SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
or
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended September 30, 1994 Commission File Number 1-3034
Northern States Power Company
Exact name of registrant as specified in its charter)
Minnesota 41-0448030
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
414 Nicollet Mall, Minneapolis, Minnesota 55401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 330-5500
None
Former name, former address and former fiscal year, if changed since
last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
-----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 31, 1994
Common Stock, $2.50 par value 66,905,587 shares
<TABLE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Northern States Power Company (Minnesota) and Subsidiaries
Statements of Income (Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1994 1993 1994 1993
(Thousands of dollars) (Thousands of dollars)
<S> <C> <C> <C> <C>
Utility operating revenues
Electric................................................. $570,522 $557,289 $1,577,904 $1,501,948
Gas...................................................... 41,806 44,635 299,850 286,045
Total.................................................. 612,328 601,924 1,877,754 1,787,993
Utility operating expenses
Fuel for electric generation............................. 88,163 82,212 248,887 238,000
Purchased and interchange power.......................... 70,028 70,517 194,071 153,962
Cost of gas purchased and transported.................... 24,987 33,955 188,617 192,823
Other operation.......................................... 76,746 70,913 227,620 227,576
Maintenance.............................................. 41,049 37,636 121,434 119,337
Administrative and general............................... 48,282 42,239 142,532 137,743
Conservation and energy management....................... 7,783 7,808 23,256 21,877
Depreciation and amortization............................ 68,628 67,139 204,340 198,232
Taxes: Property and general.............................. 59,939 57,890 178,315 169,912
Current income tax expense........................ 40,432 42,394 118,174 97,731
Deferred income tax expense....................... (436) 1,314 (2,028) 6,659
Deferred investment tax credits recognized ....... (2,205) (2,169) (7,717) (6,527)
Total.................................................. 523,396 511,848 1,637,501 1,557,325
Utility operating income.................................. 88,932 90,076 240,253 230,668
Other income and expense
Allowance for funds used during construction - equity.... 1,052 2,188 3,245 4,819
Equity in earnings of unconsolidated investees........... 8,143 2,185 20,899 2,949
Other income (expense) - net............................. 5,273 194 6,517 (536)
Total other income...................................... 14,468 4,567 30,661 7,232
Income before interest charges............................ 103,400 94,643 270,914 237,900
Interest charges
Interest on long-term debt............................... 23,863 25,985 69,154 77,898
Other interest and amortization.......................... 5,873 2,604 13,280 6,337
Allowance for funds used during construction - debt...... (2,401) (1,601) (6,188) (4,363)
Total.................................................. 27,335 26,988 76,246 79,872
Net Income ............................................... 76,065 67,655 194,668 158,028
Preferred stock dividends ................................ 3,097 3,743 9,210 11,287
Earnings available for common stock....................... $72,968 $63,912 $185,458 $146,741
Average number of common and equivalent
shares outstanding (000's).............................. 66,867 66,505 66,799 64,664
Earnings per average common share......................... $1.09 $0.96 $2.78 $2.27
Common dividends declared per share....................... $0.660 $0.645 $1.965 $1.920
Statements of Retained Earnings (Unaudited)
Balance at beginning of period............................ $1,152,787 $1,100,176 $1,127,372 $1,099,896
Net income for period..................................... 76,065 67,655 194,668 158,028
Dividends declared:
Cumulative preferred stock............................... (3,097) (3,743) (9,210) (11,287)
Common stock............................................. (44,158) (42,928) (131,233) (125,477)
Balance at end of period.................................. $1,181,597 $1,121,160 $1,181,597 $1,121,160
The Notes to Financial Statements are an integral part of the Statements of Income and Retained Earnings.
</TABLE>
<TABLE>
Northern States Power Company (Minnesota) and Subsidiaries
Balance Sheets (Unaudited)
<CAPTION>
September 30, December 31,
1994 1993
ASSETS (Thousands of dollars)
<S> <C> <C>
UTILITY PLANT
Electric.................................................. $6,305,554 $6,167,670
Gas....................................................... 658,909 621,871
Other..................................................... 257,381 237,293
Total................................................. 7,221,844 7,026,834
Accumulated provision for depreciation.................. (3,076,487) (2,888,144)
Nuclear fuel.............................................. 787,164 749,078
Accumulated provision for amortization.................. (707,875) (673,669)
Net utility plant..................................... 4,224,646 4,214,099
CURRENT ASSETS
Cash and cash equivalents................................. 39,759 57,812
Short-term investments.................................... 1,627 26
Accounts receivable - net................................. 254,861 266,531
Accrued utility revenues..................................... 78,803 111,296
Federal income tax and interest receivable........... 28,282 20,927
Materials and supplies - at average cost..................... 159,139 145,375
Prepayments and other..................................... 35,598 40,885
Total current assets.................................... 598,069 642,852
OTHER ASSETS
Regulatory assets.................................... 375,965 334,354
Non-regulated property - net......................... 160,696 157,615
Investments in non-regulated projects................ 143,192 45,772
External decommissioning fund and other investments.. 149,643 121,657
Federal income tax and interest receivable........... 57,360 0
Intangible assets and other.......................... 72,112 71,369
Total other assets................................ 958,968 730,767
TOTAL................................................. $5,781,683 $5,587,718
LIABILITIES
CAPITALIZATION
Common stock equity
Common stock and premium - authorized 160,000,000
shares of $2.50 par value, issued shares:
1994, 66,905,587; 1993, 66,879,577............... $712,592 $710,969
Retained earnings....................................... 1,181,597 1,127,372
Leveraged common stock held by ESOP ....................... (4,957) (10,887)
Currency translation adjustments - net............. 1,921 0
Total common stock equity............................. 1,891,153 1,827,454
Cumulative preferred stock and premium - authorized
7,000,000 shares of $100 par value; outstanding
shares: 1994 and 1993, 2,400,000
without mandatory redemption....................... 240,469 240,469
Long-term debt............................................ 1,311,938 1,291,867
Total capitalization.................................. 3,443,560 3,359,790
CURRENT LIABILITIES
Long-term debt due within one year........................ 14,251 90,618
Redeemable long-term debt............................ 141,600 141,600
Short-term debt - primarily commercial paper......... 252,405 106,200
Accounts payable.......................................... 181,716 210,654
Taxes accrued............................................. 218,288 177,853
Interest accrued.......................................... 22,843 24,110
Dividends payable on common and preferred stocks......... 47,255 46,195
Rate refunds to customers............................ 0 12,235
Accrued payroll, vacation and other........................ 68,638 61,557
Total current liabilities............................. 946,996 871,022
OTHER LIABILITIES
Accumulated deferred income taxes......................... 815,992 788,378
Accumulated deferred investment tax credits............... 177,291 187,466
Regulatory liabilities.................................... 243,359 243,880
Pension and other benefit obligations................ 83,936 64,224
Other long-term obligations and deferred income............ 70,549 72,958
Total other liabilities................................ 1,391,127 1,356,906
COMMITMENTS AND CONTINGENT LIABILITIES (See Notes 4, 5 and 6)
TOTAL............................................... $5,781,683 $5,587,718
The Notes to Financial Statements are an integral part of the Balance Sheets.
</TABLE>
<TABLE>
Northern States Power Company (Minnesota) and Subsidiaries
STATEMENTS OF CASH FLOWS (Unaudited)
<CAPTION>
Nine Months Ended
September 30
1994 1993
(Thousands of dollars)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income............................................................. $194,668 $158,028
Adjustments to reconcile net income to cash from operating activities:
Depreciation and amortization........................................ 226,867 211,931
Nuclear fuel amortization............................................ 34,737 32,828
Deferred income taxes................................................ (1,788) (9,091)
Deferred investment tax credits recognized........................... (7,950) (6,753)
Allowance for funds used during construction - equity................ (3,245) (4,819)
Equity in earnings of partnerships and unconsolidated subsidiaries... (20,899) (2,949)
Gain from non-regulated project termination settlement............... (9,685) 0
Cash provided by changes in certain working capital items............ 29,481 80,757
Conservation program expenditures - net of amortization.............. (18,905) (9,032)
Cash used for changes in other assets and liabilities................ (29,118) (5,907)
Net cash provided by operating activities 394,163 444,993
Cash Flows from Investing Activities:
Capital expenditures .................................................. (259,529) (242,984)
Decrease in construction payables...................................... (5,259) (3,467)
Allowance for funds used during construction - equity.................. 3,245 4,819
Temporary investment - pollution control bond refinancing proceeds.... 0 (100,000)
(Purchase) sale of short-term investments - net........................ (1,601) 61
Investment in external decommissioning fund............................ (22,230) (23,562)
Proceeds from non-regulated project termination settlement............. 14,000 0
Investments in non-regulated projects and other........................ (89,852) (7,731)
Business acquisitions.................................................. 0 (155,299)
Net cash used for investing activities (361,226) (528,163)
Cash Flows from Financing Activities:
Changes in short-term debt - net issuances (repayments)................ 146,205 (115,061)
Proceeds from issuance of long-term debt............................... 208,525 369,923
Repayment of long-term debt (including reacquisition premium).......... (267,159) (199,856)
Proceeds from issuance of common stock................................. 822 170,437
Dividends paid......................................................... (139,383) (133,303)
Net cash (used for) provided by financing activities (50,990) 92,140
Net (decrease) increase in cash and cash equivalents...................... (18,053) 8,970
Cash and cash equivalents at beginning of period.......................... 57,812 15,752
Cash and cash equivalents at end of period................................ $39,759 $24,722
The Notes to Financial Statements are an integral part of the Statements of Cash Flows.
</TABLE>
Northern States Power Company (Minnesota) and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the
financial position of Northern States Power Company (Minnesota) (the
Company) and its subsidiaries (collectively, NSP) as of September 30,
1994 and December 31, 1993, the results of its operations for the three
and nine months ended September 30, 1994 and 1993, and its cash flows
for the nine months ended September 30, 1994 and 1993. Due to the
seasonality of NSP's electric and gas sales, operating results on a
quarterly basis are not necessarily an appropriate base from which to
project annual results.
The accounting policies followed by NSP are set forth in Note 1
to NSP's financial statements in the 1993 Form 10-K. The following
notes should be read in conjunction with such policies and other
disclosures in the Form 10-K.
Certain reclassifications have been made to 1993 financial
information to conform with the 1994 presentation. These
reclassifications had no effect on net income or earnings per share as
previously reported.
1. Accounting Changes
Postemployment Benefits
Effective January 1, 1994 NSP adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 112 - Accounting for
Postemployment Benefits. This standard required the accrual of certain
postemployment costs (such as injury compensation and severance) that
are payable in future time periods. The annual expense for costs
accrued under SFAS No. 112 is not materially different than amounts
recognized under NSP's prior accounting method. NSP has recorded its
full liability related to such costs in 1994 but has deferred the pre-
1994 portion chargeable to operating expense (approximately $9 million)
based on the Company's preliminary decision to request amortization and
rate recovery over future periods, consistent with regulatory precedent
for similar costs. On October 26, 1994 the Minnesota Public Utilities
Commission (MPUC) approved another Minnesota utility's request to defer
pre-1994 SFAS No. 112 costs and amortize them over a three-year period.
When the MPUC's order becomes available in the fourth quarter of 1994,
the Company plans to evaluate its cost recovery options for SFAS No. 112
costs, including the possible use of the three-year amortization
procedure approved by the MPUC.
Fair Value Accounting for Certain Investments
Effective January 1, 1994 NSP adopted the provisions of SFAS No.
115 - Accounting for Certain Investments in Debt and Equity Securities.
This new standard resulted in an increase of approximately $4.1 million
to decommissioning investments to present such investments at their
market value at September 30, 1994. This increase represents an
unrealized gain on investments which has been deferred as a regulatory
liability. The Company anticipates the offsetting of such gains against
decommissioning costs in future ratemaking.
Accounting for Employee Stock Ownership Plans (ESOP)
Effective January 1, 1994 NSP adopted the American Institute of
Certified Public Accountants' Statement of Position (SOP) 93-6. This
SOP required the accrual of compensation expense for any market value
increase in uncommitted leveraged ESOP shares. It also required the
reduction of average common shares used to compute earnings per share
by such uncommitted ESOP shares. No compensation expense was required
to be recorded by NSP upon adoption of the SOP. The impact of the
reduction in average common shares had an immaterial impact on 1994
earnings per share (less than 1 cent). Of the 5.4 million shares of the
Company's stock that NSP's ESOP currently holds, an average of
approximately 134,000 uncommitted leveraged ESOP shares were excluded
from earnings per share calculations for the first nine months of 1994.
The fair value of NSP's leveraged ESOP shares approximated cost at
September 30, 1994.
Stock Compensation Expense
The Financial Accounting Standards Board (FASB) had previously
issued an Exposure Draft requiring the accrual of compensation expense
related to certain stock awards beginning in 1997, with disclosure
required beginning in 1994. On June 8, 1994, the FASB postponed issuing
the final version of the proposed new accounting rule, and eliminated
disclosure requirements for 1994.
2. Non-Regulated Earnings and International Investments
NSP's net income for the first nine months of 1994 includes
earnings from all non-regulated businesses of $20.9 million, or $0.31
per share. Through its subsidiaries, NRG Energy, Inc. (NRG), a wholly
owned subsidiary of the Company, has purchased equity interests in
three significant non-regulated international energy projects. Earnings
from equity interests in these international projects for the first nine
months of 1994 were $15.8 million before income taxes and $12.9 million
net of foreign income taxes, or approximately $0.20 per share.
German Projects
In December 1993, a subsidiary of NRG agreed to acquire an
ownership interest in the German corporation Mitteldeutsche
Braunkohlengesellschaft mbh (MIBRAG). MIBRAG was formed by the German
government to operate coal mines, electric power plants, and other
energy related facilities. NRG's subsidiary and its two investor
partners each agreed to acquire 33% interests in MIBRAG, while the
German government retained a 1% interest. The investor partners began
operating MIBRAG effective January 1, 1994, subject to several
contingencies. NSP's earnings for the first quarter of 1994 did not
include NRG's equity in the earnings of MIBRAG due to the unresolved
contingencies. During the second quarter 1994, essentially all of the
contingencies were favorably resolved. Accordingly, in June 1994 NRG
recorded its equity in earnings of the MIBRAG project for the first six
months of 1994. The legal closing occurred on August 11, 1994. Through
September 30, 1994, NRG had invested approximately $15 million,
including capitalized development costs, for its interest in MIBRAG.
Through September 30, 1994, another subsidiary of NRG had invested
$10 million, including capitalized development costs, in its 50% interest
in a German corporation, Saale Energie GmbH (Saale). Saale owns a 400-
megawatt share of a 900-megawatt power plant (Schkopau power station)
currently under construction near Schkopau, Germany. See Note 4 to the
Financial Statements for further discussion of commitments related to
this project.
Australian Projects
Through March 1994, another subsidiary of NRG had invested
approximately $70 million, including capitalized development costs, in
a joint venture which acquired a 1680-megawatt coal-fired power plant
in Gladstone, Queensland, Australia. NRG's investment represents a
37.5% ownership in the Australian plant.
Foreign Currency Transactions
Local currencies are generally the functional currency of NSP's
foreign operations. Assets and liabilities of international
subsidiaries are translated at end-of-period rates of exchange. Income,
expense and cash flows are translated at weighted-average rates of
exchange for the period. The resulting currency translation adjustments
are accumulated and reported as a separate component of shareholder's
equity.
Gains and losses that result from translation of foreign currency
transactions (i.e. converting cash into a different currency at a
translation rate different from that which applied when the receivable
or payable was accrued) will be included in the results of operations.
Through September 30, 1994, NRG had not experienced any material
translation gains or losses from foreign currency transactions which
have occurred since the respective investment dates.
NRG does not speculate in foreign currencies. NRG's policy
is to hedge foreign currency denominated investments as they are made
to preserve the U.S. dollar value of its equity position in foreign
currency denominated investment assets. NRG has entered into hedging
transactions through the use of forward foreign currency exchange
agreements. Gains and losses on these contracts offset the effect of
foreign currency exchange rate fluctuations on the valuation of the
investments underlying the hedges. The net effect of these gains and
losses is reported with other currency translation adjustments as a
separate component of stockholders' equity. NRG is not hedging currency
translation adjustments related to operating results.
As a part of its hedging program, NRG has entered into three
forward foreign currency exchange contracts with a counterparty.
Pursuant to these contracts, transactions have been executed which are
designed to protect the economic value of NRG's equity investments that
are denominated in Australian dollars and German deutsche marks (DM).
Management believes NRG's exposure to credit risk due to nonperformance
by the counterparty to its forward exchange contracts is not significant
based on the Investment Grade credit rating of the counterparty.
NRG's forward foreign currency exchange contracts hedge
approximately $83 million of foreign currency denominated investments
and $10 million of foreign currency denominated investment commitments
at September 30, 1994. These forward foreign currency exchange
contracts are not reflected in NSP's balance sheet. The contracts
terminate in 2004 and require foreign currency interest payments by
either party during each year of the contract. If the contracts had
been terminated at September 30, 1994, $1.7 million would have been
payable to NRG for currency exchange rate changes to date.
Income Taxes for International Operations
It is the intention of NSP's management to indefinitely reinvest
the earnings of foreign operations. Accordingly, U.S. deferred income
taxes and foreign withholding taxes have not been provided on the
earnings of foreign subsidiary companies. The cumulative amount of
undistributed pretax earnings of foreign subsidiaries upon which no U.S.
deferred income taxes or foreign withholding taxes have been provided
is approximately $15.8 million at September 30, 1994. The additional
U.S. income tax and foreign withholding tax on the unremitted foreign
earnings, if repatriated, would be offset in whole or in part by foreign
tax credits, and thus it is impracticable to estimate the amount of tax
that might be payable.
U.S. Cogeneration Project
In July 1994, Michigan Cogeneration Partners Limited Partnership
(MCP), a joint venture between subsidiaries of NRG and Cogentrix Energy,
Inc., reached an agreement with Consumers Power Company (Consumers), an
electric utility headquartered in Jackson, Michigan, to terminate the
power sales contract related to a 65 megawatt cogeneration facility being
developed by MCP in Parchment, Michigan. The agreement to terminate the
contract required Consumers to make a payment to MCP of $29.8 million. As
a result, NRG has recorded a net gain from the termination of this contract
which has increased NSP's earnings by approximately nine cents per share in
the third quarter of 1994. NRG's net gain from the termination in the
third quarter has been partially offset by a write-down of investments in
other domestic energy projects which decreased NSP's earnings by approximately
four cents per share.
3. Investments Accounted for by the Equity Method
Project Investments - NSP has investments in various projects
accounted for by the equity method of accounting. Current investments
include both international and domestic energy projects and domestic
affordable housing and real estate projects. Prior to 1994 such
investments had been limited to immaterial domestic projects. The
equity method is applied to investments in which NSP does not have a
majority interest or is not able to exercise a controlling influence
over operating and financial policies. A summary of the significant
investments is as follows:
Economic Placed in
Name Geographic Area Interest Service
Various Independent Power
Production Facilities United States 45%-50% July 1991-June 1993
Affordable Housing-Ltd.
Partnerships United States 50%-99% April 1993-May 1994
Western Syncoal
Partnership United States 50% August 1993
MIBRAG Europe 33.0% January 1994
Gladstone Power Station Australia 37.5% March 1994
Schkopau Power Station Europe 20.6% Under Construction
Summarized Financial Information of Unconsolidated Investees -
Summarized financial information for these projects, including interests
owned by NSP and other parties, was as follows as of September 30, 1994
and for the nine-month period then ended:
Financial Position Results of Operations
(Millions of dollars) (Millions of dollars)
Current Assets $489.2 Operating Revenues $513.5
Other Assets 1,311.3
Operating Income $68.9
Total Assets $1,800.5
Net Income $69.1
Current Liabilities $126.9
Other Liabilities 1,224.5
Equity 449.1
Total Liabilities and Equity $1,800.5
4. Commitments and Contingent Liabilities
The Company's public liability for claims resulting from any
nuclear incident, and insurance coverage thereon, have not changed
significantly from the circumstances set forth in Note 15 to the
Company's financial statements contained in the Company's 1993 report
on Form 10-K.
NRG is contractually committed to additional equity investments
in Saale. Such commitments are for approximately DM 16.5 million in
1994, DM 36 million in 1995, and DM 35 million in 1996. The 1994
commitment has been hedged through a forward foreign currency exchange
contract for $10 million. The 1995 and 1996 commitments would be
approximately $23 million each year, based on exchange rates in effect
at September 30, 1994.
5. Resolution of Operating Contingency
The onsite storage pool for spent nuclear fuel at the Company's
Prairie Island Nuclear Generating Plant (Prairie Island) was filled
during refueling in June 1994, so adequate space for a subsequent
refueling is no longer available. In anticipation of this, the Company
proposed construction of a temporary onsite dry cask storage facility
for spent nuclear fuel at Prairie Island. The Minnesota Legislature
(Legislature) considered the dry cask storage issue during its 1994
legislative session as required by a Minnesota Court of Appeals ruling
in June 1993.
On May 10, 1994, the Governor of the State of Minnesota (Governor)
signed into law a bill passed by the Legislature on May 6, 1994. The
law authorizes the Company to install 17 dry casks at Prairie Island if
the Company satisfies certain responsibilities. The Company executed
an agreement with the Governor concerning the renewable energy and
alternative siting commitments contained in the new law and is now
authorized the first increment of five casks. The second increment of
four casks would be available if the Minnesota Environmental Quality
Board finds that by December 31, 1996, the Company has applied to the
Nuclear Regulatory Commission for an alternative site license for the
temporary spent nuclear fuel storage facility, used good faith in
locating an alternative site and has committed to build or purchase 100
megawatts of wind generation. The final increment of eight casks would
be available unless prior to June 1, 1999, the Legislature specifically
revokes the authorization for the final eight casks. The Legislature
can revoke the authorization if an alternative storage site is not
operational or under construction, or the Company fails to meet certain
renewable energy commitments, including the increased use of wind power
and biomass generation facilities by December 31, 1998.
The Company has taken steps to comply with the new legislative
requirements. Currently, 25 megawatts (Mw) of wind generation are in
place and all significant permit applications have been filed for
another 100 Mw. The Company anticipates filing with the MPUC a proposal
for the first 50 Mw of biomass generation later this fall. In addition,
the Company announced its plan to seek significant public input in its
exploration for an alternative interim spent nuclear fuel storage site
in Goodhue County. The Company's construction commitments are not
expected to be materially different than levels previously disclosed in
the 1993 Form 10-K as a result of the 1994 Prairie Island legislation.
The impact of the legislation on power purchase commitments is not yet
determinable.
An updated nuclear decommissioning study and nuclear plant
depreciation capital recovery request was filed with the MPUC in July
1994 for the Company's nuclear power plants. Although management
expects to operate the Prairie Island plant units through the end of
their useful lives, the requested capital recovery would allow for the
plant to be fully depreciated, including the accrual and recovery of
decommissioning costs, about six years earlier than the end of its
useful life. The proposed recovery period has been reduced because of
the uncertainty regarding the spent fuel storage situation. The study
supports a decrease in cost estimates for decommissioning. The combined
impact of the request if approved as filed, including the shorter
depreciation period and lower decommissioning costs, would be a decrease
of about $500,000 in annual depreciation and decommissioning expenses.
Although there is no time deadline for MPUC action, the Company is
hopeful of a decision by the end of the year.
6. Rate Matters
NSP's 1993 Annual Report on Form 10-K discussed an appeal filed
by intervenors in the Company's 1993 Minnesota electric and gas rate
cases. On August 2, 1994, the Minnesota Court of Appeals affirmed the
final rate orders issued in January 1994 for these rate cases. This
appeal process is now completed. As a result of this decision, no
adjustments or changes are required to rates charged to customers or to
revenues recorded by the Company.
On August 9, 1994 the Company applied to the North Dakota Public
Service Commission (NDPSC) for a rate reduction of $3.6 million in
annual electric revenues. The reduction reflects a correction in cost
allocations to the North Dakota jurisdiction. The Company also
requested authority to make refunds to customers to effectively
implement the reduction as of June 1, 1994. On November 9, 1994, the
NDPSC approved the proposed rate reduction, the liability for which has
been accrued as of September 30, 1994. In early 1995 the NDPSC will
address the possibility of retroactive refunds for the period January 1,
1989 through June 1, 1994. Due to the uncertainty surrounding this issue,
no accrued liability has been recorded for retroactive refunds.
In 1991, the Minnesota legislature passed a law which granted the
MPUC authority to approve a rate adjustment clause for changes in
certain costs (including property taxes, fees and permits) incurred by
Minnesota public utilities. The MPUC may approve a utility's use of the
rate adjustment clause for billing customers if certain conservation
expenditure levels are met. On September 30, 1994 and October 4, 1994,
the Company filed for approval of the use of the rate adjustment clause
for billing its electric and gas customers, respectively, beginning in
January 1995. The potential annual revenue increase from these filings
is approximately $18.4 million.
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Results of Operations
Northern States Power Company's earnings per share for the third
quarter ended September 30, 1994, were $1.09, up $.13 from the $.96
earned for the same period a year ago. For the first nine months of
1994, earnings per share were $2.78, up $.51 from the $2.27 earned in
the comparable period a year ago. The number of average common and
equivalent shares outstanding (considering stock options and awards)
during the third quarter and first nine months of 1994 increased in
comparison to 1993 by approximately 362,000 shares due to the exercise
and granting of stock options and awards, and 2,135,000 shares due
mainly to a general stock offering made in May 1993, respectively.
In addition to items noted in the 1993 Form 10-K, the historical
and future trends of NSP's operating results have been and are expected
to be impacted by the following factors:
Non-regulated Businesses - Through September 1994, NSP's non-
regulated businesses have provided a $.25 increase in earnings per share
due mainly to income contributions from various energy projects. See
Notes 2 and 3 to the Financial Statements for more information on these
projects.
Prairie Island Nuclear Fuel Storage - In May 1994 the Minnesota
Legislature approved a plan for the temporary onsite storage of spent
nuclear fuel at the Company's Prairie Island Nuclear Generating Plant,
if the Company satisfies certain responsibilities. See Note 5 to the
Financial Statements for more information on this matter.
Accounting Changes - Effective January 1, 1994, NSP adopted three
new accounting standards for postemployment benefits, fair value
accounting for certain investments and employee stock ownership plan
transactions. These accounting changes had an immaterial impact on
earnings in the third quarter of 1994, and are not expected to have a
material impact on the full year 1994. See Note 1 to the Financial
Statements for more information on these accounting changes.
Rate Changes - The Company has proposed a $3.6 million annual
reduction in rates charged to electric customers in North Dakota
effective June 1, 1994. See Note 6 to the Financial Statements for
discussion of this and other potential rate changes.
Third Quarter 1994 Compared with Third Quarter 1993
Electric revenues for third quarter 1994 compared with third
quarter 1993 increased $13.2 million or 2.4%. Retail revenues increased
approximately $17.8 million or 3.5% largely due to a 3.0% increase in
electric retail sales and a 0.5% average retail price increase. The
increase in sales levels is due mainly to sales growth. The retail
price increase is due to fuel expense recovery. Revenues from sales to
other utilities decreased by $7.5 million mainly due to a 22.8% sales
decrease. The sales volume decrease is due to the unusually high sales
in 1993 to utilities affected by flooding.
Gas revenues for the third quarter 1994 decreased $2.8 million or
6.3% compared with the third quarter of 1993. Firm gas revenues
decreased $4.9 million or 16.0% due to a 8.9% decrease in gas sales
volume and a 7.7% average retail price decrease. The sales volume
decrease is due primarily to weather impacts in September. The price
decrease is due to rate adjustments for decreased purchased gas costs
resulting from changed natural gas supply and demand market conditions.
Other gas revenues increased $1.7 million due mainly to a new revenue
source, supplying gas to industrial customers not on NSP's system.
Fuel for electric generation and Purchased and interchange power
combined for a net increase of $5.5 million or 3.6% for the third
quarter of 1994 compared with the third quarter of 1993. Fuel expense in
the third quarter increased mainly due to higher 1994 generation levels
of fossil fuel plants as a result of a scheduled nuclear plant
maintenance and refueling outage and higher customer energy
requirements in 1994 compared to the same time period in 1993. These
factors also contributed to an increase in the amount of power purchased
over the same period. Fuel expenses also increased due to a higher
average cost of nuclear fuel in 1994 compared with 1993 due to full
utilization of nuclear plants in 1993. These increased fuel and
purchased power expenses were partially offset by lower market pricing of
purchased power in 1994 due to more favorable conditions existing in
third quarter 1994 compared with third quarter 1993.
Cost of gas purchased and transported for the third quarter 1994
compared with the third quarter 1993 decreased $9.0 million or 26.4% due
to lower cost per thousand cubic feet (Mcf) of purchased gas, and gas
cost adjustments due to purchased gas adjustment clauses. The impact
of the cost decrease of lower firm sales volumes was offset by the
impact of supplying gas to industrial customers not on NSP's system.
Other operation, Maintenance and Administrative and general
expenses together increased $15.3 million or 10.1% compared with the
third quarter 1993. The higher costs are due mainly to the timing of
expenses rather than a long-term increase in costs. First, costs
increased by $4.3 million due to a scheduled nuclear plant refueling and
maintenance outage in third quarter 1994 compared with no similar costs
in third quarter 1993. Also, $3.6 million of tree trimming costs,
delayed from earlier in the year, increased expenses in the third
quarter 1994 compared to the same period a year ago. Finally,
approximately $4 million of the 1994 expense increase relates to
postretirement health care cost accruals, including amounts deferred
from 1993.
Depreciation and amortization increased $1.5 million or 2.2%
compared with the third quarter 1993. The increase is mainly due to
increased plant in service between the two periods.
Property and general taxes for the third quarter 1994 compared
with the third quarter of 1993 increased $2.0 million or 3.5% due
primarily to higher property tax rates in the State of Minnesota.
General taxes increased due to higher gross earnings taxes from higher
sales levels in 1994.
Income taxes for the third quarter 1994 compared with the third
quarter 1993 decreased $3.7 million or 9.0% primarily due to lower
pretax operating income between the two periods. In addition, income
taxes were higher in third quarter 1993 due to a 1% statutory federal
tax rate increase enacted in August 1993, retroactive to January 1,
1993.
Equity in earnings of unconsolidated investees increased $6.0
million in the third quarter 1994 compared with the same period a year
ago, due primarily to earnings contributions from NRG's equity in
earnings of international energy projects.
Other income (expense) - net increased $5.1 million in the third
quarter 1994 compared with the same period a year ago primarily due to
interest income associated with the settlement of an NSP federal income
tax dispute. This increase was offset in part by foreign income taxes
related to NRG's equity in earnings of international energy projects.
First Nine Months of 1994 Compared with First Nine Months of 1993
Electric revenues for the nine months of 1994 compared with the
first nine months of 1993 increased $76.0 million or 5.1%. Retail
revenues increased approximately $78.9 million or 5.8% due to both
higher sales levels and rate increases. Retail electric sales increased
3.8% in 1994 due to sales growth and more favorable weather in 1994,
while price per unit increased 1.9% due to fuel expense recovery and
recognition of the full impact of Minnesota electric retail rate
increases in 1994.
Gas revenues increased $13.8 million or 4.8% compared to the first
nine months of 1993. Firm gas revenues decreased approximately $3.8
million or 1.6% due to a 0.8% decrease in gas sales volumes and an
average price decrease of 0.8%. Interruptible gas revenues decreased
$0.8 million or 2.2% compared to the first nine months of 1993 due
mainly to lower sales volumes. Revenues from Viking Gas Transmission
Company, which was acquired in June 1993, increased revenues by $7.3
million. Other gas revenues increased $10.5 million, mainly due to a
new revenue source, supplying gas to industrial customers not on NSP's
system.
Fuel for electric generation and Purchased and interchange power
together increased $51.0 million or 13.0% over the nine months ended
September 1993. The increase was due mainly to higher cost of purchased
power, primarily resulting from increased demand expenses associated
with the new Manitoba Hydro contract effective in May 1993 and increased
market pricing of purchases in 1994 compared to more favorable market
pricing conditions in the first half of 1993. Also, power purchases
were higher in 1994 than 1993 due to increased customer energy
requirements. Fuel costs for electric generation increased due to higher
1994 fossil fuel generation levels to meet increased customer energy
requirements and due to scheduled outages of lower cost plants.
Cost of gas purchased and transported for the first nine months
of 1994 compared with the first nine months of 1993 decreased $4.2
million or 2.2%. This is mainly the result of a lower cost of purchased
gas due to market conditions and lower purchased gas cost adjustments,
offset by higher sendout volumes primarily due to supplying gas to
industrial customers not on NSP's system.
Other operation, Maintenance and Administrative and general
expenses together increased $8.6 million or 1.8%. The increase is due
entirely to higher postretirement health care costs in 1994, including
amounts which were deferred from 1993.
Depreciation and amortization increased $6.1 million or 3.1%
compared to the nine months ended September 1993. The increase is due
primarily to increased plant in service between the two periods.
Property and general taxes increased $8.4 million or 4.9% compared
with the first nine months of 1993. The increase is due mainly to
higher property tax rates in the State of Minnesota and also due to
higher gross earnings taxes due to higher sales levels in 1994.
Income taxes for the first nine months of 1994 compared with the
first nine months of 1993 increased $10.6 million or 10.8%. The
increase is due primarily to higher pretax operating income between the
two periods.
Equity in earnings of unconsolidated investees increased
approximately $18.0 million in the first nine months of 1994 compared
with the same period a year ago, due primarily to earnings contributions
from NRG's international projects.
Other income (expense) - net increased $7.1 million compared with
the first nine months of 1993 due primarily to interest income
associated with the settlement of an NSP federal income tax dispute.
In addition, higher income from non-regulated operations was offset by
foreign income taxes related to NRG's equity in earnings of
international energy projects.
Interest charges before allowance for funds used during
construction have decreased $1.8 million or 2.1% compared with the first
nine months of 1993 due to refinancings, retirements of long-term debt,
and increased use of lower-cost short-term commercial paper borrowings,
partially offset by new debt incurred in connection with businesses
acquired in 1993.
Liquidity and Capital Resources
The Company had $250.3 million in commercial paper debt
outstanding as of September 30, 1994. The Company plans to keep credit
lines of at least 85% of the maximum level of commercial paper
borrowings. Commercial banks currently provide credit lines of
approximately $299 million. These credit lines make short-term
financing available in the form of bank loans and support for commercial
paper sales. The Company has regulatory approval for up to $350 million
in short-term borrowing levels.
Commercial banks currently provide credit lines of $11 million to
wholly owned subsidiaries of the Company. Approximately $9 million of
those credit lines remained available at September 30, 1994.
In January 1994, stock options for the purchase of 290,138 shares
were awarded. As of September 30, 1994, a total of 784,489 stock
options were outstanding, which were considered as potential common
stock equivalents for earnings per share purposes.
As of September 30, the Company has issued 26,010 new shares of
common stock in 1994. All of these new shares were issued under the
Executive Long-Term Incentive Award Stock Plan.
On February 10, 1994 the Company issued $200,000,000 of first
mortgage bonds due February 1, 1999 with an interest rate of 5 1/2%.
The proceeds from these bonds were used to redeem $30,000,000 in
principal amount of its 6 1/8% First Mortgage Bonds, due June 1, 1995
at a redemption price of 100.29%, to redeem $45,000,000 in principal
amount of its 5 7/8% First Mortgage Bonds due August 1, 1996 at a
redemption price of 100.51%, to redeem $30,000,000 in principal amount
of its 6 1/2% First Mortgage Bonds due October 1, 1997 at a redemption
price of 100.75%, and to redeem $45,000,000 in principal amount of its
6 3/4% First Mortgage Bonds due May 1, 1998 at a redemption price of
100.93%. The remaining proceeds were added to the general funds of the
Company and used to repay short-term borrowings.
NSP has three interest rate swap agreements covering first
mortgage bonds of approximately $320 million. These agreements
effectively convert the interest costs of these debt issues from fixed
to variable rates based on short-term interest rates. Thus, market
risks associated with these agreements result from short-term interest
rate fluctuations. Credit risk related to nonperformance of the
counterparties is not deemed significant, but would result in NSP
recording interest expense at the stated rate of each bond issue. While
such agreements are not reflected on NSP's balance sheets, interest rate
swap transactions are recognized as an adjustment of interest expense
over the terms of the agreements.
The Company entered into one such interest rate swap agreement
during 1994 with Kidder, Peabody Global Capital Corporation, which
effectively converted the interest cost of the 5 1/2% first mortgage
bonds issued on February 10, 1994 from fixed rate to variable rate. The
variable rate is set six months in arrears based on a short-term interest
rate indicator with the rate changing on February 1 and August 1 of
each year until final maturity. Accrued interest expense is recorded
at estimated net interest rates until the actual rate is set. The net
interest rate charged for the six months ended August 1, 1994 was
approximately 4.6%. The estimated net interest rate accrued for the
two months ended September 30, 1994 was approximately 5.4%.
On February 25, 1994 the Company repurchased $10,000,000 of 9 3/8%
First Mortgage Bonds due June 1, 2020 at a price of 112.75%. On April
12, 1994 the Company repurchased another $20,000,000 of these 9 3/8%
bonds at a price of 110.24%.
On May 17, 1994 NSP's wholly owned subsidiary, United Power and
Land (UP&L) issued long-term debt of $10,000,000. The debt carries an
interest rate of 7.62%, matures in 2000 and is secured by UP&L property.
Proceeds were used to recapitalize NSP's equity investment in UP&L.
On October 5, 1994 the Company issued $150,000,000 of first
mortgage bonds due October 1, 2001 with an interest rate of 7 7/8%. The
proceeds from these bonds were used to repay short-term commercial paper
borrowings which had been increased while the Company was evaluating the
issuance of the bonds during the first nine months of 1994. The Company
continues to evaluate the early redemption of higher rate securities
and, depending on capital market conditions, may refinance them with
lower rate long-term debt.
During the first quarter of 1994, the Company was placed on
"credit watch" by Moody's Investors Service and Duff & Phelps Credit
Rating Co. (D&P) due to the prior uncertainty regarding Prairie Island.
D&P removed the Company from credit watch on May 9, 1994, following
passage of the law regarding Prairie Island, and reaffirmed the previous
bond ratings. On May 20, 1994, Moody's Investors Service downgraded the
credit ratings of the Company and Northern States Power Company
(Wisconsin), a wholly owned subsidiary of the Company. The new ratings
are as follows: first mortgage bonds and secured pollution control
bonds to A1 from Aa2; shelf registration of senior secured debt to (P)
A1 from (P) Aa2; unsecured pollution control bonds to A2 from Aa3;
preferred stock to "a2" from "aa3"; and shelf registration for preferred
stock to (P) "a2" from (P) "aa3". The commercial paper rating of the
Company remains unchanged at P-1.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
On May 27, 1994, the Company was notified by the United States
Environmental Protection Agency (USEPA) that it is a potentially
responsible party (PRP) at the Union Scrap Iron & Metal III Superfund
site in Minneapolis, Minnesota, which is in addition to the sites
identified in NSP's 1993 Annual Report on Form 10-K. The USEPA states
that total costs incurred to investigate and remediate the site were
approximately $1,000,000. Over 25 parties have received similar
notifications. On October 17, 1994, the Company was notified of a
potential settlement between the United States and PRPs. Under the
proposed settlement the Company would be required to pay $30,000. If
settlement is not reached, it is likely the USEPA would sue the Company
and other PRPs for recovery of the remediation costs.
In October 1992, the Company disclosed to the Minnesota Pollution
Control Agency (MPCA), the USEPA and the Nuclear Regulatory Commission
that reports on halogen content of water discharged at Prairie Island
were based on estimates of halogen content rather than actual physical
samples of water discharged as required by the plant's National
Pollution Discharge Elimination System permits. Even though the water
discharges at the plant did not exceed the halogen levels allowed under
the permits, the applicable state and federal statutes would permit the
imposition of fines, the institution of criminal sanctions and/or
injunctive relief for the reporting violations. Corrective actions were
taken by the Company. The Company and the MPCA are currently
negotiating a Stipulation Agreement to address monitoring procedures
used at Prairie Island between January and September 1992 that allegedly
did not comply with the permits. The MPCA is alleging noncompliance
with permit terms and conditions and is proposing a civil penalty of
$105,436.
For a discussion of proceedings involving NSP's utility rates, see
Note 6 to the Financial Statements.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.01 Ownership and Operating Agreement, dated March 11, 1982,
between the Company, Southern Minnesota Municipal Power
Agency and United Minnesota Municipal Power Agency
concerning Sherburne County Generating Unit No. 3.
10.02 Transmission agreement, dated April 27, 1982, and
Supplement No. 1, dated July 20, 1982, between the Company
and Southern Minnesota Municipal Power Agency.
10.03 Power agreement, dated June 14, 1984, between the Company
and the Manitoba Hydro-Electric Board, extending the
agreement scheduled to terminate on April 30, 1993, to
April 30, 2005.
27.01 Financial Data Schedule - September 30, 1994
(b) Reports on Form 8-K. The following reports on Form 8-K were
filed either during the three months ended September 30, 1994,
or between September 30, 1994 and the date of this report:
July 18, 1994 (Filed August 3, 1994) - Item 5. Other Events.
Re: Disclosure of termination of a cogeneration project by
Michigan Cogeneration Partners (an investee of the Company's
wholly owned subsidiary, NRG Energy, Inc.) and Consumers Power
Company.
September 7, 1994 (Filed September 8, 1994) - Item 5. Other
Events. Re: Disclosure of election of NSP Generation
officers. Douglas D. Antony was elected President, NSP
Generation and Edward L. Watzl was elected Vice President,
Nuclear Generation.
October 4, 1994 - Other 5. Other Events. Re: Disclosure of a
net gain of approximately nine cents per share associated with
the Michigan Cogeneration Partners contract termination to be
recorded in the third quarter of 1994. Also, disclosure of
negotiation of a Stipulation Agreement to address monitoring
procedures used at the Company's Prairie Island Nuclear
Generating Plant.
October 5, 1994 (Filed October 7, 1994) - Item 5. Other Events.
Re: Disclosure of Underwriting Agreement and filing of a
prospectus supplement relating to $150,000,000 in aggregate
principal amount of the Company's First Mortgage Bonds, Series
due October 1, 2001. Item 7. Financial Statements and
Exhibits. Re: Filing of Underwriting Agreement between the
Company and Kidder, Peabody & Co. Incorporated, Citicorp
Securities, Inc., Lehman Brothers, J. P. Morgan Securities
Inc., NatWest Capital Markets Limited, and Salomon Brothers Inc
relating to $150,000,000 First Mortgage Bonds, Series due
October 1, 2001; Filing of Supplemental Trust Indenture
relating to First Mortgage Bonds, due October 1, 2001; Filings
of computation of ratio of earnings to fixed charges.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
NORTHERN STATES POWER COMPANY
(Registrant)
(Roger D. Sandeen)
Roger D. Sandeen
Vice President, Controller and
Chief Information Officer
(Edward J. McIntyre)
Edward J. McIntyre
Vice President and Chief Financial
Officer
Date: November 14, 1994
EXHIBIT 10.01
SHERBURNE COUNTY GENERATING UNIT NO. 3
OWNERSHIP AND OPERATING AGREEMENT
among
NORTHERN STATES POWER COMPANY,
SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY
and
UNITED MINNESOTA MUNICIPAL POWER AGENCY
March 11, 1982
TABLE OF CONTENTS
Page
CHAPTER ONE
Definitions, Representations and Warranties
ARTICLE 1.1
Definitions
ARTICLE 1.2
Representations and Warranties
Section 1.2.1. Limitations 9
Section 1.2.2. NSP Representations and Warranties 9
Section 1.2.3. SOUTHERN MINNESOTA Representations
and Warranties 10
Section 1.2.4. UNITED MINNESOTA Representations
and Warranties 12
CHAPTER TWO
Ownership Rights and Obligations
ARTICLE 2.1
Sale of Undivided Ownership Interests in
Completed Portion of Sherco 3
Section 2.1.1. Tenants in Common 14
Section 2.1.2. Sale to SOUTHERN MINNESOTA 15
Section 2.1.3. Conditions Precedent to SOUTHERN
MINNESOTA Closing 18
Section 2.1.4. Sale to UNITED MINNESOTA 23
Section 2.1.5. Conditions Precedent to UNITED
MINNESOTA Closing 26
Section 2.1.6. Payments Prior to Closings 31
Section 2.1.7. Additions to Sherco Plant Site 32
Section 2.1.8. "As Is" Sale 33
ARTICLE 2.2
Common Facilities; Additional Units on Sherco
Plant Site.
Section 2.2.1. Mutual Rights 33
Section 2.2.2. Calculation of Joint Common
Facility Percentages 33
Section 2.2.3. Future Common Facilities 38
Section 2.2.4. Additional Units on Sherco Plant Site 38
Section 2.2.5. Transfer of Certain NSP Common Facilities 39
Section 2.2.6. Additional NSP Common Facilities Modifications 39
ARTICLE 2.3
Alienation of Interests
Section 2.3.1. Special Nature of Sherco 3 40
Section 2.3.2. Transfers to Third Parties 40
Section 2.3.3. Transfer to Another Participant 43
Section 2.3.4. Waiver of Right of Partition 44
Section 2.3.5. Duration of Limitations 44
Section 2.3.6. NSP to Remain as Project Manager 44
Section 2.3.7. Interest Transferred Remains
Subject to Adjustment 44
CHAPTER THREE
Management and Administration
ARTICLE 3.1
Management Committee
Section 3.1.1. Establishment 45
Section 3.1.2. Authority and Responsibility 45
ARTICLE 3.2
Project Manager
Section 3.2.1. Appointment 46
Section 3.2.2. Mutual Dependency 46
Section 3.2.3. Authority and Responsibility 47
Section 3.2.4. Consultation 49
Section 3.2.5. Existing Contracts 50
Section 3.2.6. Standards of Conduct 50
Section 3.2.7. Commercial Operation Date 50
Section 3.2.8. Commercial Operation Date Delay 51
Section 3.2.9. Liability 51
Section 3.2.10. Removal of NSP as Project Manager 51
ARTICLE 3.3
Budgets, Accounts and Payments
Section 3.3.1. Construction Budget 52
Section 3.3.2. Construction Account 53
Section 3.3.3. Construction Payments 55
Section 3.3.4. Capital Budget 56
Section 3.3.5. Capital Account 57
Section 3.3.6. Capital Payments 59
Section 3.3.7. Operating Budget 60
Section 3.3.8. Operating Account 61
Section 3.3.9. Operating Costs and Payments 62
Section 3.3.10. Late Payments 65
Section 3.3.11. Administrative and General Costs 65
Section 3.3.12. Project Insurance 65
Section 3.3.13. Taxes 66
Section 3.3.14. Books and Records 67
Section 3.3.15. Management and Operating Audits 68
Section 3.3.16. Right to Copies 68
Section 3.3.17. Confidentiality 69
CHAPTER FOUR
Operation
ARTICLE 4.1
OPERATING COMMITTEE
Section 4.1.1. Appointment 69
Section 4.1.2. Authority and Responsibility 69
ARTICLE 4.2
DISPOSITION OF OUTPUT
Section 4.2.1. Disposition of Output Prior to
Commercial Operation 71
Section 4.2.2. Disposition of Output After
Commercial Operation 71
ARTICLE 4.3
FUELS
Section 4.3.1. Authority of Management Committee 73
Section 4.3.2. Procurement by the Project Manager 73
Section 4.3.3. Procurement by Other Participants 73
ARTICLE 4.4
OTHER OPERATING MATTERS
Section 4.4.1. Maintenance Schedule 76
Section 4.4.2. Operating Emergency 76
Section 4.4.3. Reactive Generation 77
Section 4.4.4. Initial Training and Startup Expenses 77
Section 4.4.5. Metering 78
CHAPTER FIVE
General Provisions
ARTICLE 5.1
Defaults
Section 5.1.1. Covenant to Perform 78
Section 5.1.2. Initial Procedures 78
Section 5.1.3. Payment in Event of Dispute 79
Section 5.1.4. Option to Abandon 79
Section 5.1.5. Right to Cure Defaults 80
Section 5.1.6. Adjustment to Ownership Percentages
and Joint Common Facility Percentages 80
Section 5.1.7. Loss of Entitlement 83
Section 5.1.8. Actions to Enforce 83
Section 5.1.9. NSP to Continue as Project Manager 83
ARTICLE 5.2
Damage or Destruction.
Section 5.2.1. Covered by Insurance 84
Section 5.2.2. Not Covered by Insurance 84
ARTICLE 5.3
Retirement
Section 5.3.1. Date of Retirement 85
Section 5.3.2. Retirement Costs 85
ARTICLE 5.4
Certain Additional Agreements
Section 5.4.1. No Adverse Distinction 85
Section 5.4.2. Cooperation 85
Section 5.4.3. Observers 86
Section 5.4.4. Plant Tours 87
Section 5.4.5. Settlement of Disputes 87
ARTICLE 5.5
Limitation of Liability
Section 5.5.1. General 87
Section 5.5.2. Costs Shared by Participants 88
Section 5.5.3. No Liability for Delays or Unavailability 88
Section 5.5.4. No Liability for Acts of Other Participants 88
Section 5.5.5. No Guarantee of Final Costs 89
ARTICLE 5.6
Miscellaneous
Section 5.6.1. Survival 89
Section 5.6.2. No Delay 89
Section 5.6.3. Further Assurances 89
Section 5.6.4. Governing Law 89
Section 5.6.5. Notices 89
Section 5.6.6. Article and Section Headings Not to Affect
Meaning 90
Section 5.6.7. No Partnership 90
Section 5.6.8. Time of Essence 91
Section 5.6.9. Successors and Assigns/Binding Obligations 91
Section 5.6.10. Counterparts 92
Section 5.6.11. Computation of Undivided Ownership Percentage 92
Section 5.6.12. Descriptions 92
Section 5.6.13. Severability 92
Section 5.6.14. No Third Party Beneficiary 93
Section 5.6.15. No Implied Waiver 93
Section 5.6.16. Amendments 93
Section 5.6.17. Term 94
EXHIBITS
Exhibit A. Description of Property Included in Unit 3
Exhibit B-1. NSP Common Facilities
Exhibit B-2. Joint Common Facilities
Exhibit B-3. Future Common Facilities
Exhibit C. Description of Sherco Plant Site
Exhibit D. Description of Sherco 3 Site
Exhibit E. Form of Deed
Exhibit F. Form of Bill of Sale
Exhibit G. Form of Release From Lien of NSP's Indenture
Exhibit H. Easements, Rights of Way and Interests in Land
to be Conveyed Under Sections 2.1.2(c) and
2.1.4(c)
Exhibit I. Method for Allocating Administrative and General
Costs to Sherco 3
Exhibit J. Designated Lives for Rule Against Perpetuities
Exhibit K. Form of Assignments of Contract Rights, With List
of Existing Contracts
AGREEMENT, dated as of March 11, 1982, among NORTHERN STATES
POWER COMPANY, a Minnesota corporation ("NSP"), SOUTHERN MINNESOTA
MUNICIPAL POWER AGENCY, a municipal corporation and political
subdivision of the State of Minnesota ("SOUThERN MINNESOTA"), and UNITED
MINNESOTA MUNICIPAL POWER AGENCY, a municipal corporation and political
subdivision of the State of Minnesota ("UNITED MINNESOTA").
WITNESSETH:
WHEREAS, NSP is a public utility engaged, among other things,
in the generation, purchase, transmission, distribution and sale of
electric energy; and
WHEREAS, SOUTHERN MINNESOTA is organized, pursuant to Minnesota
Statutes, Chapter 453, to undertake, among other things, to plan,
acquire, construct, finance, develop, own and operate electric
generating facilities to provide an adequate, reliable and economic
supply of electric power and energy to meet the present and future needs
of its member municipalities; and
WHEREAS, UNITED MINNESOTA is organized, pursuant to Minnesota
Statutes, Chapter 453, to undertake, among other things, to plan,
acquire, construct, finance, develop, own and operate electric
generating facilities to provide an adequate, reliable and economic
supply of electric power and energy to meet the present and future needs
of its member municipalities; and
WHEREAS, the Participants have determined that it is in their
mutual best interest to join together in the construction, ownership,
and operation of the 800 MW nominally rated coal-fired steam electric
generating unit known as Sherburne County Generating Unit No. 3,
currently under construction in Sherburne County, Minnesota, and to
share both the costs and benefits to be realized from this project; and
WHEREAS, the Participants hereto desire and intend (1) to
provide for the sale by NSP to SOUTHERN MINNESOTA and UNITED MINNESOTA,
respectively, of undivided ownership interests in Sherburne County
Generating Unit No. 3 and related facilities and other properties, and
(2) to establish their respective rights and obligations with respect
to the ownership, design, acquisition, construction, management,
control, operation and maintenance of said generating unit and related
facilities and other properties;
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, NSP, SOUTHERN MINNESOTA and
UNITED MINNESOTA, hereby agree as follows:
CHAPTER ONE
DEFINITIONS, REPRESENTATIONS AND WARRANTIES
ARTICLE 1.1. DEFINITIONS The following terms, when used herein,
shall have the meanings specified:
AFUDC. Allowance for funds used during construction.
Agreed Rate. The average of the daily prime rates published in
the "Money Rates" section of The Wall Street Journal for each day of the
applicable time period or such other rate as may hereafter be
established by the Management Committee.
Capacity. Electrical rating expressed in megawatts (MW) or
megavolt-amperes (MvA).
Capital Account. The Account to be established pursuant to
Section 3.3.5 hereof.
Certificate of Need. A Certificate issued by the Minnesota
Energy Agency (or its successor) which certifies that Unit 3 is needed
by the Participants in the proportions contemplated by this Agreement.
Commercial Operation Date. The date on which Sherco 3 is
determined by the Management Committee to be reliable as a source of
electric capacity and energy.
Common Facilities. The Common Facilities shall consist of the
NSP Common Facilities, the Joint Common Facilities and the Future Common
Facilities, together with existing intangible property rights, and such
additional intangible property rights as may hereafter be acquired,
associated with the planning, licensing, design, construction,
acquisition, completion, operation, renewal, addition, replacement,
modification and disposal of any of the items included in NSP Common
Facilities, Joint Common Facilities and Future Common Facilities.
Common Facilities may include, without limitation, river water intake,
delivery and discharge facilities; water treatment systems; sanitary and
waste handling facilities; roads; railroad facilities; security fences;
and laboratory, shop and office facilities, together with any
governmental permit, approval, appropriation and authorization obtained
in connection with the foregoing.
Construction Account. The Account to be established pursuant to
Section 3.3.2 hereof.
Cost of Construction. All costs (including administrative and
general expenses determined to be allocable to Sherco 3 in accordance
with Section 3.3.11 hereof) incurred in connection with the planning,
design, licensing, acquisition, construction, completion, testing,
start-up, renewal, addition, modification, replacement or disposal of
Sherco 3, or any portion of Sherco 3, including, without limitation, all
Joint Common Facilities and the Sherco 3 Portion of Future Common
Facilities, which costs are properly recordable in accordance with the
Electric Plant Instructions and in appropriate accounts as set forth in
the Uniform System of Accounts; provided, however, that the Cost of
Construction shall not include AFUDC attributable to NSP's investment
in Sherco 3, nor costs and expenses incurred by NSP in connection with
the development of this Agreement. Without limiting the generality of
the foregoing, Cost of Construction shall include all costs incurred
prior to the Commercial Operation Date which, if incurred on or after
the Commercial Operation Date, would be Operating Costs.
Energy. Megawatt-hours (Mwh).
Entitlement. Each Participant's share of the output of Unit 3,
expressed in terms of Capacity, and determined by multiplying the Net
Effective Generating Capability of Unit 3 by such Participant's
Ownership Percentage, together with the Energy associated with such
Capacity.
Fixed Operating Costs. All costs and expenses (other than
Variable Operating Costs) incurred on or after the Commercial Operation
Date in respect of the management, control, operation and maintenance
of Sherco 3, including without limitation that portion of administrative
and general expenses incurred by NSP determined to be allocable to
Sherco 3 in accordance with Section 3.3.11 hereof, which costs and
expenses are properly recordable in accordance with the Operating
Expense Instructions and in appropriate accounts as set forth in the
Uniform System of Accounts. Without limiting the gener- ality of the
foregoing, Fixed Operating Costs shall include fixed fuel transportation
costs, costs of fuel required for active storage and the initial
emergency storage, and costs of fuel consumed for Zero Net Load
operation on or after the Commercial Operation Date.
Future Common Facilities. All property, both real and personal
(exclusive of transmission facilities), hereafter determined to be
acquired, constructed or installed for use by Unit 3 in common, but not
necessarily equally, with one or more other generating units located on
the Sherco Plant Site and not identified as Joint Common Facilities in
Exhibit B-2 hereto. The Sherco 3 Portion of such property is to be
owned by the Participants, as tenants in common, in accordance with
their respective Ownership Percentages. Then determined, such property
and the Sherco 3 Portion thereof shall be generally identified on
Exhibit B-3 hereto.
Joint Common Facilities. The facilities (exclusive of
transmission facilities) on the Sherco Plant Site or Sherco 3 Site,
generally identified on Exhibit B-2 hereto, which are to be used by Unit
3 in common, but not necessarily equally, with one or more other
generating units located on the;Sherco Plant Site. The Joint Common
Facilities shall be owned by the Participants, as tenants in common, in
accordance with their respective Joint Common Facility Percentages.
Joint Common Facility Percentage. Each Participant's undivided
ownership interest in the Joint Common Facilities. The Joint Common
Facility Percentages of the Participants are estimated as shown on
Exhibit B-2. The Joint Common Facility Percentages of the respective
Participants shall be subject to adjustment to reflect any sale of any
portion of the Participant's undivided ownership interest in Sherco 3
pursuant to Article 2.3 hereof or any reduction or increase thereof
pursuant to Section 2.2.2 or 5.1.6 hereof or any other adjustment
provided for herein, but prior to any adjustment shall be deemed for all
purposes of this Agreement to be the respective percentages set forth
in Exhibit B-2.
Management Committee. The Committee established pursuant to
Section 3.1.1 hereof.
Minimum Net Generation. The lowest net capacity output at which
Unit 3 can be reliably and continuously maintained in service.
Net Effective Generating Capability. The hourly capacity of Unit
3 at any given time which is available to the Participants at the Point
of Delivery. The maximum Net Effective Generating Capability shall be
that capability determined by the applicable power pool testing
procedures.
Net Energy Generation. The energy generated by Unit 3 which is
available to the Participants at the Point of Delivery.
NSP Common Facilities. The Sherco Plant Site, together with
improvements and facilities thereon, owned and constructed by NSP for
use by one or both of the two coal-fired steam electric generating units
(Sherco Unit l and Sherco Unit 2) now operating there-on, and which as
existing, or with additions or modifications, including NSP Common
Facilities Modifications, are to be used by Unit 3 in common, but not
necessarily equally, with one or more other generating units located on
the Sherco Plant Site, all as generally identified on Exhibit B-1
hereto. The NSP Common Facilities shall be initially owned in their
entirety by NSP; Section 2.2.5 provides for the future reclassification
of certain NSP Common Facilities as Joint Common Facilities and the
transfer of interests therein by NSP to the other Participants. The
limestone handling facility listed on Exhibit B-1 is not in fact a
Common Facility, but shall be accounted for as an NSP Common Facilities
Modification for purposes of Section 2.2.2.
NSP Common Facilities Modifications. The modifications to NSP
Common Facilities identified on Exhibit B-1 hereto and any other
modification to NSP Common Facilities which the Management Committee
determines is an "NSP Common Facilities Modifications pursuant to
Section 2.2.6 hereof.
Objective Investment. As defined in Section 2.2.2(a) hereof.
Operating Account. The Account to be established pursuant to
Section 3.3.8 hereof.
Operating Budget. The Budget to be prepared pursuant to Section
3.3.7 hereof.
Operating Committee. The subcommittee of the Management
Committee established pursuant to Section 4.1.1 hereof.
Operating Emergency. An unscheduled operating circumstance or
event which reduces or may reduce the Net Effective Generating
Capability of Unit 3.
Operating Costs. Total of Fixed Operating Costs and Variable
Operating Costs.
Ownership Percentage. Each Participant's undivided ownership
interest in Sherco 3, other than Joint Common Facilities. Each
Participant's Ownership Percentage is set forth in Section 2.1.1. Each
Participant's Ownership Percentage shall be subject to adjustment to
reflect any sale of any portion of its undivided ownership interest in
Sherco 3 pursuant to Article 2.3 hereof or any reduction or increase
thereof pursuant to Section 5.1.6 hereof or any other adjustment
provided for herein, but prior to any adjustment shall be deemed for all
purposes of this Agreement to be the percentage set forth in Section
2.1.1.
Participants. Individually or collectively, as the case may be,
NSP, SOUTHERN MINNESOTA and UNITED MINNESOTA, and any vendee, transferee
or assignee of any of them pursuant to Article 2.3 of this Agreement.
Point of Delivery. The 345 KV switching station bus at the
Sherco Plant Site.
Project Manager. The agent appointed by the Participants to
represent them in the construction and operation of the Sherco 3
Project. Where the entity appointed to act as Project Manager is a
Participant, the term Project Manager is intended to mean such entity
in its capacity as Project Manager and not in its capacity as a
Participant.
Prudent Utility Practice. At a particular time, any of the
practices, methods and acts engaged in or approved by a significant
portion of the electric utility industry prior to such time, or any of
the practices, methods and acts which, in the exercise of reasonable
judgment in light of the facts known at the time the decision was made,
could have been expected to accomplish the desired result at the lowest
reasonable cost consistent with good business practices, reliability,
safety and expedition. Prudent Utility Practice is not intended to be
limited to the optimum practice, method or act to the exclusion of all
others, but rather to a spectrum of possible practices, methods or acts
having due regard for, among other things, manufacturers' warranties and
the requirements of governmental agencies of competent jurisdiction and
the requirements of this Agreement.
Sherco 3 or Sherco 3 Project. The steam generating unit
described herein as Unit 3, the major structures of which are to be
located on the Sherco 3 Site, together with all facilities and
structures (exclusive of transmission facilities and NSP Common
Facilities) used or to be used therewith or related thereto which
facilities and structures will be located on either the Sherco 3 Site
or on the Sherco Plant Site. More specifically Sherco 3 shall consist
of the following:
(a) Unit 3;
(b) The Sherco 3 Site;
(c) The right, in accordance with the provisions hereof,
to construct, operate and maintain on the Sherco Plant Site,
all portions of the Sherco 3 Project to be constructed thereon,
including the Common Facilities;
(d) The Joint Common Facilities and the Sherco 3 Portion
of the Future Common Facilities and the right, in accordance
with the provisions hereof, to the use and enjoyment of the NSP
Common Facilities for the benefit of Unit 3;
(e) Such additional land or rights therein as may be
acquired in accordance with this Agreement, and such additional
facilities and other tangible property as may be acquired,
constructed, installed or replaced in accordance with this
Agreement, solely in connection with Unit 3 and no other
generating unit at the Sherco Plant Site; and
(f) Existing intangible property rights, and such
additional intangible property rights as may be hereafter
acquired, associated with the planning, design, construction,
acquisition, completion, operation, renewal, addition,
replacement, modification or disposal of Sherco 3.
Sherco Plant Site. Certain land owned by NSP, excluding
improvements thereon, initially consisting of approximately 2,600 acres,
which surround the Sherco 3 Site. The Sherco Plant Site is described
in Exhibit C hereto and does not include the Sherco 3 Site.
Sherco 3 Portion. With respect to any Future Common Facility,
the portion thereof (expressed as a percentage and set forth on Exhibit
B-3 hereto) allocable to Sherco 3. The Sherco 3 Portion of any Future
Common Facility shall be determined in accordance with Section 2.2.3
hereof based upon the amount of benefit to be derived by Unit 3 from
such Facility relative to the amount of benefit to be derived by the
other generating unit or units benefiting from such Facility.
Sherco 3 Site. The land which is described in Exhibit D hereto.
SOUTHERN MINNESOTA Closing. The closing provided for in Section
2.1.2(d) hereof.
Uniform System of Accounts. The Federal Energy Regulatory
Commission's "Uniform System of Accounts Prescribed for Public Utilities
and Licensees (Class A and Class B)", in effect as of the date of this
Agreement, as such Uniform System of Accounts may be modified from time
to time. References in this Agreement to any specific Account Number
shall mean the Account Number in effect as of the effective date of this
Agreement or any successor Account. Accounting terms not otherwise
defined herein are used in this Agreement in accordance with the
meanings given them in the Uniform System of Accounts or, failing
provision therefor in said system, the meanings given them by generally
accepted accounting principles.
UNITED MINNESOTA Closing. The closing provided for in Section
2.1.4(d) hereof.
Unit 3. A nominally-rated 800 coal-fired steam electric
generating unit known as Sherburne County Generating Unit No. 3 to be
located on the Sherco 3 Site and the Sherco Plant Site, including the
turbine-generator, the boiler, the buildings housing the same, the
chimney, the cooling facilities, the associated auxiliaries and
equipment, the main step-up transformers and all other property which
is to be used solely in connection with Unit 3 and no other generating
unit at the Sherco Plant Site, all as set forth on Exhibit A hereto or
as hereafter acquired, constructed, installed or replaced in accordance
with this Agreement.
Variable Operating Costs. All costs and expenses incurred on or
after the Commercial Operation Date in respect of the management,
control, operation and maintenance of Sherco 3 which are directly
related to the amount of power and energy produced by Unit 3 including,
without limitation, costs of fuel and other minerals, costs of
transportation of fuel and other minerals, costs of disposal of wastes
directly relating to the production of energy and other incremental
operation and maintenance costs, in each case to the extent such costs
are not specified in the last sentence of the definition of Fixed
Operating Costs.
Zero Net Load. The load upon Unit 3 when the generator gross
output equals the total auxiliary consumption.
ARTICLE 1.2. REPRESENTATIONS AND WARRANTIES
SECTION 1.2.1. Limitations. The ability of the Participants
to construct Sherco 3 is contingent upon the final approval of the
Certificate of Need and other approvals of state and federal agencies
associated with or contingent upon such approval. The representations
of the Participants contained in this Article are qualified by reference
to the requirement of such approvals, which is equally applicable to all
Participants.
SECTION 1.2.2. NSP Representations and Warranties. NSP hereby
represents and warrants to the other Participants as follows:
(a) NSP Organization. NSP is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Minnesota and has corporate power and authority to own
the undivided ownership interests in Sherco 3 to be owned by it
hereunder, to execute and deliver this Agreement and to perform
its obligations hereunder and to carry on its business as it is
now being conducted and as it is contemplated to be conducted
in the future.
(b) Authority Relative to this Agreement. The execution,
delivery and performance by NSP of this Agreement have been
duly authorized by all necessary corporate action on the part
of NSP, do not contravene any law, or any governmental rule,
regulation or order, applicable to NSP or its properties, or
the Articles of Incorporation or By-Laws of NSP, and do not and
will not contravene the provisions of, or constitute a default
under, any indenture, mortgage, contract or other instrument to
which NSP is a party or by which NSP is bound. All requisite
governmental, regulatory and vendor approvals and consents for
the execution and delivery by NSP of this Agreement and the
sale and conveyance by NSP of the property to be sold and
conveyed by it hereunder have been obtained. This Agreement
constitutes a legal, valid and binding obligation of NSP
enforceable in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization or similar
laws at the time in effect.
(c) Litigation. There are no actions, suits or proceedings
pending or, to NSP's knowledge, threatened against or affecting
NSP before any court or administrative body or agency which
might materially adversely affect the ability of NSP to perform
its obligations under this Agreement.
(d) Title to Property. At the SOUTHERN MINNESOTA Closing
and at the UNITED MINNESOTA Closing, NSP shall convey to
SOUTHERN MINNESOTA and UNITED MINNESOTA, respectively, (i) good
and marketable title to all property, real and personal, to be
conveyed at each such Closing pursuant to Sections 2.1.2(a) and
2.1.4(a) hereof, free and clear of all mortgages and other
liens and encumbrances except the easements and other rights
set forth in Exhibit E hereto, and (ii) good and marketable
title to all easements, rights of way and other interests to be
conveyed at each such Closing pursuant to Sections 2.1.2(c) and
2.1.4(c) hereof, free and clear of all mortgages and other
liens and encumbrances except the rights set forth in Exhibit
H hereto and except mineral reservations in the State of
Minnesota and the right of NSP and third parties to operate and
maintain electric transmission lines, roadways, railroads or
other encumbrances which do not unreasonably interfere with the
construction or operation of Sherco 3.
(e) Other Matters. To NSP's best knowledge, there are no
defects in the construction of, or other major problems or
controversies in connection with, Sherco 3 which, in NSP's
judgment, could materially delay or otherwise materially affect
the construction or placing into commercial operation of Sherco
3, or any portion thereof, or materially affect the rights or
obligations of the other Participants in respect of Sherco 3.
SECTION 1.2.3. SOUTHERN MINNESOTA Representations and
Warranties. SOUTHERN MINNESOTA hereby represents and warrants to the
other Participants as follows:
(a) SOUTHERN MINNESOTA Organization. SOUTHERN MINNESOTA is
a municipal corporation and a political subdivision of the
State of Minnesota duly organized, validly existing add in good
standing under the laws of the State of Minnesota and has the
requisite power and authority to own the undivided ownership
interests in Sherco 3 to be owned by it hereunder, to execute
and deliver this Agreement and to perform its obligations
hereunder and to carry on its business as it now being
conducted and as it is contemplated to be conducted in the
future.
(b) Authority Relative to this Agreement. The execution,
delivery and performance by SOUTHERN MINNESOTA of this
Agreement have been duly authorized by all requisite action by
SOUTHERN MINNESOTA, do not contravene any law, or any
governmental rule, regulation or order, applicable to SOUTHERN
MINNESOTA or its properties, or the Agency Agreement or By-Laws
of SOUTHERN MINNESOTA, and do not and will not contravene the
provisions of, or constitute a default under, any indenture,
mortgage, contract, resolution or other instrument to which
SOUTHERN MINNESOTA is a party or by which SOUTHERN MINNESOTA is
bound. All requisite governmental, regulatory and vendor
approvals and consents for the execution and delivery by
SOUThERN MINNESOTA of this Agreement and the purchase by
SOUThERN MINNESOTA of the property to be purchased by it
hereunder have been obtained. This Agreement constitutes a
valid and binding obligation of SOUTHERN MINNESOTA enforceable
in accordance with its terms, except as limited by applicable
bankruptcy, insolvency, reorganization or similar laws at the
time in effect.
(c) Litigation. There are no actions, suits or proceedings
pending or, to SOUTHERN MINNESOTA's knowledge, threatened
against or affecting SOUTHERN MINNESOTA before any court or
administrative body or agency which might materially adversely
affect the ability of SOUTHERN MINNESOTA to perform its
obligations under this Agreement.
(d) Sale of Bonds. SOUTHERN MINNESOTA will use its best
efforts to issue and sell bonds or notes, at the earliest
possible date after the issuance of the Certificate of Need, in
a principal amount which will provide net proceeds adequate to
finance the purchase of all property to be purchased by it from
NSP at the SOUTHERN MINNESOTA Closing pursuant to Section 2.1.2
hereof. Notwithstanding the foregoing, it is agreed that the
earliest date that SOUTHERN MINNESOTA shall be required to
commence the offering of its bonds or notes pursuant to the
foregoing covenant shall be (i) the date that all time periods
during which there may be filed any petition for rehearing or
any petition for judicial review with respect to the decision
of the Minnesota Energy Agency (or its successor) to issue the
Certificate of Need lapse and, accordingly, such decision
becomes final or (ii), if such a rehearing or judicial review
proceeding, or petition therefor, is pending on the date when
such decision of the Minnesota Energy Agency (or its successor)
otherwise would become final, then the date when there shall be
rendered to SOUTHERN MINNESOTA an opinion, satisfactory to
SOUTHERN MINNESOTA, of counsel representing SOUTHERN MINNESOTA
in such rehearing or judicial review proceeding to the effect
that (a) the grounds asserted in such rehearing or proceeding
to overturn the decision to issue the Certificate of Need are
without merit, (b) such counsel knows of no meritorious grounds
which may be asserted to overturn such decision and (c)
accordingly, such counsel believes that such decision will be
upheld in such rehearing or proceeding and any further judicial
review proceeding.
SECTION 1.2.4. UNITED MINNESOTA Representations and Warranties.
UNITED MINNESOTA hereby represents and warrants to the other
Participants as follows:
(a) UNITED MINNESOTA Organization. UNITED MINNESOTA is a
municipal corporation and a political subdivision of the State
of Minnesota duly organized, validly existing and in good
standing under the laws of the State of Minnesota and has the
requisite power and authority to own the undivided ownership
interests in Sherco 3 to be owned by it hereunder, to execute
and deliver this Agreement and to perform its obligations
hereunder and to carry on its business as it is now being
conducted and as it is contemplated to be conducted in the
future.
(b) Authority Relative to this Agreement. The execution,
delivery and performance by UNITED MINNESOTA of this Agreement
have been duly authorized by all requisite action by UNITED
MINNESOTA, do not contravene any law, or any governmental rule,
regulation or order, applicable to UNITED MINNESOTA or its
properties, or the Agency Agreement or By-Laws of UNITED
MINNESOTA, and do not and will not contravene the provisions
of, or constitute a default under, any indenture, mortgage,
contract, resolution or other instrument to which UNITED
MINNESOTA is a party or by which UNITED MINNESOTA is bound.
All requisite governmental, regulatory and vendor approvals and
consents for the execution and delivery by UNITED MINNESOTA of
this Agreement and the purchase by UNITED MINNESOTA of the
property to be purchased by it hereunder have been obtained.
This Agreement constitutes a valid and binding obligation of
UNITED MINNESOTA enforceable in accordance with its terms,
except as limited by applicable bankruptcy, insolvency,
reorganization or similar laws at the time in effect.
(c) Litigation. There are no actions, suits or proceedings
pending or, to UNITED MINNESOTA's knowledge, threatened against
or affecting UNITED MINNESOTA before any court or
administrative body or agency which might materially adversely
affect the ability of UNITED MINNESOTA to perform its
obligations under this Agreement.
(d) Sale of Bonds. UNITED MINNESOTA will use its best
efforts to issue and sell bonds, at the earliest possible date
after the issuance of the Certificate of Need, in a principal
amount which will provide net proceeds adequate to finance the
purchase of all property to be purchased by it from NSP at the
UNITED MINNESOTA Closing pursuant to Section 2.1.4, hereof.
Notwithstanding the foregoing, it is agreed that the earliest
date that UNITED MINNESOTA shall be required to commence the
offering of its bonds pursuant to the foregoing covenant shall
be (i) the date that all time periods during which there may be
filed any petition for rehearing or any petition for judicial
review with respect to the decision of the Minnesota Energy
Agency (or its successor) to issue the Certificate of Need
lapse and, accordingly, such decision becomes final or (ii), if
such a rehearing or judicial review proceeding, or petition
therefor, is pending on the date when such decision of the
Minnesota Energy Agency (or its successor) otherwise would
become final, then the date when there shall be rendered to
UNITED MINNESOTA an opinion, satisfactory to UNITED MINNESOTA,
of counsel representing UNITED MINNESOTA in such rehearing or
judicial review proceeding to the effect that (a) the grounds
asserted in such rehearing or proceeding to overturn the
decision to issue the Certificate of Need are without merit,
(b) such counsel knows of no meritorious grounds which may be
asserted to overturn such decision and (c), accordingly, such
counsel believes that such decision will be upheld in such
rehearing or proceeding and any further judicial review
proceeding.
CHAPTER TWO
OWNERSHIP RIGHTS AND OBLIGATIONS
ARTICLE 2.1. SALE OF UNDIVIDED OWNERSHIP INTERESTS IN COMPLETED
PORTION OF SHERCO 3
SECTION 2.1.1. Tenants in Common. The Participants shall have
title to undivided ownership interests in Sherco 3, exclusive of Joint
Common Facilities, as tenants in common, as follows, subject to
adjustment as provided herein:
Undivided
Participant Ownership Interest
NSP 56.375%
SOUTHERN MINNESOTA 37.500%
UNITED MINNESOTA 6.125%
The above ownership percentages of the Participants are sometimes
collectively referred to as the 1,Ownership Percentages" and
individually as an "Ownership Percentage". The Participants shall own
the contractual rights and covenants obtained from NSP in regard to NSP
Common Facilities and shall own, as tenants in common, the Joint Common
Facilities as established by the Participants' respective Joint Common
Facility Percentages. However, except as otherwise provided herein,
until the SOUTHERN MINNESOTA Closing and the UNITED MINNESOTA Closing,
NSP shall own, and be obligated hereunder in respect of, the above
undivided ownership interests of SOUTHERN MINNESOTA and UNITED
MINNESOTA, respectively.
The Participants hereby stipulate and agree that the ownership
of the facilities comprising Unit 3 and the Common Facilities now or
hereafter constructed on the Sherco 3 Site or the Sherco Plant Site
shall be separate from and not merge with or otherwise relate to the fee
ownership of the land on which such facilities are located and
constructed. The Participants further stipulate and agree that,
notwithstanding any other provision in this Agreement, a Participant's
title to a specified Ownership Percentage in Unit 3 and the Sherco 3
Portion of the Future Common Facilities and a specified Joint Common
Facility Percentage in the Joint Common Facilities shall not vest until
final adjustment to such Percentages as required by Sections 2.2.2 and
5.1.6 hereof, and ownership shall then vest in the Participants in their
Percentages as finally calculated. It is the intention of the
Participants that the interests held hereunder shall be vested interests
held by the Participants (and their successors and assigns, if
applicable) as tenants in common but in undetermined percentages until
such percentages are finally calculated in accordance width Sections
2.2.2 and 5.1.6 hereof. However, if the rule against perpetuities or
any other rule of law limits the time by which ownership interests in
Sherco 3 must vest in the Participants in specific percentages, then
such calculations shall be made in accordance with the purpose and
intent of Sections 2.2.2 and 5.1.6 hereof and the interests of the
Participants in Sherco 3 shall vest in such final percentages no later
than the time limited by such other rule of law or 21 years after the
death of the last survivor of all the persons listed in Exhibit J
hereto, whichever period is applicable.
SECTION 2.1.2. Sale to SOUTHERN MINNESOTA.
(a) Sale of Assets. Subject to the terms and conditions
hereof and the simultaneous occurrence of the conveyances
referred to in paragraph (c) of this Section, at the SOUTHERN
MINNESOTA Closing NSP will sell and convey to SOUTHERN
MINNESOTA and SOUTHERN MINNESOTA will purchase from NSP a
37.500% undivided ownership interest, as a tenant in common
with NSP and the other Participants, in the Sherco 3 Site and
the other components of Sherco 3, excluding Joint Common
Facilities, to the extent acquired or constructed, installed or
stored in or on the Sherco 3 Site and the Sherco Plant Site
prior to the SOUTHERN MINNESOTA Closing. In addition, NSP
shall convey and SOUTHERN MINNESOTA will purchase, as a tenant
in common with NSP and the other Participants, a 33.040%
undivided ownership interest in the Joint Common Facilities to
the extent acquired or constructed, installed or stored in or
on the Sherco 3 Site and the Sherco Plant Site prior to the
SOUTHERN MINNESOTA Closing. The conveyance of the Sherco 3
Site will be in a Minnesota Standard Form Warranty Deed in
substantially the form attached hereto as Exhibit E and such
other conveyances by Bills of Sale or Assignments of Contract
Rights in substantially the forms attached hereto as Exhibits
F and K, respectively. Such transfers may be subject to an
option allowing NSP to reacquire the land for the same price by
notice to SOUTHERN MINNESOTA within 90 days after the
retirement of Sherco 3. At the SOUTHERN MINNESOTA Closing, NSP
will furnish to SOUThERN MINNESOTA a properly executed release
of Harris Trust and Savings Bank, as trustee under NSP's first
mortgage indenture, releasing from the lien of such indenture
all property title in which is being conveyed to SOUTHERN
MINNESOTA hereunder. Such release shall be substantially in
the form of Exhibit G hereto.
(b) Purchase Price and Payment. At the SOUTHERN MINNESOTA
Closing, SOUTHERN MINNESOTA shall pay to NSP for the property
to be purchased by it pursuant to paragraph (a) of this Section
an amount equal to the sum of (a)
33.040% of any Cost of Construction paid through the SOUTHERN MINNESOTA
Closing for the Joint Common Facilities and all AFUDC recorded on the
books of NSP which is allocable thereto, plus (b) 37.500% of all Cost
of Construction paid through the SOUTHERN MINNESOTA Closing for the
balance of the Sherco 3 Project (exclusive of Cost of Construction paid
by NSP for the Sherco 3 Site) and all AFUDC recorded on the books of NSP
which is allocable thereto, plus (c) 37.500% of an amount determined by
multiplying the Sherco 3 Site acreage times the average per acre price
of NSP's original cost of acquiring the Sherco Plant Site as it exists
on the date hereof and the Sherco 3 Site; provided, however, that if
NSP's AFUDC annual accrual rate during the period from the effective
date of this Agreement to the date of the SOUTHERN MINNESOTA Closing
exceeds 8% at any time, then the calculation of the payment due from
SOUTHERN MINNESOTA shall be determined as if the AFUDC annual accrual
rate Were limited to 8% for such time; and provided further, that should
SOUTHERN MINNESOTA have commenced paying Cost of Construction prior to
the SOUTHERN MINNESOTA Closing, then there shall be deducted from the
purchase price calculated hereunder the aggregate amount of Cost of
Construction so paid by SOUTHERN MINNESOTA and the amount of AFUDC
included in the calculation of such purchase price shall be
appropriately adjusted to reflect such payments.
Prior to the SOUTHERN MINNESOTA Closing, NSP shall furnish
SOUTHERN MINNESOTA a statement showing the estimated Cost of
Construction paid and to be paid through the date of the SOUTHERN
MINNESOTA Closing, broken down into major categories and supported by
detail reasonably adequate for the purpose of SOUTHERN MINNESOTA's
review thereof, and shall include, without limiting the generality of
the foregoing, information demonstrating the basis for all allocations
of administrative and general expenses and information demonstrating the
basis for any other allocations of expenses between or among Sherco 3
and the other generating units at the Sherco Plant Site. Such statement
shall also include a certificate stating that NSP keeps its books in
conformity with the Uniform System of Accounts and that the portion of
such estimated Cost of Construction actually paid is as recorded on the
books of NSP (excluding any recorded amounts which are not included
within the term Cost of Construction) and is attributable to Sherco 3;
provided, however, that such estimated Cost of Construction is subject
to adjustment based upon the actual Cost of Construction paid through
the date of the SOUTHERN MINNESOTA Closing.
The foregoing purchase price shall be payable to NSP in clearing
house funds. SOUTHERN MINNESOTA and NSP shall have until the one
hundred eightieth day after the SOUThERN MINNESOTA Closing, after the
UNITED MINNESOTA Closing or after the furnishing to SOUThERN MINNESOTA
of an accounting by NSP of such Cost of Construction, whichever occurs
last, to question or contest the correctness of the purchase price paid
by SOUTHERN MINNESOTA pursuant to this Section after which time the
correctness of such purchase price shall be conclusively presumed. In
the event of an error in calculation of the purchase price as provided
in this Section, within thirty days NSP shall reimburse SOUTHERN
MINNESOTA or SOUTHERN MINNESOTA shall make payment to NSP, as the case
may be, in the amount charged or failed to be charged in error. Any
such reimbursement by NSP to SOUTHERN MINNESOTA shall be made in
immediately available funds with Interest calculated from the date of
the SOUTHERN MINNESOTA Closing to the date of reimbursement at NSP's
average current cost of borrowed funds during the period. Any such
payment by SOUTHERN MINNESOTA to NSP shall be made in immediately
available funds with interest calculated from the date of the SOUTHERN
MINNESOTA Closing to the date of payment at NSP's average current cost
of borrowed funds during the period.
(c) Subject to the terms and conditions hereof and the
simultaneous occurrence of the sale and conveyance referred to
in paragraph (a) of this Section, at the SOUTHERN MINNESOTA
Closing NSP shall convey to SOUTHERN MINNESOTA an easement in
any land included in the Sherco Plant Site on which is situated
any portion of Sherco 3 and such other easements and rights of
way over land or interests in land included in the Sherco Plant
Site as shall be necessary to afford to SOUTHERN MINNESOTA the
full use and enjoyment of Sherco 3. The easements, rights of
way and other interests to be conveyed pursuant to the
foregoing sentence are set forth on Exhibit H hereto. Such
easements, rights of way and other interests shall
automatically terminated upon retirement of Sherco 3. SOUTHERN
MINNESOTA shall not be required to make any payment to NSP, at
the SOUTHERN MINNESOTA Closing or thereafter, in respect of
such conveyances. The intent of the Participants is that all
NSP Common Facilities, other than land, are fixtures and part
of the real property to which they are attached. NSP hereby
grants to SOUTHERN MINNESOTA an easement to use such fixtures
through the Project Manager for the benefit of Sherco 3.
Should it be determined at any time that all or any portion of
the NSP Common Facilities are personal property as opposed to
fixtures, then NSP shall lease such NSP Common Facilities to
SOUTHERN MINNESOTA for a term co-extensive with the term of
this Agreement. The consideration for any such lease shall be
the agreement of SOUTHERN MINNESOTA to perform its obligations
under this Agreement. NSP shall furnish to SOUTHERN MINNESOTA
a properly executed release of Harris Trust and Savings Bank,
as trustee under NSP's first mortgage indenture, releasing from
the lien of such indenture any easement, right of way or other
interest conveyed to SOUTHERN MINNESOTA under this paragraph in
property owned by NSP. Such release shall be substantially in
the form of Exhibit G hereto.
(d) SOUTHERN MINNESOTA Closing. The closing of the sales
and conveyances contemplated by paragraphs (a) and (c) of this
Section (the "SOUTHERN MINNESOTA Closing") will take place on
the first business day following the 90th day after the
issuance of the Certificate of Need; provided, however, that if
all such conditions precedent specified in Section 2.1.3 hereof
have not been fulfilled by such date, the SOUTHERN MINNESOTA
Closing shall take place as soon thereafter as SOUTHERN
MINNESOTA and NSP agree that such conditions precedent have
been fulfilled.
(e) Post-Closing Conveyances. From time to time after the
SOUTHERN MINNESOTA Closing, NSP and SOUTHERN MINNESOTA shall
execute and deliver such other instruments of conveyance and
transfer as may be necessary or appropriate or as either party
may reasonably request to vest in SOUTHERN MINNESOTA the
undivided ownership interest inn and to Sherco 3 and the other
interests required to be conveyed pursuant to paragraphs (a)
and (c) of this Section.
(f) Evidence of Title. At the SOUTHERN MINNESOTA Closing
and at such other time or times subsequent thereto as NSP,
pursuant to paragraph (e) of this Section, shall deliver to
SOUTHERN MINNESOTA instruments of conveyance and transfer, NSP
shall also furnish to SOUTHERN MINNESOTA evidence satisfactory
to SOUTHERN MINNESOTA that NSP is the owner of good and
marketable title to all property and interests, real and
personal, to be conveyed to SOUTHERN MINNESOTA, free and clear
of all mortgages and other liens and encumbrances except those
permitted by Section 1.2.2(d) hereof.
SECTION 2.1.3. Conditions Precedent to SOUTHERN MINNESOTA
Closing.
(a) NSP Conditions. The obligation of NSP to make the
conveyances to SOUTHERN MINNESOTA required to be made by it
pursuant to Section 2.1.2 hereof is subject to the fulfillment,
prior to or at the SOUTHERN MINNESOTA Closing, of each of the
following conditions (or the waiver of such conditions by NSP):
(i) NSP shall not have discovered any material error,
misstatement or omission in the representations and warranties
made by SOUTHERN MINNESOTA in this Agreement.
(ii) SOUTHERN MINNESOTA's representations and warranties
contained in this Agreement shall be deemed to have been made
again at and as of the time of the SOUTHERN MINNESOTA Closing
and shall then be true in all material respects; SOUTHERN
MINNESOTA shall have performed and. complied with all
agreements, covenants and conditions required by this Agreement
to be performed or complied with by it prior to or at the
SOUTHERN: MINNESOTA Closing provided for herein; and NSP shall
have been furnished with a certificate of the President of
SOUTHERN MINNESOTA, dated the date of the SOUTHERN MINNESOTA
Closing, certifying in such detail as NSP may request to the
fulfillment of the foregoing conditions and to the further
effect that there are no actions, suits or proceedings pending
or, to such officer's knowledge, threatened against or
affecting SOUTHERN MINNESOTA before any court or administrative
body or agency which might materially adversely affect the
ability of SOUTHERN MINNESOTA to perform its obligations under
this Agreement.
(iii) NSP shall have been furnished with an opinion of
Dorsey & Whitney, counsel for SOUTHERN MINNESOTA, dated the
date of the SOUTHERN MINNESOTA Closing, to the effect that (a)
SOUTHERN MINNESOTA is a municipal corporation and a political
subdivision of the State of Minnesota duly organized, validly
existing and in good standing under the laws of the State of
Minnesota and has the requisite power and authority to own the
undivided ownership interests in Sherco 3 to be owned by it
hereunder, to execute and deliver this Agreement and to perform
its obligations hereunder and to carry on its business as it is
now being conducted and as it is contemplated to be conducted
in the future; (b) the execution, delivery and performance by
SOUTHERN MINNESOTA of this Agreement have been duly authorized
by all requisite action by SOUTHERN MINNESOTA, do not
contravene any law, or any governmental rule, regulation or
order, applicable to SOUTHERN MINNESOTA or its properties, or
the Agency Agreement or By-Laws of SOUTHERN MINNESOTA, and do
not and will not contravene the provisions of, or constitute a
default under, any indenture, mortgage, contract, resolution or
other instrument to which SOUTHERN MINNESOTA is a party or by
which SOUTHERN MINNESOTA is bound; all requisite governmental,
regulatory and vendor approvals and consents for the execution
and delivery by SOUTHERN MINNESOTA of this Agreement and the
purchase by SOUTHERN MINNESOTA of the property to be purchased
by it hereunder have been obtained; and this Agreement
constitutes a valid and binding obligation of SOUTHERN
MINNESOTA enforceable in accordance with its terms, except as
limited by applicable bankruptcy, insolvency, reorganization or
similar laws at the time in effect; and (c) there are no
actions, suits or proceedings pending or, to the best knowledge
of such counsel (having made diligent inquiry with respect
thereto), threatened against or affecting SOUTHERN MINNESOTA
before any court or administrative body or agency which might
materially adversely affect the ability of SOUTHERN MINNESOTA
to perform its obligations under this Agreement.
(b) SOUTHERN MINNESOTA Conditions. The obligation of
SOUTHERN MINNESOTA to make the purchases from NSP required to
be made by it pursuant to Section 2.1.2 hereof is subject to
the fulfillment, prior to or at the SOUTHERN MINNESOTA Closing,
of each of the following conditions (or the waiver of such
conditions by SOUTHERN MINNESOTA):
(i) SOUTHERN MINNESOTA shall not have discovered any
material error, misstatement or omission in the representations
and warranties made by NSP in this Agreement.
(ii) NSP's representations and warranties contained in this
Agreement shall be deemed to have been made again at and as of
the time of the SOUTHERN MINNESOTA Closing and shall then be
true in all material respects; NSP shall have performed and
complied with all agreements, covenants and conditions required
by this Agreement to be performed or complied with by it prior
to or at the SOUTHERN MINNESOTA Closing provided for herein;
and SOUTHERN MINNESOTA shall have been furnished with a
certificate of the President or a Vice President of NSP, dated
the date of the SOUTHERN MINNESOTA Closing, certifying in such
detail as SOUTHERN MINNESOTA may request to the fulfillment of
the foregoing conditions and to the further effect that (a) no
actions, suits or proceedings are pending or, to such officer's
knowledge, threatened against or affecting NSP before any court
or administrative body or agency which might materially
adversely affect the ability of NSP to perform its obligation
under this Agreement and that (b) to the best of such officer's
knowledge, there are no defects in the construction of, or
other major problems or controversies in connection with,
Sherco 3 which, in NSP's judgment, could materially delay or
otherwise materially affect the construction or placing into
commercial operation of Sherco 3, or any portion thereof, or
materially affect the rights or obligations of SOUTHERN
MINNESOTA in respect of Sherco 3.
(iii) SOUTHERN MINNESOTA shall have been furnished with an
opinion of counsel for NSP, dated the date of, the SOUTHERN
MINNESOTA Closing, to the effect that (a) NSP is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Minnesota and has corporate power and
authority to ,own the undivided ownership interests in Sherco
3 to be owned by it hereunder, to execute and deliver this
Agreement and to perform its obligations hereunder and to carry
on its business as it is now being conducted and as it is
contemplated to be conducted in the future; (b) the execution,
delivery and performance by NSP of this Agreement have been
duly authorized by all necessary corporate action on the part
of NSP, do not contravene any law, or any governmental rule,
regulation or order, applicable to NSP or its properties, or
the Articles of Incorporation or By-Laws of NSP, and do not and
will not contravene the provisions of, or constitute a default
under, any indenture, mortgage, contract or other instrument to
which NSP is a party or by which NSP is bound; all requisite
governmental, regulatory and vendor approvals and consents for
the execution and delivery by NSP of this Agreement and the
sale and conveyance by NSP of the property to be sold and
conveyed by it to SOUTHERN MINNESOTA hereunder have been
obtained; and this Agreement constitutes a legal, valid and
binding obligation of NSP enforceable in accordance with its
terms, except as limited by applicable bankruptcy, insolvency,
reorganization or similar laws at the time in effect; (c) there
are no actions, suits or proceedings pending or, to the best
knowledge of such counsel (having made diligent inquiry with
respect thereto), threatened against or affecting NSP before
any court or administrative body or agency which might
materially adversely affect the ability of NSP to perform its
obligations under this Agreement; (d) the Warranty Deed, Bills
of Sale and Assignments of Contract Rights executed by NSP in
connection with the SOUTHERN MINNESOTA Closing have been duly
authorized, executed and delivered by NSP and are effective to
vest in SOUTHERN MINNESOTA good and marketable title in and to
the undivided ownership interests required to be conveyed to
SOUTHERN MINNESOTA hereunder in the property included in Sherco
3 which is acquired or constructed, installed or stored in or
on the Sherco 3 Site and the Sherco Plant Site as of the date
of the SOUTHERN MINNESOTA Closing, free and clear of all
mortgages and other liens and encumbrances except easements and
other rights expressly reserved by NSP in any of the foregoing
conveyance documents; and (e) the instruments delivered to
SOUTHERN MINNESOTA to convey the easements, rights of way and
other interests in property required to be conveyed to SOUTHERN
MINNESOTA at the SOUTHERN MINNESOTA Closing pursuant to
paragraph (c) of Section 2.1.2 hereof are effective to make the
conveyances purported to be made, free and clear of all
mortgages and other liens and encumbrances, except that such
opinion may except any specific easements or encumbrances which
are permitted by Section 1.2.2(d) hereof.
(c) Mutual Conditions. The respective obligations of NSP
and SOUTHERN MINNESOTA pursuant to Section 2.1.2 hereof are
subject to the fulfillment, prior to or at the SOUTHERN
MINNESOTA Closing, of the following further conditions (or the
waiver thereof by NSP and SOUTHERN MINNESOTA):
(i) UNITED MINNESOTA shall have executed and delivered this
Agreement.
(ii) SOUTHERN MINNESOTA shall have entered into
transmission agreements, with NSP and other utilities,
providing for the delivery of SOUTHERN MINNESOTA's Entitlement
to its members, including an agreement with NSP providing for
the transmission of SOUTHERN MINNESOTA's Entitlement through
NSP's system.
(iii) All requisite governmental, regulatory and vendor
approvals and consents for the execution and delivery by NSP
and SOUTHERN MINNESOTA of this Agreement, the sale and
conveyance by NSP of the property to be sold by it to SOUTHERN
MINNESOTA hereunder, and the purchase by SOUTHERN MINNESOTA of
such property, shall have been obtained.
(iv) The release of Harris Trust and Savings Bank, as
trustee under NSP's first mortgage indenture, contemplated by
Section 2.1.2(a) and (c) hereof shall have been received.
(v) SOUTHERN MINNESOTA shall have received net proceeds
from the issuance and sale of its bonds or notes adequate to
finance the purchase of all property to be purchased by it from
NSP at the SOUTHERN MINNESOTA Closing pursuant to Section 2.1.2
hereof.
SECTION 2.1.4. Sale to UNITED MINNESOTA.
(a) Sale of Assets. Subject to the terms and conditions
hereof and the simultaneous occurrence of the conveyances
referred to in paragraph (c) of this Section, at the UNITED
MINNESOTA Closing NSP will sell and convey to UNITED MINNESOTA
and UNITED MINNESOTA will purchase from NSP a 6.125% undivided
ownership interest, as a tenant in common with NSP and the
other Participants, in the Sherco 3 Site and the other
components of Sherco 3, excluding Joint Common Facilities, to
the extent acquired or constructed, installed or stored in or
on the Sherco 3 Site and the Sherco Plant Site prior to the
UNITED MINNESOTA Closing. In addition, NSP shall convey and
UNITED MINNESOTA will purchase, as tenant in common with NSP,
a 5.396% undivided ownership interest in the Joint Common
Facilities to the extent acquired or constructed, installed or
stored in or on the Sherco 3 Site and the Sherco Plant Site
prior to the UNITED MINNESOTA Closing. The conveyance of the
Sherco 3 Site will be on a Minnesota Standard Form Warranty
Deed in substantially the form attached hereto as Exhibit E and
such other conveyances by Bills of Sale or Assignments of
Contract Rights in substantially the forms attached hereto as
Exhibits F and K, respectively. Such transfers may be subject
to an option allowing NSP to re-acquire the land for the same
price by notice to UNITED MINNESOTA within 90 days after the
retirement of Sherco 3. At the UNITED MINNESOTA Closing, NSP
will furnish to UNITED MINNESOTA a properly executed release
from Harris Trust and Savings Bank, as trustee under NSP's
first mortgage indenture, releasing from the lien of such
indenture all property title in which is being conveyed to
UNITED MINNESOTA hereunder. Such release shall be
substantially in the form of Exhibit G hereto.
(b) Purchase Price and Payment. At the UNITED MINNESOTA
Closing, UNITED MINNESOTA shall pay to NSP for the property to
be purchased by it pursuant to paragraph (a) of this Section an
amount equal to the sum of (a) 5.396% of any Cost of
Construction paid through the UNITED MINNESOTA Closing for the
Joint Common Facilities and all AFUDC recorded on the books of
NSP which is allocable thereto, plus (b) 6.125% of all Cost of
Construction paid through the UNITED MINNESOTA Closing for the
balance of the Sherco 3 Project (exclusive of Cost of
Construction paid by NSP for the Sherco 3 Site) and all AFUDC
recorded on the books of NSP which is allocable thereto, plus
(c) 6.125% of an amount determined by multiplying the Sherco 3
Site acreage times the average per acre price of NSP's original
cost of acquiring the Sherco Plant Site as it exists on the
date hereof and the Sherco 3 Site; provided, however, that if
NSP's AFUDC annual accrual rate during the period from the
effective date of this Agreement to the date of the UNITED
MINNESOTA Closing exceeds 8% at any time, then the calculation
of the payment due from UNITED MINNESOTA shall be determined as
if the AFUDC annual accrual rate were limited to 8% for such
time; and provided further, that should UNITED MINNESOTA have
commenced paying Cost of Construction prior to the UNITED
MINNESOTA Closing, then there shall be deducted from the
purchase price calculated hereunder the aggregate amount of
Cost of Construction so paid by UNITED MINNESOTA and the amount
of AFUDC included in the calculation of such purchase price
shall be appropriately adjusted to reflect such payments.
Prior to the UNITED MINNESOTA Closing, NSP shall furnish
UNITED MINNESOTA a statement showing the estimated Cost of
Construction paid and to be paid through the date of the UNITED
MINNESOTA Closing, broken down into major categories and
supported by detail reasonably adequate for the purpose of
UNITED MINNESOTA's review thereof, and shall include, without
limiting the generality of the foregoing, information
demonstrating the basis for all allocations of administrative
and general expenses and information demonstrating the basis
for any other allocations of expenses between or among Sherco
3 and the other generating units at the Sherco Plant Site.
Such statement shall also include a certificate stating that
NSP keeps its books in conformity with the Uniform System of
Accounts and that the portion of such estimated Cost of
Construction actually paid is as recorded on the books of NSP
(excluding any recorded amounts which are not included within
the term Cost of Construction) and is attributable to Sherco 3;
provided, however, that such estimated Cost of Construction is
subject to adjustment based upon the actual Cost of
Construction paid through the date of the UNITED MINNESOTA
Closing.
The foregoing purchase price shall be payable to NSP in
clearing house funds. UNITED MINNESOTA and NSP shall have
until the one hundred eightieth day after the SOUTHERN
MINNESOTA Closing, after the UNITED MINNESOTA Closing or after
the furnishing to UNITED MINNESOTA of an accounting by NSP of
such Cost of Construction, whichever occurs last, to question
or contest the correctness of the purchase price paid by UNITED
MINNESOTA pursuant to this Section after which time the
correctness of such purchase price shall be conclusively
presumed. In the event of an error in calculation of the
purchase price as provided in this Section, within thirty days
NSP shall reimburse UNITED MINNESOTA or UNITED MINNESOTA shall
make payment to NSP, as the case may be, in the amount charged
or failed to be charged in error. Any such reimbursement by
NSP to UNITED MINNESOTA shall be made in immediately available
funds with interest calculated from the date of the UNITED
MINNESOTA Closing to the date of reimbursement at NSP's average
current cost of borrowed funds during the period. Any such
payment by UNITED MINNESOTA to NSP shall be made in immediately
available funds with interest calculated from the date of the
UNITED MINNESOTA Closing to the date of payment at NSP's
average current cost of borrowed funds during the period.
(c) Subject to the terms and conditions hereof and the
simultaneous occurrence of the sale and conveyance referred to
in paragraph (a) of this Section, at the UNITED MINNESOTA
Closing NSP shall convey to UNITED MINNESOTA an easement in any
land included in the Sherco Plant Site on which is situated any
portion of Sherco 3 and such other easements and rights of way
over land or interests in land included in the Sherco Plant
Site as shall be necessary to afford to UNITED MINNESOTA the
full use and enjoyment of Sherco 3. The easements, rights of
way and other interests to be conveyed pursuant to the
foregoing sentence are set forth in Exhibit H hereto. Such
easements, rights of way and other interests shall
automatically terminate upon retirement of Sherco 3. UNITED
MINNESOTA shall not be required to make any payment to NSP, at
the UNITED MINNESOTA Closing or thereafter, in respect of such
conveyances. The intent of the ParticipantS is that all NSP
Common Facilities, other than land, are fixtures and part of
the real property to which they are attached. NSP hereby
grants to UNITED MINNESOTA an easement to use such fixtures
through the Project Manager for the benefit of Sherco 3.
should it be determined at any time that all or any portion of
the NSP Common Facilities are personal property as opposed to
fixtures, then NSP shall lease such NSP Common FacilitieS to
UNITED MINNESOTA for a term co-extensive with the term of this
Agreement. The consideration for any such lease shall be the
agreement of UNITED MINNESOTA to perform its obligations under
this Agreement. NSP shall furnish to UNITED MINNESOTA a
properly executed release of Harris Trust and Savings Bank, as
trustee under NSP's first mortgage indenture, releasing from
the lien of such indenture any easement, right of way or other
interest conveyed to UNITED MINNESOTA under this paragraph in
property owned by NSP. Such release shall be substantially in
the form of Exhibit G hereto.
(d) UNITED MINNESOTA Closing. The closing of the sales and
conveyances contemplated by paragraphs (a) and (c) of this
Section (the "UNITED MINNESOTA Closing") will take place on the
first business day following the 90th day after the issuance of
the Certificate of Need; provided, however, that if all
conditions precedent specified in Section 2.1.5 hereof have not
been fulfilled by such date, the UNITED MINNESOTA Closing shall
take place as soon thereafter as UNITED MINNESOTA and NSP agree
that such conditions precedent have been fulfilled. In no
event, however, shall UNITED MINNESOTA be obligated to
consummate the UNITED MINNESOTA Closing until the SOUTHERN
MINNESOTA Closing has taken place. If the UNITED MINNESOTA
Closing is not consummated by July 1, 1983 or the date which is
six months after the date of the SOUTHERN MINNESOTA Closing,
whichever is later, then NSP shall not be required to make the
sales and conveyances to UNITED MINNESOTA referred to in this
Section 2.1.4.
(e) Post-Closing Conveyances. From time to time after the
UNITED MINNESOTA Closing, NSP and UNITED MINNESOTA shall
execute and deliver such other instruments of conveyance and
transfer as may be necessary or appropriate or as either party
may reasonably request to vest in UNITED MINNESOTA the
undivided ownership interest in and to Sherco 3 and the other
interests required to be conveyed pursuant to paragraphs (a)
and (c) of this Section.
(f) Evidence of Title. At the UNITED MINNESOTA Closing and
at such other time or times subsequent thereto as NSP, pursuant
to paragraph (e) of this Section, shall deliver to UNITED
MINNESOTA instruments of conveyance and transfer, NSP shall
also furnish to UNITED MINNESOTA evidence satisfactory to
UNITED MINNESOTA that NSP is the owner of good and marketable
title to all property, real and personal, to be conveyed to
UNITED MINNESOTA, free and clear of all mortgages and other
liens and encumbrances except those permitted by Section
1.2.2(d) hereof.
SECTION 2.1.5. Conditions Precedent to UNITED MINNESOTA
Closing.
(a) NSP Conditions. The obligation of NSP to make the
conveyances to UNITED MINNESOTA required to be made by it,
pursuant to Section 2.1.4 hereof is subject to the fulfillment,
prior to or at the UNITED MINNESOTA Closing, of each of the
following conditions (or the waiver of such conditions by NSP):
(i) NSP shall not have discovered any material error,
misstatement or omission in the representations and warranties
made by UNITED MINNESOTA in this Agreement.
(ii) UNITED MINNESOTA's representations and warranties
contained in this Agreement shall be deemed to have been made
again at and as of the time of the UNITED MINNESOTA Closing and
shall then be true in all material respects; UNITED MINNESOTA
shall have performed and complied with all agreements,
covenants and conditions required by this Agreement to be
performed or complied with by it prior to or at the UNITED
MINNESOTA Closing provided for herein; and NSP shall have been
furnished with a certificate of the President of UNITED
MINNESOTA, dated the date of the UNITED MINNESOTA Closing,
certifying in such detail as NSP may request to the fulfillment
of the foregoing conditions and to the further effect that
there are no actions, suits or proceedings pending or, to such
officer's knowledge, threatened against or affecting UNITED
MINNESOTA before any court or administrative body or agency
which might materially adversely affect the ability of UNITED
MINNESOTA to perform its obligations under this Agreement.
(iii) NSP shall have been furnished with an opinion of
Dorsey & Whitney, counsel for UNITED MINNESOTA, dated the date
of the UNITED MINNESOTA Closing, to the effect that (a) UNITED
MINNESOTA is a municipal corporation and a political
subdivision of the State of Minnesota duly organized, validly
existing and in good standing under the laws of the State of
Minnesota and has the requisite power and authority to own the
undivided ownership interests in Sherco 3 to be owned by it
hereunder, to execute and deliver this Agreement and to perform
its obligations hereunder and to carry on its business as it is
now being conducted and as it is contemplated to be conducted
in the future; (b) the execution, delivery and performance by
UNITED MINNESOTA of this Agreement have been duly authorized by
all requisite action by UNITED MINNESOTA, do not contravene any
law, or any governmental rule, regulation or order, applicable
to UNITED MINNESOTA or its properties, or the Agency Agreement
or By-Laws of UNITED MINNESOTA, and do not and will not
contravene the provisions of, or constitute a default under,
any indenture, mortgage, contract, resolution or other
instrument to which UNITED MINNESOTA is a party or by which
UNITED MINNESOTA is bound; all requisite governmental,
regulatory and vendor approvals and consents for the execution
and delivery by UNITED MINNESOTA of this Agreement and the
purchase by UNITED MINNESOTA of the property to be purchased by
it hereunder have been obtained; and this Agreement constitutes
a valid and binding obligation of UNITED MINNESOTA enforceable
in accordance with its terms, except as limited by applicable
bankruptcy, insolvency, reorganization or similar laws at the
time in effect; and (c) there are no actions, suits or
proceedings pending or, to the best knowledge of such counsel
(having made diligent inquiry with respect thereto), threatened
against or affecting UNITED MINNESOTA before any court or
administrative body or agency which might materially adversely
affect the ability of UNITED MINNESOTA to perform its
obligations under this Agreement.
(b) UNITED MINNESOTA Conditions. The obligation of UNITED
MINNESOTA to make the purchases from NSP required to be made by
it pursuant to Section 2.1.4 hereof is subject to the
fulfillment, prior to or at the UNITED MINNESOTA Closing, of
each of the following conditions (or the waiver of such
conditions by UNITED MINNESOTA):
(i) UNITED MINNESOTA shall not have discovered any material
error, misstatement or omission in the representations and
warranties made by NSP in this Agreement.
(ii) NSP's representations and warranties contained in this
Agreement shall be deemed to have been made again at and as of
the time of the UNITED MINNESOTA Closing and shall then be true
in all material respects; NSP shall have performed and complied
with all agreements, covenants and conditions required by this
Agreement to be performed or complied with by it prior to or at
the UNITED MINNESOTA Closing provided for herein; and UNITED
MINNESOTA shall have been furnished with a certificate of the
President or a Vice President of NSP, dated the date of the
UNITED MINNESOTA Closing, certifying in such detail as UNITED
MINNESOTA may request to the fulfillment of the foregoing
conditions and to the further effect that (a) no actions, suits
or proceedings are pending or, to such officer's knowledge,
threatened against or affecting NSP before any court or
administrative body or agency which might materially adversely
affect the ability of NSP to perform its obligation under this
Agreement and that (b) to the best of such officer's knowledge,
there are no defects in the construction of, or other major
problems or controversies in connection with, Sherco 3 which,
in NSP's judgment, could materially delay or otherwise
materially affect the construction or placing into commercial
operation of Sherco 3, or any portion thereof, or materially
affect the rights or obligations of UNITED MINNESOTA in respect
of Sherco 3.
(iii) UNITED MINNESOTA shall have been furnished with an
opinion of counsel for NSP, dated the date of the UNITED
MINNESOTA Closing, to the effect that (a) NSP is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Minnesota and has corporate power and
authority to own the undivided ownership interests in Sherco 3
to be owned by it hereunder, to execute and deliver this
Agreement and to perform its obligations hereunder and to carry
on it's business as it is now being conducted and as it is
contemplated to be conducted in the future; (b) the execution,
delivery and performance by NSP of this Agreement have been
duly authorized by all necessary corporate action on the part
of NSP, do not contravene any law, or any governmental rule,
regulation or order, applicable to NSP or its properties, or"
the Articles of Incorporation or By-Laws of NSP, and do not and
will not contravene the provisions of, or constitute a default
under, any indenture, mortgage, contract or other instrument to
which NSP is a party or by which NSP is bound; all requisite
governmental, regulatory and vendor approvals and consents for
the execution and delivery by NSP of this Agreement and the
sale and conveyed by NSP of the property to be sold and
conveyed by it to UNITED MINNESOTA hereunder have been
obtained; and this Agreement constitutes a legal, valid and
binding obligation of NSP enforceable in accordance with its
terms, except as limited by applicable bankruptcy, insolvency,
reorganization or similar laws at the time in effect; (c) there
are no actions, suits or proceedings pending or, to the best
knowledge of such counsel (having made diligent inquiry with
respect thereto), threatened against or affecting NSP before
any court or administrative body or agency which might
materially adversely affect the ability of NSP to perform its
obligations under this Agreement; (d) the Warranty Deed, Bills
of Sale and Assignments of Contract Rights executed by NSP in
connection with the UNITED MINNESOTA Closing have been duly
authorized, executed and delivered by NSP and are effective to
vest in UNITED MINNESOTA good and marketable title in and to
the undivided ownership interests required to be conveyed to
UNITED MINNESOTA hereunder in the property included in Sherco
3 which is acquired or constructed, installed or stored in or
on the Sherco 3 Site and the Sherco Plant Site as of the date
of the UNITED MINNESOTA Closing, free and clear of all
mortgages and other liens and encumbrances except easements and
other rights expressly reserved by NSP in any of the foregoing
documents; and (e) the instruments delivered to UNITED
MINNESOTA to convey the easements, rights of way and other
interests in property required to be conveyed to UNITED
MINNESOTA at the UNITED MINNESOTA Closing pursuant to paragraph
(c) of Section 2.1.4 hereof are effective to make the
conveyances purported to be made, free and clear of all
mortgages and other liens and encumbrances except that such
opinion may except any specific easements or encumbrances which
are permitted by Section 1.2.2(d) hereof.
(c) Mutual Conditions. The respective obligations of NSP
and UNITED MINNESOTA pursuant to Section 2.1.4 hereof are
subject to the fulfillment, prior to or at the UNITED MINNESOTA
Closing, of the following further conditions (or the waiver
thereof by NSP and UNITED MINNESOTA):
(i) SOUTHERN MINNESOTA shall have executed and delivered
this Agreement.
(ii) UNITED MINNESOTA shall have entered into a
transmission agreement with United Power Association, providing
for the delivery of United Minnesota's Entitlement to its
members, and an agreement with NSP providing for the
transmission of UNITED MINNESOTA'S Entitlement through NSP's
system.
(iii) All requisite governmental, regulatory and vendor
approvals and consents for the execution and delivery by NSP
and UNITED MINNESOTA of this Agreement, the sale and conveyance
by NSP of the property to be sold by it to UNITED MINNESOTA
hereunder, and the purchase by UNITED MINNESOTA of such
property, shall have been obtained.
(iv) The release of Harris Trust and Savings Bank, as
trustee under NSP's first mortgage indenture, contemplated by
Section 2.1.4(a) and (c) hereof shall have been received.
(v) UNITED MINNESOTA shall have received net proceeds from
the issuance and sale of its bonds or notes adequate to finance
the purchase of all property to be purchased by it from NSP at
UNITED MINNESOTA Closing pursuant to Section 2.1.4 hereof.
(vi) UNITED MINNESOTA shall have entered into contracts for
the sale of electric capacity and energy with member
municipalities having an aggregate peak load in 1980 of 56 MW.
SECTION 2.1.6. Payments Prior to Closings. The Participants
agree that, if the sale of SOUTHERN MINNESOTA's bonds or notes is
delayed so as to cause the SOUTHERN MINNESOTA Closing to be delayed
beyond October 1, 1982, the Participants will meet on that date to
review the Commercial Operation Date provided in Section 3.2.7 and to
approve a budget for Cost of Construction to be incurred after October
1, 1982. The vote of Participants whose aggregate Ownership Percentages
(assuming the closings hereunder had occurred) equal or exceed 65% shall
be necessary to approve such a budget. If a budget is approved, each
Participant shall be liable for and pay a share equal to its Joint
Common Facility Percentage of Cost of Construction for Joint Common
Facilities paid by NSP after approval of the budget and a share equal
to its Ownership Percentage of all other Cost of Construction paid by
NSP after approval of the budget; provided, however, that UNITED
MINNESOTA shall not be liable to any other Participant hereunder for
failure to make payments required hereunder if such failure is a result
of its inability to obtain financing necessary therefor. Payments will
be made to NSP in accordance with Section 3.3.3. If a budget is not
approved, NSP shall have the right, with no liability to the other
Participants, to terminate this Agreement, in which case the other
Participants shall deliver an appropriate release to NSP confirming such
termination; provided, however, that any termination by NSP must be made
on 60 days prior written notice to the other Participants and that, if
either the SOUTHERN MINNESOTA Closing shall occur or a budget shall be
approved within such 60-day notice period, this Agreement will not
terminate. If a budget is not approved and NSP does not terminate this
Agreement, NSP may proceed with construction, but with no obligation to
the other Participants to maintain a construction schedule which will
result in Sherco 3 being completed and placed in service by the date
specified in Section 3.2.7 hereof. However, after the SOUTHERN
MINNESOTA Closing, the Management Committee shall confirm the completion
date or establish a new completion date for purposes of Section 3.2.7
and the provisions of such Section shall again be applicable.
In the event that the SOUTHERN MINNESOTA Closing occurs, but the
obligation of NSP to make the sale and conveyances to UNITED MINNESOTA
referred to in Section 2.1.4 hereof is discharged, pursuant to Section
2.1.4(d) hereof, because the UNITED MINNESOTA Closing fails to occur by
the date indicated in Section 2.1.4(d), then, as soon as practicable
after such date, NSP shall convey to SOUTHERN MINNESOTA, and SOUTHERN
MINNESOTA shall purchase from NSP, as a tenant in common with NSP, (a)
an additional 2.500% undivided ownership interest in the Sherco 3 Site
and other components of Sherco 3, excluding Joint Common Facilities, and
(b) an additional 1.880% undivided ownership interest in the Joint
Common Facilities, in each case to the extent acquired or constructed,
installed or stored in or on the Sherco 3 Site and the Sherco Plant Site
prior to such conveyance. Such interests shall be conveyed in the
manner set forth in Section 2.1.2(a) and (c) hereof, free and clear of
all mortgages and other liens and encumbrances except those permitted
by Section 1.2.2(d) hereof, and the purchase price for such interests
shall be calculated on the same basis as the purchase price paid by
SOUTHERN MINNESOTA pursuant to Section 2.1.2 (b) hereof. The respective
obligations of NSP and SOUTHERN MINNESOTA under this paragraph shall be
subject to satisfaction of the respective conditions specified in
Section 2.1.3 hereof. From and after the sale and conveyance provided
for in this paragraph, the respective Ownership Percentages and Joint
Common Facility Percentages shall be revised to reflect such sale and
conveyance.
At any time after SOUTHERN MINNESOTA and UNITED MINNESOTA
commence making payments under this Agreement and through the SOUTHERN
MINNESOTA Closing and UNITED MINNESOTA Closing, respectively, SOUTHERN
MINNESOTA and UNITED MINNESOTA each shall be deemed to own (a) a
percentage undivided interest in the Joint Common Facilities determined
by dividing the amount of Cost of Construction for Joint Common
Facilities paid by it through such time by the total amount of Cost of
Construction for Joint Common Facilities paid by all Participants
through such time and (b) a percentage undivided interest in the balance
of Sherco 3 determined by dividing the amount of Cost of Construction
therefor paid by it through such time by the total amount of Cost of
Construction therefor paid by all Participants through such time. From
time to time, upon the request of SOUTHERN MINNESOTA or UNITED
MINNESOTA, NSP shall deliver such deeds, bills of sale, certificates and
opinions as shall be requested to evidence such ownership interests of
SOUTHERN MINNESOTA and UNITED MINNESOTA.
SECTION 2.1.7. Additions to Sherco Plant Site. From time to
time after the respective closings hereunder, if it is found that any
land, easements or rights of way not then owned by NSP are necessary to
the full use and enjoyment of Sherco 3, NSP shall either (a) arrange for
the acquisition of such land, easements or rights of way by all
Participants in proportion to their respective Ownership Percentages or
(b) shall acquire such lands, easements or rights of way as part of the
Sherco Plant Site and convey to each of the other Participants such
interests therein as shall be necessary to afford to each other
Participant the full use and enjoyment of Sherco 3. Any such lands,
easements or rights of way acquired as part of the Sherco Plant Site
shall be set forth in a revised Exhibit C hereto.
SECTION 2.1.8. "As Is" Sale. THE RESPECTIVE OWNERSHIP
INTERESTS OF SOUTHERN MINNESOTA AND UNITED MINNESOTA IN ThE PROPERTY
INCLUDED IN SHERCO 3 ARE TO BE SOLD "AS IS" AND "WHERE IS". NSP MAKES
NO REPRESENTATION OR WARRANTY WHATSOEVER IN THIS AGREEMENT, EXPRESSED,
IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION
OR WARRANTY AS TO THE VALUE, QUANTITY, CONDITION, SALEABILITY,
OBSOLESCENCE, MERCHANTABILITY, FITNESS OR SUITABILITY FOR USE OR WORKING
ORDER OF ANY OF SHERCO 3, NOR DOES NSP REPRESENT OR WARRANT THAT THE USE
OR OPERATION OF SHERCO 3 WILL NOT VIOLATE PATENT, TRADEMARK OR SERVICE
MARK RIGHTS OF ANY THIRD PARTIES. ThE PROVISIONS OF THIS SECTION 2.1.8
SHALL GOVERN OVER ANY CONFLICTING PROVISIONS OF THIS AGREEMENT.
Notwithstanding the foregoing, SOUTHERN MINNESOTA and UNITED MINNESOTA
shall each be entitled to rely upon any representation or warranty made
by NSP to it in writing either in this Agreement or in any certificate
delivered by NSP to it in connection with its purchase from NSP of an
undivided interest in Sherco 3, and SOUTHERN MINNESOTA and UNITED
MINNESOTA shall each have the benefit, in proportion to its percentage
ownership interest in the property included in Sherco 3, of all
manufacturers and vendors warranties and all patent, trademark and
service mark rights running to NSP in connection with the property
included in Sherco 3; provided that NSP shall have sole authority in
decisions regarding the enforcement (including any renegotiation and
settlement) of such warranties and patent, trademark and service mark
rights.
ARTICLE 2.2. COMMON FACILITIES; ADDITIONAL UNITS ON SHERCO
PLANT SITE.
SECTION 2.2.1. Mutual Rights. Without any consideration beyond
the respective obligations of this Agreement, NSP hereby covenants that
the other Participants, through the Project Manager, may use the Common
Facilities owned by it for the use and benefit of Unit 3 and the other
Participants hereby covenant that NSP may use their respective ownership
interest in Common Facilities for the use and benefit of Unit 3 as well
as for the use and benefit of the existing generating units on the
Sherco Plant Site. Notwithstanding the foregoing, NSP expressly
reserves the right to the full use and benefit of the Sherco Plant Site
and NSP Common Facilities, without any accounting to thee other
Participants, provided that NSP will not subject the Sherco Plant Site
or NSP Common Facilities to any use which unreasonably interferes with
the construction or operation of Sherco 3.
SECTION 2.2.2. Calculation of Joint Common Facility
Percentages.
(a) Objective - In consideration of the exchange of mutual
rights set forth in Section 2.2.1, the Participants agree that
the total value of NSP Common Facilities to Sherco 3 shall be
the sum of the "allocable portion" (as heretofore agreed upon
by the Participants in accordance with the next sentence) of
the total investment in each such Facility (including
investment in such Facilities as they exist on the date hereof
and investment to be made in NSP Common Facilities
Modifications) and that the total value of Joint Common
Facilities to Sherco 3 shall be the sum of the "allocable
portion" (as heretofore agreed upon by the Participants in
accordance with the next sentence) of the total investment in
each such Facility (including in the calculation of investment
all items which would constitute Cost of Construction
hereunder). The "allocable portion" of the investment in each
NSP Common Facility and in each Joint Common Facility has been
determined based upon the estimated amount of benefit to be
derived by Unit 3 from such Facility relative to the estimated
amount of benefit to be. derived from such Facility by each
other generating unit or units benefiting from such Facility.
The Participants other than NSP will pay their respective
Ownership Percentage of the total value placed on the
"allocable portion" of NSP Common Facilities toward the Cost of
Construction of Joint Common Facilities at those costs accrue
in the Construction Account. Accordingly, each Participant
other than NSP, in lieu of paying to NSP its Ownership
Percentage of the "allocable portion" of NSP's investment in
NSP Common Facilities made prior to the closing of its
acquisition hereunder or paying any portion of the investment
to be made in NSP Common.Facilities thereafter, will pay a
percentage of the "allocable portion" of Cost of Construction
of Joint Common Facilities which is greater than its Ownership
Percentage and NSP will pay a percentage of the "allocable
portion" of such Cost of Construction which is less than its
Ownership Percentage. In addition, as the owner of any other
generating unit or units which will benefit from each Joint
Common Facility, NSP will make all other investment (that is,
the portion not allocable to Sherco 3) required to be made in
each such Facility. NSP will make all required investment in
NSP Common Facilities including, without limitation, all
investment in NSP Common Facilities Modifications.
It is the objective of the Participants that each
Participant's percentage responsibility for the total
investment in Joint Common Facilities, represented by its Joint
Common Facility Percentage, be established so that, upon
completion of construction, the "allocable portion" of such
Participant's investment in NSP Common Facilities (if any) and
in Joint Common Facilities will equal its Ownership Percentage
times the "allocable portion" of the total investment in such
Common Facilities. The level of investment required to be made
by each Participant in Joint Common Facilities to meet this
objective (its "Objective Investment") shall be determined by
the formula set forth in paragraph (b) below. The resulting
Joint Common Facility Percentage shall be determined in
accordance with paragraph (c) below.
(b) Objective Investment Calculation. The Objective
Investment of each Participant in Joint Common Facilities shall
be determined by the following formula:
OI = OP (Cj-Cx+Ce+Cm)+Cxp-Cep-Cmo
---
100
Where:
OI Such Participant's Objective Investment in Joint Common
Facilities, as to be determined by the formula;
OP Such Participant's Ownership Percentage;
Cj Total investment in Joint Common Facilities;
Cx Total investment in Joint Common Facilities to the extent
allocable to generating units other than Sherco 3. The
Participants have agreed that Cx equals 0.262 times Cj;
Ce Total investment in NSP Common Facilities, exclusive of
investment in NSP Common Facilities Modifications, to the
extent allocable to Sherco 3. The Participants have agreed
that Ce equals $6,258,500;
Cm Total investment in NSP Common Facilities Modifications to
the extent allocable to Sherco 3. The Participants have
agreed that Cm shall equal the sum of (i) 0.866 times the
total investment in NSP Common Facilities Modifications
identified in Exhibit B-1 hereto plus (ii) the total
investment, to the extent allocable to Sherco 3 in
accordance with Section 2.2.6 hereof, in other NSP Common
Facilities Modifications from time to time determined to
be made prior to the completion of construction pursuant
to Section 2.2.6 hereof;
Cxp Such Participant's investment, if any, in Joint Common
Facilities to the extent allocable to generating units
other than Sherco 3; solely for purposes of the formula,
Cxp for NSP shall equal Cx and Cxp for each other
Participant shall equal zero;
Cep Such Participant's investment, if any, in NSP Common
Facilities, exclusive of investment in NSP Common
Facilities Modifications, to the extent allocable to Sherco
3; Cep for NSP shall equal Ce and Cep for each other
Participant shall equal zero; and
Cmo Such Participant's objective investment, if any, in NSP
Common Facilities Modifications to the extent allocable to
Sherco 3; solely for purposes of the formula, Cmo for NSP
shall equal Cm and Cmo for each other Participant shall
equal zero.
(c) Joint Common Facility Percentage Calculation. Subject
to the provisions of (d) below regarding defaults, the Joint
Common Facility Percentage of each Participant shall be
determined by the following formula:
JP = OI x 100
--
Cj
Where:
JP Such Participant's Joint Common Facility Percentage as to
be determined by the formula;
OI Such Participant's Objective Investment in Joint Common
Facilities, as determined under (b) above; and
Cj Total investment in Joint Common Facilities.
(d) Preliminary Calculation and Adjustment. The
Participants recognize that the Objective Investment and Joint
Common Facility Percentage of each Participant cannot be
finally established until the actual total investment in Joint
Common Facilities and in NSP Common Facilities Modifications is
known upon completion of construction. The Joint Common
Facility Percentages of the respective Participants set forth
in Exhibit B-2 hereto, therefore, are preliminary in that such
Percentages (and the Objective Investments on which they are
based) were calculated under the formulae in (b) and (c) above
using the cost estimates of Joint Common Facilities and the
cost estimates of NSP Common Facilities Modifications.
Accordingly, not more than 90 days after completion of
construction, which such completion of construction, for
purposes of this Agreement, shall occur no later than two years
after the Commercial Operation Date unless a later date is
agreed to by SOUTHERN MINNESOTA, the Management Committee shall
re-calculate the Objective Investment of each Participant under
the formula in (b) above using the actual total investment in
Joint Common Facilities and the actual total investment in
NSP Common Facilities Modifications.
After the Objective Investment of each Participant has been
re-calculated as provided above, any Participant whose "Pro
Forma Investment" in Joint Common Facilities is less than its
Objective Investment shall pay to the Participant or
Participants whose "Pro Forma Investment" therein is larger
than its Objective Investment such amount as is necessary so
that; each Participant's "Pro Forma Investment" in Joint Common
Facilities will equal its Objective Investment. Each
Participant's "Pro Forma Investment" in Joint Common Facilities
is defined to mean its actual investment therein (hereinafter
referred to as the amount Cjp), less any amount included in
such actual investment attributable to payments made by such
Participant to cover uncured defaults of other Participants in
making investment in Joint Common Facilities, plus the amount
of any uncured defaults by such Participant in making
investment in Joint Common Facilities. Following such
payments, which shall be considered to be adjustments to
investments in Joint Common Facilities, the Management
Committee shall re-calculate the Joint Common Facility
Percentage of each Participant. If no defaults exist toward
Cost of Construction of Sherco 3, the Management Committee
shall re-calculate the Joint Common Facility Percentage of each
Participant under the formula in (c) above, using such
Participant's Objective Investment determined under the formula
in (b) above. However, if one or more Participants are in
default in the payment of Cost of Construction of Sherco 3, the
Management Committee shall, in lieu of using the formula in (c)
above, re-calculate the Ownership Percentage and the Joint
Common Facility Percentage of each Participant in accordance
with the provisions of Section 5.1.6 hereunder. The re-
calculation of the Joint Common Facility Percentage of each
Participant made under the formula in (c) above shall be made
after giving effect to the reclassification as Joint Common
Facilities, pursuant to Section 2.2.5 hereof, of those NSP
Common Facilities listed as "Essential Equipment" on Exhibit B-
1. The Joint Common Facility Percentages as so finally
established shall be set forth in an amendment to Exhibit B-2
hereof.
Any Participant whose Joint Common Facility Percentage as
so finally established under this Section 2.2.2 is less than
that originally set forth in Exhibit B-2 hereof (i) shall
deliver to each other Participant or Participants whose final
Joint Common Facility Percentage is greater than that
originally set forth in Exhibit B-2 such deeds, bills of sale,
certificates and opinions as such other Participant shall
request to evidence such interest and
(ii) shall take such action as shall be necessary so that
much interest shall be owned by such other Participant free and
clear of any mortgages and other liens and encumbrances except
those permitted by Section 1.2.2(d) hereof.
SECTION 2.2.3. Future Common Facilities. Upon acquisition,
construction or installation of any Future Common Facilities, the
Management Committee shall determine the Sherco 3 Portion thereof, and
such Common Facilities and the Sherco 3 Portion thereof shall be set
forth on Exhibit B-3 hereto.
SECTION 2.2.4. Additional Units on Sherco Plant Site. NSP
shall have the right to (a) install, enlarge, modify and operate any
additional generating unit or units, including necessary appurtenances
thereto, on the Sherco Plant Site, and (b) enlarge, modify and operate
any existing generating unit or units (other than Unit 3), including
necessary appurtenances thereto, on the Sherco Plant Site; provided that
such additional or existing unit or units shall not be so installed,
enlarged, modified or operated as to unreasonably interfere with or
burden the construction or operation of Sherco 3. In the event that NSP
determines to exercise any of its rights under the preceding sentence,
NSP shall also have the right (subject to any approval of the Management
Committee required under Section 3.2.3 hereof) to use, enlarge, modify
or relocate any facilities installed as a part of Sherco 3 in connection
with the installation, enlargement, modification or operation of such
additional or existing unit or units; provided that (a) such use,
enlargement, modification or relocation of Sherco 3 facilities shall not
unreasonably interfere with or burden the construction or operation of
Sherco 3; (b) if such use, enlargement, modification or relocation is
of Sherco 3 facilities which are to be jointly used by Unit 3 and such
additional or existing unit or units, then (i) if said Sherco 3
facilities are then listed as Joint Common Facilities on Exhibit B-2
hereto, but the proposed use by Unit 3 of said Sherco 3 facilities is
different from that previously contemplated, then the obligations of the
Participants with respect thereto shall be determined by the Management
Committee, (ii) if said Sherco 3 facilities are then listed as Future
Common Facilities in Exhibit B-3 hereto, but the proposed Sherco 3
Portion of said Sherco 3 facilities is different from that stated for
said facilities in such Exhibit, then such Exhibit shall be amended
accordingly, or (iii) if said Sherco 3 facilities are not then listed
in Exhibit B-1, B-2 or B-3 hereto, then Exhibit B-3 shall be amended so
as to reflect said Sherco 3 facilities as Future Common Facilities and
the proposed Sherco 3 Portion thereof; (c) the cost of such enlargement,
modification or relocation of Sherco 3 facilities shall not be
considered Cost of Construction hereunder except to the extent that it
results in additions to the Joint Common Facilities or the Sherco 3
Portion of Future Common Facilities; and (d) any net benefits and
savings resulting from the joint use of Sherco 3 facilities by Unit 3
and such additional or existing unit or units, if and when such joint
use occurs, shall be allocated fairly among Unit 3 and such additional
or existing unit or units, and the portion of such net benefits and
savings which is allocated to Unit 3 shall be shared by the Participants
in proportion to their respective Joint Common Facility Percentages, in
cases involving Joint Common Facilities, or their respective Ownership
Percentages, in cases involving Future Common Facilities.
SECTION 2.2.5. Transfer of Certain NSP Common Facilities. At
the time of re-calculating the Joint Common Facility Percentages under
Section 2.2.2(d) or Section 5.1.6 hereof, the facilities listed as
"Essential Equipment" on Exhibit B-1 shall be reclassified as Joint
Common Facilities and Exhibits B-1 and B-2 shall be amended accordingly.
NSP's original cost of such facilities shall be considered an investment
in Joint Common Facilities and credited to NSP under the appropriate
formulae for re-calculating the Joint Common Facility Percentages.
After re-calculation of the Joint Common Facility Percentages (giving
effect to the reclassification provided for in this Section), NSP shall
convey to each other Participant an undivided ownership interest in such
facilities equal to its re-calculated Joint Common Facility Percentage.
NSP shall deliver to each other Participant such deeds, bills of sale,
certificates and opinions as such other Participant shall request to
evidence the conveyances provided for in this Section 2.2.5 and shall
also furnish to each other Participant a properly executed release from
Harris Trust and Savings Bank, as trustee under NSP's first mortgage
indenture, releasing from the lien of such indenture the interests
conveyed and take such action as shall be necessary so that the interest
conveyed shall be owned by such other Participant free and clear of any
mortgages and other liens and encumbrances, except those permitted by
Section 1.2.2(d) hereof.
SECTION 2.2.6. Additional NSP Common Facilities Modifications.
The Participants recognize that it may be necessary, during the period
of construction of Sherco 3, to make certain investments in NSP Common
Facilities in addition to the investment in the NSP Common Facilities
Modifications identified in Exhibit B-1 hereto on the date hereof. All
such investments shall be made by NSP. To the extent that such
investments are for repairs and renewals necessary to maintain NSP
Common Facilities in good operating condition, such investments shall
not be considered to be for NSP Common Facilities Modifications and
shall not be reflected in the various formulae contained in Sections
2.2.2 and 5.1.6 hereof. To the extent that such investments are
determined by the Management Committee to be for modifications which are
necessary as a result of the construction of Sherco 3, such investments
shall be considered to be for NSP Common Facilities Modifications and
such modifications shall be identified as such in an amendment to
Exhibit B-1 hereto. The Management Committee shall determine the portion
of each such investment allocable to Sherco 3 based upon the estimated
amount of benefit to be derived by Unit 3 from each such NSP Common
Facilities Modification relative to the estimated amount of benefit to
be derived from such NSP Common Facilities Modification by each other
generating unit or units benefiting therefrom. The portion of such
investment so allocable to Sherco 3 shall be reflected in the various
formulae contained in Sections 2.2.2 and 5.1.6 hereof.
ARTICLE 2.3. ALIENATION OF INTERESTS
SECTION 2.3.1. Special Nature of Sherco 3.
(a) The Participants recognize that Sherco 3 will be an
integral part of the facilities required to provide adequate
service in their respective service territories and that the
physical partition of Sherco 3 or any material part thereof
would be impossible and impractical and wholly inconsistent
with the purposes for which this Agreement is made.
Accordingly, and in recognition of these circumstances, the
Participants agree as provided in the remaining Sections of
this Article 2.3.
(b) NSP covenants not to convey any portion of the Sherco
Plant Site which is needed for Sherco 3 unless the necessary
rights for Sherco 3 are excepted and reserved from the
conveyance.
(c) As used in this Article 2.3, (i) the term "selling
Participant" means any Participant which hereafter desires to
dispose of (whether by sale, conveyance, transfer, assignment,
lease or otherwise) all or any portion of its ownership
interest in Sherco 3 to the other Participants or any third
party and (ii) the term "third party" means any entity other
than one of the Participants.
SECTION 2.3.2. Transfers to Third Parties
(a) If a Participant shall desire to dispose (whether by
sale, conveyance, transfer, assignment, lease or otherwise) of
all or any portion of its undivided ownership interest in
Sherco 3 to any third party or parties, such Participant shall
give the other Participants written notice thereof, and any
such transaction with a third party or parties shall not be
consummated until each of the other Participants has determined
not to exercise its right of first refusal, as set forth in
this paragraph. Such written notice shall fully disclose the
nature and terms of the proposed transaction and the identity
of the third party or parties involved, and attach a copy of
the third party's written offer. Upon receipt of such written
notice, the other Participants shall have the first right to
acquire the entire (but not less than the entire) undivided
ownership interest in Sherco 3 proposed to be disposed of upon
the same terms and conditions which the selling Participant
proposes to make with the third party or parties. Within 90
days following receipt of such notice, each other Participant:
shall give written notice to the selling Participant stating
whether or not it elects to acquire such undivided ownership
interest. If only one Participant elects to do so, then such
Participant shall acquire such ownership interest. If more
than one Participant elects to do so then such Participants
shall acquire such undivided ownership interest in such
proportions as they may have agreed upon in writing or, in the
absence of much agreement, each of such Participants shall
acquire such ownership interest in proportion to the ratio
which its undivided ownership interest in Sherco 3 bears to the
undivided ownership interests in Sherco 3 of all such
Participants which elect to acquire such undivided ownership
interest. The selling Participant, as soon as practicable,
shall execute such instruments as may be necessary and
appropriate to effectuate any sale, conveyance, transfer,
assignment, lease or other disposition pursuant to this Section
2.3.2, free and clear of all mortgages and other liens and
encumbrances for which the selling Participant is responsible.
(b) If none of the other Participants elect to acquire the
undivided ownership interest in Sherco 3 proposed to be
disposed of, the selling Participant may consummate its
proposed transaction with the third party or parties and
dispose of such ownership interest to the third party or
parties; provided, however, that such transaction must be
consummated within one year following the date on which the
other Participants give written notice to the selling
Participant pursuant to paragraph (a) of this Section that none
of them elects to acquire such undivided ownership interest;
and provided further, that the selling Participant shall
require (as a condition of or in connection with the sale,
conveyance, transfer, assignment, lease or other disposition,
and for the benefit of the other Participants) the third party
or parties acquiring such undivided ownership interest to
assume and agree to be bound by the provisions of this
Agreement and any amendments hereof, and in furtherance thereof
the provisions of this Agreement shall be amended appropriately
to reflect (i) the addition of such third party or parties as
a party or parties to this Agreement, (ii) the ownership
interest in Sherco 3 acquired by such third party or parties
and the decreased ownership interest in Sherco 3 of the selling
Participant and (iii) the rights, duties and obligations of the
selling Participant and such third party or parties under this
Agreement. Further, the selling Participant shall save the
other Participants harmless from and against all loss or
liability which they may incur within ten years of the date of
such disposition as a result of any failure by such third party
or parties to fulfill its or their duties and obligations under
this Agreement and any amendments hereof. In addition, the
consummation of any transaction by the selling Participant with
a third party or parties shall not release the selling
Participant from any of its debts or liabilities to the other
Participants which, at the time of the consummation of the
transaction, have accrued under this Agreement, and any
amendments hereof unless the Participants shall agree in
writing to the contrary.
(c) The right of any Participant to dispose of an undivided
ownership interest to a third party or parties, as set forth in
paragraph (b) of this Section, is subject to the further
condition that (i) if such Participant shall undertake to
consummate its proposed transaction at a time subsequent to one
year following the date on which the other Participants give
written notice to the selling Participant pursuant to paragraph
(a) of this Section that none of them elects to acquire such
undivided ownership interest or (ii) if such Participant shall
undertake to dispose of such ownership interest to a third
party or parties other than those whose identity was disclosed
in the notice given by the selling Participant to the other
Participants pursuant to paragraph (a) of this Section, or
(iii) if such Participant shall undertake to dispose of such
ownership interest upon different terms and conditions than
were disclosed in said notice, then the other Participants
shall be given written notice thereof and shall have the
further right of first refusal, to the same extent and by the
same procedure described in paragraph (a) of this Section, with
respect to any of such proposed transactions.
(d) The provisions of the foregoing paragraphs (a), (b) and
(c) of this Section shall continue for the duration of this
Agreement and shall be applicable to each and every occasion
and whenever any Participant desires to dispose (whether by
sale, conveyance, transfer, assignment, lease or otherwise) of
all or any portion of its ownership interest in Sherco 3 to any
third party or parties; provided, that such provisions shall
not be applicable to, and each of the Participants hereby
consents to, the following:
(i) the transfer by NSP to Lake Superior District Power
Company, a Wisconsin corporation ("LSDPC"), of a 2.5% undivided
ownership interest in Sherco 3, provided that LSDPC shall by
written agreement assume the obligations of a Participant
hereunder; or
(ii) the transfer, assignment, pledge, hypothecation,
mortgage or grant (by indenture of mortgage, deed of trust or
otherwise) by any Participant of its undivided interest in
Sherco 3, together with all or substantially all of its other
electric utility property, for the purpose of securing bonds or
other obligations for borrowed money issued or to be issued by
it, including the effect of any after acquired property clause
of any such indenture of mortgage, deed of trust or other
instrument now existing or hereafter created.by such
Participant, or the realization on or enforcement off such
security or the exercise by the trustee or the mortgagee, as
the case may be, or the beneficiaries of such security of any
of the rights, powers, or privileges provided for with respect
thereto; or
(iii) the transferring by any Participant to a third party
of its undivided ownership interest in Sherco 3, together with
all or substantially all of its other electric utility
property, whether by sale or pursuant to or as a result of a
merger, consolidation or corporate reorganization; provided,
that such third party, by written agreement or by operation of
law, assumes the obligations of this Agreement, and any
amendments hereof of the Participant so transferring; or
(iv) the transfer, assignment, pledge, hypothecation,
mortgage or grant by any Participant of its undivided interest
in pollution control facilities; or
(v) the transfer, assignment, pledge, hypothecation,
mortgage or grant by any Participant of its undivided interest
in fossil fuel at Unit 3 in connection with any financial
arrangement for the discharge of fossil fuel payment
obligations.
SECTION 2.3.3. Transfer to Another Participant. Each of the
Participants retains complete freedom to dispose of all or any portion
of its ownership interest in Sherco 3 to any other Participant. Such
disposition (whether by sale, conveyance, transfer, assignment, lease
or otherwise) shall be made upon such terms and conditions as may be
agreed upon by the selling Participant and such purchasing Participant;
provided, that nothing in the arrangements made by the selling
Participant and such purchasing Participant in regard to such
disposition of ownership interest shall be prejudicial to the rights of
the other Participants under this Agreement. Further, in the event of
any such transfer of ownership interest by the selling Participant to
any other Participant, this Agreement shall be appropriately amended to
reflect the effect of the decrease in undivided ownership interest of
the selling Participant on the rights, duties and obligations of the
selling Participant and the other Participants under this Agreement.
SECTION 2.3.4. Waiver of Right of Partition. Each of the
Participants agrees that it will not take any action, by judicial
proceedings or otherwise, to partition Sherco 3, nor any part thereof,
in any way, whether by partition in kind or by sale and division of the
proceeds thereof. Each of the Participants further waives the right of
partition and the benefit of all statutory or common law provisions that
may now or hereafter authorize such partition of Sherco 3 or any part
thereof. In the event any such right of partition shall hereafter
accrue, each Participant shall from time to time upon the written
request of any other Participant execute and deliver such further
instruments as may be necessary to confirm the foregoing waiver and
release of its right to partition. The foregoing provisions of this
Section 2.3.4 shall be binding upon and inure to the benefit of the
Participants, their respective successors and assigns, including
mortgagees, receivers, trustees or other representatives and their
respective successors and assigns, and shall run with the land.
SECTION 2.3.5. Duration of Limitations. Each provision of
Section 2.3.2, 2.3.3 and 2.3.4 of this Article 2.3 shall be effective
to the full extent permitted by law, now or hereafter applicable, for
the duration of this Agreement; provided, however, that if the rule
against perpetuities, or any other rule of law, limits the time during
which any such provision can be effective, then such provisions shall
continue to be effective for no longer than the time limited by such
other rule of law or 21 years after the death of the last survivor of
all of the persons listed in Exhibit J hereto, whichever period is
applicable.
SECTION 2.3.6. NSP to Remain as Project Manager. No sale,
lease, conveyance, transfer, assignment or alienation whatsoever by NSP
of any or all of its undivided ownership interest in Sherco 3, whether
as security for an indebtedness, in connection with the financing of
pollution control facilities, or otherwise, shall relieve NSP of its
obligation to act as Project Manager hereunder.
SECTION 2.3.7. Interest Transferred Remains Subject to
Adjustment. The Ownership Percentage and Joint Common Facility
Percentage applicable to any interest disposed of pursuant to this
Article 2.3 shall be subject to adjustment as provided in Sections 2.2.2
and 5.1.6 hereof or any other adjustment provided herein.
CHAPTER THREE
MANAGEMENT AND ADMINISTRATION
ARTICLE 3.1. MANAGEMENT COMMITTEE
SECTION 3.1.1. Establishment.
(a) As a means of securing effective cooperation,
interchange of information and consultation on a prompt and
orderly basis among the Participants in connection with the
various administrative and technical problems which may arise
from time to time in connection with this Agreement and for
deciding certain matters of significance to all of the
Participants as required hereby, the Participants hereby
establish a Management Committee.
(b) The Management Committee shall be composed of one
primary representative of each Participant and one alternate
for such primary representative, each to be designated by the
Participant represented by written notice to the other
Participants.
SECTION 3.1.2. Authority and Responsibility
(a) The Management Committee shall have such authority,
responsibility, functions, and duties as are specifically
assigned to it in this Agreement.
(b) The Management Committee shall meet on call of any
Participant and at such other times as may be established by
the Management Committee. The Management Committee may
establish procedures to govern the conduct of its affairs;
provided, however, that decisions with respect to any matters
to be decided by the Management Committee pursuant to this
Agreement shall require the affirmative vote of representatives
of Participants having Ownership Percentages aggregating not
less than 65%, such vote to be made in accordance with Section
5.6.11 hereof. Decisions made by the Management Committee
shall be binding upon all Participants except as provided in
Section 5.4.5 hereof with respect to settlement of disputes.
(c) The Management Committee may establish such
subcommittees as it shall deem appropriate. Each subcommittee
shall have such responsibilities as shall be delegated to it by
the Management Committee. Each subcommittee shall be composed
of one representative of each Participant, to be designated by
written notice to the other Participants. Each such
representative may, but need not, be a member of the Management
Committee. Any decision or determination by any subcommittee
shall be by unanimous vote; if agreement cannot be reached with
respect to any matter, the matter shall be referred to the
Management Committee.
(d) The Management Committee and any other committee or
subcommittee created pursuant to this Agreement shall keep
written summary minutes of all meetings.
(e) Any cost or expense incurred by any Management
Committee member, or members of any other committee or sub-
committee created pursuant to this Agreement in connection with
duties as a member of any committee or subcommittee, shall be
borne and paid by the Participant the member represents.
(f) The existence of the Management Committee or any other
committee or subcommittee created pursuant to this Agreement
shall not limit or diminish in any manner the authority of the
Project Manager pursuant to this Agreement, except to the
extent as may be herein specifically provided.
(g) The Participants recognize that certain commitments to
financial participation and the awarding of contracts must be
confirmed by April 1, 1982 to maintain the Sherco 3 Project's
schedule. The Management Committee will meet on or about April
1, 1982 to confirm the decision to proceed with these actions.
The vote of the Management Committee shall be made as if the
closings hereunder had occurred.
ARTICLE 3.2. PROJECT MANAGER
SECTION 3.2.1. Appointment. SOUTHERN MINNESOTA and UNITED
MINNESOTA hereby appoint NSP as their agent (the "Project Manager") in
connection with Sherco 3 to act on their behalf in the planning, design,
licensing, acquisition, construction, completion, management, control,
operation, maintenance, renewal, addition, replacement, modification and
disposal thereof. NSP hereby accepts such appointment, and in
consideration of the limitations of liability provided herein agrees to
perform its services as Project Manager, charging to the Sherco 3
Project its direct and indirect costs incurred in its capacity as
Project Manager, which may be withdrawn by the Project Manager from the
Construction Account, the Capital Account or the Operating Account, as
appropriate.
SECTION 3.2.2. Mutual Dependency
(a) The Participants recognize that over the term of this
Agreement, the Project Manager, in the accomplishment of the
Sherco 3 Project, will find it desirable to procure large
quantities of goods and services by contract from a large
number of organizations and individuals, to provide substantial
resources and personnel, and to recruit and build a substantial
staff to carry on the Sherco 3 Project.
(b) The Participants recognize also that unnecessary delays
in licensing, design and construction could add significantly
to:the cost of the Sherco 3 Project. The Participants have
agreed that the Project Manager should be authorized to act
promptly and decisively with respect to matters entrusted to it
hereunder, and accordingly, to the extent provided herein, have
provided the Project Manager with authority in matters
pertaining to the accomplishment of the Sherco 3 Project.
SECTION 3.2.3. Authority and Responsibility. Subject to the
authority granted to the Management Committee hereunder, the Project
Manager shall have authority and responsibility for the planning,
licensing, design, construction, acquisition, completions management,
control, operation, maintenance, renewal, addition, replacement,
modification and disposal of Sherco 3 and shall take all actions
necessary in discharging such responsibility in accordance with the
applicable provisions of this Agreement. In respect thereof, and
subject to the applicable provisions of this Agreement, the Project
Manager is authorized, in the name and on behalf of the Participants,
to take all reasonable actions which, in the discretion and judgment of
the Project Manager, are deemed necessary or advisable to effect the
planning, licensing, design, construction, acquisition, completion,
management, control, operation, maintenance, renewal, addition,
replacement, modification and disposal of Sherco 3, including, without
limitation, the following:
(a) The making of such agreements and modifications of
existing agreements, other than this Agreement, and the taking
of such other action as the Project Manager deems necessary or
appropriate or as may be required under the regulations or
directives of any regulatory agencies having jurisdiction, with
respect to the planning, licensing, design, construction,
acquisition, completion, management, control, operation and
maintenance of Sherco 3 for commercial operation;
(b) The making of such agreements and modifications of
existing agreements, other than this Agreement, after the
Commercial Operation Date and the taking of such other action
after the Commercial Operation Date with respect to the
renewal, addition, replacement or modification of Sherco 3
(including the Common Facilities) as (i) shall be required
under the regulations or directives of any regulatory agencies
having jurisdiction or (ii) the Project Manager shall deem
necessary or appropriate; provided, however, that except with
respect to any such agreements or modifications or other
actions within clause (i) above, any such agreement or
modification or other action shall be approved by the
Management Committee unless it involves expenditures of less
than $2,000,000 and either is necessary to keep Sherco 3 in
good operating condition in accordance with Prudent Utility
Practice or is made or undertaken in connection with another
generating unit on the Sherco Plant Site pursuant to Article
2.2 hereof;
(c) The making of such agreements and modifications of
existing agreements, other than this Agreement, and the taking
of such other action with respect to the disposal (including
retirement and salvaging) of all or any part of Sherco 3,
whether before or after the Commercial Operation Date, as (i)
shall be required under the regulations or directives of any
regulatory agencies having jurisdiction or (ii) the Project
Manager shall deem necessary or appropriate; provided, however,
that the Management Committee shall approve disposals,
retirements, and salvage in excess of $2,000,000;
(d) The execution and filing, with any regulatory agency
having jurisdiction, of applications, amendments, reports and
other documents and filings in or in connection with the
licensing and other regulatory matters with respect to Sherco
3 except as otherwise provided in Section 3.2.3(h) hereof;
(e) Subject to the foregoing provisions of this Section
3.2.3, the right, on behalf of the Participants, to provide, or
contract with any of its affiliates to purchase or provide, at
cost, any equipment or facilities or to perform, or contract
with any of its affiliates to perform, services, at cost, in
connection with the planning, licensing, design, construction,
acquisition, completion, management, control, operation,
maintenance, renewal, addition, replacement, modification and
disposal of Sherco 3; and
(f) The settlement of any claims by or against the
Participants involving third parties relating to the planning,
licensing, design, construction, acquisition, completion,
management, control, operation, maintenance, renewal, addition,
replacement, modification and disposal of Sherco 3; provided,
however, that the approval of the Management Committee shall be
obtained for settlement of any such claim by the Participants
unless the amount originally claimed is less than $2,000,000
and for settlement of any such claim against the Participants
unless it would subject the Participants to a total liability
of less than $2,000,000.
(g) Any contracts entered into pursuant to this Section
3.2.3 shall be executed by the Project Manager as agent on
behalf of the Participants. If the other party to any contract
is unwilling to enter into the contract on such basis, the
Project Manager may enter into such contract on its own behalf
only but shall hold such contract as agent for the
Participants. Contracts entered into by the Project Manager or
its agent on behalf of the Participants will provide for
several but not joint liability in proportion to such
Participants' respective Ownership Percentages unless the other
party to the contract is unwilling to provide for several
liability in the contract. Whether or not a contract specifies
that it is entered into on behalf of the Participants or
includes a provision for several liability, the Participants
agree that, as among themselves, they shall be severally and
not jointly responsible for their respective Ownership
Percentages of all amounts payable under or with respect to
such contract. The Project Manager is hereby authorized to
enforce all Sherco 3 contracts which it enters into pursuant to
this Agreement and all warranties on goods and services sold or
furnished for Sherco 3 pursuant thereto, in the name of the
Project Manager, acting as agent for all the Participants;
provided, however, that each other Participant may enforce any
such contract and warranties on its own behalf.
(h) The Project Manager shall have the responsibility to
execute and file, with all regulatory agencies having
jurisdiction, such applications, amendments, reports and other
documents and filings as shall be required in or in connection
with the licensing and other regulatory matters with respect to
Sherco 3; provided, however, that each Participant shall have
the responsibility for proving its need for its undivided
ownership interest in Sherco 3 in obtaining a Certificate of
Need, and each Participant shall be responsible for obtaining
all required approvals and authorizations relating to its
participation in Sherco 3 and to its performance of this
Agreement. The Project Manager and each Participant shall use
its best efforts to fulfill its responsibilities under this
Section on a timely basis.
SECTION 3.2.4. Consultation.
(a) The Project Manager hereunder, in addition to obtaining
the approvals of the Management Committee with respect to
certain matters as required by this Agreement, shall from time
to time advise and consult with the Management Committee
concerning all significant matters with respect to planning,
licensing, staffing, design, acquisition, construction,
completion, management, control, operation, maintenance,
renewal, addition, replacement, modification and disposal of
Sherco 3 (including plans, specifications, engineering studies,
construction schedules, environmental reports, budgets and
supporting data, whether existing on the date hereof or
hereafter prepared).
(b) The Project Manager shall timely furnish or make
available to the Management Committee all records, contracts,
and other documents relating to Sherco 3, and shall give due
consideration to comments and recommendations made by each
Participant; provided, however, that such comments and
recommendations shall not be allowed to delay Sherco 3 or to
affect the discretion of the Project Manager acting within the
scope of its authority.
(c) Each Participant shall provide to the extent possible
all assistance requested by the Project Manager and such
Participant shall be reimbursed for its costs and expenses
incurred in providing such assistance on such terms and
conditions as may be agreed upon by such Participant and the
Project Manager.
SECTION 3.2.5. Existing Contracts. The Participants hereby
ratify and confirm all contracts heretofore entered into by NSP in
connection with and relating to Sherco 3 and each assumes several
liability therefor in proportion to its Ownership Percentage; all such
contracts are described in Exhibit K attached hereto.
SECTION 3.2.6. Standards of Conduct. In accepting
responsibilities, as set forth herein, the Project Manager agrees it
will carry out the provisions of this Agreement with the same prudence
and care that it would exercise if it were constructing and operating
the Sherco 3 Project solely for its own benefit; the Project Manager
further agrees that it will proceed with construction and operation in
accordance with Prudent Utility Practice and other provisions of this
Agreement.
SECTION 3.2.7. Commercial Operation Date. Subject to causes
beyond the reasonable control of the Project Manager, including, without
limiting the generality of the foregoing, accidents, strikes,
litigation, acts of God, the timely receipt of all necessary regulatory
approvals, authorizations and permits, or the procurement of the
necessary rights-of-ways, materials and labor, the Project Manager shall
make its best effort to complete and place in service the Sherco 3
Project on or before May 1, 1986, or such other date as the Participants
may establish by mutual agreement. If any of the aforesaid causes delay
the installation of the Sherco 3 Project beyond said date, it shall
nevertheless be completed as soon thereafter as reasonably possible.
SECTION 3.2.8. Commercial Operation Date Delay. The Commercial
Operation Date shall be delayed if the Management Committee determines
it benefits the Participants as a group and each Participant has
sufficient power or can purchase sufficient power to meet its needs.
If any Participant demonstrates a financial loss due to the delay, the
benefiting Participant(s) shall pay the Participant(s) suffering the
loss an amount equal to the loss. Each benefiting Participant shall
share the loss payment in proportion to its benefit; provided, however,
that if UNITED MINNESOTA is a benefiting Participant it shall not be
required to share the loss payment in an amount which exceeds the amount
of the benefit derived by it. The benefits and losses of Participants
will be determined by the Management Committee.
SECTION 3.2.9. Liability. The liability of the Project Manager
in carrying out the provisions of this Agreement shall be governed by
Article 5.5 hereof.
SECTION 3.2.10. Removal of NSP as Project Manager.
Participants having Ownership PercentageS aggregating not less than 42%
may remove NSP as Project Manager for one or more of the following
reasons:
(a) NSP's gross negligence or intentional wrongdoing (as
such terms are defined in Article 5.5 hereof);
(b) consistent or significant breaches of its obligations
under this Agreement to the other Participants which are not
remedied to their satisfaction through the action of the
Management Committee.
The participants taking such action shall provide all Participants with
a written notice of the decision to remove NSP as Project Manager, which
notice shall identify the date upon which such removal and appointment
shall be effective, the cause for such removal and the provisions hereof
upon which such removal is based. The removal will not be effective
unless accepted by written notice to the other ParticipantS by NSP
within ten days of the date of the notice. If NSP does not accept its
removal, it shall continue as Project Manager until final judgment of
a court having jurisdiction that the ParticipantS who have given the
written notice specified above are entitled under this Section to remove
NSP as Project Manager. The Management Committee, including NSP, shall
select the successor Project Manager. Costs of the successor Project
Manager shall be paid by all Participants in proportion to their
respective Ownership percentages. NSP agrees that it will cooperate
with the successor project Manager in facilitating the assumption of
such position by the successor Project Manager and in generally
familiarizing the successor Project Manager and its employees and agents
with Sherco 3.
ARTICLE 3.3. BUDGETS, ACCOUNTS AND PAYMENTS
SECTION 3.3.1. Construction Budget. As Project Manager for the
Participants in the construction of Sherco 3, NSP has delivered to the
other Participants an initial construction budget setting forth the
amounts estimated to be expended by the Participants for the Cost of
Construction for Unit 3 and Joint Common Facilities and a summary cash
flow setting forth the amounts estimated to be expended in each quarter
to the estimated Commercial Operation Date of Sherco 3. By October 1
of each year until the Commercial Operation Date of Sherco 3, the
Project Manager shall provide to all Participants a proposed revised
construction budget supported by detail adequate for the purpose of each
Participant's review thereof, which estimate shall include, without
limiting the generality of the foregoing, information demonstrating the
basis for all allocations of administrative and general expenses,
staffing allocations and the Project Manager services and information
demonstrating the basis for any other allocations of expenses between
or among Sherco 3 and the other units at the Sherco Plant Site, and
which shall describe the items of Cost of Construction and the amounts
expected to be expended therefor each month during the twelve-month
period commencing on the following January 1 and in each quarter
thereafter to the estimated Commercial Operation Date of Sherco 3. Each
such proposed budget shall include the schedule for Sherco 3 containing
a critical path analysis for the design and construction thereof, a plan
and timetable for obtaining the necessary permits, licenses and
approvals from any agency having jurisdiction over Sherco 3, the then
currently expected Commercial Operation Date of Sherco 3 and such other
plans, timetables or schedules, if any, as the Project Manager may deem
appropriate. The Management Committee shall then proceed, with due
consideration of comments and recommendations of all Participants, to
adopt a construction budget by January 1 of each year, and, in the
failure of which, the construction budget to be utilized shall be the
one submitted by the Project Manager. The Project Manager may otherwise
from time to time propose changes in the construction budget or revised
construction budget as necessary to reflect changes in construction
schedules, payment schedules, plans, specifications or costs. The
Project Manager shall similarly submit such proposed changes to all
Participants and the Management Committee shall approve or disapprove
in accordance with the preceding provisions of this Section 3.3.1.
The Project Manager shall attempt to construct Sherco 3 in
accordance with the then current construction budget. The Project
Manager makes no representation, warranty or promise of any kind as to
the accuracy of any such construction budget or that such attempt to
construct Sherco 3 in accordance with the then current construction
budget will be successful.
In the event the Project Manager alters any construction
schedule or construction budget solely because NSP desires to defer the
time or times at which NSP would otherwise be obligated to contribute
to the Cost of Construction, unless approved by the Management Committee
all Participants shall be liable for construction payments as if such
alteration had not been made.
The Project Manager shall provide each Management Committee
representative monthly reports which reflect actual construction
expenditures to date, contracts awarded during the past month, and other
developments which may affect the projected construction schedules,
activities, cost estimates and expenditure forecasts.
SECTION 3.3.2. Construction Account. Immediately following the
SOUTHERN MINNESOTA Closing or the UNITED MINNESOTA Closing, whichever
is the first to occur, or at such earlier time as either SOUTHERN
MINNESOTA or UNITED MINNESOTA or both commence making payments in
respect of Cost of Construction, the Management Committee shall direct
the Project Manager to establish for Sherco 3 a separate account or
accounts (the "Construction Account"), which in the discretion of the
Project Manager may be interest bearing or non-interest bearing, in a
bank or banks which insure deposits, subject to applicable limits, with
the Federal Deposit Insurance Corporation. The Construction Account
shall be held in the names of all of the Participants. All moneys for
the payment of the Cost of Construction paid following the respective
closings hereunder and prior to the Commercial Operation Date of Sherco
3 shall be deposited by the Participants in the Construction Account and
the Project Manager as agent shall withdraw and apply funds therefrom
only as necessary to pay such Cost of Construction. At the time the
Management Committee establishes the Construction Account, the Committee
shall determine, based upon the budget, the amounts, if any, that each
Participant shall deposit in the Account immediately and from time to
time thereafter so that the Project Manager shall have sufficient funds
to pay all Costs of Construction which may become payable before regular
deposits to the Account are made in accordance with Section 3.3.3. In
the event that during any month the balance in the Construction Account
is insufficient to pay the Cost of Construction required to be paid that
month (other than as a result of the nonpayment by a Participant of an
amount due from it pursuant to Section 3.3.3 hereof), the Project
Manager shall promptly so notify the Participants by telephone of the
amount required to be paid by each Participant and thereafter promptly
confirm the same in writing. Each of the Participants shall pay its
respective share of such deficit into the Construction Account in
immediately available funds not later than on the third banking day
after receipt of such notice from the Project Manager. The Project
Manager shall have no responsibility or liability to make up any such
deficiency out of its own funds.
Through the closing of the Construction Account pursuant to the
next paragraph each Participant shall continue to own and maintain its
proportionate undivided ownership interest in the Construction Account
(other than amounts, if any, deposited in the Construction Account
pursuant to the second paragraph of Section 3.3.3 below, which amounts
shall be owned solely by the Participants to whom such amounts are to
be distributed as provided in such paragraph); provided, however, that
the Project Manager shall have the sole right and authority to make
withdrawals from the Construction Account; and provided further, that
a Participant shall not own any undivided ownership interest in any
amount in the Construction Account in respect of interest paid into such
Account by or on behalf of such Participant pursuant to the provisions
of this Agreement, which amount shall, if there is only one other
Participant, be owned entirely by such other Participant and credited
against payments required to be made into such Account by such other
Participant in the performance of its obligations under this Agreement,
and which amount shall, if there are three or more Participants, be
owned in common by, and credit.ed against payments required to be made
into such Account by, the other Participants not then in default in the
performance of their obligations under this Agreement in the proportion
which their respective Joint Common Facility Percentages bear to the
aggregate of their Joint Common Facility Percentages (in the case of
payments relating to the Cost of Construction incurred for Joint Common
Facilities) or in the proportion which their respective Ownership
Percentages bear to the aggregate of their Ownership Percentages (in the
case of payments relating to all other Cost of Construction). In no
event shall the Project Manager commingle any funds deposited in the
Construction Account with any other funds.
Upon the completion of construction of Sherco 3, and the
settlement of all the obligations relating to the Cost of Construction
incurred prior to completion, the Project Manager shall close the
Construction Account and distribute to each Participant its undivided
ownership interest of any balance remaining in the Construction Account
(exclusive of amounts therein, if any, in which such Participant shall
not own any undivided ownership interest), except that if a Participant
shall then be in default with respect to any payments required to be
made under this Agreement, an amount equal to the liability of such
defaulting Participant on account of such default (or if such amount
exceeds such Participant's share of the balance in the Construction
Account, its entire share of such balance) shall first be distributed
to the nondefaulting Participant or, if there is more than one
nondefaulting Participant, to the nondefaulting Participants in the
proportion which their respective Joint Common Facility Percentages bear
to the aggregate of their Joint Common Facility Percentages (in the case
of defaults relating to Cost of Construction for Joint Common
Facilities) or in the proportion which their respective Ownership
Percentages bear to the aggregate of their Ownership Percentages (in the
case of defaults relating to all other Cost of Construction).
SECTION 3.3.3. Construction Payments. From and after the
closing of its purchase of an undivided interest in Sherco 3, each
Participant shall pay a percentage share of the Cost of Construction
paid by the Project Manager after such date. In the case of Cost of
Construction relating to Joint Common Facilities, such percentage share
shall equal its Joint Common Facility Percentage; in the case of all
other Cost of Construction, such percentage share shall equal its
Ownership Percentage. On or before the twentieth day of each month
following the respective closings, the Project Manager shall:notify each
Participant of the nature and amount of the Cost of Construction
anticipated to be paid during the succeeding calendar month plus or
minus any adjustments for such costs incurred in prior months but not
previously charged or credited to the Participants, as appropriate.
Each Participant shall make payment into the Construction Account in
immediately available funds of its percentage share of such Cost of
Construction during such succeeding calendar month in accordance with
the schedule determined and delivered to it by the Project Manager;
provided, however, that each Participant shall have not less than three
banking days notice prior to the due date for any requested payment.
Each such notification by the Project Manager of anticipated costs and
adjustments shall be accompanied and adjusted by an accounting of costs
incurred, as adjusted, for preceding months.
Each Participant shall have until the one hundred eightieth day
after (i) the date of completion of construction of Sherco 3 or (ii) the
furnishing of an accounting by the Project Manager of all items of the
Cost of Construction paid prior to such date, whichever is later, to
question or contest the correctness of any such charge or credit made
to it pursuant to this Section 3.3.3 in respect of Sherco 3, after which
time the correctness of such charge or credit shall be conclusively
presumed. In the event that any Participant by timely notice questions
or contests the correctness of any such charge or credit as provided in
the preceding sentence, the Project Manager shall promptly review the
questioned charge or credit and shall within 55 days following such
notice from a Participant notify each Participant of the amount of any
error and the amount of reimbursement, if any, that each Participant is
required to make or is entitled to receive in respect of such error.
Not later than the third banking day after receipt of such notice from
the Project Manager, each Participant required to make reimbursement
shall deposit the amount specified in such notice into the Construction
Account in immediately available funds. From the amount so deposited,
the Project Manager shall immediately thereafter distribute in
immediately available funds to each Participant entitled to receive such
reimbursement the amount that such Participant is entitled to receive
(or if the amount so deposited is insufficient to reimburse in Bull all
Participants entitled to receive reimbursement, then the Project Manager
shall distribute the amount so deposited among the Participants entitled
to receive such reimbursement pro rata in accordance with each
Participant's entitlement to reimbursement in respect of such error),
except that if any such Participant is then in default in respect of any
payments required to be made under this Agreement, an amount equal to
such defaulting Participant's share of the amount so deposited with
respect to such reimbursement shall be retained in the Construction
Account and distributed in accordance with the provisions of Section
3.3.2 of this Agreement.
The Project Manager shall have no responsibility or liability
for the failure of any Participant to deposit funds as provided in this
Section 3.3.3.
The Project Manager shall provide each Participant with such
information as is reasonably required by such Participant in order to
account for payments made pursuant to this Section 3.3.3 on such
Participant's books.
SECTION 3.3.4. Capital Budget. At least three months prior to
the expected Commercial Operation Date of Sherco 3, the Project Manager,
as agent for the Participants, shall propose to all Participants a
capital budget setting forth the amounts estimated to be expended for
completions, renewals, additions, replacements, modifications and
disposals in connection with Sherco 3 following such date and during
each month from such date through the end of the next full calendar year
and during each year in the four year period commencing on the following
January 1. Payments shall be made in accordance with the provisions of
Section 3.3.6 hereof. Each Participant shall be responsible for payment
of (1) its Ownership Percentage of all Cost of Construction contained
in the capital budget relating to Unit 3; (2) its Joint Common Facility
Percentage of all such Cost of Construction relating to Joint Common
Facilities; and (3) its Ownership Percentage of all such Cost of
Construction relating to the Sherco 3 Portion of Future Common
Facilities. By October 1 of each year thereafter, the Project Manager
shall provide to all Participants a proposed revised capital budget
describing the items of additional Cost of Construction and the amounts
expected to be expended therefor in each month during the twelve-month
period commencing on the following January 1 and during each of the next
three calendar years in respect of such completions, renewals,
additions, replacements modifications and disposals in connection with
Sherco 3. Each such proposed capital budget and revised capital budget
shall be supported by detail reasonably adequate for the purpose of each
Participant's reasonable review thereof and shall include, without
limiting the generality of the foregoing, information demonstrating the
basis for all allocations of administrative and general expenses and
information demonstrating the basis for any other allocations of expense
between or among Sherco 3 and other generating units at the Sherco Plant
Site. The Management Committee shall then proceed, with due
consideration of comments and recommendations of all Participants, to
adopt a capital budget by January 1 of each year, and, in the failure
of which the capital budget to be utilized shall be the one submitted
by the Project Manager. The Project Manager may otherwise from time to
time propose changes in the capital budget and revised capital budget
as necessary to reflect any changes in construction, purchasing or
payment schedules, plans, specifications or costs related to
completions, renewals, additions, replacements, modifications and
disposals in connection with Sherco 3. The Project Manager shall
similarly submit such proposed changes to all Participants and the
Management Committee shall approve or disapprove them in accordance with
the preceding provisions of this Section 3.3.4.
The Project Manager shall attempt to make all such completions,
renewals, additions, replacements, modifications and disposals in
connection with Sherco 3 in accordance with the then current capital
budget. The Project. Manager makes no representation, warranty or
promise of any kind as to the accuracy of any such capital budget or
that such attempt to make all such completions, renewals, additions,
replacements, modifications and disposals in accordance with the then
current capital budget will be successful.
SECTION 3.3.5. Capital Account. Prior to the Commercial
Operation Date of Sherco 3, the Management Committee shall direct the
Project Manager to establish for Sherco 3 a separate account (the
"Capital Account"), which in the discretion of the Project Manager may
be interest bearing or non-interest bearing, in a bank or banks which
insure deposits, subject to applicable limits, with the Federal Deposit
Insurance Corporation. The Capital Account shall be held in the names
of all of the Participants. All such payments (for which provision is
made in Section 3.3.6 hereof) of additional Cost of Construction paid
by the Participants after the Commercial Operation Date of Sherco 3
shall be deposited by the Participants in the Capital Account and the
Project Manager as agent shall withdraw and apply funds therefrom only
as necessary to pay such additional Cost of Construction in accordance
with the provisions of Section 3.3.6 hereof. In the event that during
any month the balance in the Capital Account is insufficient to pay such
additional Cost of Construction required to be paid that month (other
than as a result of the non-payment by a Participant of an amount due
from it pursuant to Section 3.3.6 hereof), the Project Manager shall
promptly so notify the Participants by telephone of the amount required
to be paid by each Participant and thereafter promptly confirm the same
in writing. Each of the Participants shall pay its respective share of
such deficit into the Capital Account in immediately available funds not
later than on the third banking day after receipt of such notice from
the Project Manager. The Project Manager shall have no responsibility
or liability to make up any such deficit out of its own funds.
Until termination of this Agreement and settlement of all
obligations relating to Cost of Construction, each Participant shall
continue to own and maintain its undivided ownership interest in the
Capital Account (other than amounts, if any, deposited in the Capital
Account pursuant to the second paragraph of Section 3.3.6 below, which
amounts shall be owned solely by the Participants to whom such amounts
are to be distributed as provided in such paragraph); provided, however,
that the Project Manager as agent shall have the sole right and
authority to make withdrawals from the Capital Account; and provided
further, that a Participant shall not own any undivided ownership
interest in any amount in the Capital Account in respect of interest
paid into such Account by or on behalf of such Participant pursuant to
the provisions of this Agreement, which amount shall, if there is only
one other Participant, be owned entirely by such other Participant and
credited against payments required to be made into such Account by such
other Participant in the performance of its obligations under this
Agreement, and which amount shall, if there are three or more
Participants, be owned in common by, and credited against payments
required to be made into such Account by, the other Participants not
then in default in the performance of their obligations under this
Agreement in the proportion which their respective Ownership Percentages
bear to the aggregate of their Ownership Percentages (or, in the case
of any payment for Cost of Construction for Joint Common Facilities, in
the proportion which their respective Joint Common Facility Percentages
bear to the aggregate of their Joint Common Facility Percentages). In
no event shall the Project Manager commingle any funds deposited in the
Capital Account with any other funds.
Upon termination of this Agreement and settlement of all
obligations relating to Cost of Construction, including without
limitation all costs incurred in the disposal of Sherco 3, the Project
Manager shall close the Capital Account and distribute to each
Participant its undivided ownership interest of any balance remaining
in the Capital Account (exclusive of amounts therein, if any, in which
such Participant shall not own any undivided ownership interest), except
that if a Participant shall then be in default with respect to any
payment required to be made under this Agreement, an amount equal to the
liability of such defaulting Participant on account of such default (or
if such amount exceeds such Participant's share of the balance in the
Capital Account, its entire share of such balance) shall first be
distributed to the nondefaulting Participant or, if there is more than
one nondefaulting Participant, to the nondefaulting Participants in the
proportion which their respective Ownership Percentages bear to the
aggregate of their Ownership Percentages (or, in the case of defaults
relating to Cost of Construction for Joint Common Facilities, in the
proportion which their respective Joint Common Facility Percentages bear
to the aggregate of their Joint Common Facility Percentages).
SECTION 3.3.6. Capital Payments. As agent for the
Participants, the Project Manager will, on or about the twentieth day
of each month, commencing with the month immediately preceding the
Commercial Operation Date of Sherco 3, notify the Participants of the
nature and amount of all additional Cost of Construction anticipated to
be paid during the succeeding calendar month in respect of completions,
renewals, additions, replacements, modifications or disposals of Sherco
3, plus or minus any adjustments for costs paid in prior months but not
previously charged or credited to the Participants under the provisions
of this Section 3.3.6 or Section 3.3.3 hereof. The Project Manager will
give each Participant as much notice as is reasonably practicable of any
major anticipated cost. Each Participant shall make payment into the
Capital Account in immediately available funds of its applicable
percentage share (determined as provided in Section 3.3.4) of such
additional Cost of Construction during the succeeding month in
accordance with the schedule determined and delivered to it by the
Project Manager; provided, however, that each Participant shall have not
less than three banking days notice prior to the due date of any
requested payment. Each such notification made by the Project Manager
of anticipated costs and adjustments shall be accompanied and adjusted
by an accounting of costs incurred and credits, if any, received for
preceding months.
Each Participant shall have until the one hundred eightieth day
after the furnishing of such accounting by the Project Manager for any
charge or credit made to it pursuant to this Section 3.3.6 to question
or contest the correctness of such charge or credit after which time the
correctness of such charge or credit shall be conclusively presumed.
In the event that any Participant by timely notice questions or contests
the correctness of any such charge or credit, the Project Manager shall
promptly review the questioned charge or credit and shall within 55 days
following such notice from a Participant notify each Participant of the
amount of any error and the amount of reimbursement, if any, that each
Participant is required to make or is entitled to receive in respect of
such error. Not later than the third banking day after receipt of such
notice from the Project Manager, each Participant required to make
reimbursement shall deposit the amount specified in such notice into the
capital Account in immediately available funds. From the amount so
deposited, the Project Manager shall immediately thereafter distribute
in immediately available funds to each Participant entitled to receive
such reimbursement the amount that such Participant is entitled to
receive (or if the amount so deposited is insufficient to reimburse in
full all Participants entitled to receive reimbursement, then the
Project Manager shall distribute the amount so deposited among the
Participants entitled to receive such reimbursement pro rata in
accordance with each Participant's entitlement to reimbursement in
respect of such error), except that if any such Participant is then in
default in respect of any payments required to be made under this
Agreement, an amount equal to such defaulting Participant's share of the
amount so deposited with respect to such reimbursement shall be retained
in the Capital Account and distributed in accordance with the provisions
of Section 3.3.5 of this Agreement. The Project Manager shall have no
responsibility or liability for the failure of any Participant to
deposit funds as provided in this Section 3.3.6.
The Project Manager will provide each Participant with such
information as is reasonably required by such Participant in order to
account for payments made pursuant to this Section 3.3.6 on such
Participant's books.
SECTION 3.3.7. Operating Budget.
(a) Prior to the expected Commercial Operation Date of Sherco
3, each Participant shall provide the Project Manager with a schedule
of its monthly energy requirements from Sherco 3 through the end of the
first full calendar year of commercial operation. The Project Manager
as agent for the Participants shall then develop and provide each
Participant a budget estimate (the "Operating Budget") of the Operating
Costs anticipated to be incurred during each month from the Commercial
Operation Date to the end of such first full calendar year. On or
before August l of each year, commencing with the first full year of
commercial operation, each Participant shall provide the Project Manager
with a schedule of its energy requirements through the end of the
following calendar year. The Project Manager shall then develop and
provide to each Participant a proposed Operating Budget by September l
for the next succeeding calendar year. Each proposed Operating Budget
shall be supported by detail reasonably adequate for the purpose of each
Participant's reasonable review thereof and shall include, without
limiting the generality of the foregoing, information demonstrating the
basis for all allocations of administrative and general expenses,
staffing allocations and the Project Manager services, and information
demonstrating the basis for any other allocations of expenses between
or among Sherco 3 and the other generating units at the Sherco Plant
Site. By November 15 of each year, the Management Committee, giving due
consideration to comments by Participants, shall approve an Operating
Budget, in the failure of which the Operating Budget to be used shall
be the one submitted by the Project Manager (with such modifications
therein as the Project Manager shall have proposed prior to such date).
(b) The Project Manager may propose changes in the Operating
Budget as necessary to reflect changed operating conditions and shall
similarly submit such proposed changes to all Participants who shall
approve or disapprove them in accordance with the provisions of
paragraph (a) of this Section. The Project Manager shall attempt to
manage, control, operate and maintain Sherco 3 in accordance with the
then current Operating Budget. Notwithstanding the foregoing, the
Project Manager makes no representation, warranty or promise of any kind
as to the accuracy of any estimate contained in an Operating Budget or
revised Operating Budget or that any such attempt referred to in the
preceding sentence will be successful.
SECTION 3.3.8. Operating Account. Prior to the Commercial
Operation Date of Sherco 3, and on such date as the Project Manager
shall recommend, the Management Committee shall direct the Project
Manager to establish a separate account or accounts ("Operating
Account"), which at the discretion of the Project Manager may be
interest-bearing or non-interest bearing in a bank or banks which insure
deposits, subject to applicable limits, with the Federal Deposit
Insurance Corporation. The Operating Account shall be held in the names
of all of the ParticipantS. All payments by the Participants for
Operating Costs after the Commercial Operation Date shall be deposited
by the ParticipantS in the Operating Account and the Project Manager as
agent shall withdraw and apply funds therefrom only as necessary to pay
Operating Costs.
Prior to the Commercial Operation Date of Sherco 3, the Project
Manager shall establish a minimum amount of working capital for the
Operating Account for the purposes of providing funds to pay the
Operating Costs for Sherco 3. Such minimum amount shall be based upon
estimates of such Costs for approximately two months of operation of
Sherco 3 plus provisions for adequate fuel inventory. The amount of
working capital may be revised by the Project Manager at any time. The
original minimum amount and any change therein shall be allocated among
the ParticipantS in accordance with their Ownership Percentages and
shall be due and payable within fifteen businesS days following
notification of the establishment of the Operating Account or the date
on which any change in such minimum amount shall become effective. In
the event the Project Manager authorizes a decrease in such minimum
amount, then each Participant shall receive a credit which shall be
equal to its Ownership Percentage of any such decrease.
Until retirement of Sherco 3 and settlement of all the
obligations relating to Operating Costs, each Participant shall continue
to own and maintain its undivided ownership interest in the Operating
Account. Such undivided ownership interest of each Participant on any
date shall include a full ownership interest in all amounts deposited
in the Operating Account by such Participant for payment of Operating
Costs and a full ownership interest in all amounts deposited in the
Operating Account and to be distributed to such Participant pursuant to
Section 3.3.9(c) hereof; provided, however, that the Project Manager as
agent shall have the sole right and authority to make withdrawals from
the Operating Account; and provided further, a Participant shall not own
any undivided ownership interest in any amount in the Operating Account
in respect of interest paid into such Account by or on behalf of such
Participant pursuant to the provisions of this Agreement, which amount
shall, if there is only one other Participant, be owned entirely by such
other Participant and credited against payments required to be made into
such Account by such other Participant in the performance of its
obligations under this Agreement, and which amount shall, if there are
three or more Participants, be owned in common by, and credited against
payments required to be made into such Account by, the other
Participants not then in default in the performance of their obligations
under this Agreement in the proportion which their respective Ownership
Percentages bear to the aggregate of their Ownership Percentages (or,
in the case of any payment relating to Variable Operating Costs, in
proportion to the amount of their respective payments of Variable
Operating Costs during the period of default). In no event shall the
Project Manager commingle any funds deposited in the Operating Account
with any other funds.
Upon retirement of Sherco 3 and settlement of all the
obligations relating to Operating Costs the Project Manager shall close
the Operating Account and distribute to each Participant its undivided
ownership interest of any balance remaining in said Account, except that
if a Participant shall then be in default with respect to any payment
required to be made under this Agreement, an amount equal to the
liability of such defaulting Participant on account of such default (or
if such amount exceeds such Participant's share of the balance in the
Operating Account, its entire share of such balance) shall first be
distributed to the nondefaulting Participant, or, if there is more than
one nondefaulting Participant, to the nondefaulting Participants in the
proportion which their respective Ownership Percentages bear to the
aggregate of their Ownership Percentages (or, in the case of any payment
relating to Variable Operating Costs, in proportion to the amount of
their respective payments of Variable Operating Costs during the period
of default).
SECTION 3.3.9. Operating Costs and Payments
(a) Fixed Operating Costs. Except as otherwise provided
herein, each Participant shall be responsible for the payment
of its respective percentage share of all Fixed Operating
Costs, which percentage share shall (except as set forth in the
next sentence) be equivalent to its Ownership Percentage.
Fixed Operating Costs relating to Joint Common Facilities will
be paid by the Participants in accordance with their respective
Joint Common Facility Percentages. All fixed operating and
maintenance costs relating to NSP Common Facilities will be
paid by NSP.
(b) Variable Operating Costs.
(1) When the Project Manager is solely responsible for
acquiring all fuel for Unit 3, Variable Operating Costs shall
be shared by each Participant in the ratio that such
Participant's monthly Net Energy Generation scheduled and
produced from Unit 3 bears to the total monthly Net Energy
Generation scheduled and produced from Unit 3.
(2) In the event any Participant supplies fuel and/or
transportation by separate arrangement, as specified in Section
4.3.3 hereof, then Variable Operating Costs and fuel costs
which are Fixed Operating Costs shall be paid for as follows:
(i) all items of Variable Operating Costs and Fixed Operating
Costs attributable to fuel and/or transportation supplied under
such separate arrangement ("Excluded Items of Variable
Operating Costs" and "Excluded Items of Fixed Operating Costs",
respectively) shall be paid for by the Participant supplying
such fuel and/or transportation; (ii) all items of Variable
Operating Costs attributable to fuel and/or transportation
supplied by the Project Manager on behalf of NSP and any other
Participants which are of the same categories as the Excluded
Items of Variable Operating Costs shall be shared by NSP and
each such other Participant each month in the ratio which its
Net Energy Generation scheduled and produced from Unit 3 in
such month bears to the total Net Energy Generation scheduled
and produced from Unit 3 in such month excluding the Net Energy
Generation of any Participant allocable to fuel and/or
transportation supplied under a separate arrangement; (iii) all
remaining items of Variable Operating Costs shall be shared by
each Participant each month in the ratio which its Net Energy
Generation scheduled and produced from Unit 3 in such month
bears to the total Net Energy Generation scheduled and produced
from Unit 3 in such month; and (iv) all items of Fixed
Operating Costs attributable to fuel and/or transportation
supplied by the Project Manager on behalf of NSP and any other
Participant which are of the same categories as the Excluded
Items of Fixed Operating Costs shall be shared by NSP and each
such other Participant in the ratio which its Ownership
Percentage bears to the Ownership Percentages of all
Participants other than the Participant supplying fuel and/or
transportation under a separate arrangement.
(3) Each Participant shall have the right to make whatever
financial arrangements it may desire, whether by lease,
security transaction or otherwise, for the discharge of its
fuel payment obligations so long as such arrangements do not
adversely affect the rights of the other Participants.
(c) Payment and Settlement
(1) Except as provided in Section 3.3.9(b) hereof, the
Project Manager shall be responsible for making payment to
third parties of all Operating Costs to the extent that funds
are available therefor in the Operating Account.
(2) Beginning with the month immediately succeeding the
first month in which Operating Costs are paid;, by the
twentieth day of such month the Project Manager shall notify
each Participant of the actual amount of such Costs for the
preceding month and of the amount to be paid by each
Participant. On or before the last banking day of the month of
such notification, each Participant shall deposit immediately
available funds into the Operating Account in an amount equal
to the sum of (i) its respective share of the Fixed Operating
Costs as provided herein and (ii) Variable Operating Costs for
which it is responsible pursuant to paragraph (b) hereof.
(3) Each Participant shall have ninety days to question or
contest the correctness of charges for Operating Costs after
which time the corrections of such charges shall be
conclusively presumed. In the event any Participant by timely
notice questions or contests the correctness of any such
charge, the Project Manager shall within 55 days following such
notice from a Participant notify each Participant of the amount
of any error and the amount of reimbursement, if any, each
Participant is required to make or is entitled to receive in
respect of such error. Not later than the third banking day
after receipt of such notice from the Project Manager, each
Participant required to make reimbursement shall deposit the
amount specified in such notice into the Operating Account in
immediately available funds. From the amount so deposited, the
Project Manager shall immediately thereafter distribute in
immediately available funds to each Participant entitled to
receive such reimbursement the amount such Participant is
entitled to receive except if any such Participant is then in
default in respect of any payments required to be made under
this Agreement, an amount equal to such defaulting
Participant's share of the amount so deposited with respect to
such reimbursement shall be retained in the Operating Account
and distributed in accordance with the provisions of Section
3.3.8 hereof.
The Project Manager shall have no responsibility liability
for the failure of any Participant to deposit funds as provided
in this Section 3.3.9. The Project Manager will provide each
Participant with such information as is reasonably required by
such Participant in order to account for payments made pursuant
to this Section 3.3.9 on such Participant's books.
SECTION 3.3.10. Late Payments. Payments of a Participant not
made when due shall bear interest from the due date at the Agreed Rate.
SECTION 3.3.11. Administrative and General Costs. The portion
of the Project Manager's administrative and general costs appropriately
allocable to Cost of Construction and Operating Costs hereunder shall
be determined from time to time in accordance with the methods and
procedures described in Exhibit I hereto. Such allocation for any
fiscal year shall be subject to review after the conclusion of such year
by a nationally recognized firm of certified public accountants selected
by the Management Committee pursuant to Section 3.3.14 hereof and shall
be subject to revision based upon considerations of fairness and equity.
SECTION 3.3.12. Project Insurance
(a) From and after the date hereof and at all times during
the construction of Sherco 3, the Project Manager shall carry
in the name of itself and the Participants, in proportion to
their respective ownership interests to be owned by them after
the Closings provided for in Article Two hereof, insurance,
including fire and extended coverage and installation floater
insurance, in an amount and including such risks as is
consistent with the Project Manager's customary practices and
in accordance with Prudent Utility Practice. The Project
Manager shall also procure and maintain public liability
insurance in the amount of not less than ten million dollars
subject to a deductible determined by the Project Manager
naming the Participants as insureds. The foregoing policy
shall contain, where necessary, cross liability endorsement and
waivers of subrogation, or equivalent releases, which shall
protect the Participants. The Project Manager shall also
reasonably satisfy itself that all contractors, subcontractors,
engineers, and all equipment suppliers or manufacturers have
adequate insurance and limits thereof, with carriers approved
by the Project Manager, for workers' compensation, public
liability, contractors' liability and such other hazards as the
Project Manager shall deem appropriate with respect to Sherco
3, or the Project Manager, at its option, may provide for an
insurance program of the nature of a "wrap-up" which shall
combine all hazards in one policy, with all parties, including
owners, contractors, subcontractors, but not including engineer
and equipment suppliers and manufacturers, involved in Sherco
3 being insured thereunder as their interests may appear. The
Project Manager will require engineer and equipment suppliers
and manufacturers to have such insurance as the Project Manager
deems appropriate. The aggregate cost of all insurance
procured pursuant to this paragraph (a) and all uninsured
losses shall be considered a Cost of Construction and as such
shall be apportioned among the Participants and paid pursuant
to Sections 3.3.3 and 3.3.6 hereof.
(b) During the period of its operation of Sherco 3
hereunder, the Project Manager shall carry in the name of the
Participants as their interests appear the public liability
insurance referred to in the preceding paragraph (a) and
insurance covering workers' compensation and property, in such
amounts and with such deductible or self-insurance features as
is consistent with the Project Manager's customary practices.
The aggregate cost of all such insurance and uninsured losses
shall be considered a Fixed Operating Cost.
(c) The Project Manager shall promptly provide copies of
all insurance policies or certificate therefor and make
available notices with respect thereto to the other
Participants for insurance carried by the Project Manager
pursuant to this Section 3.3.12. Each other Participant may
also maintain additional or other insurance at its own cost and
expense which it deems necessary or advisable to protect its
respective interest in Sherco 3, provided that such additional
insurance does not reduce or diminish in any way the coverage
of the insurance procured and maintained by the Project Manager
pursuant to this Section 3.3.12.
SECTION 3.3.13. Taxes.
(a) The Participants shall use their best efforts to have
any taxing or other authority levying any taxes or assessments
on Sherco 3, levy such taxes or assessments directly against
the ownership or beneficial interest of each Participant.
(b) All taxes or assessments or payments in lieu thereof
levied against or with respect to each Participant's undivided
ownership interest in Sherco 3 under statutes now or hereafter
in effect shall be the sole responsibility of, and shall be
paid by, the Participant upon whose interest said taxes or
assessments or payments in lieu thereof are levied.
(c) If any property taxes or other taxes or assessments or
payments in lieu thereof are levied on Sherco 3, or any
interest or rights therein, in a manner other than as specified
in paragraph (a) of this Section, such taxes or. assessments or
payments in lieu thereof shall be apportioned among the
Participants in accordance with their respective ownership
interests; provided, however, that each Participant shall be
entitled to the entire benefit, to the extent of actual
realization, of all exemptions from or reductions of taxes,
payments in lieu of taxes, assessments, impositions, charges
and related costs of every kind and nature, foreseen or
unforeseen, settled or pending settlement, including but not
limited to property, sales, use and payroll taxes, connected
with or arising out of the construction, ownership, operation,
alteration, repair, rebuilding, use or retirement of Sherco 3
or any part thereof, which may be realized under the provisions
of the Constitutions of the State of Minnesota or the United
States of America, statutes, ordinances, rules, regulations or
laws applicable to such Participant.
(d) Each of the Participants claiming exemption from any
taxes or assessments or payments in lieu thereof shall be
responsible for and shall pay all expenses in connection with
the sustaining or determination of such claims, and each of the
other Participants shall lend all reasonable cooperation in
connection with the filing of tax renditions and reports and in
connection with the making of any payment under protest as may
be requested by each Participant claiming an exemption. No
Participant who is exempt from any taxes assessed against any
or all of the other Participants shall be obligated to make any
contribution toward such taxes to the extent of the exemption.
(e) Participants shall within 30 days of payments under (b)
above send a receipt of such payment to the Project Manager.
Failure to pay such taxes shall be considered default in
payment under Article 5.1 and the nondefaulting Participants
may cure the default to avoid the imposition of a lien or other
consequence on the Sherco 3 Project.
SECTION 3.3.14. Books and Records. The Project Manager shall
keep books of account and records concerning details of cost applicable
to Sherco 3. Such books and accounts shall be kept in accordance with
the Uniform System of Accounts. The Project Manager shall arrange for
annual audits of such books of account and records by a nationally
recognized firm of certified public accountants selected by the
Management Committee. The auditing firm shall certify that such books
of account and records are in accordance with this Agreement and in
accordance with sound accounting practice. Prior to the Commercial
Operation Date, the costs of such audits shall be a Cost of Construction
and thereafter such costs shall be a Fixed Operating Cost.
SECTION 3.3.15. Management and Operating Audits. Each
Participant shall have the right from time to time to conduct management
and operating audits, at its own cost, of the Project Manager's
performance as agent hereunder including audits of all books, records
and other documents regarding Operating Costs and Cost of Construction
sufficient to allow it to determine that such costs attributed to Sherco
3 by the Project Manager are appropriate. Such audits may; be made
either by its own officers and employees or through its duly authorized
agents or representatives. No payment made by any Participant shall
constitute a waiver of the right of such Participant to question or
contest the correctness of any charge or credit by the Project Manager
hereunder. The Project Manager shall cooperate with each Participant
in the conducting of any such audit and, subject to the applicable
regulations of any regulatory agency having jurisdiction and the
provisions of Section 5.4.2 hereof, give each other Participant
reasonable access to all contracts, records and other documents relating
to Sherco 3.
SECTION 3.3.16. Right to Copies. SOUTHERN MINNESOTA, UNITED
MINNESOTA and any successor Project Manager hereunder shall each be
entitled to copy any and all (i) contracts, books, records, reports and
other documents and papers to which SOUTHERN MINNESOTA, UNITED
MINNESOTA, their respective officers, employees, duly authorized agents
or representatives and consultants or any successor Project Manager is
permitted access, or which NSP has agreed shall be available for audit,
under the terms of this Agreement, and (ii) any and all architectural,
engineering and design drawings and specification that have been or
shall hereafter be prepared in connection with Sherco 3. SOUTHERN
MINNESOTA, UNITED MINNESOTA and any successor Project Manager shall use
any such copy, the information contained therein, or both, only in the
exercise of their respective rights and obligations hereunder and shall
not sell or otherwise transfer any such copy or the information
contained therein to any person or entity; provided, however, that
SOUTHERN MINNESOTA and UNITED MINNESOTA each may disclose the contents
thereof to the extent required by applicable law or to the extent
required in connection with the sale of its securities and each may
provide any such copy or disclose the contents thereof to any
independent consultant responsible for reporting to it with respect to
the feasibility of Sherco 3 or to any trustee, mortgagee or security
holder for the holders of its indebtedness.
SECTION 3.3.17. Confidentiality. Each Participant agrees to
comply with any provisions in any contract with vendors or consultants
concerning the confidentiality of the terms and provisions thereof and
will not sell or otherwise transfer the information contained therein
to any person or entity.
CHAPTER FOUR
OPERATION
ARTICLE 4.1. OPERATING COMMITTEE
SECTION 4.1.1. Appointment. The Participants hereby establish,
as a subcommittee of the Management Committee, an Operating Committee.
The Operating Committee shall be composed of one representative of each
Participant, to be designated by written notice to the other
Participants. Each such representative may, but need not, be a member
of the Management Committee. Any decision or determination by the
Operating Committee shall be by unanimous vote; if agreement cannot be
reached with respect to any matter, the matter shall be referred to the
Management Committee.
SECTION 4.1.2. Authority and Responsibility. The Operating
Committee shall have the following functions, among others:
(a) providing liaison among the Participants and between
them and the Management Committee.
(b) Reviewing and reporting or recommending to the
Management Committee certain courses of action or procedures
pertaining to the following items related to the performance of
operating Sherco 3:
(1) The annual capital expenditures budget, annual manpower
table and budget, and annual operation and maintenance budget.
(2) The planned outages scheduled for maintenance and the
manner of selection of any maintenance contractor for contract
maintenance included in the annual operation and maintenance
budget.
(3) The policies for establishing the spare parts inventory
and materials and supplies inventory.
(4) The written statistical and administrative reports,
written budgets, and information and other similar records, and
the form thereof, to be kept and furnished by the Project
Manager in accordance with Section 3.3.14 hereof (excluding
accounting records used internally by the Project Manager for
the purpose of accumulating financial and statistical data,
such as books of original entry, ledgers, work papers, and
source documents).
(5) The procedures for determining Net Effective Generating
Capability, Minimum Net Generation, and Net Energy Generation.
(6) The procedures for maintaining complete and accurate
fuel accounting procedures for usage and Capacity and Energy
transactions.
(7) The Project Manager's analysis of the total
expenditures caused by an Operating Emergency.
(8) The written statement of operating practices and
procedures.
(9) The procedures and practices for weighing, sampling,
and analysis of fuel delivered to Unit 3 in accordance with the
requirements of any fuel supply agreement.
(10) The procedures for determining the costs for control
of Sherco 3.
(c) Establishing practices and procedures for keeping each
Participant advised of the available operating capacity, and
for the delivery of power and energy from Unit 3 in accordance
with the Participants' schedules and for the provision of
operating reserves as scheduled by the Participants from
available operating capacity not used for power and energy
scheduled. Such practices and procedures shall provide for
modifying such schedules to meet the needs of day-to-day or
hour-by-hour operation, including emergencies on a
Participant's system.
(d) Periodically reviewing the amount of fuel to be
maintained in permanent fuel storage and the procedures for
delivery of fuel and making periodic reviews and
recommendations to the Management Committee regarding any
increases or decreases therein.
(e) Establishing procedures for the operation of Sherco 3
during periods of curtailed operation which reduce or may
reduce the Net Effective Generating Capability.
(f) Reviewing and approving procedures and practices for
the measurement and sampling of fuel.
(g) Reviewing and approving procedures and practices for
the apportionment of charges to be made pursuant to Section
3.3.9 hereof pursuant to the bills rendered by the fuel
supplier or suppliers.
(h) Performing general inspections, which will not
interfere with operating Sherco 3 (i) prior to approval of the
annual budgets; (ii) during planned maintenance outages; and
(iii) such other times that it deems appropriate.
(i) Periodically revising and updating operation and
maintenance standards for Sherco 3.
(j) Reviewing.periodically whether or not the operation or
maintenance standards are being attained.
(k) Performing such other functions and duties as may be
assigned by the management Committee.
ARTICLE 4.2. DISPOSITION OF OUTPUT
SECTION 4.2.1. Disposition of Output Prior to Commercial
Operation. Prior to the Commercial Operation Date, Capacity and Energy
as may be produced by Unit 3 shall be sold by the Project Manager at the
best available price to Participants or others and the proceeds thereof
deposited in the Construction Account.
SECTION 4.2.2. Disposition of Output liter Commercial
Operation.
(a) Net Effective Generating Capability. The Project
Manager shall keep the system dispatcher of each Participant
advised of the Net Effective Generating Capability.
(b)Scheduling
(l) Each Participant shall be entitled to schedule Capacity
and Energy from Unit 3 and shall be entitled to receive such
Capacity and Energy as scheduled, subject to the provisions of
this Agreement, up to the amount of its Entitlement.
(2) When a Participant schedules Capacity and Energy from
Unit 3, each Participant shall, unless otherwise determined by
the Management Committee, schedule for its account its share of
Minimum Net Generation which shall be the product of its
Ownership Percentage and the Minimum Net Generation established
for Unit 3. At any time any Participant has scheduled an
amount of Capacity from Unit 3 in excess of the product of its
Ownership Percentage and Minimum Net Generation, then unless
otherwise determined by the Management Committee, the other
Participants whose schedules are less than their respective
Ownership Percentages of such Minimum Net Generation shall
schedule on a pro rata basis, in the proportion which their
respective Ownership Percentages bear to each other, the
remaining amount of Minimum Net Generation.
(3) Operation of Sherco 3 by the Project Manager and a
Participant's right to receive the output thereof shall be
subject to scheduled outages or curtailments, Operating
Emergencies aid unscheduled outages or curtailments of Unit 3.
(c) Substitution of Another Resource. In the event, and
only in the event, the Project Manager voluntarily ceases to
operate Sherco 3 solely because of the availability of Energy
to NSP from another source or sources, the average cost of
which is projected to be lower than the cost of Energy
generated by Unit 3 would be during the period of such
cessation in operation, NSP shall make available to the other
Participants replacement Energy from such other sources during
the period of such cessation in operation. The amount of such
replacement Energy to be made available to other Participants
during such period shall be the amount of Energy requested by
such Participants, but not in excess of the amount to which
such Participants would have been entitled during such period
had the operation of Sherco 3 not ceased. The cost of such
replacement Energy shall be the estimated cost which would have
been incurred by the other Participants for Energy generated by
Unit 3 if Sherco 3 were continued in operation during such
period at a level equal to the Energy requested by the other
Participants plus NSP's share of the Minimum Net Generation.
(d) Transactions With Other Systems. Each
Participant shall be entitled to dispose of its Entitlement or
any part thereof through scheduled transactions with other
systems or agencies, or with one or more of the other
Participants.
ARTICLE 4.3. FUELS
SECTION 4.3.1. Authority of Management Committee. The
Management Committee shall prescribe from time to time the policies and
procedures for obtaining fuel supplies for Unit 3, for maintaining fuel
reserves at Unit 3 and for measuring inventories, shrinkage and
consumption of fuel at Unit 3.
SECTION 4.3.2. Procurement by the Project Manager. Subject to
the further provisions of this Article 4.3, as agent for the
Participants, the Project Manager shall have sole authority to acquire,
and shall arrange for and acquire, all fuel for Unit 3.
SECTION 4.3.3. Procurement by Other Participants.
(a) In the event any Participant (other than the Project
Manager as agent for the Participants) shall be able to locate
and arrange for a source of fuel for Unit 3 and
(1) the total cost per Btu of such fuel, including, without
limitation, all brokerage, transportation, handling, testing
and storage charges, is equal to or lower than the cost of fuel
which the Project Manager would be able to procure for Unit 3
for the same period of time;
(2) the quality and characteristics of such fuel are in all
respects equal to or better than and compatible with those of
the other fuel being utilized or to be utilized for Unit 3
during the period of such contract, and such fuel is in all
respects compatible with Unit 3 and will enable Unit 3 to
operate at normal operational levels in compliance with all
governmental regulations applying thereto;
(3) transportation for such fuel can be arranged which is
at least as reliable as transportation which would be available
for the other sources of fuel for Unit 3 for the same period of
time, and such transportation is compatible with the
transportation and fuel delivery facilities of Unit 3;
(4) procurement of such fuel would not interfere with,
diminish any benefits of or replicate any other fuel
arrangement which the Project Manager has procured for or
entered into with respect to Unit 3, including any options or
rights for renewals or extensions of contracts, and would not
interfere with, diminish any benefits of or replicate any
transportation arrangements, agreements or tariffs;
(5) procurement of such fuel would not increase or diminish
the level of fuel supply in the Unit 3 coal stockpile
determined by the Project Manager to be the appropriate level
therefor;
(6) the vendor of such fuel is willing to enter into a
contract with the Project Manager (as agent for the
Participants) on terms and conditions no less favorable to the
Participants than those then being bargained for by the Project
Manager; and
(7) the necessary contracts and arrangements are for a
period of 12 months or longer;
then the Project Manager as agent for the Participants, shall enter into
a contract to obtain such fuel for Unit 3 and shall thereafter
exclusively administer such contract and all transportation arrangements
associated therewith, all costs and benefits of such contract to be
shared by all of the Participants pursuant to the provisions of this
Agreement. No Participant (other than the Project Manager as agent for
the Participants) shall enter into any arrangement or agreement with
respect to the procurement of fuel for Unit 3 on behalf of the other
Participants.
(b) Any Participant which has an opportunity to procure or
participate in a fuel supply arrangement which meets all of the
conditions specified in clauses (1) through (7) of the
preceding paragraph (a), but for which such Participant cannot,
because of legal restrictions, obtain beneficial financing if
the economic benefits, if any, of such fuel supply arrangement
are shared with the other Participants, shall be permitted to
supply, solely for its own account, up to its proportionate
share of the fuel requirements for Unit 3 from such fuel supply
arrangement, upon the following conditions. The Participant
proposing to participate in such fuel supply arrangement shall
give the Project Manager written notice of its intention to
supply part or all of its proportionate share of the fuel
requirements for Unit 3, the period of time for which it
proposes to supply such requirements and the percentage of its
proportionate share of such requirements which it proposes to
provide. Such notice shall be tendered at least one year prior
to the date of the first contemplated delivery of fuel from
such fuel supply arrangement. At least one year prior to the
first scheduled delivery of fuel from any such arrangement, the
Participant proposing to participate in the arrangement shall
enter into a valid, binding and enforceable contract for such
fuel and transportation thereof providing by its terms for such
Participant to be solely responsible for all administration
with respect thereto, including coordination with the mine
operator, scheduling of deliveries, transportation
arrangements, testing and enforcement. Such Participant shall
schedule deliveries to Unit 3 under such arrangement with the
Operating Committee.
For the duration of any such notice of intention,
(1) The Project Manager shall have no obligation to
purchase, arrange for or contract for this purchase of fuel for
Unit 3 in the amount specified in the notice of intention; and
(2) Any Participant which gives any such notice of
intention to supply fuel shall indemnify the other Participants
for any and all damages, costs and expenses which result,
directly or indirectly, from any such notice of intention, from
any such fuel supply arrangement or from the failure of supply
of fuel as contemplated in such notices or arrangement.
If, at any time, any one or more deliveries of fuel from any
such fuel supply arrangement fail in any respect to satisfy the
requirements as specified in the preceding paragraph (a) or are
incompatible with Unit 3 or any governmental regulations applying
thereto, then the Project Manager may decline to use the fuel from any
such delivery, and the Project Manager may order the controlling
participant to suspend further deliveries from such fuel supply
arrangement until it receives adequate assurances that all future
deliveries of fuel will conform to all of the requirements of Unit 3
and/or to the delivery schedules.
The Project Manager shall not be liable to any participant for
any actions taken by it under this paragraph (b), and the Participant
participating in any such fuel supply arrangement shall indemnify and
hold harmless the Project Manager and the other Participants from and
against any and all costs, expenses, claims, judgments and fines,
including legal fees incurred in defense of any lawsuit or other
proceeding, as a result of any such action taken by the Project Manager,
except the Project Manager shall not be so indemnified and held harmless
from the payment of legal fees incurred in defense of any lawsuit
brought by a Participant proposing to participate in such arrangement
seeking specific performance or injunctive relief against the Project
Manager to reverse the Project Manager's determination that such a
proposed arrangement does not comply with the terms and conditions of
this paragraph (b).
(c) Any Participant shall have the right to arrange for
transportation by separate arrangement of its proportionate
share of the fuel requirements for Unit 3 provided such
transportation is compatible with the fuel delivery facilities
of Unit 3 and the impact of such transportation on the overall
fuel arrangement for Unit 3 meets all the conditions specified
in clauses (1) through (7) of the preceding paragraph (a) to
the extent applicable. Scheduling of deliveries and
administration of any contractual arrangements associated
therewith shall be coordinated through the Operating Committee.
If, in order for such Participant to obtain beneficial
financing for such transportation, it shall be necessary for it
to have sole ownership of the fuel being transported, then
legal title to such fuel shall be conveyed to such Participant
by the Project Manager or the supplier of such fuel if such
fuel arrangement meets all of the conditions specified in
clauses (1) through (7) of the preceding paragraph (a) to the
extent applicable.
ARTICLE 4.4. OTHER OPERATING MATTERS
SECTION 4.4.1. Maintenance Schedule. The Project Manager
agrees to submit to the Participants on or before September 1 of each
year a scheduled maintenance plan for the ensuing five calendar years.
Each such plan shall describe in reasonable detail the contemplated time
and duration of each outage and maintenance work to be done and the
estimated cost thereof. The Management Committee, giving due
consideration to matters and comments submitted by all Participants,
shall adopt a scheduled maintenance plan by each November 1. If the
Management Committee fails to adopt a plan by such time, the plan to be
utilized shall be the one submitted by the Project Manager. Scheduled
maintenance plans may be changed by the Project Manager from time to
time as deemed appropriate by the Project Manager and when so changed
shall be delivered to the Participants and adopted as provided above in
this Section. The Project Manager makes no representation, warranty or
promise of any kind as to the accuracy of any estimate or other
information contained in any scheduled maintenance plan and in no event
shall the Project Manager have any liability to any of the Participants
in these regards.
SECTION 4.4.2. Operating Emergency. The Project Manager shall
take any and all steps required by Prudent Utility Practice to terminate
any Operating Emergency, subject to the provisions of this Section. As
soon as practicable after the commencement of an Operating Emergency,
the Project Manager shall advise the Participants of the occurrence of
such Emergency, its nature and the steps taken or to be taken to
terminate the Operating Emergency, including a preliminary estimate of
the expenditures required to terminate the Operating Emergency. In the
event the Project Manager determines the estimated amount required to
terminate the Operating Emergency exceeds the amount which it is
authorized to expend hereunder, the Project Manager shall so notify the
Participants and shall call a meeting of the Operating Committee to be
held not later than five days following such determination. At such
meeting the Project Manager shall submit the following information:
(a) The estimated date when the Operating Emergency can be
terminated.
(b) The person or persons who the Project Manager proposes
would perform the work and furnish the materials required toe
terminate the Operating Emergency.
(c) The estimated amount of overtime, if any, which would
be paid in order to expedite the termination of the Operating
Emergency.
(d) The costs proposed to be capitalized, facilities to be
retired, and salvage to be realized.
(e) The costs proposed to be charged as maintenance
expense.
(f) Such other information as may be necessary and required
by Operating Committee to determine the manner in which the
Operating Emergency is to be terminated.
The Operating Committee shall review and recommend to the Management
Committee the items as set forth in this Section or recommend an
alternative thereto.
SECTION 4.4.3. Reactive Generation. Unless otherwise mutually
agreed by the Participants, each Participant shall provide the reactive
power requirements of its electric system. The Project Manager will,
at all times, operate Sherco 3 in a manner consistent with the safe
operation of the NSP electric system and systems interconnected with the
NSP system. The Project Manager will not, however, vary the generation
of reactive power supplied by Unit 3 in such a manner as to impair the
ability to generate real power for the benefit of any Participant except
during emergencies. The Project Manager will not be required, at any
time, to operate Sherco 3 in a manner which is intended to supply
reactive power generated by Unit 3 to the systems or electric loads of
any of the Participants other than NSP.
SECTION 4.4.4. Initial Training and Startup Expenses. Up to
the Commercial Operation Date of Sherco 3, the Project Manager shall
accumulate and charge the initial training and startup expenses to the
Cost of Construction. Such expenses shall be accounted for in a manner
which will provide identification thereof.
SECTION 4.4.5. Metering. The Project Manager shall install and
maintain the necessary metering equipment to determine the amounts of
net Capacity and Energy from Unit 3 at the Point of Delivery. Metering
records shall be available at all times to authorized representatives
of the Participants. Each meter used shall, by comparison with accurate
standards, be tested and calibrated by the Project Manager at
approximate intervals of twelve months. If a meter shall be found not
registering within 1% accuracy, it shall be restored to an accurate
condition or an accurate meter shall be substituted. The results of all
tests and calibrations shall be open to examination by the Participants
and a report of every test shall be furnished immediately to the
Participants. Any meter tested and found to be within 1% accuracy shall
be considered to be accurate. If, as a result of any test, any meter is
found to register not within 1% accuracy, the readings of such meter
previously taken shall be corrected according to the percentage of
inaccuracy so found but no such correction shall extend beyond sixty
days previous to the day on which such inaccuracy was discovered by such
test. If any metering equipment fails to register or if the meter
registration is erratic, the Capacity and Energy produced shall be
determined by the Participants. All costs incurred in connection with
such metering equipment and compliance with the provisions of this
Section shall be considered a Fixed Operating Cost and as such shall be
borne by the Participants in proportion to their respective Ownership
Percentages.
CHAPTER FIVE
GENERAL PROVISIONS
ARTICLE 5.1. DEFAULTS
SECTION 5.1.1. Covenant to Perform. Each Participant covenants
to pay all monies and to perform all other obligations agreed to be paid
or performed under this Agreement. This Article provides for
consequences and remedies relating to financial defaults. For the
purposes of this Article a "default" shall occur if any Participant
fails to make any payment in the time and manner provided by this
Agreement, provided that Section 5.6.11 shall not apply until a written
notice of default has been given to the defaulting Participant. Such
notice shall be given by the Project Manager, but upon failure of the
Project Manager to do so it may be given by any Participant.
SECTION 5.1.2. Initial Procedures.
(a) Following a default by a Participant, the nondefaulting
Participants shall make payments and take actions necessary to
cover the default. In the case of a default in the payment of
Cost of Construction relating to
Joint Common Facilities, the amount in default shall be paid by
each nondefaulting Participant in the ratio that its Joint
Common Facility Percentage bears to the total Joint Common
Facility Percentages of all nondefaulting Participants. In the
case of a default in the payment of any other Cost of
Construction or Operating Costs, the amount in default shall be
paid by each nondefaulting Participant in the ratio that its
Ownership Percentage bears to the total Ownership Percentages
of all nondefaulting Participants. The Project Manager may
notify the nondefaulting Participants by telephone or telegraph
if there exists an immediate need for the advancement of funds
to cover a default. Within three banking days of the receipt
of such notice, each nondefaulting Participant shall advance
the funds requested to the Project Manager in such manner as
the Project Manager may request. Neither the advance of funds
pursuant to such a request nor the covering of a default shall
constitute an: election of rights or option under this Article
5.1.
(b) The failure by UNITED MINNESOTA to cover a default of
another Participant in accordance with paragraph (a) shall not
constitute a default for purposes of Sections 5.1.7 and 5.6.11
hereof.
SECTION 5.1.3. Payment in Event of Dispute. If a Participant
disputes the existence or extent of any failure to make any payment
hereunder, it shall nevertheless make such payment under written protest
directed to each of the other Participants. Such payments of a
Participant not made when due shall bear interest at the Agreed Rate.
SECTION 5.1.4. Option to Abandon. If a payment default should
continue for a period of 120 days after the due date thereof, the
Management Committee, subject to the vote adjustment required by Section
5.6.11, may elect to discontinue the Sherco 3 Project immediately and
liquidate the same for the benefit of the Participants. In such event,
the defaulting Participant shall not be relieved of any of its
obligations then existing or thereafter existing hereunder and shall be
liable for any and all costs incurred by the nondefaulting Participants
in covering such default; and any provisions of this Agreement to the
contrary notwithstanding, the defaulting Participant shall be liable for
all costs directly attributable to the discontinuance of the Sherco 3
Project (including, without limitation, all cancellation charges and
penalties imposed by contractors, engineering companies, constructors,
equipment suppliers and suppliers of materials and services) and shall
indemnify the nondefaulting Participants for any and all such costs paid
or borne by them.
SECTION 5.1.5. Right to Cure Defaults. A Participant in
default for failure to make any payment of Cost of Construction required
to be paid by it prior to the Commercial Operation Date shall have the
right to cure such default by paying the amounts in default, plus
interest thereon at the Agreed Rate, to the other Participant or
Participants that shall have paid such amounts or, to the extent no
other Participant shall have paid such amounts, by paying such amounts,
plus interest thereon at the Agreed Rate, into the Construction Account;
provided, however, that any such payment to another Participant may be
made only within 120 days after the date of default unless such other
Participant shall agree to accept payment at a later date; and provided
further, that no Participant shall have the right to cure any such
default after the Commercial Operation Date. A Participant in default
for failure to make any payment required to be made by it on or after
the Commercial Operation Date may cure such default as provided in
Section 5.1.7 hereof.
SECTION 5.1.6. Adjustment to Ownership Percentages and Joint
Common Facility Percentages.
(a) If necessary to reflect defaults by one or more
Participants, upon completion of construction and after the
adjustments in the Participants' investments in Joint Common
Facilities pursuant to Section 2.2.2 (d) hereof, the Management
Committee shall review the investment made by each Participant
hereunder through the completion of construction and shall re-
determine the Ownership Percentages and Joint Common Facility
Percentages of the respective Participants in accordance with
the formula in (b) and (c) below with the intent that, if the
total investment by any Participant hereunder (including Cost
of Construction of Joint Common Facilities to the extent
allocable to Sherco 3, all other Cost of Construction and
investment in NSP Common Facilities to the extent allocable to
Sherco 3) represents a percentage of. the total investment by
all Participants hereunder (including Cost of Construction of
Joint Common Facilities to the extent allocable to Sherco 3,
all other Cost of Construction and investment in NSP Common
Facilities to the extent allocable to Sherco 3) which is
different from its Ownership Percentage, then the Ownership
Percentage of such Participant shall be revised to equal such
other percentage. All amounts used in the formula shall be
determined from Sherco 3 Project accounting records.
(b) The Ownership Percentage of each Participant shall be
re-determined in accordance with the following formula:
OP' = Csp + Cep + Cjsp + Cmp x 100
----------------------
CS + CE + Cjs + Cm
Where:
OP Such Participant's revised Ownership Percentage, as to be
determined from the formula;
Cs Total Cost of Construction of Sherco 3 excluding Joint
Common Facilities;
Csp Such Participant's investment in Sherco 3 excluding Joint
Common Facilities;
Ce is as defined in Section 2.2.2(b);
Cep is as defined in Section 2.2.2(b);
Cjs Total investment in Joint Common Facilities to the extent
allocable to Sherco 3. This amount is equal to the amount
Cj less the amount Cx, where Cj and Cx are as defined in
Section 2.2.2(b);
Cjsp Such Participant's investment in Joint Common Facilities
to the extent allocable to Sherco 3. This amount shall be
equal to the amount Cjp less the amount Cxp, where Cjp
shall be equal to such Participant's investment in Joint
Common Facilities (including all adjustments pursuant to
Section 2.2.2(d)) and Cxp is as defined in Section
2.2.2(b);
Cm is as defined in Section 2.2.2(b); and
Cmp Such Participant's investment, if any, in NSP Common
Facilities Modifications to the extent allocable to Sherco
3. Cmp for NSP shall equal the sum of (i) the total
investment by NSP in NSP Common Facilities Modifications
identified on Exhibit B-1 hereto on the date hereof less
0.134 times the total investment by all Participants in
such Modifications plus (ii) the total investment by NSP
in NSP Common Facilities Modifications made pursuant to
Section 2.2.6 hereof less the portion of the investment
therein made by all Participants which is allocable to
generating units other than Sherco 3. Cmp for each other
Participant shall equal such Participant's total
investment, if any, in NSP Common Facilities Modifications.
(c) After the Ownership Percentage of each Participant has
been re-determined, its Joint Common Facility Percentage shall
be re-determined in accordance with the following formula:
OP
---
JP' = Csp + Cjp - 100 (Cs) + Cmp - Cmo
-------------------------------- x 100
CJ
Where:
JP' Such Participant's adjusted Joint Common Facility
Percentage, as to be determined from the formula;
Cj
and
Cmo are defined in Section 2.2.2(b); and
Cjp, Cmp, OP', Cs and Csp are as defined above in this Section
5.1.6.
The re-calculation of the Joint Common Facility Percentages
under this paragraph (c) shall be made after giving effect to the
reclassification as Joint Common Facilities, pursuant to Section 2.2.5
hereof, of those NSP Common Facilities listed as "Essential Equipment"
on Exhibit B-1 hereto.
(d) After any adjustment to the Ownership Percentage or
Joint Common Facility Percentage of the Participants as
provided above, each Participant shall own undivided ownership
interests in the Joint Common Facilities and in the remainder
of Sherco 3 equal to its Joint Common Facility Percentage and
Ownership Percentage, respectively, as so finally established.
Any Participant whose Ownership Percentage or Joint Common
Facility Percentage as so finally established under this
Section 5.1.6 is less than that originally set forth in Section
2.1.1 or Exhibit B-2 hereof, respectively, (i) shall deliver to
each other Participant or Participants whose corresponding
Percentage is greater than that originally set forth such
deeds, bills of sale, certificates and opinions as such other
Participant shall request to evidence such interest and (ii)
shall take such action as shall be necessary so that such
interest shall be owned by such other Participant free and
clear of any mortgages and other liens and encumbrances, except
those permitted by Section 1.2.2(d) hereof.
(e) Nothing in this Section 5.1.6 shall be construed to
relieve a Participant of any liability for failure to make any
payment hereunder.
SECTION 5.1.7. Loss of Entitlement. A Participant in default
for failure to make any payment accruing on or after the Commercial
Operation Date which continues for a period of 60 days after the due
date thereof shall lose its Entitlement. The Capacity and Energy
unavailable to a defaulting Participant by operation of this Section may
be thereafter utilized by each nondefaulting Participant during the
period of default in the proportion that its Ownership Percentage bears
to the total of the nondefaulting Participants' Ownership Percentages
as if such Capacity and Energy were a part of the nondefaulting
Participants Entitlement. For a period of 730 days after the date of
default, such utilization by any nondefaulting Participant shall be on
an interruptible basis until all amounts in default are paid by the
defaulting Participant, together with interest at the Agreed Rate.
After such period, such utilization by any nondefaulting Participant
shall be on a firm basis for one or more one-year periods; provided,
however, that at the end of any such one-year period, to defaulting
Participant shall regain its Entitlement if (i) six months or more
before the end of such one-year period, the defaulting Participant gives
written notice to such nondefaulting Participant of its intention to pay
all amounts in default and (ii) prior to the end of such one-year
period, the defaulting Participant pays all amounts in default, together
with interest at the Agreed Rate. Nothing in this Section shall be
construed to relieve a defaulting Participant of any liability for its
default including reimbursement to nondefaulting Participants for all
payments made in respect of the defaulting Participant's obligation to
make payments with the exception of payments for Variable Operating
Costs which shall be borne solely by the nondefaulting Participants in
proportion to their receipt of Energy associated with utilization of a
defaulting Participant's Entitlement.
SECTION 5.1.8. Actions to Enforce. In addition to the rights
granted in this Article 5.1, the Participants may take any action in law
or equity, including an action for specific performance, to enforce this
Agreement in accordance with the terms hereof.
SECTION 5.1.9. NSP to Continue as Project Manager.
Notwithstanding any other provisions of this Article, if NSP is the
Participant in default, NSP shall continue to perform its duties as
Project Manager hereunder until removed in accordance with the
provisions hereof.
ARTICLE 5.2. DAMAGE OR DESTRUCTION.
SECTION 5.2.1. Covered by Insurance. Subject to the receipt
of all requisite approvals of any governmental agency having
jurisdiction, in the event Sherco 3 or any portion thereof should be
damaged or destroyed and the cost of repairs or reconstruction is
estimated to be less than or equal to the aggregate amount of insurance
coverage (including any deductible) procured and maintained by the
Project Manager pursuant to Section 3.3.12 of this Agreement, carried
and covering the cost of such repairs and reconstruction, then, unless
the Management Committee determines not to repair or reconstruct Sherco
3, the Project Manager shall cause such repairs or reconstruction to be
made so that Sherco 3 shall be restored to substantially the same
general condition, character and use as existed prior to such damage or
destruction.
SECTION 5.2.2. Not Covered by Insurance. Subject to the
receipt of all requisite approvals of any governmental agency having
jurisdiction, in the event Sherco 3 or any portion thereof should be
damaged or destroyed and the cost of repairs or reconstruction is
estimated to be more than the aggregate amount of insurance coverage
(including any deductible) procured and maintained by the Project
Manager pursuant to Section 3.3.12 of this Agreement carried and
covering the cost of such repairs or reconstruction, then, if the
Management Committee determines to repair or reconstruct Sherco 3, the
Project Manager shall cause such repairs or reconstruction to be made
so that Sherco 3 shall be restored to substantially the same general
condition, character and use as existed prior to such damage or
destruction, and the Participants shall share the costs of such repairs
or reconstruction in excess of available insurance proceeds in
proportion to their respective Ownership Percentages. In the absence
of such determination, the Project Manager shall not cause such repairs
or reconstruction to be made and the insurance proceeds received as a
result of such damage or destruction shall be deposited in the
Construction Account (if the damage or destruction occurred prior to the
Commercial Operation Date) or the Capital Account (if the damage or
destruction occurred on or after the Commercial Operation Date) and
expended or distributed to the Participants in accordance with Section
3.3.2 or Section 3.3.5 hereof.
If repairs or reconstruction are not made in accordance with the
foregoing but one or more Participants desire to repair or reconstruct
Sherco 3, then each other Participant shall sell its undivided ownership
interest in Sherco 3 to the Participant or Participants which desire to
repair or reconstruct Sherco 3 for a purchase price equal to the product
of the salvage value of Sherco 3 and the selling Participant's Ownership
Percentage. The Participants agreeing to repair or reconstruct Sherco
3 shall share the cost of such purchase in the ratio of their respective
Ownership Percentages.
ARTICLE 5.3. RETIREMENT
SECTION 5.3.1. Date of Retirement. The determination to retire
Sherco 3 shall be made by the Management Committee; provided, however,
that no determination to retire Sherco 3 during the first forty years
of its commercial operation shall be effective without the approval of
NSP, SOUTHERN MINNESOTA and UNITED MINNESOTA so long as each owns an
undivided interest in Sherco 3.
SECTION 5.3.2. Retirement Costs. All costs less salvage
credits, if any, associated with retirement of Sherco 3, including,
without limitation: dismantling, demolishing and removal of equipment,
facilities and structures; security; maintenance; and disposing of
debris, shall be shared by the Participants in proportion to their
Ownership Percentages. Payments for these costs less salvage credits,
if any, as they are expected to be incurred, shall be made in accordance
with the provisions of Section 3.3.4, Section 3.3.5, and Section 3.3.6.
If such salvage credits exceed such costs, the difference shall be
shared by the Participants in proportion to their respective Ownership
Percentages. To the extent requested by NSP, the Participants other
than NSP each agrees to sell to NSP its interest in Common Facilities
needed by NSP in the operation of any other generating unit at the
Sherco Plant Site.
ARTICLE 5.4. CERTAIN ADDITIONAL AGREEMENTS
SECTION 5.4.1. No Adverse Distinction. Notwithstanding any
other provision of this Agreement, in discharging their respective
responsibilities hereunder, neither NSP, as Project Manager or as
Participant, nor any other Participant shall make any adverse
distinction between Sherco 3 and any other generating unit or common
facilities in which it has an interest solely because of its co-
ownership of Sherco 3 with the other Participants. Any action or
failure to act by a Participant shall not violate this Section if such
Participant's decision to act, or not to act, was based upon factors
other than its co-ownership of Sherco 3 with the other Participants.
SECTION 5.4.2. Cooperation. The Participants will cooperate
with each other in all activities relating to Sherco 3, including,
without limitation, the execution and filing of applications for
authorizations, permits and licenses and the execution of such other
documents as may be reasonably necessary to carry out the provisions of
this Agreement. In addition, each Participant agrees, upon the request
of any other Participant, to cooperate with such requesting Participant,
as reasonably necessary and at the requesting Participant's expense, in
the issuance and sale by the requesting Participant of securities to
finance its ownership interest in Sherco 3 and to provide at the
requesting Participant's expense such information, certificates,
opinions and other documentation with respect to the construction and
operation of Sherco 3 and with respect to its business and affairs as
are requested and reasonably necessary in connection with the issuance
and sale of such securities. Each Participant shall preserve and
protect the confidentiality of any such information or other
documentation specified by the furnishing Participant except to the
extent prevented from doing so by applicable law or except to the extent
that the issuance and sale of its securities requires disclosure
thereof. Where disclosure of such information or other documentation,
or any part thereof, is required by applicable law or by the issuance
and sale of the requesting Participant's securities, the requesting
Participant shall to the extent practicable promptly notify the
furnishing Participant. prior to such disclosure and give it reasonable
opportunity to present its views on the necessity and form of
disclosure.
SECTION 5.4.3. Observers. From and after the SOUTHERN
MINNESOTA Closing, SOUTHERN MINNESOTA shall have the right to have two
resident observers at the Sherco 3 Site at all times for purposes of
observing and monitoring Sherco 3. From and after the UNITED MINNESOTA
Closing, UNITED MINNESOTA shall have the right to have one resident
observer at the Sherco 3 Site for the same purpose.
Such resident observers shall be subject to, and required to
conduct themselves in accordance with, the directives of the Project
Manager's senior site official to the end that their activities shall
not interfere with the Project Manager's performance of its obligations.
The resident observers shall be reasonably qualified to perform the
duties assigned to them but at no time shall they be permitted to take
any part in nor to give any instructions or orders.
The resident observers shall have access to all parts of Sherco
3 and, upon request and within a reasonable time to comply or as soon
thereafter as the same are prepared or available to the Project
Manager's employees, shall have access to all records, papers,
documents, reports, and other information concerning Sherco 3.
The resident observers shall be provided with office space and
furnishings, reasonably necessary to allow them to perform their duties,
as part of the project cost. All other costs shall be borne by the
Participant the observer represents.
Each resident observer shall be the employee of SOUTHERN
MINNESOTA or UNITED MINNESOTA, as the case may be, and shall not be the
employee, servant, or agent of NSP. In addition to the resident
observers, SOUTHERN MINNESOTA and UNITED MINNESOTA each shall be
entitled to have other authorized representatives, including outside
consultants, at reasonable times observe and inspect Sherco 3. Such
observers, visitors, and representatives shall be subject to, and
required to conduct themselves in accordance with, the directives of the
Project Manager's senior site official to the end that their activities
shall not in any way interfere with the Project Manager's
responsibilities.
SECTION 5.4.4. Plant Tours. Upon prior approval of the Project
Manager, the Participants may schedule plant tours and visits at Sherco
3.
SECTION 5.4.5. Settlement of Disputes. In the event any
dispute between any of the Participants should arise out of or relating
to this Agreement concerning a matter not already delegated by this
Agreement for determination by the Management Committee, such dispute
shall be first submitted to the Management Committee for review and
decision. The Management Committee shall have thirty days from and
after the date upon which such dispute is submitted to it in which to
resolve such dispute. Such dispute shall be deemed to be resolved by
the Management Committee if, but only if, said Committee unanimously
arrives at a single determination thereof. If the Management Committee
is unable to resolve such dispute, then the Participants shall forthwith
submit such dispute to the chief executive officers of the Participants
for review. Said chief executive officers shall have an additional
thirty days from and after the date upon which such dispute is submitted
to them in which to resolve such dispute. Said chief executive officers
may resolve such dispute if, but only if, they unanimously arrive at a
single determination thereof. If such dispute is not so resolved and
the Participants involved in the dispute resort to litigation, the other
Participants shall have the right to intervene in such litigation.
ARTICLE 5.5. LIMITATION OF LIABILITY
SECTION 5.1. General. Except to the extent such liability is
discharged by project insurance acquired under Section 3.3.12, the
Project Manager and its directors, officers, agents and employees shall
not be liable to the Participants for any loss, cost, damage or expense
incurred by the Participants as the result of any action or failure to
act, whether negligent or otherwise, by the Project Manager or its
directors, officers, agents or
employees in carrying out the provisions of this Agreement, except for
any such loss, cost, damage or expense which is the result of the
Project Manager's "gross negligence" or "intentional wrongdoing", which
terms are defined as follows:
(a) "gross negligence" is more than a failure to exercise
due care under the particular facts and circumstances and is
more than inadvertence or inattention. "Gross negligence" must
involve an act or an omission of an aggravated character
respecting a significant legal duty. Such an act or omission
amounts to a reckless disregard of such a legal duty or is an
act or omission that shows, or at least raises a presumption
of, conscious indifference to such a legal duty;
(b) "intentional wrongdoing" is any action or failure to
act by the Project Manager with the intent of using its
authority as Project Manager to place any Participant at an
unfair disadvantage in-relation to NSP or any intentional
violation of a significant obligation to a Participant under
the provisions of this Agreement.
In the event of its gross negligence or intentional wrongdoing, the
Project Manager shall be liable to the Participants for all direct
damages. Nothing herein shall prevent any Participant from pursuing an
action for specific performance of the Project Manager's obligations
hereunder after the complaining Participant has sought and been denied
satisfactory relief by the Management Committee. In no event, however,
shall the Project Manager or any Participant be liable for actions
arising out of this Agreement to a Participant with respect to any
claim, whether based upon contract, tort (including negligence), patent,
trademark or service mark or otherwise, for any indirect or
consequential damages. Actions of nonmanagement employees of the
Project Manager shall not be imputed to the Project Manager.
SECTION 5.5.2. Costs Shared by Participants. Except to the
extent such liability is discharged by project insurance acquired under
Section 3.3.12, and except as otherwise provided in Section 5.5.1, all
loss, cost, damage and expense incurred or sustained by the Project
Manager in connection with the performance of this Agreement, including
but not limited to (i) workers' compensation liability of the Project
Manager to its employees, (ii) liability to agents, contractors,
subcontractors, consultants and other third parties and (iii) any cost
and expense related to investigating, defending or settling claims of
any Participant or third party (including counsel fees and other costs
of litigation) whether based upon contract, tort (including negligence)
or otherwise, shall be shared by the Participants in proportion to their
respective Ownership Percentages (or, to the extent the liability
relates to Joint Common Facilities, in proportion to their respective
Joint Common Facility Percentages); provided, however, that the Project
Manager shall not settle any claim except in accordance with Section
3.2.3(f) hereof.
SECTION 5.5.3. No Liability for Delays or Unavailability. The
Project Manager shall not be liable to the Participants for any loss,
cost, damage or expense caused by delays in completion or unavailability
of the Sherco 3 Project or by plant shutdowns or service interruptions
except as otherwise provided in Section 5.5.1.
SECTION 5.5.4. No Liability for Acts of Other Participants.
Nothing in this Agreement shall be construed to create joint or several
liability of a Participant for the acts, omissions or obligations of any
other Participant (except as otherwise provided under Chapter Three or
Section 5.5.2 hereof for acts, omissions or obligations of the Project
Manager as agent for the Participants).
SECTION 5.5.5. No Guarantee of Final Costs. The Project
Manager does not guarantee the final cost of construction, operation,
maintenance or decommission of any part of the Sherco 3 Project. All
oral and written forecasts of costs, construction expenditures and
operating and maintenance expenses are estimates only, subject to change
and final determination at the time the costs are incurred.
ARTICLE 5.6. MISCELLANEOUS
SECTION 5.6.1. Survival. The agreements, covenants,
representations and warranties contained herein shall survive the
SOUTHERN MINNESOTA Closing and the UNITED MINNESOTA Closing.
SECTION 5.6.2. No Delay. No disagreement or dispute of any
kind between or among any of the Participants concerning any matter,
including without limitation the amount of any payment due hereunder or
the correctness of any charge made hereunder, shall permit any
Participant to delay or withhold any payment pursuant to this Agreement.
SECTION 5.6.3. Further Assurances. From time to time after the
respective closings hereunder, the Participants will execute and deliver
such instruments of conveyance and other documents, upon the request of
another Participant, as may be necessary or appropriate to carry out the
intent of this Agreement.
SECTION 5.6.4. Governing Law. The validity, interpretation,
and performance of this Agreement shall be governed by the laws of the
State of Minnesota.
SECTION 5.6.5. Notices. Any notice, request, consent or other
communication permitted or required by this Agreement (other than
notices for payment) shall be in writing and shall be deeded given when
deposited in the United States mail, first class postage prepaid, and
if given to NSP shall be addressed to:
Northern States Power Company
414 Nicollet Mall
Minneapolis, Minnesota 55401
Attn: Office of the President;
and if given to SOUTHERN MINNESOTA shall be addressed to:
Southern Minnesota Municipal Power Agency
1440 Valley High Drive
P.O. Box 6547
Rochester, Minnesota 55903
Attn: Executive Director;
and if given to UNITED MINNESOTA shall be addressed to:
United Minnesota Municipal Power Agency
421 West Third Street
P.O. Box 521
Litchfield, Minnesota 55355
Attn: President
unless a different officer or address shall have been designated by any
Participant by notice in writing.
SECTION 5.6.6. Article and Section Headings Not to Affect
Meaning. The descriptive headings of the various Articles and Sections
of this Agreement have been inserted for convenience of reference only
and shall in no way modify or restrict any of the terms or provisions
hereof.
SECTION 5.6.7. No Partnership.
(a) The covenants, obligations and liabilities of the
Participants shall be several and not joint or collective. Each
Participant shall be solely and individually responsible for
its own covenants, obligations and liabilities as herein
provided. Neither this Agreement nor any grant, lease or
license related thereto, shall create any new entity nor be
construed to create a new entity, such as a partnership,
association or joint venture. The Participants shall not be
liable as partners. No Participant or group of Participants
shall be under the control of or be deemed to control any other
Participant or the Participants as a group. Except to the
extent this Agreement confers upon NSP the authority to act as
agent for and on behalf of the other Participants with respect
to their several and separate individual interests and
obligations, no Participant shall have the right or power to
bind any other Participant.
(b) The Participants agree that they will take any and all
action necessary and appropriate to secure exclusion from
Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue
Code of 1954, as amended to date or as it may be amended
hereafter, or under any similar income tax laws. The
Participants agree to formally elect, if necessary, under the
authority of Section 761(a) of the Internal Revenue Code of
1954, to be excluded from the application of all provisions of
said Subchapter K. If the tax laws of the State of Minnesota
hereafter contain provisions similar to those contained in
Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue
Code of 1954 under which a similar election is permitted, the
Participants agree to exercise such similar election. NSP is
hereby authorized to file such evidence as may be necessary to
give effect to the election made in this Section 5.6.7(b).
SECTION 5.6.8. Time of Essence. Time is of the essence of this
Agreement.
SECTION 5.6.9. Successors and Assigns/Binding Obligations.
(a) Except as otherwise provided in subsection (b) hereof
all of the respective covenants, undertakings and obligations
of each of the Participants set forth in this Agreement (i)
shall apply to and bind all other persons, firms, partnerships,
corporations or entities claiming by, through or under any of
the Participants and their successors or assigns; (ii) shall be
covenants, restrictions and obligations running with each
Participant's respective interest in the land and all other
rights, titles and interests in Sherco 3 and with all of the
rights and interests of each Participant under this Agreement;
and (iii) shall be for the benefit of the Participants and
their respective successors and assigns in and to Sherco 3.
All such covenants and obligations shall be binding upon any
entity which acquires any of the rights, titles and interests
of any Participant in Sherco 3 or in, to and under this
Agreement, except that in the case of a partial assignment the
assignee shall only be required to share in the cost of
fulfilling said covenants and obligations of the assigning
Participant to an extent proportionate to the interest so
assigned.
(b) Any party which acquires the interest of a Participant in
Sherco 3 after the Commercial Operation Date through enforcement of the
default provisions contained in any mortgage or other security agreement
granted by such Participant as authorized by Section 2.3.2(d) hereof
shall not be required to assume or become obligated to perform, or be
liable for, any of the payment obligations of such Participant which
accrued prior to the time that such party acquires such interest nor
shall such party be required to assume or become obligated to perform,
or be liable for, any of the obligations of such Participant which
accrue after such party ceases to have an interest in Sherco 3. During
the time that such party has an interest in Sherco 3, it shall not be
liable for failure to make any payment hereunder which accrues during
such time, except that the provisions of Section 5.1.6 and Section 5.1.7
hereof shall be applicable in respect of such failure and except that
such party shall be liable for failure to make any payment accruing
during, but not before or after, any period that such party is receiving
Energy from Unit 3 by exercising the rights of such Participant
hereunder, which rights can be exercised without curing such
Participant's defaults. Such a party may convey its interest acquired
from such Participant subject to the provisions of Article 2.3, but free
of any obligation on a purchaser to cure defaults of such Participant
and free of any obligation on such party to hold the other Participants
harmless if the purchaser fails to fulfill its obligations to the other
Participants under this Agreement.
SECTION 5.6.10. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be
deemed an original but all of which together shall constitute one and
the same instrument.
SECTION 5.6.11. Computation of Undivided Ownership Percentage.
Notwithstanding any other provision of this Agreement, whenever,
pursuant to any provision of this Agreement, any action is required to
be agreed to or taken by the Management Committee, (i) only those
Participants not in default in the payment of any amounts (together with
interest, if appropriate) required under or contemplated by any
provisions of this Agreement at the time such action is to be agreed to
or taken shall have the right to participate in such agreement or the
taking of such action; and (ii) the computation of the Ownership
Percentages of Participants agreeing to or taking any such action shall
be based solely upon the Ownership Percentages of Participants not so
in default and, for such purposes, the Ownership Percentage of a
defaulting Participant shall be allocated to the nondefaulting
Participants in the ratio that each respective nondefaulting
Participant's Ownership Percentage bears to the aggregate Ownership
Percentages of all nondefaulting Participants.
SECTION 5.6.12. Descriptions. As soon as practicable after the
Commercial Operation Date of Sherco 3, the Project Manager shall furnish
to each other Participant descriptions of Sherco 3, setting forth in
reasonable detail the facilities, equipment and other property and
rights then constituting such unit or facilities, including all
property, real or personal, and rights therein jointly paid for under
this Agreement.
SECTION 5.6.13. Severability. In the event that any of the
terms, covenants or conditions of this Agreement or the application of
any such term, covenant or condition shall be held invalid as to any
person or circumstances by any court having jurisdiction in the
premises, the remainder of this Agreement and the application of its
terms, covenants or conditions to such persons or circumstances shall
not be affected thereby but shall remain in force and effect.
SECTION 5.6.14. No Third Party Beneficiary. The Participants
do not intend to create rights in or to grant remedies to any third
party as a beneficiary of this Agreement or of any duty, covenant,
obligation or undertaking established herein except as otherwise
provided in Section 2.3.2 and Section 5.6.9.
SECTION 5.6.15. No Implied Waiver. Any waiver at any time by
the Project Manager or any Participant of its rights with respect to a
default or any other matter arising in connection with this Agreement
shall not be deemed a waiver with respect to any subsequent default or
matter.
SECTION 5.6.16. Amendments. (a) Except for any amendment to
this Agreement or the Exhibits hereto which, pursuant to the terms
hereof, may be made by vote of the Management Committee, no amendment
to this Agreement or the Exhibits hereto shall be effective unless
approved in writing by each Participant hereto. Whenever an amendment
to this Agreement or any Exhibit hereto is made, in Accordance with this
Agreement, by action of the Management Committee, the Participants shall
ratify such action by duly executing such Amendment.
(b) In the event any provision of this Agreement is
determined to be unenforceable under any applicable statute or
any regulation or order of any regulatory agency having
jurisdiction, the Management Committee shall direct an
amendment of this Agreement which is believed to cure such
provision while at the same time permitting the accomplishment
of any lawful objective sought to be accomplished by such
provision.
(c) It is the intent of the Participants in entering into
this Agreement not to create restrictions on their respective
ownership interests in Sherco 3 which will disqualify the use
of a Participant's ownership interest as collateral for
financing purposes to the extent permitted by Section 2.3.2(d)
hereof. If a Participant demonstrates to the other
Participants' satisfaction the need for an amendment to qualify
the Participant's ownership interest as collateral for such
financing purposes, the Management Committee shall direct the
adoption of such amendment unless such amendment (i) would be
prohibited by the terms of, or materially adversely affect the
interests of holders of indebtedness under, any bond
resolution, indenture or other debt instrument of any other
Participant or (ii) would so adversely affect any other
Participant's ownership interest in Sherco 3 or rights
hereunder that this Agreement, as amended, would no longer
reflect an equitable arrangement between the respective
Participants.
SECTION 5.6.17. Term. This Agreement shall become effective
when it has been duly executed and delivered on behalf of all of the
Participants and shall remain in full force and effect, subject to prior
determination by unanimous agreement by all Participants, until such
time as Sherco 3 is retired from service in accordance with Article 5.3
hereof and all payments associated therewith are made.
IN WITNESS WHEREOF, the undersigned parties hereto have duly
executed this Agreement as of the date first above written.
(SEAL) NORTHERN STATES POWER COMPANY
Attest:
____________________________________ By_____________________________
(SEAL) SOUTHERN MINNESOTA MUNICIPAL
POWER AGENCY
Attest:
___________________________________ By ______________________________
(SEAL) UNITED MINNESOTA MUNICIPAL
POWER AGENCY
Attest:
_____________________________________ By _____________________________
STATE OF MINNESOTA)
ss.
COUNTY OF HENNEPIN)
The foregoing instrument was acknowledged before me this 11th
day of March, 1982 by Donald W. McCarthy, Chairman of the Board and
Chief Executive Officer of Northern States Power Company, a Minnesota
corporation, on behalf of the corporation.
__________________________________
Notary Public
STATE OF(MINNESOTA)
ss.
COUNTY OF OLMSTED )
The foregoing instrument was acknowledged before me this 11th
day of March, 1982 by David M. Martin, President of Southern Minnesota
Municipal Power Agency, a municipal corporation and political
subdivision of the State of Minnesota, on behalf of such Agency.
_________________________________
Notary Public
STATE OF MINNESOTA)
ss.
COUNTY OF OLMSTED )
The foregoing instrument was acknowledged before me this 11th
day of March, 1982 by Dallas E. Nelson, President of United Minnesota
Municipal Power Agency, a municipal corporation and political
subdivision of the State of Minnesota, on behalf of such Agency.
____________________________
Notary Public
EXHIBIT A
Brief Description of Unit 3
Unit 3 is a steam electric generating unit to be owned in common by
Northern States Power Company (NSP), Southern Minnesota Municipal Power
Agency and United Minnesota Municipal Power Agency in accordance with
their respective Ownership Percentages as set forth in Section 2.1.1 of
the Agreement.
Unit 3 will be a subbituminous coal-fired steam electric generating unit
with a nominal net generating capacity of 800,000 Kw. The unit will
have a net heat rate of about 10,300 Btu/Kwh.
The unit will be constructed as an addition to NSP's existing Sherburne
County generating plant located near Becker, Minnesota. Fuel supplies
for Unit 3 will be delivered by unit trains from mines in Montana and
Wyoming in conjunction with the fuel supplies for Units #l and #2.
Although a more detailed listing of the components of the unit is
provided under the "Description" below, the major components of the unit
can be generally described as follows:
The boiler will be a Babcock and Wilcox drum-type, balanced
draft, pulverized coal unit producing 6,100,000 lbs. of steam
per hour at a pressure of 2520 psi and super heat and reheat
temperatures of 1,000 degrees F each. The boiler will utilize dual
register low nitrous oxide burners.
The turbine generator, supplied by General Electric Co., will
include a 3600 rpm, tandem compound, four flow, single reheat
steam turbine operating at 2520 psi, 1,000 degrees F with 1,000
degrees F reheat. The turbine will be equipped for seven stages of
extraction and employ 33-inch last stage blades. The generator
will be rated 950,000 kva, 860,000 Kw, 26,000 v, 0.90 p.f and
will be hydrogen cooled with a liquid cooled stator conductor.
The unit will be equipped with three boiler feed pumps (two 50%
capacity units driven by steam turbines and one 30% capacity
unit driven by an electric motor) and will employ two forced
draft and four induced draft fans.
The flue-gas clean-up system will employ spray dryer absorbers
for S02 removal and fabric filters for particulate removal.
Flue gas will be discharged through a 650 ft. high steel lined,
concrete shell chimney. Ash and solids removed from the
combustion process will be deposited in clay-sealed basins on
the plant site.
The unit will have a closed-cycle cooling system employing
mechanical draft cooling towers and obtaining make-up water
from the Mississippi River.
DESCRIPTION OF PROPERTY INCLUDED IN UNIT 3
Unit 3 consists of all structures, equipment and facilities now or
hereafter constructed or installed as a part of Unit 3 in or on the
Sherco 3 Site and the Sherco Plant Site including, but not limited to,
those listed under A.l through A.8 below and excluding all portions of
the structures and facilities below which are listed on Exhibit B.
A.1 STEAM GENERATOR AND ASSOCIATED EQUIPMENT
A.1.1 Steam Generator (Boiler)
(1) Pulverizers
(2) Piping
(3) Burners
(4) Gas Recirculation Fan
(5) Primary Air Fans
(6) Air Preheaters
A.1.2 Coal Handling Equipment
(1) Coal Silos
(2) Scales and Feeders
(3) Crushers
(4) Dust Collectors
(5) Transfer Houses 3 and 4 and the Coal Conveyors (identified
on Figure Al between Crusher House West Addition and the
Generation Building)
A.1.3 Boiler Vents and Drains
A.1.4 Fly Ash Removal System and Piping (Specific equipment and
piping will be identified when engineering is complete.)
A.1.5 Bottom Ash Removal System and Piping (Specific equipment will
be identified when engineering is complete.)
A.1.6 Air Quality Control System
(1) Absorber Modules
(2) Fabric Filters
(3) Lime Receiving, Storage, and Preparation Equipment
(4) Piping
A.1.7 Combustion Air System (including forced draft fans)
A.1.8 Combustion Air Preheating System
A.1.9 Flue Gas Exhaust System
(1) Breeching
(2) Induced Draft Fans
(3) Chimney (see Figure A1)
A.2 TURBINE GENERATOR AND AUXILIARIES
A.2.1 Turbine Generator Equipment
A.2.2 Turbine Lube Oil Purifications System
A.2.3 Carbon Dioxide Distribution and Storage System
A.2.4 Hydrogen Distribution and Storage System
A.2.5 Turbine Drains and Seals
A.2.6 Condenser Vacuum System
A.2.7 Circulating Water Chemical Feed
A.2.8 Circulating Water System (including cooling towers, circulating
water pumps and condenser)
A.3 PRIMARY MECHANICAL SYSTEMS
A.3.1 Steam Piping
(1) Main Steam
(2) Hot Reheat Steam
(3) Cold Reheat &team
(4) Extraction Steam
(5) Miscellaneous Steam
A.3.2 Feedwater System
(1) High Pressure Heaters
(2) Boiler Feed Pumps
A.3.3 Condensate System
(1) Condensate Polishing
(2) Condensate Seal Water
(3) Low Pressure Heaters
(4) Deaerator
(5) Condensate Makeup and Return
(6) Heater Drains and Vents
(7) Condensate Pumps
A.4 PRIMARY MECHANICAL SUPPORT SYSTEMS
A.4.1 Makeup Water Treatment System
A.4.2 Wastewater Treatment System
A.4.3 Nitrogen Distribution and Storage System
A.4.4 Closed Cooling Water System
A.4.5 Service Water System
A.4.6 Cycle Chemical Feed System
A.4.7 Auxiliary Cooling Water System
A.4.8 Well Water System
A.5 SECONDARY MECHANICAL SUPPORT SYSTEMS
A.5.1 In-plant and Control Room Fire Protection Systems
A.5.2 Equipment, Floor, and Roof Drains
A.5.3 Embedded Base Slab Piping
A.5.4 Heating, Ventilating, and Air-Conditioning Systems (see A.8 for
extent of structures and improvements within):
(1) Generation and Air Quality Control Buildings
(2) Control Equipment Building
(3) Transfer Houses 3 and 4, Crusher Building Addition,
Circulating Water Pump Building, Compressed Gas Building
A.5.5 Compressed Air Systems
(1) Station Air
(2) Instrument Air
A.5.6 Temporary Steam Blowout System
A.5.7 Chemical Cleaning System
A.5.8 Vacuum Cleaning System
A.5.9 Miscellaneous Lube Oil Systems
A.5.10 Elevators, Cranes, and Hoists
A.6 INSTRUMENTATION AND CONTROLS (including all instruments and
controls in Unit 3 Generation Building that serve Joint Common
Facilities listed in Exhibit B-2 located outside the Generation
Building)
A.6.1 Coordinated Control
A.6.2 Information System
A.6.3 Load Control
A.6.4 Unit Protection
A.6.5 Vibration Monitoring
A.6.6 Control Panels
A.6.7 Annunciation Equipment
A.7 ELECTRICAL
A.7.1 Generator Isolated Phase Bus
A.7.2 Generator and Auxiliary Transformers (see Note 1 and Figure A1)
A.7.3 6900 and 4160 Volt Station Electrical System (including
nonsegregated bus, see Note 1)
A.7.4 480 and 120 Volt Power Systems (see Note 1)
A.7.5 Direct Current Power Supply (see Note 1)
A.7.6 Wire, Cable, Cable Tray, and Duct Banks (see Note 2)
A.7.7 Grounding
A.7.8 Emergency Power System (see Note 1)
A.7.9 Essential Service Power System
A.7.10 Communications and Security Systems
A.7.11 Freeze Protection
A.7.12 Lighting Systems
A.7.13 Control Cable (see Note 2)
A.8 STRUCTURES AND IMPROVEMENTS (see Figure A1)
A.8.1 Generation Building (housing the steam generator and turbine
generator)
A.8.2 Control Equipment Building (excluding the joint common areas
described in Exhibit B-2)
A.8.3 Water Management Building (excluding the joint common
laboratory area described in Exhibit B-2)
A.8.4 Air Quality Control Building
A.8.5 Coal Crusher Building (or House) West Addition (located
westerly of and adjoining the existing Crusher House) excluding
the NSP common and joint common areas described in Exhibits B-1
and B-2, respectively, except that portion of the structure
supporting the portions of the Limestone Handling System (owned
by NSP for the exclusive use of Units 1 and 2; see Group VIII
of Exhibit B-1) located within the West Addition
FIGURE A-1
--DIAGRAM OF UNIT 3 AIR QUALITY CONTROL BUILDING AND GENERATION
BUILDING--
A.8.6 Compressed Gas Building
A.8.7 Circulating Water Pump Building (by Unit 3 cooling towers)
Notes
1. Includes all facilities located in the Unit 3 Generation
Building that serves Joint Common Facilities listed in
Exhibit B-2.
2. Includes all cable runs between equipment located in the
Unit 3 Generation Building and Joint Common Facilities
listed in Exhibit B-2 located outside the Generation
Building.
EXHIBIT B
COMMON FACILITIES
Common Facilities consist of NSP Common Facilities (Exhibit B-1), Joint
Common Facilities (Exhibit B-2) and Future Common Facilities (which,
when acquired or constructed, will be shown on Exhibit B-3).
EXHIBIT B-1
NSP COMMON FACILITIES
Ownership: The property set forth on this Exhibit B-1 is solely owned
by Northern States Power Company (NSP) but, as set forth in Section
2.2.1 of the Agreement, shall be used by the Project Manager for the use
and benefit of both existing units owned by NSP and also for the use and
benefit of Unit 3 owned in common by NSP and other Participants (see
Exhibit A).
FUNCTIONAL GROUP I
Site Preparation, Roads, and Security
Item Description
Land Improvements Yard clearing, grading, surfacing,
landscaping, lighting, and drainage
Plant Roads About 6,200 lineal feet of existing
plant roads (excluding cooling
tower areas)
Permanent Parking Lot About 1.7 acres of surfaced main
parking and about 0.5 acres of
aggregate surfaced coal yard
parking area
Plant Fencing About 13,000 lineal feet of
existing permanent chain link
fencing (excluding cooling tower
areas)
Gatehouse A complete one-level building east
of the Plant Services Building
Fire Protection All yard fire protection piping,
valves, hydrants, and #1 and #2
Fire Pumps with accessories
Landscaping Landscaping on the east side of the
Plant Services Building entrance
Overflow Parking Lot The parking lot located south of
the permanent parking area, and
used for overflow parking
FUNCTIONAL GROUP II
Railroads
Item Description
Plant Railroads Tracks #2A, #3 and #4 of
approximately 7,300 lineal feet
Coal Yard Railroad Tracks #1 and #2 of approximately
28,000 lineal feet
Automatic Switch The remote radio-controlled
railroad-track switch between the
Burlington-Northern mainline and
the main plant railroad
FUNCTIONAL GROUP III
Coal Handling and Storage
Item Description
Car Dumper Building The Car Dumper Building together
with station air and water spray
fire protection equipment located
therein, but excluding equipment
therein listed under "Essential
Equipment"
Coal Storage Area About 71.5 acres of clay sealed
storage area
Crusher Building That portion of the existing
Crusher-Building above the existing
coal and limestone hoppers housing
the Conveyors 4A and 4B drive units
and discharge chutes
Emergency Reclaim Structure The complete building together with
station air and water spray fire
protection equipment located
therein but excluding equipment
therein listed under "Essential
Equipment"
Fire Protection Equipment All water spray fire protection
equipment within the coal handling
area
Maintenance Garage The complete Maintenance Garage
with light and power, HVAC, fire
protection, lockers, plumbing,
sewage, and drainage systems
housing locker rooms, lunch room,
offices, garage bays, and garage
storage for the coal yard
Oil Storage Expansion Additional oil storage room on the
north end of the Maintenance Garage
Scraper Loading Hopper The complete hopper used to aid in
coal stockout located north of
stacker reclaimer berm
Stacker Reclaimer Track
and Berms The track and road bed for the
stacker reclaimer as well as berms
for the active coal storage area
Station Air Equipment All piping and equipment comprising
the compressed air system within
the coal handling area
Transfer House 1 and 2 The complete buildings together
with station air and water spray
fire protection equipment located
therein, but excluding equipment
therein listed under "Essential
Equipment"
Women's Locker Room Women's locker room, water closets,
and showers in the Maintenance
Garage
FUNCTIONAL GROUP IV
Ash Handling and Storage
Item Description
Recycle and Holding Basin
Pumphouse The complete two-level structure
with recycle water pumps, piping
and valves located between the
Recycle and Holding Basins
Bottom Ash Complex The 20-acre clay sealed basin and
discharge structure
Holding and Recycle Basin A 4-acre clay sealed holdup pond
and a 10.5-acre clay sealed Recycle
Basin
Holding Basin Divider The divider dike added for positive
separation of cooling tower
blowdown from scrubber recycle
water
FUNCTIONAL GROUP V
Water Intake and Discharge
Item Description
Discharge Water Monitoring
Building A complete three-level building
with plant effluent sample pump,
piping, and valves located at the
south end of the Holding Basin
River Intake Structure A complete structure with light and
power, HVAC, and drainage systems
River Water Pumps #1 and #2 River Water Pumps #1 and #2
complete with drives and
accessories located in the River
Intake Structure
River Water Piping Piping, valves and accessories from
the Units 1 and 2 river water pumps
to the connection with Unit 3
piping
FUNCTIONAL GROUP VI
Plant Administration and Services
Item Description
Plant Services Building A two-level building east of the
Unit 1 turbine room that houses the
auxiliary boilers, machine shop,
store room, locker rooms,
electrical shop, instrument and
control shop, and general office
area.
Building Heating That part of the building heating
system insulated piping, valves,
and hot water unit heaters serving
the auxiliary boiler room, machine
shop, store room, electrical shop,
and instrument storage room in the
Plant Services Building
Plant Fire Protection The Plant Fire Protection System
for the Plant Services Building
Septic Tanks and Tile
Fields Septic systems for the Crusher
House, central plant, and
Maintenance Garage
Chemical Laboratory A complete 1,900 square foot
laboratory to be used for scrubber
analysis located on the ground
floor of the Units 1 and 2 Control
Building
Bio-Assay Lab The complete sampling laboratory
including equipment located
northwest of the River Intake
Structure
Plant Environmental Office The office building located
northwest of and adjacent to the
Bio-Assay Lab for site
environmental and regulatory
activities
Tour Reception Facility The double-wide trailer for
training and tour reception located
east of and adjacent to the Plant
Services Building
FUNCTIONAL GROUP VII
Miscellaneous Equipment
Item Description
Turbine Room Cranes Two 75-ton Turbine Room Cranes with
25-ton auxiliary hooks
Plant Equipment Office, machine shop and garage
tools, and environmental monitoring
equipment
Fuel Oil Facilities Two 200,000 gallon storage tanks
with a clay sealed spill
containment and pumphouse
Auxiliary Steam Piping The portion of the auxiliary steam
distribution system located in the
turbine buildings for units 1 and
2 necessary to deliver steam from
the boilers in the auxiliary boiler
room portion of the Plant Services
Building to the Unit 3 Generation
Building
Auxiliary Steam Piping The Saturated Steam System
Addition Addition
GROUP VIII
Modifications to NSP Common Facilities
Item Description
Gatehouse Modification All necessary modifications to
existing gatehouse
Bottom Ash Pond Raise northeast corner of bottom ash
Modification pond dike
Plant Services Building The structural, lockers, furniture,
Modification drains and plumbing, fire protection,
HVAC, lighting remodeling of the Plant
Services Building
Land Addition 200 acres of additional land to be
acquired for Sherco Plant Site
Limestone Handling System All limestone handling additions
including the following:
Limestone Conveyors including
structures
Reclaim Structure (west of Transfer
House 2)
Reclaim Feeders and Surge Hoppers
Frozen Limestone Crushers
Accessory Equipment
GROUP IX
Essential Equipment
(See Figure B1 for diagram of general location of coal handling
facilities.)
Item Description
Auxiliary Steam Boilers
and Accessories Two Riley-Union auxiliary steam
boilers, serial numbers 98760 and
98759, together with all associated
controls, pumps, pipes, valves,
fans, ducts, chimney, and light and
power to the extent all such
associated equipment is located and
enclosed within the auxiliary
boiler room portion of the Plant
Services Building
Car Positioner and Car
Dumper Equipment All the unit coal train cab
positioning and dumping equipment
including the coal car positioning
and dumping machinery and all
associated controls, track hoppers,
hopper feeders, hopper gates,
conveyor 1A, dust control, and CO2
fire protection relating to the
positioning and dumping equipment
located at and within the car
dumper building, but excluding the
building and related foundations,
tunnel, plumbing, HVAC, as well as
excluding station air and water
spray fire protection equipment
Emergency Reclaim
Equipment The emergency reclaim hoppers and
chutes, chute heaters and
insulation, hopper feeders, reclaim
conveyor, dust control, light, and
power, but excluding the building
structure and related foundations
and tunnel, as well as excluding
station air and water spray fire
protection equipment
Emergency Stockout Conveyor
and Conveyors 2A, 3A, 4A and 4B The listed conveyors including
drive motors, light, power,
attached controls, supporting
structures and foundations, as well
as magnetic separators on 2A, 4A
and 4B, and belt scales on 2A and
the Emergency Stockout Conveyor,
but excluding station air and water
spray fire protection equipment
Stacker-Reclaimer A rail mounted mobile support
structure and adjustable powered
boom equipped with a reversible
coal conveyor belt and a bucket
wheel, located over conveyor 3A and
between the active storage piles,
including all related light and
power, electric and hydraulic
drives, attached controls, and
control cab HVAC, but excluding the
track, road-bed, and berms for the
active coal storage area
Transfer House 1 and 2
Equipment All chutes, bins, hoppers, light,
power, attached controls and dust
control equipment within Transfer
House 1 and 2, as well as chute
heaters and insulation within House
2, but excluding the building
structure and related foundations,
as well as all coal conveyors,
station air and water spray fire
protection equipment
Wet Coal Dust Suppression
System The Wet Coal Dust Suppression
System includes the complete
building and the wet coal dust
suppression equipment therein as
well as all related wet coal dust
suppression equipment, which
equipment includes water supply
piping, water and additive storage
tanks, dust suppression pumps and
pipes, and all light, power and
attached controls, but excluding
all mobile wet dust control
equipment
Mobile Yard Equipment All the equipment identified on the
following list:
NSP Identification Serial
Description Number Number
Front End Loader, CN644B SN 236712
John Deere
Front End Loader, SN 0157
Bulldog M#725
w/ 1/3 CY Bucket, w Forks
Grader, 740 MG SN 203-2
Champion
Locomotive, CN5 SN 31000
GE 45 Ton
M#HBI-600
Scraper, CN29 SN 68K1229
Caterpillar M#657,
w/Scraper M#657 SN 47M305
Scraper, CN28 SN 68K1228
Caterpillar M#657
w/Scraper M#657 SN 47M303
Scraper, CN30 SN 68Kl259
Caterpillar M#657B
w/Scraper M#657 SN 47M325
Tractor, Crawler with Blade CN8250 SN 62860
Terex M#82-50
w/Ripper,
Borchert-Ingersoll,
ATECO, M#LPRF#5-5739 82-50
Tractor, Crawler Loader CN7281 SN 62913
Terex M#72-81
Tractor, CN14 SN 3IG487
Caterpillar M#657
w/Scraper M#666 SN 20G157
Tractor, CN15 SN 46M101
Caterpillar M#657
w/Scraper M#666 SN 20G208
Water Wagon, CN8 SN 39
Euclid TS24
w/Sprinkler Wagon SN 35914
Water Truck 2460
(A 1978 International Load Star 5000 currently being adapted with a 4000
gal. water tank for delivery to NSP in early 1982.)
Super Sucker "Vacuum Truck
(To be acquired in 1982.)
FIGURE B-1
--DIAGRAM OF DEAD COAL STORAGE--
EXHIBIT B-2
JOINT COMMON FACILITIES
Ownership: The facilities and improvements to real estate, excluding
land, set forth on this Exhibit B-2 are owned by the Participants in
common by the applicable percentage (Joint Common Facility Percentage)
set forth below:
Northern States Power Company 61.564%
Southern Minnesota Municipal Power Agency 33.040%
United Minnesota Municipal Power Agency 5.396%
FUNCTIONAL GROUP I
Site Preparation, Roads, and Security
Item Description
Operations Access Road About 7,900 lineal feet of asphalt
paved road from US Highway 10 to
the main parking area
Coal Yard Over pass The complete coal yard railroad
track overpass structure
Plant Roads About 16,000 lineal feet of
additional plant roads (excluding
cooling tower area)
Permanent Parking Area All additional parking lots as
follows:
Main parking lot -- about 1.8 acres
of asphalt paving
Administration Building parking lot
-- about 0.5 acres of asphalt
paving
Coal Yard parking lot -- about 1/2
acre of aggregate paving
Fencing All additional fencing as follows:
Approximately 13,000 lineal feet of
barbed wire fence
Approximately 10,000 lineal feet of
relocated chain link fencing
Approximately 15,000 lineal feet of
additional chain link fencing
(excluding cooling tower area)
Gatehouse A complete building for the new
gatehouse located southerly of the
existing gatehouse and including
HVAC, lighting, drains, and
plumbing
Fire Protection Fire pump 3 and motor in the Unit
3 Circulating Water Pump Building,
with all yard piping, valves,
hydrants, and accessories
FUNCTIONAL GROUP II
Railroads
Item Description
Unit Train Railroad Track #5 coal unit train track of
approximately 7,200 lineal feet
Plant Railroad Tracks #3A and #6 of approximately
3,200 lineal feet which provide
rail access to the turbine rooms
and transformers of the three units
FUNCTIONAL GROUP III
Coal Handling and Storage
Item Description
Coal Storage Barn The complete building including
earthwork, structure, hoists,
elevator, drains, sump pumps,
IiVAC, and lighting that will house
additional coal handling equipment
as follows:
Conveyors 52, 53, and 55
Rotary Plow Feeders
Hoppers and Chutes
Traveling Tripper
Associated Dust Control Equipment
Accessory Equipment
Coal Handling Equipment All coal handling additions, except
crushers, Conveyors 6A, 6B, 7A, 7B,
4C and Silo Fill System
Major equipment included is as
follows:
Conveyors 51, 58, 57, 53, 52, 55,
and 54
Rotary Plow Feeders
Hoppers and Chutes
Accessory Equipment
Traveling Tripper
Associated Dust Control
Transfer House 1
and 2 Additions Additions including structure,
lighting, drains, and ventilation
to accommodate coal handling
equipment as follows:
Conveyors 57, 58, 54, and 4C
Associated Dust Control Equipment
Accessory Equipment
Transfer House 5 A complete building including
structure, lighting, drains,
and ventilation to accommodate the
modified Emergency Stockout
Conveyor, Conveyor 51, associated
dust control equipment and
accessory equipment
Coal Crusher Building
Upper Addition That part of the Coal Crusher
Building addition housing Conveyor
4C drive unit and discharge
chutework located above and east of
the existing Crusher House
described in Exhibit B-1.
Conveyor 4C A complete conveyor with supports,
scale, and dust collection which
conveys coal from Transfer House 2
Addition to the Coal Crusher
Building Upper Addition
Maintenance Garage
Addition The addition to the Maintenance
Garage including structure, HVAC,
lockers, and drains and plumbing
systems to house new offices, tool
storage room, and locker room
Coal Handling Control
Center The complete building including
structure, HVAC, drains and
plumbing, and lighting to house tee
coal handling computer and control
room and locker rooms located south
of the stacker reclaimer
Coal Handling Fire Fire protection equipment applicable
Protection to coal handling equipment and
buildings
Coal Handling Air compressors, piping, and valves
Compressed Air for the coal handling equipment
Coal Storage The addition to the clay sealed coal
Area Addition storage area of approximately 42 acres
FUNCTIONAL GROUP IV
Ash Handling and Storage
Item Description
Ash Water Return Complex A clay sealed basin of
approximately 7 acres and building
including HVAC, lighting, drains,
and fire protection to house the
ash water return pumps, piping and
valves, and associated electrical
equipment
Fly Ash Pond Complex A discharge structure and a clay
sealed fly ash pond of
approximately 95 acres
Scrubber Return Water Scrubber return water pumps, piping
Facility and accessories, pumphouse, and
associated electrical equipment
FUNCTIONAL GROUP V
Water Intake and Discharge
Item Description
River Water Pumps River Water Makeup Pumps 3 and 4
and accessories
River Water Piping Piping, valves, and accessories
connecting the existing river water
header near the river water intake
structure to the existing river
water header near units 1, 2 and 3
FUNCTIONAL GROUP VI
Plant Administration and Services
Item Description
Administration Building The complete new Administration
Building with earthwork, structure,
HVAC, drains and plumbing, fire
protection, furniture, lighting and
elevator to house administrative,
supervisory, and engineering
personnel and their lockers. The
Administration Building will be
located south of Unit 3 Generation
Building
Transition Building That building located between Unit
2 and 3 Generation Buildings
including earthwork, structure,
drains and plumbing, fire
protection, HVAC, lighting, cranes,
and elevator that will house the
electrical shop, auxiliary
deaerator and building heating
pumps, part of the instrument and
control shop, machine shop, store
room, lunch room, turbine room
crane hatch, and Railroad Track 6
Control Equipment Building That part of the Control Equipment
Building located between the
Transition Building and Unit 3
Generation Building including
earthwork, structure, drains and
plumbing, fire protection, HVAC,
and lighting that will house the
ground floor maintenance offices
and second floor instrument and
control shop and excluding the Unit
3 portion described in Exhibit A
Water Testing Laboratory That part of the Unit 3 Water
Management Building including
drains and plumbing, fire
protection, HVAC, and lighting,
that will house the second floor
laboratory.
Building Heating The portion of the building heating
piping and equipment required to
serve joint common facilities
located in the Transition Building,
Water Management Building, and
Control Equipment Building
FUNCTIONAL GROUP VII
Miscellaneous Equipment
Item Description
Auxiliary Steam Piping The additions to the super-heated
Addition and saturated steam distribution
piping and valves
Plant Equipment Office, lunch room, and test
equipment, and machine shop and
garage tools
EXHIBIT B-3
FUTURE COMMON FACILITIES
At such time as any Future Common Facilities are acquired, constructed
or installed, they shall be identified on this Exhibit B-3 pursuant to
Section 2.2.3 of the Agreement.
EXHIBIT C
SHERCO PLANT SITE
The following described land located in Sherburne County, Minnesota, to-
wit:
All those portions of Sections 25, 35, and 36, Township 34
North, Range 29 West; and those portions of Sections 1, 2, 11,
and 12, township 33 North, Range 29 West; and that part of
Section 31, Township 34 North, Range 28 West; and those portions
of Sections 6 and 7, Township 33 North, Range 28 West, lying
within the following described boundary line:
Beginning at the point of intersection of the West line of
Section 25, Township 34 North, Range 29 West and the
Southwesterly right of way line of the Burlington Northern
Railroad; thence South along the said West line of Section
25 to the Southwest corner of said Section 25; thence
continue South along the East line of Section 35, Township
34 North, Range 29 West to the Southeast corner of the NED
of said Section 35; thence West along the quarter section
line of said Section 35 to the Southwest corner of the NW
of said Section 35; thence South along the West line of
said Section 35 to its intersection with the Northeasterly
shoreline of the Mississippi River; thence South and
Easterly along the North-easterly shoreline of the
Mississippi River to its point of intersection with the
East-West quarter line of Section 12, Township 33 North,
Range 29 West; thence East along said East-West quarter
line to the East line of said Section 12; thence continuing
East along the East-West quarter line of Section 7,
Township 33 North, Range 28 West to the center of said
Section 7; thence North along the North-South quarter line
of said Section 7 to the North line of said Section 7;
thence continuing North along the North-South quarter of
Section 6, Township 33 North, Range 28 West to the North
line of said Section 6; thence East along the North line of
said Section 6 to its intersection with the Southwesterly
right of way line of the Burlington Northern Railroad;
thence Northwesterly along the said Southwesterly right of
way line through Section 31, Township 34 North, Range 28
West; thence continuing Northwesterly along said
Southwesterly right of way line through Sections 36 and 25,
Township 34 North, Range 29 West to the point of beginning
and there terminating.
Excepting from the above the SW 1/4 of Section 6, and the NE 1/4
of the NW 1/4 of Section 7 all being in Township 33 North,
Range 28 West and also excepting the Sherco 3 Site set forth
on Exhibit D of this Agreement.
EXHIBIT D
SHERCO 3 SITE
The following described land located in Sherburne County, Minnesota, to-
wit:
Tract One
All that part of the W 1/2 of the W 1/2 of Section 1,
Township.33 North, Range 29 West, described as follows, to-wit:
The South 1,220 feet of the North 3,193 feet of the East
450 feet of the West 1,241 feet of said W 1/2 of the W 1/2
of Section 1.
Tract Two
All that part of the E 1/2 of the E 1/2 of Section 2, Township
33 North, Range 29 West, described as follows, to-wit:
The South 775 feet of the North 2,652 feet of the West 736
feet of the East 882 feet of said E 1/2 of the E 1/2 of
Section 2.
EXHIBIT E
WARRANTY DEED
No delinquent taxes and transfer
entered; Certificate of Real
Estate Value ( ) filed ( ) not
required Certificate of Real
Estate Value No.
___________________________ 19
County Auditor
by
Deputy
STATE DEED TAX DUE HEREON: $______
Date: ___________________ , 19 ____
FOR VALUABLE CONSIDERATION, NORTHERN STATES POWER COMPANY, a
corporation under the laws of Minnesota (hereinafter sometimes referred
to as "NSP"), Grantor, hereby conveys and warrants to SOUTHERN MINNESOTA
MUNICIPAL POWER AGENCY, Grantee, a municipal corporation and political
subdivision, under the laws of Minnesota, an undivided 37.5 percent
interest as tenant in common in real property in Sherburne County,
Minnesota, described as follows:
All that part of the W 1/2 of the W 1/2 of Section 1, Township
33 North, Range 29 West, described as follows, to-wit:
The South 1,220 feet of the North 3,193 feet of the East
450 feet of the West 1,241 feet of said W 1/2 of the W 1/2
of Section 1, the foregoing land being hereinafter referred
to as "TRACT ONE";
together with the following land which is hereinafter referred
to as "TRACT TWO":
All that part of the E 1/2 of the E 1/2 of Section 2,
Township 33 North, Range 29 West, described as follows, to-
wit:
The South 775 feet of the North 2,652 feet of the West 736 feet
of the East 882 feet of said E 1/2 of the E 1/2 of Section 2,
together with all hereditaments and appurtenances belonging thereto,
subject to.the rights reserved by NSP as set forth hereafter and subject
to the rights of NSP and any other tenant in common as established by
or as incorporated by reference within the covenants hereafter set
forth.
EXCEPTING AND RESERVING unto NSP, its successors and assigns,
as to both TRACTS ONE and TWO, the right and easement to construct,
operate, maintain, repair and reconstruct facilities and structures,
including buildings, for the operation of other electric steam
generating units, or structures and facilities related thereto or
dependent thereon, whether now existing or hereafter constructed,
together with the unrestricted access rights necessary to accomplish and
enjoy the rights reserved above, provided that the exercise of such
rights shall not unreasonably interfere with or burden the construction
or operation of Unit 3 and related facilities, all in accordance with
and subject to the provisions of Section 2.2.4 of the Ownership
Agreement, which Agreement is hereafter incorporated by reference.
TRACT ONE AND TRACT TWO ARE HEREBY CONVEYED SUBJECT TO THE
FOLLOWING COVENANTS:
1. This Deed is given by NSP in fulfillment of its obligations
to convey to Grantee an undivided ownership interest as a tenant
in common to the Sherco 3 Site under Article 2.1 of that certain
Sherburne County Generating Unit No. 3 Ownership and Operating
Agreement among NORTHERN STATES POWER COMPANY, SOUTHERN
MINNESOTA MUNICIPAL POWER AGENCY and UNITED MINNESOTA MUNICIPAL
POWER AGENCY, dated March 11, 1982, (hereinafter referred to as
"Ownership Agreement"). The Ownership Agreement is incorporated
by reference as though fully set forth in this Deed, and which
Ownership Agreement, less certain Exhibits thereto, is filed for
record as Document Number ____________________ with the
Registrar of Titles in and for Sherburne County, and recorded
as Document Number __________ with the County Recorder in and
for Sherburne County.
2. The Ownership Agreement is an agreement between the parties
thereto to construct, own, operate and maintain on the land
conveyed hereby (Sherco 3 Site), and on adjoining land (Sherco
Plant Site) owned by NSP, a coal-fired steam electric generating
unit (hereinafter referred to as "Unit 3"). The Ownership
Agreement creates covenants, restrictions and obligations
between the parties thereto which, except as otherwise provided
in Section 5.6.9 thereof, are established as covenants,
restrictions and obligations running with the title to the
Sherco 3 Site as Bell as with NSP's fee title and the other
parties easement rights or leasehold interests in the
surrounding land referred to as the Sherco Plant Site and
described on Exhibit C attached to the Ownership Agreement. The
Grantor and Grantee hereby confirm these covenants which
include, but are not limited to, the restrictions on alienation
and waiver of partition rights of the tenancy in common as set
forth in Article 2.3 of the Ownership Agreement, the respective
rights and obligations relating to Common Facilities described
in Article 2.2 thereof, and the covenant to pay all monies and
perform all other obligations required by the Ownership
Agreement as set forth in Section 5.1.1 thereof. The parties
hereto also confirm that there is no necessary correlation
between the ownership interest in the land described in the
Ownership Agreement and the ownership interest in facilities
constructed thereon, and each party hereto covenants to execute,
from time to time, documents defining or disclaiming their
ownership interest or other right in particular facilities
located on the land when reasonably requested by the other
party.
3. NSP hereby covenants that it is the purpose of this Deed to
convey an interest in land which is of sufficient size to locate
the Generation Building and Air Quality Control System Building
for Unit 3 on TRACT ONE and the basic cooling tower structures
on TRACT TWO and, if said buildings or structures are not fully
constructed within the bounds of such TRACTS, NSP covenants to
convey for the same per acre consideration an interest in such
additional land as needed to accomplish the above purpose,
subject to the terms and covenants set forth in this Deed;
Grantee hereby covenants that if the conveyance of land hereby
is of a greater amount than necessary to accomplish the
aforesaid purpose, it shall, upon request of NSP and tender to
it of the same per acre consideration it paid, reconvey the
interest granted hereby in excess of such purpose to NSP,
subject to Grantee's reservation of easement and leasehold
rights as necessary to protect its interest in Unit 3 facilities
or Common Facilities located or to be located on such land.
4. Grantee further covenants that, as provided by Section
2.1.2(a) of the Ownership Agreement, NSP may at its option
(which option NSP hereby excepts and reserves unto NSP, its
successors and assigns) acquire the interest of Grantee in
TRACT. ONE and TRACT TWO, by tendering to Grantee, within 90
days after retirement of Sherco 3 pursuant to Section 5.3.1 of
the Ownership Agreement, the amount of consideration represented
by the average per acre price paid to NSP by Grantee in
accordance with Section 2.1.2(b) of the Ownership Agreement.
No future conveyance pursuant to this option shall change the
respective rights and obligations under the Ownership Agreement
of NSP and Grantee as to facilities constructed on TRACT ONE and
TRACT TWO.
IN TESTIMONY WHEREOF, the said Grantor has hereunto set its
hand, and the said Grantee, in acceptance of the terms and covenants
hereof, has hereunto set its hand, both as of the day and year first
above written.
NORTHERN STATES POWER COMPANY (Grantor)
By
Its _____________________________________
By ____________________________________
Its ____________________________________
STATE OF MINNESOTA
SS
COUNTY OF HENNEPIN
The foregoing instrument was acknowledged before me this ____day
of _______________________ , 19 ___ , by
_______________________________________ Vice President and
______________________________________ Assistant Secretary of NORTHERN
STATES POWER COMPANY, a Minnesota corporation, on behalf of the
corporation.
Notary Public
SOUTHERN MINNESOTA MUNICIPAL
POWER AGENCY (Grantee)
By __________________________
Its _________________________
By _________________________
Its _________________________
STATE OF MINNESOTA
SS
COUNTY OF HENNEPIN
The foregoing instrument was acknowledged before me this ____day
of ______________________________, 19___ by of SOUTHERN MINNESOTA
MUNICIPAL POWER AGENCY, a municipal corporation and political
subdivision, on behalf of the corporation.
Notary Public
Property Tax Statements Should Be Sent To:
Northern States Power Company
Property Tax Department
414 Nicollet Mall
Minneapolis, Minnesota 55401
(The Warranty Deed to United Minnesota will convey an undivided 6.125%
interest and paragraph numbered "4" will refer to Section "2.1.4" rather
than Section "2.1.2".)
EXHIBIT F
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS, that NORTHERN STATES POWER
COMPANY, a Minnesota corporation (hereinafter sometimes referred to as
"NSP"), party of the first part, in consideration of One Dollar and
other good and valuable consideration, to it in hand paid by Southern
Minnesota Municipal bower Agency, a municipal corporation and political
subdivision of the State of Minnesota, a party of the second part,
receipt of which is hereby acknowledged, does hereby grant, bargain,
sell and convey unto the party of the second part, its successors and
assigns, forever, an undivided 37.5 percent interest as tenant in common
in all of the following described property to the extent it is or will
be incorporated into Unit 3 and an undivided 33.040 percent interest as
a tenant in common in all of the following described property to the
extent it is or will be incorporated into Joint Common Facilities, as
such terms and interests are defined and set forth in that certain
Ownership and Operating Agreement relating to Sherburne County
Generating Unit No. 3 among Northern States Power Company, Southern
Minnesota Municipal Power Agency and United Minnesota Municipal Power
Agency dated March 11, 1982, to wit:
A turbine-generator, serial #170X819, and two boiler feed pump
turbines, serial #153150 and #153151, manufactured by General
Electric Company; a steam generator, serial #RB-566,
manufactured by The Babcock & Wilcox Company; one dearator
manufactured by The Chicago Heater Company, Inc.; one lot of
four high pressure closed feedwater heaters, serial #42-2921-1
through #42-2921-4, manufactured by Foster Wheeler Energy
Corporation; one lot of five low pressure closed feedwater
heaters and drain cooler tank, manufactured by Yuba Heat
Transfer Corporation, together with all Structural steel,
piping, equipment and all other properties, both tangible and
intangible, delivered or to be delivered to NSP under each and
all of the following identified contracts between NSP and the
contracting party identified below under the applicable NSP
Purchase Order identified below:
1. The Babcock & Wilcox Company
NSP Purchase Order #SC 3301, dated July 28, 1977 For
fabricating, delivery and erection of one steam generator
for Unit 3
2. Brown Minneapolis Tank
NSP Purchase Order #SC 3254, dated May 9, 1977 For
fabricating and delivery of one lot of steel circulating
pipe for Unit 3
3. Chicago Heater Company, Inc.
NSP Purchase Order #SC 3226, dated October 24, 1976 For
fabricating and delivery of one dearator for Unit 3
4. Custom Control Manufacturer of Kansas, Inc.
NSP Purchase Order #SC 3176, dated February 16, 1979 For
fabricating and delivery of one programmable controller
input/output simulation test panel and equipment racks
5. Daniel Industries, Inc.
NSP Purchase Order #SC 3118, dated September 6, 1978 For
fabricating and delivery of one lot of primary flow
elements for Unit 3
6. Delaval Turbine of Transamerica Delaval
NSP Purchase Order #SC 3271, dated March 22, 1977 For the
fabricating and delivery of three boiler feed pumps for
Unit 3
7. Eastern Industries
NSP Purchase Order #SC 3504, dated September 30, 1977 For
fabricating and delivery of three chemical solution mixers
for Unit 3
8. Foster Wheeler Energy Corporation
NSP Purchase Order #SC 3227, dated October 6, 1976 For
fabricating and delivery of one lot of four high pressure
closed feedwater heaters for Unit 3
9. General Electric Company
NSP Purchase Order #SC 3221, dated July 8, 1977 For
fabricating and delivery of the turbine-generator for Unit
3
10. General Electric Company
NSP Purchase Order #SC 3250, dated July 12, 1978 For
fabricating and delivery of three boiler feed pump turbines
for Unit 3
11. Metro Metals, Inc.
NSP Purchase Order #SC 3216, dated August 2, 1977 For
fabricating and delivery of twenty-six hose houses for Unit
3
12. Nott Company
NSP Purchase Order #SC 3217, dated August 2, 1977 For
fabricating and delivery of twenty-six sets of hose house
accessories for Unit 3
13. P.S.M. Joint Venture
NSP Purchase Order #SC 3457, dated December 7, 1977 For
fabricating, delivery and erection of one lot of structural
steel for Unit 3
14. Swanson Contracting, Inc.
NSP Purchase Order #SC 5549, dated August 25, 1977 For
construction and materials of railroad for Unit 3
15. TLT Babcock Company
NSP Purchase Order #SC 3299, dated August 24, 1978 For
fabricating and delivery of two forced draft fans for Unit
3
16. The William Powell Company
NSP Purchase Order #SC 3314, dated June 17, 1977 For
fabricating and delivery of one lot of cast steel valves
for Unit 3
17. Yuba Heat Transfer Corporation
NSP Purchase Order #SC 3228, dated October 15, 1976 For
fabricating and delivery of one lot of five low pressure
closed feedwater heaters and drain cooler tank for Unit 3
TO HAVE AND TO HOLD THE SAME, unto the said party of the second
part, its successors and assigns forever. And NSP, for itself and its
successors and assigns, convenants and agrees to and with the said part
of the second part, its successors and assigns, that it is the lawful
owner of said personal property, and has the right to sell the same as
aforesaid and that the same is free from all encumbrances.
PARTY OF THE SECOND PART, by acceptance of the above described
property, acknowledges that there are no warranties which extend beyond
the face hereof. PARTY OF THE SECOND PART ACCEPTS SAID PROPERTY "AS IS"
AND "WITH ALL FAULTS" AND ACKNOWLEDGES THAT NSP MAKES NO EXPRESS OR
IMPLIED WARRANTIES AS TO THE MERCHANTABILITY OF SUCH PROPERTY OR THAT
SUCH PROPERTY IS FIT FOR ANY PARTICULAR PURPOSE.
IN TESTIMONY WHEREOF, NSP has caused this instrument to be
executed in its name, by the proper officers and its corporate seal to
be hereto affixed this ____ day of______________ , 19
NORTHERN STATES POWER COMPANY
By____________________________
Its__________________________
And By ______________________
Its __________________________
STATE OF MINNESOTA
SS
COUNTY OF HENNEPIN
The foregoing instrument was acknowledged before me this _____
day of __________________________ , 19 _____, by Vice President and
Assistant Secretary of NORTHERN STATES POWER COMPANY, a Minnesota
corporation, on behalf of the corporation.
Notary Public
(The Bill of Sale for United Minnesota will be the same except for the
change in the percentages conveyed. The form will be adjusted to add
Contracts, if any, under which deliveries are made between the date of
the Agreement and the Closing.)
EXHIBIT G
PARTIAL RELEASE
KNOW ALL MEN BY THESE PRESENTS, That HARRIS TRUST AND SAVINGS
BANK, an Illinois corporation, as Trustee under and by virtue of the
Trust Indenture and Supplemental Indentures hereinafter described, for
valuable consideration, receipt where of is hereby acknowledged, does
forever discharge and release (1) the easement and leasehold rights set
forth in the attached Easement and Lease relating to the real property
described in the attachment to such Easement and Lease and also relating
to the NSP Common Facilities which are described therein and in the
Ownership Agreement thereby incorporated by reference, an executed copy
of which Ownership Agreement has been received by this Trustee; (2) all
right, title, and interest in and to Joint Common Facilities, Future
Common Facilities and Unit 3 hereafter acquired or constructed and
situated on the Sherco 3 Site and the Sherco Plant Site (as all such
terms are defined in the Ownership Agreement), save and except the
portion of the ownership of such Joint Common Facilities, Future Common
Facilities and Unit 3 which ultimately vests in Northern States Power
Company after the final determination of ownership percentages are made
under the provisions of Sections 2.2.2 and 5.1.6 of the Ownership
Agreement; and (3) further, does forever discharge and release the
undivided interest percentage specified below in the following described
property situated in the County of Sherburne, State of Minnesota,
described as follows, to-wit:
(Herein insert the description of the properly to be conveyed
by Warranty Deed (see Exhibit E of the Ownership Agreement) and
by Bill of Sale (see Exhibit F of the Ownership Agreement) and
the undivided interest percentage being conveyed by NSP.)
(Also insert all Exceptions and Reservations of NSP in regard
to the applicable property.)
from all claims and liens of and under that certain Trust Indenture
dated February 1, 1937, from Northern States Power Company to Harris
Trust and Savings Bank, Trustee, and Indentures supplemental thereto
dated June 1, 1942, February 1, 1944, October 1, 1945, July 1, 1948,
August 1, 1949, June 1, 1952, October 1, 1954, September 1, 1956,
August 1, 1957, July 1, 1958, December 1, 1960, August 1, 1961,
June 1, 1962, September 1, 1963, August 1, 1966, June 1, 1967,
October 1, 1967, May 1, 1968, October 1, 1969, February 1, 1971,
May 1, 1971, February 1, 1972, January 1, 1973, January 1, 1974,
September 1, 1974, April 1, 1975, May 1, 1975, March 1, 1976,
June 1, 1981, and December 1, 1981 respectively which Trust Indenture
and Supplemental Trust Indentures are recorded in the office
of the County Recorder, Sherburne County, Minnesota, as follows:
Book of Page
Date of Indenture Mortgages Number
February 1, 1937 40 311
February 1, 1944 42 279
October 1, 1945 42 383
July 1, 1948 34 60
August 1, 1949 34 229
June 1, 1952 34 463
October 1, 1954 47 341
September 1, 1956 49 98
Date of Indenture Document No.
August 1, 1957 86723
July 1, 1958 88289
December 1, 1960 92676
August 1, 1961 93734
June 1, 1962 95353
September 1, 1963 97768
August 1, 1966 103882
June 1, 1967 105587
October 1, 1967 106452
May 1, 1968 107660
October 1, 1969 110971
February 1, 1971 114172
May 1, 1971 114856
February 1, 1972 117397
January 1, 1973 121608
January 1, 1974 125970
September 1, 1974 128966
April 1, 1975 131151
May 1, 1975 131384
March 1, 1976 134959
June 1, 1981 165736
December 1, 1981 167760
and also filed for record in the office of the Registrar of Titles in
Sherburne County, Minnesota, as follows:
Date of Indenture Document Number
February 1, 1937 4251
February 1, 1944 4252
October 1, 1945 4253
July 1, 1948 4254
June 1, 1952 4255
October 1, 1954 4256
February 1, 1972 4058
January 1, 1973 4250
January 1, 1974 4498
September 1, 1974 4715
April 1, 1975 4838
May 1, 1975 4862
March 1, 1976 5043
June 1, 1981 7074
December 1, 1981 7216
and also filed for record as a Chattel Mortgage in the office of the
County Recorder of Sherburne County, Minnesota as follows:
Date of Indenture Document Number
February 1, 1937 23788
February 1, 1944 35364
October 1, 1945 36595
July 1, 1948 39441
August 1, 1949 41033
June 1, 1952 45933
October 1, 1954 50694
September 1, 1956 55089
August 1, 1957 57030
July 1, 1958 59873
December 1, 1960 65608
August 1, 1961 67234
June 1, 1962 69268
September 1, 1963 72638
and also filed for record, pursuant to the Uniform Commercial Code, in
the office of the Secretary of State of the State of Minnesota, as
follows:
Date of Document
Date of Indenture Filing Number
February 1, 1937,
Indenture and all
Supplements listed
above were filed on
July 1, 1966 07 01 66 004133
August 1, 1966 07 28 66 008118
June 1, 1967 06 08 67 036715
October 1, 1967 10 20 67 47050
May 1, 1968 05 14 68 63585
October 1, 1969 10 03 69 104211
February 1, 1971 02 25 71 149237
May 1, 1971 05 28 71 160816
February 1, 1972 02 24 72 191408
January 1, 1973 01 26 73 227674
January 1, 1974 01 17 74 261438
September 1, 1974 09 25 74 286111
April 1, 1975 05 02 75 306237
May 1, 1975 05 22 75 308445
March 1, 1976 03 08 76 336914
June 1, 1981 06 29 81 576056
December 1, 1981 12 01 81 597840
It is hereby expressly stipulated and provided that this Partial
Release shall not be effective in any manner or to any extent to release
any property, rights, or interest from the lien of said Trust Indenture
and said supplemental Trust Indentures, excepting only as herein
specifically expressed, and the lien of said Trust Indenture and said
supplemental Trust Indentures shall in other respects remain unaffected
and unimpaired by the execution and delivery of this Partial Release.
IN WITNESS WHEREOF, Harris Trust and Savings Bank, as Trustee,
has caused these presents to be executed in its corporate name by its
Vice President and sealed with its corporate seal and attested by its
Assistant Secretary for and in its behalf this ____ day of ____________
, 1982.
HARRIS TRUST AND SAVINGS BANK
Trustee
By_____________________________
Vice President
ATTEST:
(Corporate Seal)
Assistant Secretary
STATE OF ILLINOIS
SS
COUNTY OF COOK
On this _____ day of _______________________ , 19 _____ before
me, _____________________________, a Notary Public in and.for the County
and State aforesaid, personally appeared __________________________ and
_______________________ to me personally known, and to me known to be
the Vice President and Assistant Secretary, respectively, of Harris
Trust and Savings Bank, and who, being by me severally duly sworn, each
for himself, did say that he, the said ________ _____________________
is Vice President, and he, the said ______________________________ is
the Assistant Secretary of Harris Trust and Savings Bank, a corporation;
that the seal affixed to the within and foregoing instrument is the
corporate seal of said corporation; and that said instrument was
executed in behalf of said corporation by authority of its Board of
Directors; and that __________________________ and
___________________________ each acknowledged said instrument to be the
free act and deed of said corporation, and that such corporation
executed the same.
WITNESS MY HAND AND NOTARIAL SEAL this _____ day of
________________________ , 19 ____
Notary Public
My Commission Expires:
THIS INSTRUMENT WAS DRAFTED BY:
NORTHERN STATES POWER COMPANY
414 NICOLLET MALL
MINNEAPOLIS, MINNESOTA 55401
(Notarial Seal)
EXHIBIT H
EASEMENT AND LEASE
THIS INSTRUMENT, made this ___ day of ___________ 1982, by and
between NORTHERN STATES POWER COMPANY, a Minnesota corporation ("NSP"),
and SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY, a municipal corporation
and political subdivision of the State of Minnesota ("SMMPA").
WITNESSETH THAT:
WHEREAS, NSP, SMMPA and United Minnesota Municipal Power Agency,
a municipal corporation and political sub-division of the State of
Minnesota have entered into a certain Sherburne County Generating Unit
No. 3 Ownership and Operating Agreement dated March 11, 1982,
(hereinafter referred to as the "Ownership Agreement"), in regard to the
ownership and operation of a coal-fired steam electric generating unit
(hereinafter refereed to as "Unit 3"). The Ownership Agreement is
incorporated herein by reference as though fully set forth in this
Instrument, and which Ownership Agreement is filed for record as
Document Number __________ with the Registrar of Titles in and for
Sherburne County, Minnesota, and recorded as Document Number ________
with the County Recorder in and for Sherburne County, Minnesota.
WHEREAS, NSP is the fee owner of certain property in Sherburne
County, Minnesota, legally described on Exhibit A attached hereto
(hereinafter referred to as the "Sherco Plant Site"y; and
WHEREAS, SMMPA is, or will become, the fee owner of an undivided
interest in and to certain property in Sherburne County, Minnesota,
legally described on Exhibit B attached hereto (hereinafter referred to
as the "Sherco 3 Site") together with certain other rights and interests
including, but not limited to, undivided interests in Unit 3, the Joint
Common Facilities and Future Common Facilities and certain other rights
in the NSP Common Facilities, all as defined in the Ownership Agreement,
which undivided interests in the Sherco 3 Site, Unit 3, the Joint Common
Facilities, the Future Common Facilities and rights in the NSP Common
Facilities are collectively referred to herein as the "SMMPA Interests";
and
WHEREAS, NSP currently owns and operates two coal-fired steam
electric generating units (hereinafter referred to as "Prior Units") on
the Sherco Plant Site; and
WHEREAS., although the major buildings housing Unit 3 will be
located on the Sherco 3 Site, accessory buildings and other facilities
of Unit 3, as well as facilities common to Unit 3 and Prior Units will
be located on the Sherco Plant Site, and
WHEREAS, NSP has agreed to grant certain easement and leasehold
rights to SMMPA, as set forth hereinbelow.
NOW, THEREFORE, in consideration of the execution by SMMPA of
the Ownership Agreement, payment of certain sums thereunder and other
good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged by NSP, NSP does hereby grant, convey and lease unto
SMMPA those easements, leasehold interests and other rights for the term
and upon.the terms and conditions hereinafter described or set forth:
1. Definitions. Except as expressly provided in this
Instrument, all terms when used herein shall have the meanings specified
in Article 1.1 of the Ownership Agreement.
2. Grant of Easement. NSP hereby conveys and warrants unto
SMMPA a nonexclusive easement in the Sherco Plant Site and the NSP
Common Facilities and in NSP's interest in and to Unit 3, the Joint
Common Facilities and the Future Common Facilities for the purposes set
forth below, but subject to the superior right of NSP to operate,
maintain, repair and reconstruct on the Sherco Plant Site existing
facilities related to Prior Units, provided that any additions to or
enlargements of such facilities are governed by the respective rights
set forth in Section 2.2.4 of the Ownership Agreement. NSP also
expressly reserves the right to use the Sherco Plant Site for any
purpose which does not unreasonably interfere with the construction or
operation of SMMPA Interests in accordance with Section 2.2.1, but
subject to the respective rights set forth in Section 2.2.4, of the
Ownership Agreement.
3. Scope of Easement. Said easement shall be for the purposes
of access to and construction, reconstruction, maintenance, repair,
operation, and use of all structures and facilities related to Unit 3
located on the Sherco 3 Site and the Sherco Plant Site, including the
Joint Common Facilities, the NSP Common Facilities, and the Future
Common Facilities together with the use of all portions of the Sherco
Plant Site necessary or appropriate to the use and operation of the
SMMPA Interests. The uses authorized by this paragraph 3 and by
paragraph 10 hereof shall include all rights given to SMMPA under the
Ownership Agreement and all rights necessary or appropriate to exercise
the responsibilities given to the Project Manager in the Ownership
Agreement or reasonably implied therefrom for the use and operation of
SMMPA Interests. Nothing herein shall be construed as imposing upon
SMMPA any of the obligations of the Project Manager under the Ownership
Agreement.
4. Agent. So long as there is a Project Manager appointed and
acting pursuant to the Ownership Agreement, the rights granted by this
Instrument may be exercised by SMMPA solely through the Project Manager
as agent for SMMPA. As of the date hereof, NSP is the Project Manager
appointed and acting as agent pursuant to the Ownership Agreement, which
Agreement permits, but does not assume there will be, the appointment
of a successor Project Manager.
5. Duration. The easement granted by this Instrument shall
continue in full force and effect until such time, if ever, that Sherco
3 shall be retired pursuant to Section 5.3.1 of the Ownership Agreement,
in which event such easement shall expire when all actions contemplated
by the Ownership Agreement for such retirement shall have been
completed.
6. Appurtenant. Such easement shall be deemed appurtenant to
and shall pass with title to SMMPA's undivided ownership interest in the
Sherco 3 Site.
7. Improvements. The parties hereby stipulate and agree that,
for purposes of this Instrument, all facilities now or hereafter
constructed on the Sherco Plant Site or Sherco 3 Site and designated as
Common Facilities are now or shall, upon completion, be deemed to be
fixtures attached to the land subject to this Easement and Lease and
deemed to be "real property". However, it is expressly agreed that the
ownership of such Common Facilities shall be as determined by the
Ownership Agreement and shall be separate from and not merge with or
otherwise relate to the fee ownership of the land to which such fixtures
are attached. It is the purpose of this Instrument to grant SMMPA an
easement (or leasehold) interest in the Sherco Plant Site which enables
SMMPA to enjoy its undivided ownership interest or other rights in such
Common Facilities.
8. Lease, Term. To the extent that any of the rights granted
hereby or to the Project Manager under the Ownership Agreement shall be
deemed not to be validly granted by easement and to the extent that any
interest of NSP so encumbered shall be deemed not subject to imposition
of an easement and to the extent that a lease of such interests of NSP
shall create further, greater or superior rights for the benefit of
SMMPA than does an easement, NSP does hereby demise, lease and let unto
SMMPA and SMMPA does hereby hire and take from NSP a non-exclusive
tenancy in the Sherco Plant Site, the NSP Common Facilities and NSP's
interest in and to Unit 3 the Joint Common Facilities and the Future
Common Facilities, to have and to hold the said tenancy for a term
commencing on the date hereof and expiring on the date provided for
expiration of the easement in paragraph 5 hereof.
9. Rent. The rent for such lease term shall be deemed prepaid
in full for the consideration first above recited.
10. Conditions of Lease. The rights and obligations of NSP as
lessor and SMMPA as tenant shall be identical to the rights and
obligations set forth in paragraph 3 above. So long as there is a
Project Manager appointed and acting pursuant to the Ownership
Agreement, SMMPA shall have the right to enter and occupy the premises
leased hereby solely through the Project Manager as agent for SMMPA.
11. Partial Release or Limitation. SMMPA hereby covenants that
for no additional consideration, it shall, from time to time, execute
and deliver instruments, when requested by NSP, releasing, defining or
limiting its rights hereunder as to a specifically described portion or
portions of the Sherco Plant Site in order to facilitate the right of
NSP to convey, lease, transfer any interest therein, encumber, or
otherwise use the Sherco Plant Site for any purpose provided that such
a conveyance, lease, transfer, encumbrance, or use does not unreasonably
interfere with the construction, reconstruction, maintenance, repair,
operation and use of SMMPA Interests.
IN WITNESS WHEREOF, the parties hereto have executed this
Instrument as of the day and year first above written.
SOUTHERN MINNESOTA MUNICIPAL NORTHERN STATES POWER COMPANY
POWER AGENCY
By _________________________ By __________________________
Its ________________________ Its _________________________
And __________________________ And ___________________________
Its _________________________ Its __________________________
(Insert appropriate acknowledgements necessary for recording the
instrument. Wherever "SMMPA" appears in the above contract, "SMMPA" can
be inserted for the purpose of the applicable Easement and Lease.)
EXHIBIT I
ADMINISTRATIVE AND GENERAL COSTS
I. DIRECT AND INDIRECT COSTS ALLOCATED TO CONSTRUCTION OF SHERCO 3
A. Direct Cost Loadings:
1. Labor - All labor costs directly charged to Sherco 3
will be loaded with indirect labor costs such as pensions,
payroll taxes, insurance and non-productive on a percentage
basis which fully allocates all indirect labor costs to
productive labor annually.
2. Materials - All material costs directly charged
to Sherco 3 will be loaded with indirect material such as
purchasing, warehousing and other indirect material costs
on a percentage basis with specified maximum dollar amounts
per invoice and which allocates all indirect material costs
to projects annually.
B. Indirect Cost Loadings:
1. Engineering and Supervision - Engineering personnel
(engineers, draftsmen, etc. ) in all the engineering
departments charge their time to estimate numbers on their
time cards. An existing table has a corresponding work
order number set up for each estimate number. Therefore,
the engineering time is translated from E-Number to work
order number and is charged directly to the project as
labor.
Engineering mandays are accumulated by E-Number and
totalled by engineering department. The cost of
supervision and clerical labor and expense are accumulated
in a series of accounts for each engineering department.
The engineering mandays for each department are divided
into these accounts and a department rate for supervision
and clerical is determined. The rate is applied to each
estimate number on the basis of engineering mandays.
Through the translation table, this cost is charged to each
project work order.
Contract engineering and drafting services are charged
directly to the project work order. If the services are
not attributable to a specific project, the invoice is
charged to the department account for supervision and
clerical and included in the manday rate and spread to that
department's projects.
2. Administrative and General - The basis for assigning a
portion of administrative and general cost to construction
is as follows. A time study by employee of selected
administrative departments is conducted annually to
determine the estimated amount of labor allocable to
construction. The actual amount of labor is allocated
monthly to a clearing account based on this study. The
ratio of construction labor to total labor for each of
these administrative departments is applied to the previous
years office supplies and expenses of the departments. The
result is allocated to the clearing account equally over
twelve months of the current year. The corporate ratio of
pension and other employee benefits and payroll taxes to
total labor is applied to the labor amount transferred to
the clearing account. The result is also transferred to
the clearing account.
Administrative and general expenses are then drawn from the
clearing account and charged to construction in the ratio
that administrative and general expense bears to that
year's Construction Expenditure Forecast. As the actual
construction program varies up or down from the forecast,
so the rate varies inversely.
II. DIRECT AND INDIRECT COSTS ALLOCATED TO OPERATION OF SHERCO 3
A. Operating and maintenance expenses charged to Sherco 3 will
include loadings to recover A&G expenses consistent with
Company policy used for all regulatory jurisdictional cost
studies described as follows:
1. Labor Additives - All labor costs assigned to Sherco 3
will be loaded with indirect labor costs such as pensions,
payroll taxes, insurance and non-productive on a percentage
ratio which fully allocates all indirect labor costs on the
basis of the amount of productive labor in operating and
maintenance expenses charged to Sherco 3 to the total
electric utility labor.
2. Materials and Supplies Overhead Expense - All material
and supply costs assigned to Sherco 3 will be loaded with
indirect material costs such as purchasing, warehousing and
other indirect material costs on a Company experienced
percentage basis.
3. General Office Expense Recorded as Administrative and
General Expenses - General Office administrative and
general office salaries, office supplies, outside services
and other A&G expenses which are determined by an analysis
to be related to the operating and maintenance of Sherco
3 will be assigned to Sherco 3 on the basis of productive
labor in operating and maintenance expense charged to
Sherco 3 to total electric utility labor.
4. General Office Expenses Recorded as Production - General
Office expenses such as power production, computer
operations, production training, etc. which are determined
by an analysis to be related to Sherco 3 will be assigned
to Sherco 3 on the ratio of Sherco 3 capacity to the total
NSP system capacity plus the Sherco 3 capacity of Southern
Minnesota and United Minnesota.
B. General Office Fixed Charged on Investment - A charge will
be made to recover the fixed charges on general and common
facilities assigned to the production functional use. This
charge will include a return on investment, income taxes,
depreciation, deferred income taxes and property taxes.
This charge will be assigned to the production function on
the basis of labor and be charged on the ratio of Sherco
3 capacity to the total NSP system capacity plus the Sherco
3 capacity of Southern Minnesota and United Minnesota.
EXHIBIT J
The following persons, currently employed by the entities indicated, are
listed for the purposes of Sections 2.1.1. and 2.3.5.
DORSEY & WHITNEY
Craig A. Beck
Thomas M. Brown
Philip M. Chen
Jacqueline B. Goodyear
William J. Keppel
W. Charles Lantz
Paul J. Scheerer
Arthur B. Whitney
MUDGE ROSE GUTHRIE & ALEXANDER
Michael J. Hannigan
Carl F. Lyon, Jr.
NORTHERN STATES POWER COMPANY
Roger B. Anderson
Harold J. Bagley
Ralph S. Bartel
James R. Forest
James E. Kettner
Rod Leas
David G. McGannon
Gale K. Nordling
Robert H. Schulte
James R. Tacheny
R.W. BECK AND ASSOCIATES
Lynn R. Coles
Kevin T. Favero
William L. Porter
G.T. Strodthoff
SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY (SMMPA)
Edwin L. Cobb
Kenneth E. De Villers
Pierre J. Heroux
UNITED MINNESOTA MUNICIPAL POWER AGENCY (UMMPA)
Dallas E. Nelson
EXHIBIT K
ASSIGNMENT OF CONTRACTS
KNOW ALL MEN BY THESE PRESENTS, that NORTHERN STATES POWER
COMPANY, a Minnesota corporation, (hereinafter sometimes referred to as
"NSP), party of the first part, in consideration of One Dollar and other
good and valuable consideration, to it in hand paid by Southern
Minnesota Municipal Power Agency, a municipal corporation and political
subdivision of the State of Minnesota, a party of the second part,
receipt of which is hereby acknowledged, does hereby sell, assign and
transfer unto the party of the? second part, its successors and assigns,
forever, an undivided 37.5 percent interest as tenant in common of its
interest in all of the following contracts to the extent that services
or properties provided under the contracts relate to, or will be
incorporated into, Unit 3 and an undivided 33.040 percent interest as
a tenant in common of its interest in all of the following contracts to
the extent that services or properties provided under the contracts
relate to, or will be incorporated into, Joint Common Facilities, as
such terms and interests are defined and set forth in that certain
Ownership and Operating Agreement relating to Sherburne County
Generating Unit No. 3 among Northern States Power Company, a Southern
Minnesota Municipal Power Agency and United Minnesota Municipal Power
Agency dated March 11, 1982, all of such contracts being listed below
and are contracts between NSP and the contracting party identified below
under the applicable NSP Purchase Order identified below:
NSP AGREEMENTS FOR ENGINEERING CONSULTING WITH:
1. Black & Veatch
Dated March 1, 1977
For design engineering services for Sherburne County
Generating Unit 3, and to act as NSP's agent in
contracting for goods and services in conjunction with the
design and construction of Unit 3
NSP AGREEMENTS FOR EQUIPMENT AND MATERIALS WITH:
2. Allis-Chalmers Corporation
NSP Purchase Order #SC 3272, dated March 23, 1977 For
manufacturing and delivery of one lot of circulating water
pumps for Unit 3
3. Allis-Chalmers Corporation
NSP Purchase Order #SC 3272-5P, dated May 18, 1979 For
spare parts for circulating water pumps for Unit 3
4. American standard, Incorporated
NSP Purchase Order #SC 3222, dated December 8, 1978 For
fabricating and delivery of one lot of air preheating coils
for Unit 3
5. Brown-Minneapolis Tank
NSP Purchase Order #SC 3254, dated May 9, 1977 For
fabricating and delivery of one lot of steel circulating
pipe for Unit 3
6. Chicago Heater Company, Inc.
NSP Purchase Order #SC 3226, dated October 14, 1976 For
fabricating and delivery of one dearator for unit 3
7. Colt Industries-Trent Tube Division
NSP Purchase Order #SC 3225, dated September 2, 1977 For
fabricating and delivery of one lot of condensor tubes for
Unit 3
8. Crane Company
NSP Purchase Order #SC 3345, dated July 29, 1977 For
manufacturing and delivery of one lot of low pressure check
valves for Unit 3
9. Custom Control Manufacturer of Kansas, Inc.
NSP Purchase Order #SC 3176, dated February 16, 1979 For
fabricating and delivery of one programmable controller
input/output simulation test panel and equipment racks for
Unit 3.
10. Daniel Industries, Inc.
NSP Purchase Order #SC 3118, dated September 6, 1978 For
fabricating and delivery of one lot of primary flow
elements for Unit 3
11. Delaval Turbine Inc. of Transamerica Delaval
NSP Purchase Order #SC 3271, dated March 22, 1977 For
fabricating and delivery of the three boiler feed pumps for
Unit 3
12. Delaval Turbine Inc. of Transamerica Delaval
NSP Purchase Order #SC 3271-5P, dated May 27, 1977 For
spare parts for boiler feed pumps for Unit 3
13. Eastern Industries
NSP Purchase Order #SC 3504, dated September 30, 1977 For
fabricating and delivery of three chemical solution mixers
for Unit 3
14. Foster Wheeler Energy Corporation
NSP Purchase Order #SC 3224, dated January 6, 1977 For
fabricating and delivery of one lot of surface condensers
for Unit 3
15. Foster Wheeler Energy Corporation
NSP Purchase Order #SC 3227, dated October 6, 1976 For
fabricating and delivery of one lot of high pressure closed
feedwater heaters for Unit 3
16. General Electric Company
NSP Purchase Order #SC 3068, dated May 30, 1978 For
manufacturing and delivery of two reserve auxiliary
transformers for Unit 3
17. General Electric Company
NSP Purchase Order #SC 3073, dated September 30, 1977 For
manufacturing and delivery of one generator transformer
neutral reactor for Unit 3
18. General Electric Company
NSP Purchase Order #SC 3221, dated July 8, 1977 For
fabricating and delivery of the turbine-generator for Unit
3
19. General Electric Company
NSP Purchase Order #SC 3250, dated July 12, 1978 For
fabricating and delivery of two boiler feed pump turbines
for Unit 3
20. Green Fan Company
NSP Purchase Order #SC 3300, dated September 28, 1977 For
manufacturing and delivery of four induced draft fans for
Unit 3
21. Hunger ford & Terry, Incorporated
NSP Purchase Order #SC 3510, dated September 16, 1977 For
manufacturing and delivery of one complete demineralization
system for Unit 3
22. Ingersoll Rand Company
NSP Purchase Order #SC 3273, dated April 25, 1977 For
manufacturing and delivery of one lot of condensate pumps
for Unit 3
23. Ingersoll Rand Company
NSP Purchase Order #SC 3206, dated August 8, 1977 For
manufacturing and delivery of two air compressors for Unit
3
24. Metro Metals, Inc.
NSP Purchase Order #SC 3216, dated August 2, 1977 For
fabricating and delivery of twenty-six hose houses for Unit
3
25. Nash Engineering Company
NSP Purchase Order #SC 3274, dated May 2, 1977 For
manufacturing and delivery of four condensor vacuum pumps
with motors for Unit 3
26. Nott Company
NSP Purchase Order #SC 3217, dated August 2, 1977 For
fabricating and delivery of twenty-six sets of hose house
accessories for Unit 3
27. Rockwell International
NSP Purchase Order #SC 3315, dated June 23, 1977 For
manufacturing and delivery of one lot of high pressure
special check valves for Unit 3
28. Struthers Wells Corporation
NSP Purchase Order #SC 3223, dated September 12, 1977 For
fabricating and delivery of two auxiliary cooling water
heat exchangers for Unit 3
29. Square D Company
NSP Purchase Order #SC 3142, dated December 22, 1978 For
fabricating and delivery of one lot of programmable
controllers for Unit 3
30. TLT Babcock, Incorporated
NSP Purchase Order #SC 3299, dated August 24, 1978 For
fabricating and delivery of two forced draft fans for Unit
3
31. TLT Babcock, Incorporated
NSP Purchase Order #SC 3299-5P, dated February 28, 1979 For
spare parts for forced draft fans for Unit 3
32. The Trane Company
NSP Purchase Order #SC 3294, dated December 8, 1978 For
manufacturing and delivery of one lot of hot water unit
heaters for Unit 3
33. The Trane Company
NSP Purchase Order #SC 3339, dated December 8, 1978 For
manufacturing and delivery of one lot of hot water cabinet
heaters for Unit 3
34. United Conveyor Corporation
NSP Purchase Order #SC 3241, dated August 24, 1978 For
fabricating and delivery of one ash handling system for
Unit 3
35. Westinghouse Electric Corporation
NSP Purchase Order #SC 3069, dated April 24, 1978 For
manufacturing and delivery of two main auxiliary
transformers for Unit 3
36. Westinghouse Electric Corporation
NSP Purchase Order #SC 3072, dated May 17, 1978 For
manufacturing and delivery of one generator transformer for
Unit 3
37. Westinghouse Electric Corporation
NSP Purchase Order #SC 3022, dated June 1, 1978 For
manufacturing and delivery of one lot of isolated phase
bus, surge protection and potential transformer equipment
for Unit 3
38. The William Powell Company
NSP Purchase Order #SC 3314, dated June 17, 1977 For
fabricating and delivery of one lot of cast steel valves
for Unit 3
39. Yuba Heat Transfer Corporation
NSP Purchase Order #SC 3228, dated October 15, 1976 For
fabricating and delivery of one lot of low pressure closed
feedwater heaters for Unit 3
NSP AGREEMENTS FOR EQUIPMENT AND ERECTION CONTRACTS WITH:
40. The Babcock & Wilcox Company
NSP Purchase Order #SC 3301, dated July 28, 1977 For
fabricating, delivery and erection of one steam generator
for Unit 3
41. Hardrives, Inc.
NSP Purchase Order #SC 5550, dated April 1, 1977 For
concrete batch plant installation and operation for Unit
3
42. Haughton Elevator-Division of Reliance Electric Co.
NSP Purchase Order #SC 3421, dated August 29, 1977 For
fabricating, delivery and erection of three elevators for
Unit 3
43. Paul A. Laurence Company
NSP Purchase Order #SC 5543, dated April 28, 1977 For
construction of substructures for Unit 3
44. The Marley Cooling Tower Company
NSP Purchase Order #SC 3213, dated June 10, 1977 For
fabricating, delivery and erection of two cooling towers
for Unit 3
45. P.S.M. Joint Venture
NSP Purchase Order #SC 3457, dated December 7, 1977 For
fabricating, delivery and erection of one lot structural
steel for Unit 3
46. Swanson Contracting, Inc.
NSP Purchase Order #SC 5549, dated August 25, 1977 For
construction and materials of railroad for Unit 3
The parties hereto acknowledge that this instrument represents
a partial assignment of the interests and rights, but not obligations,
of NSP under the above contracts. The obligations of NSP under the
above contracts will be shared by the party of the second part as set
forth in the aforesaid Ownership and Operating Agreement. The parties
hereto acknowledge that nothing herein modifies NSP's rights and
obligations in regard to the above contracts as the agent (Project
Manager) for the parties hereto and other owners under the aforesaid
Ownership and Operating Agreement.
IN TESTIMONY WHEREOF, NSP has caused this instrument to be
executed in its name, by the proper officers and its corporate seal to
be hereto affixed this ____ day of ___________ 19
NORTHERN STATES POWER COMPANY
By __________________________
ACCEPTED:
SOUTHERN MINNESOTA MUNICIPAL
POWER AGENCY
By _________________________
Its _________________________
Its
and
By ___________________________
Its __________________________
(This form will be adjusted to add all contracts outstanding at Closing.
It will be the same for United Minnesota except for the change in
percentages assigned.)
AMENDMENT NO. 1 dated as of January 10, 1983 to the SHERBURNE
COUNTY GENERATING UNIT NO. 3 OWNERSHIP AND OPERATING AGREEMENT dated as
of March 11, 1982 among NORTHERN STATES POWER COMPANY, SOUTHERN
MINNESOTA MUNICIPAL POWER AGENCY and UNITED MINNESOTA MUNICIPAL POWER
AGENCY (the "Joint Ownership Agreement").
The parties hereto have agreed to amend the Joint Ownership
Agreement to provide for (i) a redistribution of ownership interests in
Sherco 3 due to the withdrawal of the City of Willmar, Minnesota from
UNITED MINNESOTA; (ii) a delay in the Commercial Operation Date of
Sherco 3; (iii) the purchase by NSP of additional portions of the Sherco
Plant Site; and (iv) certain administrative matters. All capitalized
terms used herein and not otherwise defined shall have the meanings
assigned in the Joint Ownership Agreement.
Accordingly, the parties hereto agree to amend the Joint
Ownership Agreement as follows:
1. The ownership percentages set forth in the first sentence
of Section 2.1.1 (page 14) are hereby deleted and the following are
hereby substituted therefor:
Undivided
"Participant Ownership Interest
NSP 59.0%
SOUTHERN MINNESOTA 37.5%
UNITED MINNESOTA 3.5%".
2. (a) The number "6.125" in the first sentence of Section
2.1.4(a) and in Section 2.1.4(b)(b) and (c)(page 23) is hereby deleted
and the number "3.5" is hereby substituted therefor.
(b) The number "5.396" in the second sentence of Section
2.1.4(a) and in Section 2.1.4(b) (a) (page 23) is hereby deleted and the
number "3.084" is hereby substituted therefor.
3. Section 2.1.5(c) (vi) (page 31) is hereby deleted.
4. The date "October 1, 1982" in the first sentence of Section
2.1.6 (page 31) is hereby deleted (in each of the two places where it
appears) and the date "March 1, 1983" is hereby substituted therefor.
5. The numbers "2.500" and "1.880" in the first sentence of the
second paragraph of Section 2.1.6 (pages 31 and 32) are hereby deleted
and the numbers "1.5" and "1.051" are hereby substituted therefor,
respectively.
6. The date "May 1, 1986" in the first sentence of Section
3.2.7 (page 50) his hereby deleted and the date "January 1, 1988" is
hereby substituted therefor.
7. The number "42" in the first sentence of Section 3.2.10
(page 51) is hereby deleted and the number "38" is hereby substituted
therefor.
The addresses for SOUTHERN MINNESOTA and UNITED MINNESOTA set
forth in Section 5.6.5 (page 90) are hereby deleted and the following
is hereby substituted therefor:
"21 First Street, S.W. (Suite 400)
Rochester, Minnesota 55901
Attn: Executive Director".
9. The number "200" in the item "Land Addition" in Group VIII
in Exhibit B-1 is hereby deleted and the number "185" is hereby
substituted therefor.
10. The Joint Common Facility Percentages set forth in the
first sentence of Exhibit B-2 are hereby deleted and the following are
hereby substituted therefor:
"NSP 63.876%
SOUTHERN MINNESOTA 33.040%
UNITED MINNESOTA 3.084%".
11. The last four lines of Exhibit C are hereby deleted and the
following is hereby substituted therefor:
"Excepting from the above that part of the SW 1/4 of the SW 1/4
lying east of the west 500 feet thereof, and the NW 1/4 of the
SW 1/4, and E 1/2 of the SW 1/4 of Section 6; and the NE 1/4 of
the NW 1/4 of Section 7, all being in Township 33 North, Range
28 West, and also excepting the Sherco 3 Site set forth on
Exhibit D of this Agreement."
12. The following is hereby added at the end of the legal
description of "TRACT ONE" on page l of 5 of Exhibit E:
"(The relationship of the boundaries of Tract One to the
section lines is illustrated by the Certificate of Survey
attached hereto as Exhibit A.)"
13. The following is hereby added at the end of the legal
description of "TRACT TWO" on page 1 of 5 of Exhibit E:
"(The relationship of the boundaries of Tract Two on the
section lines is illustrated by the Certificate of Survey
attached hereto as Exhibit 3.)"
14. Exhibits A and B hereto are hereby attached as Exhibits,A
and B, respectively, to Exhibit E to the Joint Ownership Agreement.
15. The phrase "as amended by Amendment No. 1 thereto dated as
of January 10, 1983" is hereby added immediately after the date "March
11, 1982" in paragraph 1 on page 2 of: 5 of Exhibit E, in the second
paragraph on page 1 of Exhibit H and in the first paragraph on page 1
of Exhibit K.
16. The number "6.125" in the brackets on the bottom of page
5 of 5 of Exhibit E is hereby deleted and the number "3.5" is hereby
substituted therefor.
17. Except as amended hereby, the Joint Ownership Agreement
shall continue in full force and effect, and any reference in the Joint
Ownership Agreement, in any Exhibit thereto or in any other document to
such Agreement shall mean the Joint Ownership Agreement as amended
hereby; provided, however, that the parties hereto hereby agree to
execute as soon as practicable a restatement of the Joint Ownership
Agreement dated as of the date hereof to incorporate the amendments set
forth herein, and upon execution and delivery thereof, such restatement
shall supersede the Joint Ownership Agreement and this Amendment.
18. This Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original but all
of which together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by duly authorized officers all as of the date
first set forth above.
Attest: NORTHERN STATES POWER COMPANY
(Seal) By
Attest: SOUTHERN MINNESOTA MUNICIPAL
POWER AGENCY
(Seal) By
Attest: UNITED MINNESOTA MUNICIPAL
POWER AGENCY
(Seal) By
STATE OF MINNESOTA)
ss.
COUNTY OF HENNEPIN)
The foregoing instrument was acknowledged before me this 10th
day of February, 1983 by Bruce Richard, Senior Vice President of
Northern States Power Company, a Minnesota corporation, on behalf of the
corporation.
Notary Public
Catherine A Jones
STATE OF MINNESOTA)
ss.
COUNTY OF HENNEPIN)
The foregoing instrument was acknowledged before me this 19th
day of January, 1983 by Pierre J Heroux, Executive Director of Southern
Minnesota Municipal Power Agency, a municipal corporation and political
subdivision of the State of Minnesota, on behalf of such Agency.
Notary Public
Jacqueline B Goodyear
STATE OF MINNESOTA)
ss.
COUNTY OF HENNEPIN)
The foregoing instrument was acknowledged before me this 19th
day of January, 1983 by Dallas E Nelson, President of United Minnesota
Municipal Power Agency, a municipal corporation and political
subdivision of the State of Minnesota, on behalf of such Agency.
Notary Public
Jacqueline B Goodyear
CERTIFICATE OF SURVEY
--DIAGRAM OF POWERHOUSE SURVEY--
All that part of the West 1/2 of the West 1/2 of Section 1. Township 33
North. Range 29 West. Sherburne County Minnesota, described as follows,
to-wit: The South 1220.00 feeL of the North 3193.00 feet of the East
450.00 feet of the West 1241.00 feet of said West 1/2 of the Went 112
of Section 1.
I hereby certify to Northern States Power Company that this survey was
prepared by me or under my direct supervision. is correct to the best
of my knowledge and belief, was executed in accordance with the current
Minimum Standards for Property Boundary Surveys adopted by the Minnesota
Land Surveyors Association, and that I am a duly registered Land
Surveyor under the laws of the State of Minnesota. This certificate
does not purport to show improvements or encroachments, if any. No
liability is assumed except to the client for whom this survey was
prepared. his heirs, and assigns, and said liability is assumed only for
the actual cost of this survey.
John O. Oliver, Land Surveyor
Minnesota Registration No. 8194
Date: December 1, 1982
Exhibit "A"
Tract One "Powerhouse"
CERTIFICATE OF SURVEY
--DIAGRAM OF COOLING TOWERS SURVEY--
All that part of the East 112 of the East 112 of Section 2, Township 33
North, Range 29 West, Sherburne County Minnesota, described as follows,
to-wit: The South 775.00 feet of the North 2652.00 feet of the West
736.00 feet of the East 882.00 feet of said East 112 of the East 1/2 of
Section 2.
I hereby certify to Northern States Power Company that this survey was
prepared by me or under my direct supervision, is correct to the best
of my knowledge and belief, gas executed in accordance with the current
Minimum Standards for Property Boundary Surveys adapted by the Minnesota
Land Surveyors Association, and that I am a duly registered Land
Surveyor under the laws of the State of Minnesota. This certificate
does not purport to show improvements or encroachments, if any. No
liability is assumed except to the client for whom this survey Gas
prepared, his heirs, and assigns, and said liability is assumed only for
the actual cost of this survey.
John O. Oliver, Land Surveyor
Minnesota Registration No. 8194
Date: December 1, 1982
Exhibit "B"
Tract Two "Cooling Towers"
EXHIBIT 10.02
SHERCO 3 OUTLET
TRANSMISSION AGREEMENT BETWEEN
NORTHERN STATES POWER COMPANY
AND
SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY
AGREEMENT, made this 27 day of April, 1982, by and between the
NORTHERN STATES POWER COMPANY, a Minnesota corporation, hereinafter
called "NSP", and SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY, a municipal
corporation of the State of Minnesota, hereinafter called "SMMPA", such
parties being herein referred to individually as "Party" or collectively
as "Parties".
WITNESSETH:
WHEREAS, NSP is engaged in the business of generating,
transmitting and distributing electric power and energy in the States
of Minnesota, North Dakota, and South Dakota; and
WHEREAS, SMMPA is a public body corporate and politic and
instrumentality of the State of Minnesota and is empowered to engage in
the business of generating and transmitting electric power and energy
to its members; and
WHEREAS, the Parties are signatories to the Sherburne County
Generating Unit No. 3 Ownership and Operating Agreement dated March 11,
1982 (Ownership Agreement) providing for joint ownership and operation
of Unit 3 at the Sherco Plant Site; and
WHEREAS, SMMPA's share of the electrical output of Sherco 3 will
be delivered to the switching substation located on the Sherco Plant
Site; and
WHEREAS, the Parties are signatories to the Shared Transmission
Agreement ("STS Agreement") dated November 18, 1981, providing for
certain transmission services for SMMPA members on NSP s system; and
WHEREAS, in addition to the SMMPA members connected to the NSP
system, all other SMMPA members are interconnected with systems of
either the Dairyland Power Cooperative ("DPC") or Interstate Power
Company ("ISP"); and
WHEREAS, SMMPA is responsible to deliver a portion of its share
of the Sherco 3 output to its members interconnected to DPC's and ISP's
transmission systems; and
WHEREAS, SMMPA has entered or will enter into shared transmission
agreements with DPC and ISP for the joint use and development of
transmission systems to deliver electricity to its members and
customers; and
WHEREAS, NSP and DPC and NSP and ISP are signatories to certain
Interconnection and Interchange Agreements which establish
interconnections between said signatory parties; and
WHEREAS, NSP is willing to deliver a portion of SMMPA's power and
energy from Sherco 3 to ISP and DPC points of interconnection with NSP
pursuant to the terms and conditions of this Agreement.
NOW THEREFORE, the Parties hereto agree to the following:
ARTICLE I
NSP's Transmission Obligation
1.01 SMMPA will be delivering to NSP a certain amount of its
Sherco 3 power and energy at the 345 Kv switching station at the Sherco
Plant Site. The maximum amount of power and energy to be delivered by
SMMPA to NSP shall be determined by subtracting SMMPA's estimated peak
load delivery under the STS Agreement from SMMPA's 300 MW ownership in
Sherco 3. Such amount shall be considered NSP's maximum transmission
obligation and when determined shall be stated in an amendment to this
Section. NSP agrees to deliver an equivalent amount of power and
energy, less losses in accordance with Section 4.03 hereof, to ISP and
DPC points of interconnection with NSP.
1.02 If SMMPA pays the total transmission obligation determined
pursuant to Article II hereof prior to Sherco 3 commercial operation,
NSP agrees to deliver power and energy purchased by SMMPA from other
sources and delivered to NSP to points of inter-connection with DPC and
ISP, providing NSP has transmission capacity available as determined by
NSP. NSP's obligation shall not exceed the maximum transmission
obligation determined in Section 1.01 hereof. Line losses shall be
mutually agreed to at the time.
ARTICLE II
SMMPA's Transmission Obligation
2.01 For the transmission services provided by NSP in Article
I hereof, SMMPA shall construct new transmission facilities in NSP's
transmission system and/or purchase existing NSP transmission facilities
of 345 Kv and above, which are no more than 10 years old at date of this
Agreement, at NSP's original cost depreciated, as determined by NSP,
equal to an investment of 73.00/Kw in 1981 dollars multiplied by NSP's
maximum transmission obligation pursuant to Section 1.01 hereof and
adjusted thereafter in accordance with Section 2.02 hereof. SMMPA shall
make its best effort to fulfill such transmission investment obligation
by the commercial operation of Sherco 3. In the event the SMMPA
transmission investment has not been fulfilled by the commercial
operation date of Sherco 3, SMMPA shall pay NSP for transmission service
for the balance owed NSP based on the following formula:
Monthly Charge = X x Y x T
-- -
12 Z
Where:
T = Maximum transmission obligation pursuant to Section
1.01, hereof.
X = NSP's annual firm power wheeling rate as accepted
for filing by the Federal Energy Regulatory
Commission expressed in $/Kw.
Y = SMMPA's remaining investment obligation owed NSP.
Z = SMMPA's total investment obligation pursuant to
Article II, hereof.
2.02 SMMPA's investment obligation stated in Section 2.01
shall be adjusted by the smaller of the following:
(a) The proportionate change between January 1, 1981 and the date
of SMMPA's investment based on the Handy-Whitman Total
Transmission Plant Index in the North Central Region, or
(b) 6% per annum increase from January 1, 1981 and the date of
SMMPA's investment.
2.03 NSP shall have the unrestricted right to use the
transmission facilities provided by SMMPA as set forth in Section 2.01
hereof.
ARTICLE III
Transmission Buy Back
3.01 At the time Sherco 3 is retired by the Parties pursuant
to the Ownership Agreement, NSP shall purchase the transmission
facilities owned by SMMPA pursuant to Article II hereof for SMMPA's
original costs, less depreciation at 2.7% per year.
3.02 If Sherco 3 does not reach commercial operation, by
January 1, 1991, NSP shall be obligated to purchase the transmission
facilities owned by SMMPA pursuant to Article II hereof for SMMPA's
original costs plus interest from the date of SMMPA's investment to
NSP's purchase. The interest rate shall be the average of: 1) cost of
capital for NSP approved in the most recent Minnesota jurisdiction
electric rate case and 2) the average interest rate of SMMPA's
outstanding revenue bond issues.
ARTICLE IV
Operation
4.01 Operation and Maintenance
NSP shall assume full responsibility for the operation, and
SMMPA shall assume full responsibility for the proper maintenance and
replacement of the transmission facilities to be constructed or
purchased by SMMPA pursuant to Article II hereof. SMMPA shall pay NSP
for operation of these facilities at NSP's average operating costs per
mile for the same voltage class. The cost of maintenance and
replacement of equipment and facilities, shall be borne by the Party
providing such equipment and facilities unless such maintenance was
occasioned by the negligence of the other Party, in which event such
cost shall be borne by the negligent Party. Through mutual agreement,
one Party may accept the maintenance responsibility for all or a portion
of the other Party s facilities on a continuous or temporary basis. In
such instances, the owning Party shall pay the Party performing the
maintenance for the cost incurred. In the event the owning Party
requests the other Party to perform maintenance work on facilities for
which mutual agreement for performing the maintenance has not been
obtained, or in the event of an emergency requiring repair or
replacement, the other Party may perform the necessary work on the
owning Party's facility, and within fifteen (15) days of the billing
therefore, the owning Party shall reimburse the other Party for the cost
thereof, which shall include the actual cost of labor, materials,
transportation and applicable overheads. Late payments shall bear
interest at the average daily prime rates published in the "Money Rates"
section of the Wall Street Journal for each day from the date due to
date of payment.
4.02 SMMPA shall pay NSP for SMMPA's share of NSP's cost of
providing control of the transmission system for delivery of SMMPA's
Sherco 3 power and energy to DPC and ISP points of inter-connection with
NSP in accordance with Exhibit A, attached hereto and made a part
hereof.
4.03 Delivery and Losses
When SMMPA schedules generation from Sherco 3 for delivery to
the DPC or ISP systems, the power and energy scheduled shall be
delivered to such system less losses. Such losses shall be determined
from time to time by the Parties; and, initially, the losses shall be
3% of the power and energy to be delivered.
4.04 Continuity of Service
The Parties shall use all reasonable care to provide
continuous delivery of electric energy unless they are prevented from
doing so for the following reasons:
a. Interruptions or reductions due to uncontrollable forces
which, by exercise of due diligence and foresight, could not
reasonably have been avoided. The term "uncontrollable
forces" shall be deemed to mean any cause beyond the control
of the Party affected, including, but not limited to, failures
of facilities, flood, earthquake, storm, fire, lightning,
epidemic, war, riots, civil disturbance, labor disturbance,
sabotage, and restraint by court or public authority. The
Party rendered unable to fulfill any obligation by reason of
uncontrollable forces shall exercise due diligence to remove
such inability with all reasonable dispatch.
b. Interruptions or reductions due to operation of devices
installed for electric system protection.
c. Temporary interruptions or reductions which are necessary or
desirable for the purposes of maintenance, repairs,
replacements, installation of equipment, or investigation and
inspection. Each Party shall give the other Party reasonable
advance notice of such interruptions or reductions, except in
case of an emergency as determined by the Party creating the
interruption or reduction, and shall remove the cause thereof
with all reasonable dispatch.
ARTICLE V
General
5.01 Liability
Each Party shall be responsible for its own facilities and
personnel used in the performance of this Agreement and neither Party
shall be responsible to the other for damage to or loss of property,
wherever located, unless this damage or loss is occasioned by its own
negligence or by the negligence of its employees or agents.
Notwithstanding any language to the contrary herein, NSP and SMMPA shall
have no liability to each other for any loss of use, cost of purchased
or replacement power, interest charges or cost of capital, or claims of
customers or for any other indirect, special, consequential, loss of
revenue or loss of profit damages of any type from any cause howsoever
arising.
Furthermore, nothing in this Agreement shall be construed to be nor
shall in fact give any third party beneficiary or related rights to any
customers, members or other third party dealing with either NSP or
SMMPA.
5.02 Waivers
A waiver by either Party of the other Party's default shall
not be deemed a waiver of any other or subsequent defaults.
5.03 Right of Access
Each of the Parties shall give authorized agents and employees
of the other Party the right to enter upon its transmission facilities
at all reasonable times for the purpose of constructing, testing,
repairing, renewing, exchanging or removing any or all of its equipment
which may be located on the property of the other Party or performing
any work incident to rendering service under this Agreement, provided,
however, each Party shall have the right to designate certain parts of
its premises where entry of employees or agents of the other Party is
prohibited unless such employees or agents are accompanied by an
authorized employee or agent of the Party owning such premises.
5.04 Notices
Any notices, demands or requests required or authorized by
this Agreement to be delivered by one Party to the other shall be
properly delivered if mailed, postage prepaid, to the chief executive
officer of the respective Party.
5.05 Successors and Assigns
This Agreement shall be binding upon the inure to the benefit
of the Parties, their successors and assigns.
5.06 Interpretation
The Agreement shall not be interpreted to limit the right or
either Party hereafter to design, construct, acquire or own any
facilities it deems desirable.
5.07 Limitations
This Agreement is not intended to and shall not create rights
of any character whatsoever in favor of any person, corporation,
association or entity other than the Parties of this Agreement and their
successors and assigns, and the obligations herein assumed are solely
for the use and benefit of the Parties to this Agreement and their
successors and assigns.
5.08 Term of Agreement
This Agreement shall become effective on the day, month and
year first above written and shall remain effective for a period of the
useful life of Sherco 3.
5.09 Authority
SMMPA hereby asserts and warrants it has full power and
authority to represent the member municipal political subdivisions and
to enter into this Agreement and to comply with the terms hereof. NSP
hereby asserts and warrants it has power and authority to enter into
this Agreement and to comply with the terms hereof.
5.10 No Partnership
Notwithstanding any provisions of this Agreement, NSP and
SMMPA do not intend to create hereby any joint venture, partnership,
association taxable as a corporation, or other entity for-the conduct
of any business for profit. NSP and SMMPA agree to take timely all
voluntary actions as may be necessary to be excluded from treatment as
a partnership under the Internal Revenue Code of 1954, as amended.
5.11 Governing Law
Validity, interpretation, and performance of this Agreement
and each of its provisions shall be governed by the laws of the State
of Minnesota.
5.12 Amendments
This Agreement may be amended by a written instrument duly
executed by the Parties thereto.
5.13 A Heading is Not to Affect Meaning
The description headings of the various articles and sections
of this Agreement have been inserted for convenience of reference only
and shall in no way modify or restrict any of the terms and provisions
hereof.
5.14 Regulatory Approval
This Agreement and the rights and obligations of the Parties
hereunder are subject to the prior receipt by the Parties of all
requisite governmental and regulatory approvals.
IN WITNESS WHEREOF, the Parties have caused this Agreement to
be duly executed and attested by their duly authorized officers as of
the day and year first above written.
ATTEST NORTHERN STATES POWER COMPANY
ATTEST SOUTHERN MINNESOTA MUNICIPAL
POWER AGENCY
SHERCO 3 OUTLET AGREEMENT
BETWEEN
NSP AND SMMPA
EXHIBIT A
Transmission Control
NSP shall provide control of the transmission system. The charge to
SMMPA for such service shall be based on NSP's average cost per MW.
Charge to SMMPA = A x B
_____
C
A = NSP's maximum transmission obligation pursuant to
Section
1.01 hereof.
B = NSP's total annual cost for transmission control.
C = Total maximum coincident demand on transmission
system.
SUPPLEMENT NO. 1
to the
SHERCO 3 OUTLET TRANSMISSION AGREEMENT
between
NORTHERN STATES POWER COMPANY
and
SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY
It is hereby agreed between Northern States Power Company, a
Minnesota corporation, and Southern Minnesota Municipal Power Agency,
a municipal corporation of the State of Minnesota, that
the Sherco 3 Outlet Transmission Agreement, dated April 27, 1982 between
said parties is amended as follows:
1. Exhibit A is deleted therefrom in its entirety and First
Revised Exhibit A, attached hereto, is substituted
therefor.
This Agreement is subject to the regulation of any regulatory
body having jurisdiction thereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the 20 day of July, 1982.
ATTEST NORTHERN STATES POWER COMPANY
ATTEST SOUTHERN MINNESOTA MUNICIPAL
POWER AGENCY
First Revised Exhibit A
SHERCO 3 OUTLET AGREEMENT
between
NSP and SMMPA
EXHIBIT A
Transmission Control
NSP shall provide control of the transmission system. The
charge to SMMPA for such service shall be based on NSP's average cost
per MW.
Charge to SMMPA = A x B
_____
C
A = NSP's maximum transmission obligation pursuant to
Section 1.01 hereof.
B = NSP's total annual cost for transmission control.
C = Total maximum coincident demand on transmission system.
In the event that SMMPA has not fulfilled its transmission
investment obligation set forth in Article II, the above charge will be
reduced to reflect that portion of NSP's annual cost for transmission
control which is included in NSP's annual firm power wheeling rate used
to calculate the "Monthly Charge" in Section 2.01.
EXHIBIT 10.03
POWER AGREEMENT
Between
NORTHERN STATES POWER COMPANY.
of the first part
and
THE MANITOBA HYDRO-ELECTRIC BOARD and
THE MANITOBA ENERGY AUTHORITY
of the second part
THIS AGREEMENT, made this 14th day of June, 1984, between
Northern States Power Company (NSP), a Minnesota corporation; and The
Manitoba Hydro-Electric Board (MHEB), a Manitoba corporation, and The
Manitoba Energy Authority (MEA), a Manitoba corporation (jointly and
severally hereinafter referred to as "Manitoba"); both parties
hereinafter individually called "Party, " or collectively "Parties".
WITNESSETH:
0.01 WHEREAS, NSP and B are the owners and operators of
electric generation and transmission facilities in the United States and
in Canada, respectively, and are engaged in the generation,
transmission, distribution and sale of electric energy; and
0.02 WHEREAS, the MEA has the authority to negotiate for the
purchase and import, and sale and export of electric energy to and from
the Province of Manitoba; and
0.03 WHEREAS, MHEB requires the approval of MEA for such
import and export and has been granted approval to enter into this
Agreement; and
0.04 WHEREAS, NSP, MHEB, Minnkota Power Cooperative and Otter
Tail Power Company have entered into a 230 Kv Interconnection
Coordinating Agreement, dated 16 January 1969, for the purposes of
conducting power and energy transactions; and
0.05 WHEREAS, NSP AND MHEB have-entered into a "Manitoba,
Canada - Minnesota, United States, Winnipeg - Twin Cities 500 Kv
Interconnection Coordinating Agreement" (Coordinating Agreement), dated
21 July 1976, providing for a 500 Kv interconnection, and for the
purpose of conducting power and energy transactions; and
0.06 WHEREAS, NSP and MHEB have entered into a Transactions
Agreement, dated 21 July 1976, which provides for certain power and
energy transactions the last of which is scheduled to terminate 30 April
1993; and
0.07 WHEREAS, MHEB intends to complete the partially
constructed Limestone Hydro Electric Generating Plant (Limestone)
consisting of ten generating units, in the early 1990's; and
0.08 WHEREAS, as a result of the construction of Limestone
Manitoba will have power available which Manitoba desires to sell and
NSP desires to purchase beginning in the early 1990's; and
0.9 WHEREAS, the Parties acknowledge that such a sale of
power would be beneficial to the Parties.
NOW THEREFORE, the Parties agree as follows:
ARTICLE I
SERVICE TO BE PROVIDED
1.01 Manitoba shall make 500 megawatts (MW) available to NSP
at the points of delivery for the twelve Contract Years beginning May
1, 1993 and ending April 30, 2005, subject to the conditions of Sections
1.04 and 1.05 herein. Each Contract Year shall commence on May 1 and
end on the following April 30th.
1.02 The hourly delivery of energy shall be scheduled by NSP
in accordance with guidelines set forth by the Coordinating Committee
established in the Coordinating Agreement. The minimum hourly schedule
shall not be less than 150 MW unless otherwise mutually agreed to by the
Parties.
1.03 The points of delivery for transactions under this
Agreement shall be the points of interconnection between MHEB and NSP
on the International Boundary between Canada and the United States of
America.
1.04 In the event of the unavailability of one or more
generating units at Limestone or the unavailability of sufficient High
Voltage Direct Current transmission from northern Manitoba to Winnipeg
(HVDC) due to planned or unplanned maintenance-or repairs. Manitoba may
reduce the 500 MW delivery. The maximum allowable reduction shall be
the greater of A or B:
A. 50 MW per unavailable Limestone unit provided such units
have been placed in commercial operation.
B. The lesser of:
i) The MW reduction from the rated load carrying capability
of the HVDC facilities. The rated load carrying
capability of the HVDC facilities shall be determined as
necessary by the Coordinating Committee; or
ii) The MW reduction required to enable Manitoba to meet its
firm load commitments from its available firm resources.
The definition of firm load and firm resources shall be
established by the Coordinating Committee.
1.05 In the event of the unavailability of the 500 Kv
facility from Winnipeg to Minneapolis the delivery will be limited to
the schedule that NSP can arrange on the remaining interconnections
between United States utilities and the Province of Manitoba.
1.06 Each Party shall at its own expense, operate and &
maintain its facilities to minimize as far as practicable reductions in
this transaction.
ARTICLE II
ENERGY DELIVERIES
2.01 Subject to Article I herein, NSP shall schedule the
capacity factor in each Contract Year. The Parties may mutually agree
to a different schedule in any given year. Manitoba shall have the
right to limit the capacity factor to a maximum of 80% in each summer
month, May through October, and 75% in each winter month, November
through April, of each Contract Year and the right to limit the annual
capacity factor to a maximum of 75% in each Contract Year.
2.02 At the end of each Contract Year, if the energy
delivered pursuant to Section 2.01 herein during the Contract Year is
less than 500 MW at a 75% capacity factor, the Parties will either:
a) Make the payments herein described in Section 5.05 and
Section 5.06 where appropriate; or
b) Agree to some other arrangement in respect of the energy
not delivered.
ARTICLE III
BASIS FOR PRICING
3.01 The price of capacity and energy purchased by NSP from
Manitoba under this Agreement shall be based upon the cost to NSP of
capacity and energy from NSP's share of the Sherburne County Unit 3
(Sherco 3) generating unit.
3.02 Sherco 3 is the third generating unit at the NSP power
plant in Sherburne County, Minnesota generally known as Sherco. Sherco
3 is being jointly constructed and will be jointly owned and operated
by NSP, Southern Minnesota Municipal Power Agency and United Minnesota
Municipal Power Agency.
3.03 NSP shall provide Manitoba with sufficient data to
document NSP's cost of owning and operating its share of Sherco 3,
including Sherco 3's share of existing and future facilities used in
common with one or more other generating units located at Sherco.
3.04 The costs of owning and operating NSP's share of Sherco
3 shall be in accordance with the provisions set forth in the "Sherburne
County Generating Unit No. 3 Ownership and Operating Agreement" among
NSP, Southern Minnesota Municipal Power Agency and United Minnesota
Municipal Power Agency, dated January 10, 1983 and as may be amended.
3.05 Manitoba shall have the right to review the books and
records concerning details of costs applicable to Sherco 3 to ensure
that such books and records are in accordance with the "Sherburne County
Generating Unit No. 3 Ownership and Operating Agreement" and sound
accounting practice. This review shall be by an independent auditor
agreed upon by the Parties.
ARTICLE IV
CAPACITY PRICING
4.01 Manitoba shall bill NSP monthly beginning May 31, 1993,
and NSP shall pay for the 500 MW capacity purchase as follows:
Monthly Capacity Bill = 1 x 0.8 x 500,000 x CI x LARR x Adj
----
12
Where: 500,000 is the capacity sale in kilowatts (Kw).
CI is the Capital Investment in $/Kw described herein.
LARR is the Levelized Annual Revenue Requirement
described herein.
Adj is the Adjustment Factor described herein and
reflects the fact that the contract term is shorter
than the life of Sherco 3.
4.02 CI will be the Total Installed Cost of NSP's share of
Sherco 3 escalated to May 1, 1993 and divided by the average summer
season Permanent Accredited Generating Capability between 1988 and 1993
of NSP's share of Sherco 3, as demonstrated to the Mid Continent Area
Power Pool or its successor organization.
4.03 The Total Installed Cost will be the capital costs
associated with Sherco 3 at the time Sherco 3 begins commercial
operation, defined in accordance with the "FERC Uniform System of
Accounts, Electric Plant Instruction #3, Components of Construction
Costs", as modified under the terms of the "Sherburne County Generating
Unit No. 3 Ownership and Operating Agreement" to account for Sherco 3's
portion of the facilities used in common with one or more other
generating units located on the Sherco plant site.
4.04 The Total Installed Cost shall be escalated to May 1,
1993 using the Handy-Whitman Index of Public Utility Construction Costs
for Fossil Steam Production Plants (identified as Total Steam Production
Plant) in the North Central Region (H-W Index) assuming a uniform daily
escalation rate between reporting dates of the Index. The daily
escalation between January 1, 1993 and May 1, 1993 shall be equal to the
daily escalation between July 1, 1992 and January 1, 1993. This Total
Installed Cost, except as provided in Section 4.06, shall remain fixed
for the term of this Agreement.
4.05 In the event Sherco 3 does not begin commercial
operation prior to May 1, 1993, CI shall be $1294/Kw as of January 1,
1988 escalated as above to May 1, 1993. When Sherco 3 begins commercial
operation, the Total Installed Cost will be de-escalated to May 1, 1993
using the H-W Index to determine the new CI to be used from the date of
commercial operation.
4.06 In the event additional capital investments are required
on Sherco 3 to meet United States federal regulations, an additional
monthly capacity charge shall be determined using the formula described
in Section 4.01. Each individual monthly capacity charge shall become
effective one month subsequent to the month that the expenditure is
classified as depreciable property in accordance with the "FERC Uniform
System of Accounts, Electric Plant Instruction #3, Components of
Construction Costs". If an expenditure is classified prior to May 1,
1993, it shall be escalated from the date it is classified to May 1,
1993 using the procedures described in Section 4.04. For these
additional capital investments Adj shall be determined based on the life
of the investments considering the difference between the date of Sherco
3 commercial operation and May 1, 1993 and on the Contract Years
remaining at the time the investments are made.
4.07 LARR shall be defined as:
(Return + Depreciation + Income Taxes - Allowance For
- Funds Used During Construction)
- --------------------------------------------------------
Total Investment
LARR shall be determined for each Contract Year using the Cost of
Capital components and formula defined in Schedule 1.
4.08 Adj shall be determined for each Contract Year using the
following formula:
33 12 12
Adj = (1 + D) - 1 (1 + D) - (1 + E)
------------- x -------------------
12 33 33
(1 + D) - 1 (1 + D) - (1 + E)
Where: D is the Cost of Capital as defined in Schedule 1.
E is the effective annual escalation rate during the
five year period before each Contract Year as
determined from the H-W Index, expressed as a percent
and divided by 100.
33 is the life in years of Sherco 3.
12 is the twelve Contract Years.
If D=E, the Adjustment Factor shall be:
33 (12-1)
Adj = (1 + D) - 1 12 (1 + E)
------------- x ------------------
12 (33-1)
(1 + D) - 1 33 (1 + E)
ARTICLE V
ENERGY PRICING
5.01 Manitoba shall bill NSP monthly beginning May 31, 1993,
and NSP shall pay for the energy delivered as follows:
Monthly Energy Bill = 0.8 x (Fixed Operating Costs + Variable
Operating Costs).
Where: Fixed Operating Costs and Variable Operating Costs
are as defined by formula in Schedule 2.
5.02 Beginning in 1992, on or before December 15 of each
year, NSP shall provide Manitoba an estimate of the Fixed Operating
Costs and the Variable Operating Costs for the following year by month.
These estimates shall be the basis for the monthly energy billing.
5.03 Beginning with June 1993, by the twentieth day of each
month, NSP shall notify Manitoba of the actual Fixed Operating Costs and
the actual Variable Operating Costs as defined in Schedule 2 for the
proceeding month. These actual costs shall be used to adjust the
current month's billing to account for any differences between the
estimated costs and actual costs for the previous month.
5.04 In the event Sherco 3 is abandoned, retired, or NSP
relinquishes its share of Sherco 3 prior to April 30, 2005, Fixed and
Variable Operating Costs shall be based on the average Fixed and
Variable Operating Costs of NSP's Sherco 1 and Sherco 2 generating
units.
5.05 In accordance with Section 2.02 herein, at the end of
each Contract Year Manitoba shall bill NSP and NSP shall pay as follows:
NSP Payment = (L - A) x 0.8 x B
where: L - is 3,294,000 Mwh for the Contract Years ending
April 30, 1996, April 30, 2000 and April 30, 2004 and
3,285,000 Mwh for the other nine Contract Years.
A - is the energy delivered to NSP pursuant to
Section 2.01 herein during the Contract Year
expressed in Mwh.
B - is the Variable Operating Costs for the Contract
Year as determined in accordance with Schedule 2,
divided by the energy delivered, A, to express it in
$/Mwh.
5.06 In accordance with Section 2.02 herein, at the end of
each Contract Year if the delivery of energy scheduled by NSP has been
restricted under Sections 1.04 and/or 1.05 herein, NSP shall bill
Manitoba and Manitoba shall pay the lesser of the following:
P = C x 1.2 x B + F x 0.8 x B; or
L - A
1 -----
P = P x C + F
where: A, B and L are as defined in Section 5.05 herein.
C - is the amount of energy scheduled for delivery by
NSP during the Contract Year pursuant to Section 2.01
herein for which delivery was restricted pursuant to
Section 1.04 herein, expressed in Mwh.
F - is the amount of energy scheduled for delivery by
NSP during the Contract Year pursuant to Section 2.01
herein for which delivery was restricted pursuant to
Section 1.05 herein, expressed in Mwh.
ARTICLE VI
ADVERSE WATER PROVISIONS
6.01 During the contract period, in the event of adverse
water conditions in MHEB's watershed, NSP shall deliver to Manitoba upon
request a maximum of 1,500,000 Mwh of energy in any twelve month period
to allow Manitoba to fulfill its obligation under this Agreement.
6.02 This energy shall be that available from generation on
the NSP system after NSP has made provision to supply its firm energy
commitments, including firm sales to other utilities.
6.03 Manitoba shall pay NSP for the energy delivered an
amount equal to NSP's cost of providing such energy plus the average
percent markup NSP received from energy sales to U.S. utilities during
the previous twelve month period or plus 10% of NSP's cost of providing
such energy, whichever is greater.
ARTICLE VII
GENERAL
7.01 All references to costs and provision for payments
herein shall be in the currency of the United States of America. All
billing shall be in accordance with the procedure specified in the
Coordinating Agreement, or with any other procedure agreed to by the
Parties, provided however that all payments due to Manitoba hereunder
shall be made to MEA as Manitoba may from time to time direct.
7.02 Except as otherwise provided herein, the transactions
under this Agreement shall be made in accordance with the Coordinating
Agreement.
7.03 NSP and MHEB are parties to agreements with other power
suppliers which provide for interconnection, interchange and pooling of
electrical services. This Agreement shall not affect the obligations
and rights of a Party with respect to such agreements.
7.04 A Party shall not be held responsible or liable for any
loss or damage resulting from failure to perform its obligations
hereunder as a result of any cause beyond its control, including but not
limited to, acts of God, strikes, injunctions, or breakdown. A Party
shall be prompt and diligent in removing the cause of such failure to
perform, but nothing herein contained shall be construed as permitting
a Party to continue to fail to perform after said cause has been
removed.
7.05 If Manitoba fails to make available capacity and/or
deliver energy as provided in this Agreement for any reasons other than
those for which performance is excused herein, Manitoba shall reimburse
NSP at the end of the Contract Year for any costs incurred in that
Contract Year as a result of the failure, including payments to
Manitoba.
7.06 This Agreement is not intended to and shall not create
rights of any character whatsoever in favour of any person, corporation,
association, or entity other than the Parties, and the obligations
herein assumed are solely for the use and benefit of the Parties.
7.07 This Agreement shall be binding upon and its benefits
inure to the Parties and their successors and assigns except that this
Agreement and any of the rights and obligations hereunder shall not be
assigned by a Party without the written consent of the other Party,
which consent shall not be unreasonably withheld.
7.08 For any controversy, claim or dispute arising out of
this Agreement or the breach thereof, the matter shall at the written
request of either Party, be referred to and determined by a single
arbitrator or, if the Parties are unable to agree upon the choice of a
single arbitrator, then three arbitrators, one chosen by each Party and
the third selected by the two arbitrators so chosen.
7.09 Any notices, demands, or requests, required or
authorized by this Agreement, shall be in writing addressed as follows:
The President, Northern States Power Company, 414 Nicollet Mall,
Minneapolis, Minnesota 55401, if to NSP; and to the President, Manitoba
Hydro, 820 Taylor Avenue, Winnipeg, Manitoba, R3C 2P4, if to MHEB; and
to the Chairman, Manitoba Energy Authority, 606 - 330 Graham Avenue,
Winnipeg, Manitoba, R3C 4E3, if to MEA; and shall be deemed accomplished
upon actual receipt by the Party to whom addressed. Notice to Manitoba
shall be given to both MEA and to MHEB. The designation of the persons
to be notified or the address of such persons may be changed at any time
by similar notice.
7.10 This Agreement may be terminated or suspended by or as
a result of an order of the Department of Energy in case of war or other
emergency, as provided in the Federal Power Act as amended, or by or as
a result of an order of the National Energy Board of Canada in case of
war or other emergency, but this Agreement shall become effective again
as soon as such order is rescinded or the approval for connection and
transfer of power and energy is again secured.
7.11 This Agreement is subject to the regulation of the
National Energy Board of Canada with respect to Manitoba, and to the
regulation of any regulatory body having jurisdiction with respect to
NSP.
7.12 This Agreement shall not become effective until all
necessary approvals have been received provided, however, in the event
the terms or conditions of this Agreement are materially altered in the
approval process, the Agreement shall not become effective until such
alterations are approved by the Parties in writing.
7.13 Subject to Sections 7.11 and 7.12, this Agreement shall
become effective on the date first above written and shall continue in
full force and effect until April 30, 2005.
7.14 All rights and obligation of the Parties under the
Memorandum of Understanding dated March 8, 1984 shall cease and
terminate on the execution of this Agreement, which supersedes said
Memorandum of Understanding.
IN WITNESS WHEREOF, the Parties have caused this Agreement to
be executed by their duly authorized officers as of the day and year
first above written.
Northern States Power Company
By:
Chairman, President and CEO
And
Assistant Secretary
The Manitoba Hydro-Electric Board
By:
President and Chief Executive
Officer
And
Assistant Secretary
The Manitoba Energy Authority
By:
Chairman
SCHEDULE 1
(ARTICLE IV)
The Levelized Annual Revenue Requirement (LARR) and the Cost of Capital
(D) shall be calculated at the beginning of each Contract Year and shall
be determined using the definitions and formulas shown below. LARR and
D shall be expressed as a fraction and rounded to the nearest ten-
thousandth.
LARR = (1.2689 + 0.1553 (WD + WS) + 0.2748 (WP + WC))2
-----------------------------------------------
100
D = WD + WS + WP + WC
-----------------
100
where:
WD = The average weighted cost of long-term debt
expressed in percent.
WS = The average weighted cost of short-term debt
expressed in percent.
WP = The average weighted cost of preferred equity
expressed in percent.
WC = The average weighted cost of common equity
expressed in percent.
The weighted costs of long-term debt, short-term debt, preferred stock
and common equity shall be determined based on the cost rates and
capital structure used by the Minnesota Public Utilities Commission
(MPUC) to determine the overall rate of return granted in final orders
with respect to rate of return and capital structure for NSP's Minnesota
electric retail jurisdiction (hereinafter called the MPUC Orders). MPUC
Orders shall be those Orders effective on May 1 of each Contract Year
and as of May 1 of the preceding four years. Capitalization ratios
rounded to the nearest ten-thousandth shall be determined using the
following formulas:
Long-term debt capitalization ratio (CRD) = AD/(AD+AS+AP+AC)
Short-term debt capitalization ratio (CRS) = AS/(AD+AS+AP+AC)
Preferred equity capitalization ratio (CRP) = AP/(AD+AS+AP+AC)
Common equity capitalization ratio (CRC) = AC/(AD+AS+AP+AC)
where: AD, AS, AP and AC are, respectively, the dollar
amounts of long-term debt, short-term debt,
preferred equity and common equity employed in the
MPUC Orders.
The cost rates for long-term debt, short-term debt and preferred equity
used to determine D shall be those approved in the MPUC Orders. The
cost rate for common equity used to determine D shall be the return on
common equity approved in the MPUC Orders, adjusted to reflect any
difference between the rate base approved in each MPUC Order and the
capitalization corresponding to that rate base.
The following formula shall be used to determine the Common Equity Cost
Rate to be used herein:
Common Equity Cost Rate (CC) = RAC + (RB-CAP) x
ROR/(CRCxCAP)
where:
RAC = The return on common equity specified in the MPUC
Orders expressed in percent.
RB = The dollar amount of the rate base approved in the
MPUC Orders.
CAP = The dollar amount of the capitalization
corresponding to the above rate base. The
capitalization used herein will reflect the
relationship between rate base and capitalization
applicable to the MPUC Order. Currently, this is
equal to rate base less accumulated deferred
investment tax credits.
ROR = The overall rate of return granted in the MPUC
Orders expressed in percent.
CRC = The common equity capitalization ratio expressed as
a ratio.
In the event the interest deduction used to determine income taxes in
the MPUC Order reflects interest on rate base rather than interest on
capitalization, the following formula shall be used for such years the
Order is in effect to determine the Common Equity Cost Rate to be used
herein:
Common Equity Cost Rate (CC) = RAC + (RB-CAP) x
(ROR-(WX+WY)xt)/(CRC x CAP)
where: All terms are obtained from the same MPUC Order and
RAC, RB, CAP, ROR and CRC are as described above.
WX = The weighted cost of long-term debt approved in the
MPUC Order expressed in percent.
WY = The weighted cost of short-term debt approved
in the MPUC Order expressed in percent.
t = The composite federal and state income tax rate
employed in the MPUC Order expressed as a fraction.
The weighted cost of long-term debt as of May 1 of each year shall be
based on the MPUC Order in effect on May 1 of that year and determined
by multiplying the long-term debt capitalization ratio times the long-
term debt cost rate expressed as a percent. WD for each Contract Year
will be determined by summing the weighted cost of long-term debt as of
May 1 of that Contract Year and as of May 1 of the preceding four years
and dividing that summation by five.
WS, WP and WC shall be determined using the same procedure and using the
respective capitalization ratios and cost rates.
Schedule 2
(ARTICLE V)
Fixed Operating Costs (FOC) = (OC-(VMR x EP) + (CF x ZNL)) x 500
---
MAC
Where: OC = The monthly Operating Costs and shall include all
costs and expenses (other than-fuel costs) incurred in respect
of the management, control, operation and maintenance of
Sherco 3, including without limitation that portion of
administrative and general expenses incurred by NSP determined
to be allocable to Sherco 3. OC shall consist of all items
which were properly recordable as a production expense in
accordance with the United States Federal Energy Regulatory
Commission (FERC) Uniform System of Accounts as of the date of
this Agreement. Without limiting the generality of the
foregoing, OC shall include fixed fuel transportation costs
(if any), carrying charges associated with the cost of fuel
required to establish initial inventory on May 1, 1993 and any
property taxes or payments in lieu thereof levied against
Sherco 3.
VMR = The Variable Maintenance Rate expressed in $/Mwh. The
Variable Maintenance Rate is $1.325/Mwh in 1984 and shall be
escalated to the current Contract Year as follows:
$0.825/Mwh times the ratio of the Cost Index in the
current Contract Year to the Cost Index in 1984, such Cost
Index being the Handy-Whitman Index of Public Utility
Construction Costs for Boiler Plant Equipment-Coal Fired
in the North Central Region, plus $0.50/Mwh times the
ratio of the weighted average hourly wage rate in the
current Contract Year to the weighted average hourly wage
rate in 1984, as stated in the labor agreement between NSP
and the International Brotherhood of Electrical Workers or
any successor agreement.
The method of determining VMR and its value shall be reviewed
annually by the Coordinating Committee.
EP = The monthly production of NSP's share of Sherco 3
expressed in Mwh.
CF = Cost of Coal expressed in dollars per million British
Thermal Units ($/MBTU) as determined below.
ZNL = The monthly coal consumed expressed in MBTU had Sherco
3 operated all hours of the month such that NSP's share of the
Sherco 3 gross output equalled NSP's share of the total
auxiliary energy consumption (Zero Net Load).
MAC = The Monthly Accredited Capability expressed in MW of
NSP's share of Sherco 3.
Variable Operating Costs (VOC) = (FC x CF) + (VMR x MED)
Where: FC = The Fuel Consumption expressed in MBTU and shall
be the total monthly coal consumed above ZNL by Sherco 3 had
Sherco 3 produced energy equal to the energy delivered to NSP
from Manitoba. FC shall be determined on an hourly basis and
shall be the Mwh delivered to NSP from Manitoba multiplied by
the coal consumed above ZNL, expressed in MBTU/Mwh, had Sherco
3 been operating at a net output equal to the same percentage
of its monthly accredited capability as the delivery is of 500
MW.
MED = The total monthly energy delivered to NSP by Manitoba
expressed in Mwh.
The Cost of Coal (CF) = BC x ESC
Where: BC = The Base Fuel Cost and shall be the delivered cost
of the primary coal supply for NSP's share of Sherco 3
effective May 1, 1993, as reported to FERC expressed in
$/MBTU.
ESC = The ratio of the Sherco 3 primary coal price for NSP at
the point of origin in the current month expressed in $/MBTU
to that portion of BC which is the Sherco 3 primary coal price
for NSP at the point of origin effective May 1, 1993.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> UT EXHIBIT 27
Exhibit 27.01
Financial Data Schedule
This schedule contains summary financial information extracted from the
Statements of Income, Balance Sheets and Statements of Cash Flows and
is qualified in its entirety by referencing to such financial statements.
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-END> SEP-30-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 4,224,646
<OTHER-PROPERTY-AND-INVEST> 453,531
<TOTAL-CURRENT-ASSETS> 598,069
<TOTAL-DEFERRED-CHARGES> 375,965
<OTHER-ASSETS> 129,472
<TOTAL-ASSETS> 5,781,683
<COMMON> 167,264
<CAPITAL-SURPLUS-PAID-IN> 545,328
<RETAINED-EARNINGS> 1,181,597
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,891,153
0
240,469
<LONG-TERM-DEBT-NET> 1,311,938
<SHORT-TERM-NOTES> 2,057
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 250,348
<LONG-TERM-DEBT-CURRENT-PORT> 155,851
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,929,867
<TOT-CAPITALIZATION-AND-LIAB> 5,781,683
<GROSS-OPERATING-REVENUE> 1,877,754
<INCOME-TAX-EXPENSE> 108,429
<OTHER-OPERATING-EXPENSES> 1,529,072
<TOTAL-OPERATING-EXPENSES> 1,637,501
<OPERATING-INCOME-LOSS> 240,253
<OTHER-INCOME-NET> 30,661
<INCOME-BEFORE-INTEREST-EXPEN> 270,914
<TOTAL-INTEREST-EXPENSE> 76,246
<NET-INCOME> 194,668
9,210
<EARNINGS-AVAILABLE-FOR-COMM> 185,458
<COMMON-STOCK-DIVIDENDS> 131,233
<TOTAL-INTEREST-ON-BONDS> 69,154
<CASH-FLOW-OPERATIONS> 394,163
<EPS-PRIMARY> 2.78
<EPS-DILUTED> 0
</TABLE>
