1796
HEAT VALUE, GROSS MM BTU/BBL 6.2 million D-240
Min.
LOADING TEMPERATURE Degrees F. 110 Min. n/a
150 Max.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT B
DIESEL SPECIFICATIONS
Specification - Test Item Measurement Unit Limits ASTM Method
<S> <C> <C> <C>
GRAVITY @ 60 DEGREES F. Degrees API 30.0 Min. D-1298,
D-4052-86
SPECIFIC GRAVITY 60/60 DEGREES F. n/a .8762 Min. D-1298,
D-4052-86
VISCOSITY SSU At 100 DF 32.6 Min. D-445,
40.1 Max. D-2161
FLASH POINT, PM Degrees F. 150 Min. D-93
POUR POINT Degrees F. 35 Max. D-97
ASH PPM, Wt. 100 Max. D-482
CETANE INDEX n/a 40 Min. D-4737
CARBON RESIDUE,
10% RESIDUUM %, Wt. .35 Max. D-524
SEDIMENT & WATER Percent, Volume 0.05 Max. D-1796
SULFUR Percent, Weight 0.40 Max. D-1552,
D-2622,
D-4294
DISTILLATION,
90% RECOVERED Degrees F. 540 - 650 D-86
SODIUM+POTASSIUM PPM, Wt. 0.5 Max. D-3605
NITROGEN PPM, Wt. Report D-4629
* HEAT VALUE, GROSS MM BTU/BBL 5.86 D-240,
D-4868
</TABLE>
* Typical Value
30
<PAGE>
EXHIBIT C
No. 6 FUEL OIL EXAMPLE PRICE CALCULATION
Illustrative Price Calculation for August, 1995
The price in U.S. Dollars ("USD") per barrel of No. 6 Fuel Oil shall be
determined monthly on the basis of the following price formula for a Delivery
wit a standard gross heat content (no less than 6.2 million Btu per barrel nor
more than 6.45 million Btu per barrel, as measured):
--------------
BP = Platt's Bunkerwire Los Angeles Bunker C
- --------------------------------------------
Date of Price Price in USD per barrel
Low High
--- ----
6/22/95 $93.00 $96.00
6/27/95 $91.00 $94.00
6/29/95 $93.00 $96.00
7/06/95 $91.00 $93.00
7/11/95 $89.00 $92.00
7/13/95 $89.00 $91.00
7/18/95 $85.00 $89.50
Average of mean in USD per metric ton: $91.607
Expressed in USD per Bbl: BP = $14.386 per barrel
(= $91.607/MT / 6.368 Bbl/MT)
- ---------------------
T = Taxes applicable to sale of Fuel Oil
- ----------------------------------------
Taxes before application of Hawaii General Excise Tax (HGET):
Federal Superfund Petroleum Fee = $0.097 per barrel
HGET = 4.167% of pre-HGET price
Hawaii Environmental Response Tax applied after HGET = $0.05 per barrel
31
<PAGE>
Price For Fuel Oil With Standard Gross Heat Content (6.2 - 6.45 MM Btu Per
Barrel)
=
------------------------------------------
=
------------------------------------------
=
------------------------------------------
The price in USD per barrel of No. 6. Fuel Oil shall be determined monthly on
the basis of the following price formula for a Delivery with other than a
standard gross heat content (less than 6.2 million Btu per barrel or more than
6.45 million Btu per barrel, as measured):
-----------------------------------
HC = The actual gross heat content of each Fuel Oil Delivery pursuant to Section
5.5 expressed in million BTUs per barrel with three significant figures to
the right of the decimal point.
Fuel Oil Price For Delivery with Assumed Gross Heat Content Other than Standard
For an assumed HC value of 6,498 MM Btu per barrel
=
------------------------------------------
=
------------------------------------------
=
------------------------------------------
=
------------------------------------------
EXPLANATION OF TAXES:
- --------------------
Taxes in the Fuel Oil price currently in effect include Superfund Tax of $0.097
per barrel and the Hawaii Environmental Response Tax of $0.050 per barrel. Also,
Hawaii State General Excise Tax of 4.167% will be paid on all components of the
Fuel Oil price, except the Hawaii Environmental Response Tax.
32
<PAGE>
EXHIBIT D
---------
DIESEL EXAMPLE PRICE CALCULATION
--------------------------------
Illustrative Price Calculation for August, 1995
The price in U.S. Dollars ("USD") per gallon of Diesel shall be determined
monthly on the basis of the following price formula for a Delivery with a
standard gross heat content (no less than 137,000 Btu per gallon nor more than
141,000 Btu per gallon, as measured):
---------------------
DP = Oil Price Information Service Pacific Northwest Spot .5% Sulfur
- --------------------------------------------------------------------
Diesel Price
- ------------
<TABLE>
<CAPTION>
Date of Price Price in USD per gallon
<S> <C> <C>
Low High
--- ----
6/19/95 $0.5200 $0.5250
6/20/95 $0.5250 $0.5300
6/21/95 $0.5200 $0.5250
6/22/95 $0.5200 $0.5250
6/26/95 $0.5150 $0.5200
6/27/95 $0.5100 $0.5150
6/28/95 $0.5100 $0.5200
6/29/95 $0.5150 $0.5250
7/05/95 $0.5250 $0.5350
7/06/95 $0.5225 $0.5300
7/10/95 $0.5300 $0.5350
7/11/95 $0.5250 $0.5350
7/12/95 $0.5250 $0.5350
7/13/95 $0.5250 $0.5350
7/17/95 $0.5300 $0.5350
7/18/95 $0.5300 $0.5400
7/19/95 $0.5400 $0.5450
7/20/95 $0.5300 $0.5400
</TABLE>
Average of mean in USD per gallon: $0.5270
DP = $0.5270 per gallon
- -----------------
33
<PAGE>
T = Taxes applicable to sale of Diesel
- --------------------------------------
Taxes before application of Hawaii General Excise Tax (HGET):
Federal Superfund Petroleum Fee = $0.097 per barrel, $0.0023 per gallon
HGET = 4.167% of pre-HGET price
Taxes after application of Hawaii General Excise Tax (HGET):
Hawaii Environmental Response Tax = $0.05 per barrel, $0.0012 per gallon
Hawaii Liquid Fuel Tax = $0.01 per gallon
PRICE FOR DIESEL WITH STANDARD GROSS HEAT CONTENT (137,000 - 141,000 BTU PER
GALLON)
= ---------------------------
= ------------------------------------
= ---------------------------
The price in USD per gallon of Diesel shall be determined monthly on the basis
of the following price formula for a Delivery with other than a standard gross
heat content (less than 137,000 Btu per gallon or more than 141,000 Btu per
gallon, as measured):
--------------------------
HC = The actual gross heat content of each Diesel Delivery pursuant to Section
5.5 expressed in BTUs per gallon.
PRICE FOR DELIVERY OF DIESEL WITH ASSUMED GROSS HEAT CONTENT OTHER THAN STANDARD
For an assumed HC value of 136,000 Btu per gallon
= ---------------------------
= ---------------------------
= ---------------------------
= ---------------------------
34
<PAGE>
EXPLANATION OF TAXES:
Taxes in the Diesel price currently in effect include Superfund Tax of $0.097
per barrel ($0.0023 per gallon), the Hawaii Environmental Response Tax of $0.050
per barrel ($0.0012 per gallon) and the Hawaii Liquid Fuel Tax of $0.01 per
gallon. Also, the Hawaii State General Excise Tax of 4.167% will be paid on all
components of the Diesel price, except the Hawaii Environmental Response Tax and
the Hawaii Liquid Fuel Tax.
35
