SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended January 3, 1998.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Commission File Number 1-13572
THERMO ECOTEK CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 04-3072335
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
245 Winter Street, Suite 300
Waltham, Massachusetts 02154
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 622-1000
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 January 30, 1998
---------------------------- -------------------------------
Common Stock, $.10 par value 24,375,995
PAGE
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMO ECOTEK CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
January 3, September 27,
(In thousands) 1998 1997
------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 54,480 $ 83,540
Restricted funds 14,104 20,773
Accounts receivable and unbilled revenues 33,572 33,039
Inventories:
Raw materials and supplies 15,975 11,886
Work in process and finished goods 7,301 2,030
Prepaid income taxes 4,467 4,298
Other current assets 1,449 1,728
-------- --------
131,348 157,294
-------- --------
Property, Plant, and Equipment, at Cost 352,203 328,837
Less: Accumulated depreciation and
amortization 70,831 65,770
-------- --------
281,372 263,067
-------- --------
Due from Parent Company 10,164 10,164
-------- --------
Long-term Available-for-sale Investments,
at Quoted Market Value (amortized cost
of $8,504 in fiscal 1998 and 1997) 14,879 12,497
-------- --------
Restricted Funds 21,175 20,905
-------- --------
Other Assets 19,511 21,378
-------- --------
$478,449 $485,305
======== ========
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THERMO ECOTEK CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
January 3, September 27,
(In thousands except share amounts) 1998 1997
------------------------------------------------------------------------
Current Liabilities:
Current portion of long-term obligations $ 31,183 $ 35,012
Accounts payable 3,028 4,031
Lease obligations payable 5,544 1,736
Accrued interest 949 3,524
Other accrued expenses 21,751 21,022
Due to parent company 956 1,255
-------- --------
63,411 66,580
-------- --------
Long-term Obligations:
Nonrecourse tax-exempt obligations 37,600 51,800
Subordinated convertible debentures (includes
$68,500 due to parent company in fiscal
1998 and 1997) 126,618 130,648
Capital lease obligations 17,204 22,242
-------- --------
181,422 204,690
-------- --------
Deferred Income Taxes 54,188 49,934
-------- --------
Other Deferred Items 16,157 13,521
-------- --------
Minority Interest 7,951 3,304
-------- --------
Shareholders' Investment:
Common stock, $.10 par value, 50,000,000
shares authorized; 26,275,395 and
25,978,198 shares issued 2,628 2,598
Capital in excess of par value 99,506 95,573
Retained earnings 76,851 67,593
Treasury stock at cost, 1,860,061 and
1,477,250 shares (27,544) (20,872)
Cumulative translation adjustment (9) (52)
Net unrealized gain on available-for-sale
investments 3,888 2,436
-------- --------
155,320 147,276
-------- --------
$478,449 $485,305
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMO ECOTEK CORPORATION
Consolidated Statement of Income
(Unaudited)
Three Months Ended
---------------------------
January 3, December 28,
(In thousands except per share amounts) 1998 1996
-----------------------------------------------------------------------
Revenues $47,809 $38,514
------- -------
Costs and Operating Expenses:
Cost of revenues (includes $1,523 and
$1,241 to related parties) 31,395 26,228
Selling, general, and administrative
expenses (includes $478 and $412 to
related parties) 5,574 2,819
------- -------
36,969 29,047
------- -------
Operating Income 10,840 9,467
Interest Income 1,540 1,396
Interest Expense (includes $685 to parent
company in fiscal 1998 and 1997) (3,621) (3,537)
Gain on Issuance of Stock by Subsidiary
(Note 3) 4,055 -
Equity in Earnings (Loss) of Joint Venture 43 (26)
------- -------
Income Before Provision for Income Taxes and
Minority Interest 12,857 7,300
Provision for Income Taxes 3,326 2,749
Minority Interest Expense 273 251
------- -------
Net Income $ 9,258 $ 4,300
======= =======
Earnings per Share (Note 4):
Basic $ .38 $ .18
======= =======
Diluted $ .25 $ .12
======= =======
Weighted Average Shares (Note 4):
Basic 24,412 24,507
======= =======
Diluted 39,456 37,882
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMO ECOTEK CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
-------------------------
January 3, December 28,
(In thousands) 1998 1996
------------------------------------------------------------------------
Operating Activities:
Net income $ 9,258 $ 4,300
Adjustments to reconcile net income to net
cash provided by operating activities:
Minority interest expense 273 251
Depreciation and amortization 5,540 5,160
Gain on issuance of stock by subsidiary
(Note 3) (4,055) -
Increase in deferred income taxes 3,324 2,749
Changes in current accounts, excluding
the effect of acquisition:
Restricted funds 6,669 (14,252)
Accounts receivable and unbilled
revenues (553) 6,233
Inventories (638) (1,684)
Other current assets 279 497
Accounts payable (1,006) 1,213
Lease obligations payable 3,808 3,808
Due to parent company (299) (650)
Other current liabilities (2,220) (51)
-------- --------
Net cash provided by operating activities 20,380 7,574
-------- --------
Investing Activities:
Acquisition (Note 2) (19,100) -
Funding of long-term restricted funds (270) (2,133)
Increase in other deferred items 2,636 1,633
Increase in other assets (193) -
Purchases of property, plant, and equipment (11,128) (6,570)
-------- --------
Net cash used in investing activities (28,055) (7,070)
-------- --------
Financing Activities:
Repayment of long-term obligations (18,400) -
Payments under capital lease obligations (4,703) -
Net proceeds from issuance of Company and
subsidiary common stock (Note 3) 9,020 65
Purchases of Company common stock (6,877) -
Distribution to minority partner (453) (487)
-------- --------
Net cash used in financing activities (21,413) (422)
-------- --------
Exchange Rate Effect on Cash 28 -
-------- --------
Increase (Decrease) in Cash and Cash Equivalents (29,060) 82
Cash and Cash Equivalents at Beginning of Period 83,540 63,238
-------- --------
Cash and Cash Equivalents at End of Period $ 54,480 $ 63,320
======== ========
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THERMO ECOTEK CORPORATION
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Three Months Ended
-------------------------
January 3, December 28,
(In thousands) 1998 1996
------------------------------------------------------------------------
Noncash Activities:
Fair value of assets of acquired company $ 19,825 $ -
Cash paid for acquired company (19,100) -
-------- --------
Liabilities assumed of acquired company $ 725 $ -
======== ========
Conversion of noninterest-bearing
subordinated convertible debentures $ 4,030 $ 9,522
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMO ECOTEK CORPORATION
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by Thermo Ecotek Corporation (the Company) without audit and, in
the opinion of management, reflect all adjustments of a normal recurring
nature necessary for a fair statement of the financial position at
January 3, 1998, and the results of operations and cash flows for the
three-month periods ended January 3, 1998, and December 28, 1996. The
Company's results of operations for the three-month periods ending
January 3, 1998, and December 28, 1996, include 14 weeks and 13 weeks,
respectively. Interim results are not necessarily indicative of results
for a full year.
The consolidated balance sheet presented as of September 27, 1997,
has been derived from the consolidated financial statements that have
been audited by the Company's independent public accountants. The
consolidated financial statements and notes are presented as permitted by
Form 10-Q and do not contain certain information included in the annual
financial statements and notes of the Company. The consolidated financial
statements and notes included herein should be read in conjunction with
the financial statements and notes included in the Company's Annual
Report on Form 10-K for the fiscal year ended September 27, 1997, filed
with the Securities and Exchange Commission.
2. Acquisition
In November 1997, the Company's Thermo Trilogy Corporation subsidiary
acquired the sprayable bacillus thuringiensis (Bt) - biopesticide
business of Novartis AG and its affiliates (the Bt business of Novartis)
for $19.1 million in cash and the assumption of certain liabilities.
This acquisition has been accounted for using the purchase method of
accounting, and the results of operations of the Bt business of Novartis
have been included in the accompanying financial statements from the date
of acquisition. The cost of this acquisition equaled the estimated fair
value of the net assets acquired. Allocation of the purchase price was
based on an estimate of the fair value of the net assets acquired and is
subject to adjustment upon finalization of the purchase-price allocation.
The Company has gathered no information that indicates the final
allocation will differ materially from the preliminary estimate. Based on
unaudited data, the following table presents selected financial
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THERMO ECOTEK CORPORATION
2. Acquisition (continued)
information for the Company and the Bt business of Novartis on a pro
forma basis, assuming that the Bt business of Novartis had been purchased
at the beginning of fiscal 1997.
Three Months Ended
------------------------
January 3, December 28,
(In thousands except per share amounts) 1998 1996
-----------------------------------------------------------------------
Revenues $51,042 $44,520
Net income 9,429 4,874
Earnings per share:
Basic .39 .20
Diluted .26 .14
The pro forma results are not necessarily indicative of future
operations or the actual results that would have occurred had the
acquisition of the Bt business of Novartis been made at the beginning of
fiscal 1997.
3. Issuance of Stock by Subsidiary
At the time a subsidiary sells its stock to unrelated parties at a
price in excess of its book value, the Company's net investment in that
subsidiary increases. If at that time the subsidiary is an operating
entity and not engaged principally in research and development, the
Company records the increase as a gain.
If gains have been recognized on the issuance of a subsidiary's stock
and shares of the subsidiary are subsequently repurchased either by the
subsidiary, the Company, or Thermo Electron Corporation, gain recognition
does not occur on issuances subsequent to the date of a repurchase until
such time as shares have been issued in an amount equivalent to the
number of repurchased shares.
In December 1997, the Company's Thermo Trilogy subsidiary sold
1,160,900 shares of its common stock in a private placement at $8.25 per
share for net proceeds of $8.9 million, resulting in a gain of $4.1
million. Following the private placement, the Company owned 87% of Thermo
Trilogy's outstanding common stock.
4. Earnings per Share
During the quarter ended January 3, 1998, the Company adopted
Statement of Financial Accounting Standards No. 128, "Earnings per
Share." As a result, all previously reported earnings per share have been
restated; however, diluted earnings per share equals the Company's
previously reported fully diluted earnings per share for the fiscal 1997
period. Basic earnings per share have been computed by dividing net
income by the weighted average number of shares outstanding during the
period. Diluted earnings per share have been computed assuming the
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THERMO ECOTEK CORPORATION
4. Earnings per Share (continued)
conversion of convertible obligations and the elimination of the related
interest expense, and the exercise of stock options, as well as their
related income tax effects. Basic and diluted earnings per share were
calculated as follows:
Three Months Ended
------------------
Jan. 3, Dec. 28,
(In thousands except per share amounts) 1998 1996
-----------------------------------------------------------------------
Basic
Net income $ 9,258 $ 4,300
------- -------
Weighted average shares 24,412 24,507
------- -------
Basic earnings per share $ .38 $ .18
======= =======
Diluted
Net income $ 9,258 $ 4,300
Effect of:
Convertible debentures 790 418
------- -------
Income available to common
shareholders, as adjusted $10,048 $ 4,718
------- -------
Weighted average shares 24,412 24,507
Effect of:
Convertible debentures 14,725 12,889
Stock options 319 486
------- -------
Weighted average shares, as adjusted 39,456 37,882
------- -------
Diluted earnings per share $ .25 $ .12
======= =======
The computation of diluted earnings per share excludes the effect of
assuming the exercise of certain outstanding stock options because the
effect would be antidilutive. At January 3, 1998, there were 98,050 of
such options outstanding, with exercise prices ranging from $14.88 to
$16.48 per share.
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THERMO ECOTEK CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations.
For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates,"
"plans," "expects," "seeks," "estimates," and similar expressions are
intended to identify forward-looking statements. There are a number of
important factors that could cause the results of the Company to differ
materially from those indicated by such forward-looking statements,
including those detailed under the heading "Forward-looking Statements"
in Exhibit 13 to the Company's Annual Report on Form 10-K for the fiscal
year ended September 27, 1997, filed with the Securities and Exchange
Commission.
Overview
The Company operates in two business segments: the Energy segment
operates independent electric power-generation facilities through joint
ventures, limited partnerships, or wholly owned subsidiaries (the
Operating Companies) and the Biopesticide segment manufactures and sells
biopesticides through the Company's majority-owned subsidiary, Thermo
Trilogy Corporation.
In the Energy segment, each Operating Company sells power under a
long-term power-sales agreement. The profitability of operating the
Company's facilities depends on the price received for power under the
power-sales agreements with power purchasers, on plant performance or
availability, and on the fuel, operating, and maintenance costs for the
facilities. The Energy segment earns a disproportionately high share of
its income in May to October due to the rate structures under the
power-sales agreements for its California plants, which provide strong
incentives to operate during this period of high demand. Conversely, the
Energy segment has historically operated at a loss or marginal
profitability during the second fiscal quarter due to the rate structure
under these agreements. The Energy segment's profitability is also
dependent on the amount of development expenses that it incurs.
The Company has also entered the field of engineered clean fuels
through a partnership agreement with KFx, Inc. (KFx). The Company is a
95% partner in a partnership established to design, construct, and
operate the first full-scale coal-beneficiation facility to use a
patented K-fuel "clean coal" technology. This facility, located in
Gillette, Wyoming, uses the K-fuel technology to transform high-moisture,
low-energy coal into a low-moisture, high-energy, solid fuel.
The Company plans to expand its energy operations into international
markets and has begun business development efforts in India, Italy, and
the Czech Republic. In January 1998, the Company, through a wholly owned
subsidiary's participation in a Joint Venture (EMD Ventures), purchased
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THERMO ECOTEK CORPORATION
Overview (continued)
an 83% interest in the assets of a 12-megawatt energy center near Tabor,
Czech Republic, along with the business of five auxiliary boilers in the
town of Pribram, Czech Republic. EMD Ventures has begun development
efforts to expand the 12-megawatt facility to 50-megawatt capacity. The
cost of business development efforts is expected to increase as the
Company expands into these markets due to increased complexity inherent
in foreign development. In addition, the amount of cash required to fund
equity investments is expected to increase, due to the financing
requirements of lenders in foreign markets.
Thermo Trilogy's biopesticide products include botanical extracts
from the seed of the tropical "neem" tree, microbial-based pesticides
(fungal-based insecticides and fungicides, bacterial-based insecticides,
baculovirus, and beneficial nematodes), insect pheromone-based products
such as traps and lures, and disease-free sugar cane planting stock.
These biopesticide products are used as alternatives or complements to
conventional chemical-based pest-control technologies. In January 1997,
Thermo Trilogy acquired substantially all of the assets of biosys, inc.
In November 1997, Thermo Trilogy acquired the sprayable bacillus
thuringiensis (Bt) - biopesticide business of Novartis AG and its
affiliates (the Bt business of Novartis).
Results of Operations
First Quarter Fiscal 1998 Compared With First Quarter Fiscal 1997
Total revenues in the first quarter of fiscal 1998 increased 24% to
$47.8 million from $38.5 million in the first quarter of fiscal 1997.
Revenues from the Energy segment in fiscal 1998 were $41.4 million,
compared with $37.6 million in fiscal 1997. The increase was primarily
due to higher contractual energy rates at all of the Company's
facilities, except the Hemphill plant and, to a lesser extent, higher
electrical generation at all of the Company's facilities in fiscal 1998
due to the first quarter of fiscal 1998 including 14 weeks, compared with
13 weeks in the first quarter of fiscal 1997. Pursuant to the Company's
utility contracts for its four plants in California, there will be no
further contractual energy rate increases beginning in calendar 1998.
Revenues at Thermo Trilogy in the first quarter of fiscal 1998 were
$6.4 million, compared with $0.9 million in the first quarter of fiscal
1997. The increase was primarily due to the inclusion of revenues from
biosys and the Bt business of Novartis, acquired in January 1997 and
November 1997, respectively.
The gross profit margin increased to 34% in the first quarter of
fiscal 1998, compared with 32% in the first quarter of fiscal 1997. The
gross profit margin for the Energy segment increased to 33% in fiscal
1998, compared with 31% in fiscal 1997. The improvement resulted
primarily from higher contractual energy rates at all of the Company's
facilities in fiscal 1998, except the Hemphill plant.
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THERMO ECOTEK CORPORATION
First Quarter Fiscal 1998 Compared With First Quarter Fiscal 1997
(continued)
The gross profit margin for Thermo Trilogy decreased to 43% in the
first quarter of fiscal 1998 from 65% in the first quarter of fiscal
1997, due primarily to the inclusion in fiscal 1998 of lower-margin sales
from biosys and the Bt business of Novartis.
The Company's plants have power-sales agreements under which
utilities presently purchase power at fixed rates. Certain of these
arrangements contain provisions under which the utilities will convert
from fixed rates to "avoided-cost" rates at specified dates. Avoided-cost
rates are currently substantially less than the Operating Companies'
fixed rates. The Woodland plant, which converts to avoided-cost rates in
March 2000, has conditions in its nonrecourse lease agreement that
require the funding of a "power reserve" in years prior to 2000, based on
projections of operating cash flow shortfalls in 2000 and thereafter. The
power reserve represents funds available to make lease payments in the
event that revenues are not sufficient after the plant converts to
avoided-cost rates.
Although it is difficult to predict future levels of avoided costs,
based on current estimates, avoided costs are expected to be lower in
2000 than the rates currently being paid. If the Woodland plant were to
operate at projected avoided-cost rates, substantial losses would result,
primarily due to nonrecourse lease obligations that extend beyond 2000.
Absent sufficient reductions in fuel prices and other operating costs,
the Company would either renegotiate its nonrecourse lease for the
Woodland plant or forfeit its interest in the plant. In November 1996,
the Company began to record as an expense the funding of reserves
required under Woodland's nonrecourse lease agreement to cover projected
shortfalls in lease payments beginning in 2000. Although the Company
recorded $1.0 million of income from Woodland during the first quarter of
fiscal 1997, the Company has not recorded any income since that time nor
does it expect to record additional income at Woodland in the foreseeable
future.
The Company has continued to refine and optimize operations at its
Gillette, Wyoming, coal-beneficiation facility. The Company has conducted
extensive testing and operated the facility, producing commercially
salable product. As stated previously, for tax purposes the facility must
be "placed in service" by June 30, 1998, to qualify for certain tax
credits on its output. Although the facility has operated and produced
commercially salable product, the Company has encountered certain
difficulties in optimizing its performance to achieve optimal and
sustained operation. The Company has addressed and resolved certain
problems previously encountered, including a fire at the facility and
certain construction problems, including issues relating to the flow of
materials within the facility and the design and operation of certain
pressure-release equipment. Currently, the Company is experiencing
certain operational problems relating to tar residue build-up within the
system during production. The Company is actively exploring solutions to
this problem. Because the technology being developed at the facility is
new and untested, no assurance can be given that other difficulties will
not arise or that the Company will be able to correct these problems and
achieve optimal and sustained performance.
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THERMO ECOTEK CORPORATION
First Quarter Fiscal 1998 Compared With First Quarter Fiscal 1997
(continued)
Selling, general, and administrative expenses as a percentage of
revenues were 12% in the first quarter of fiscal 1998, compared with 7%
in the first quarter of fiscal 1997. The change resulted primarily from
the inclusion of higher selling, general, and administrative expenses as
a percentage of revenues at Thermo Trilogy due to the acquisitions of
biosys and the Bt business of Novartis.
Interest income increased to $1.5 million in the first quarter of
fiscal 1998 from $1.4 million in the first quarter of fiscal 1997.
Interest income earned on invested proceeds from the Company's April 1997
issuance of 4 7/8% subordinated convertible debentures was largely offset
by a reduction in invested funds due to cash expended for the acquisition
of the Bt business of Novartis, the repurchase of Company common stock,
and construction of the Gillette, Wyoming, coal-beneficiation facility.
Interest expense increased to $3.6 million in the first quarter of
fiscal 1998 from $3.5 million in the first quarter of fiscal 1997. An
increase in interest expense related to the issuance of the 4 7/8%
subordinated convertible debentures was largely offset by a decrease in
interest expense due to lower outstanding debt related to the Company's
Delano and Mendota plants.
The Company and its parent, Thermo Electron Corporation, have adopted
a strategy of spinning out certain of their businesses into separate
subsidiaries and having these subsidiaries sell a minority interest to
outside investors. The Company believes that this strategy provides
additional motivation and incentives for the management of the
subsidiaries through the establishment of subsidiary-level stock option
incentive programs, as well as capital to support the subsidiaries'
growth. As a result of the sale of stock by Thermo Trilogy, the Company
recorded a gain on issuance of stock by subsidiary of $4.1 million in the
first quarter of fiscal 1998. The size and timing of these transactions
are dependent on market and other conditions that are beyond the
Company's control. In addition, in October 1995, the Financial Accounting
Standards Board (FASB) issued an exposure draft of a Proposed Statement
of Financial Accounting Standards, "Consolidated Financial Statements:
Policy and Procedures" (the Proposed Statement). The Proposed Statement
would establish new rules for how consolidated financial statements
should be prepared. If the Proposed Statement is adopted, there could be
significant changes in the way the Company records certain transactions
of its controlled subsidiaries. Among those changes, any sale of the
stock of a subsidiary that does not result in a loss of control would be
accounted for as a transaction in the equity of the consolidated entity
with no gain or loss being recorded. The FASB continues to deliberate on
this issue and the timing and contents of any final statement are
uncertain. Accordingly, there can be no assurance that the Company will
be able to realize gains from such transactions in the future.
The effective tax rate was 26% in the first quarter of fiscal 1998,
compared with 38% in the first quarter of fiscal 1997. The effective tax
rate in the first quarter of fiscal 1998 was below the statutory federal
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THERMO ECOTEK CORPORATION
First Quarter Fiscal 1998 Compared With First Quarter Fiscal 1997
(continued)
income tax rate due to the nontaxable gain on issuance of stock by
subsidiary. The effective tax rate in the first quarter of fiscal 1997
exceeded the statutory federal income tax rate primarily due to the
impact of state income taxes, offset in part by the exclusion of income
taxed directly to a minority partner.
Minority interest expense represents the allocation of income from
plant operations to a minority partner in an Operating Company and, in
fiscal 1998, minority shareholders' proportionate share of Thermo
Trilogy's results.
Liquidity and Capital Resources
Working capital was $67.9 million at January 3, 1998, compared with
$90.7 million at September 27, 1997. The Company had cash, cash
equivalents, and current restricted funds of $68.6 million at January 3,
1998, compared with $104.3 million at September 27, 1997. Current
restricted funds held in trust pursuant to certain lease and debt
agreements totaled $14.1 million and $20.8 million at January 3, 1998,
and September 27, 1997, respectively. In addition, cash and cash
equivalents include $10.0 million and $12.0 million at January 3, 1998,
and September 27, 1997, respectively, which are restricted by the terms
of certain lease and financing agreements. These restrictions limit the
ability of the Operating Companies to transfer funds to the Company in
the form of dividends, loans, advances, or other distributions. Further,
until such time, if ever, as projections of avoided costs change, all
cash flows from the Woodland Operating Company, other than cash required
for tax distributions, will be restricted from distribution to the
Company. During the first quarter of fiscal 1998, the Company's operating
activities provided cash and restricted funds of $13.7 million. Cash of
$3.8 million, provided by an increase in lease obligations payable due to
semiannual payment requirements was offset in part by a decrease of $3.2
million in accounts payable and other current liabilities.
During the first quarter of fiscal 1998, the Company's investing
activities used cash of $28.1 million. In November 1997, the Company,
through Thermo Trilogy, acquired the Bt business of Novartis for $19.1
million in cash and the assumption of certain liabilities. The Company,
through its Limited Partnership Agreement with KFx Wyoming, Inc.,
expended $4.2 million (net of insurance proceeds related to fire damage)
for the construction of a coal-beneficiation facility in Gillette,
Wyoming. Excluding costs which are currently undeterminable relating to
the tar residue build-up problem, the Company expects to fund an
additional amount of approximately $1.0 million of construction and
related costs for the facility provided there are no further construction
difficulties requiring additional funding.
In November 1997, the Company entered into an agreement to acquire
two power-generation facilities and related sites in California during
the first six months of calendar 1998 for approximately $9.5 million in
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THERMO ECOTEK CORPORATION
Liquidity and Capital Resources (continued)
cash and the assumption of certain liabilities. In January 1998, the
Company, through a wholly owned subsidiary's participation in a joint
venture, purchased an 83% interest in the assets of a 12-megawatt energy
center near Tabor, Czech Republic, along with the business of five
auxiliary boilers in the town of Pribram, Czech Republic, for $6.9
million in cash.
During the first quarter of fiscal 1998, the Company's financing
activities used cash of $21.4 million. The Company used cash of $23.1
million for the repayment of long-term obligations and payments under
capital lease obligations related to two of its California plants. In
December 1997, Thermo Trilogy issued shares of its common stock in a
private placement for net proceeds of approximately $8.9 million (Note
3). Through a series of transactions commencing in April 1997, the
Company's Board of Directors has authorized the repurchase, through
various dates, of up to $30 million of its own securities in the open
market, or in negotiated transactions. Through January 3, 1998, the
Company had repurchased $26.6 million in common stock under these
authorizations, including $6.9 million during the first quarter of fiscal
1998. Any such purchases are funded from working capital.
Although the Company's projects are designed to produce positive cash
flow over the long term, the Company will have to obtain significant
amounts of funds from time to time to meet project-development
requirements, including the funding of equity investments. As the Company
acquires, invests in, or develops future plants or technologies, the
Company expects to finance them with nonrecourse debt and to fund equity
contributions through internal funds, raising additional equity, or
through borrowings from third parties or Thermo Electron. While Thermo
Electron has expressed its willingness to provide funds to the Company to
help finance the Company's equity investments in future projects, the
Company has no agreements with Thermo Electron that ensure funds will be
available on acceptable terms, or at all.
PART II - OTHER INFORMATION
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
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THERMO ECOTEK CORPORATION
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 as of the 10th day of February
1998.
THERMO ECOTEK CORPORATION
Paul F. Kelleher
---------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
---------------------------
John N. Hatsopoulos
Chief Financial Officer and
Senior Vice President
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THERMO ECOTEK CORPORATION
EXHIBIT INDEX
Exhibit
Number Description
------------------------------------------------------------------------
10.1 Master Repurchase Agreement dated as of January 1, 1994,
between Thermo Electron Corporation and the Company.
10.2 Amended and Restated Master Guarantee Reimbursement and
Loan Agreement dated as of December 19, 1997, between
Thermo Electron Corporation and the Company.
10.3* First Amendment to Power Purchase Agreement dated
November 6, 1997, between Woodland Biomass Power, Ltd.
and Pacific Gas and Electric Company.
10.4* Second Amendment to Power Purchase Agreement dated
November 6, 1997, between Mendota Biomass Power, Ltd. and
Pacific Gas and Electric Company.
27 Financial Data Schedule.
* Confidential treatment requested as to certain portions of the
document, which portions have been omitted and filed separately with
the Securities and Exchange Commission.
MASTER REPURCHASE AGREEMENT
The Master Repurchase Agreement dated as of January 1, 1994
between Thermo Electron Corporation, a Delaware corporation
("Seller"), and Thermo Ecotek Corporation, a Delaware corporation
(the "Buyer").
1. Applicability
From time to time Buyer and Seller may enter into
transactions in which Seller agrees to transfer to Buyer certain
securities and/or financial instruments ("Securities") against
the transfer of funds by Buyer, with a simultaneous agreement by
Buyer to transfer to Seller such Securities on demand, against
the transfer of funds by Seller. Each such transaction shall be
referred to herein as a "Transaction" and shall be governed by
this Agreement, unless otherwise agreed in writing.
2. Definitions
(a) "Act of Insolvency", with respect to either party (i)
the commencement by such party as debtor of any case or
proceeding under any bankruptcy, insolvency, reorganization,
liquidation, dissolution or similar law, or such party seeking
the appointment of a receiver, trustee, custodian or similar
official for such party or any substantial part of its property;
or (ii) the commencement of any such case or proceeding against
such party, or another seeking such an appointment, which (A) is
consented to or not timely contested by such party, (B) results
in the entry of an order for relief, such an appointment or the
entry of an order having a similar effect, or (C) is not
dismissed within 15 days; or (iii) the making by a party of a
general assignment for the benefit of creditors; or (iv) the
admission in writing by a party of such party's inability to pay
such party's debts as they become due;
(b) "Additional Purchased Securities", Securities provided
by Seller to Buyer pursuant to Paragraph 4(a) hereof;
(c) "Income", with respect to any Security at any time, any
principal thereof then payable and all interest, dividends or
other distributions thereon;
(d) "Market Value", with respect to any Securities as of
any date, the price for such Securities on such date obtained
from a generally recognized source agreed to by the parties or
the most recent closing bid quotation from such a source, plus
accrued Income to the extent not included therein (other than any
Income transferred to Seller pursuant to Paragraph 6 hereof) as
of such date (unless contrary to market practice for such
Securities);
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(e) "Other Buyers", third parties that have entered into an
agreement with Seller that is substantially similar to this
Agreement;
(f) "Pricing Rate", a rate equal to the Commercial Paper
Composite rate for 90-day maturities provided by Merrill Lynch,
Pierce, Fenner & Smith Incorporated (or, if such rate is not
available, a substantially equivalent rate agreed to by Buyer and
Seller) plus 25 basis points, which rate shall be adjusted on the
first business day of each fiscal quarter and shall be in effect
for the entirety such fiscal quarter;
(g) "Purchase Price", the price at which Purchased
Securities are transferred by Seller to Buyer;
(h) "Purchased Securities", the Securities transferred by
Seller to Buyer in a Transaction hereunder, and any Securities
substituted therefor in accordance with Paragraph 9 hereof. The
term "Purchased Securities" with respect to any Transaction at
any time also shall include Additional Purchase Securities
transferred pursuant to Paragraph 4(a) and shall exclude
Securities returned pursuant to Paragraph 4(b);
(i) "Repurchase Collateral Account", a book account
maintained by Seller containing, among other Securities, the
Purchased Securities; and
(j) "Repurchase Price", for any Purchased Security, an
amount equal to the Purchase Price paid by Buyer to Seller for
such Purchased Security.
3. Transactions
(a) A Transaction may be initiated by Buyer upon the
transfer of the Purchase Price to Seller's account. Upon such
transfer, Seller shall transfer to Buyer Purchased Securities
having a Market Value equal to 103% of the Purchase Price.
(b) Purchased Securities shall be held in custody for Buyer
by Seller in the Repurchase Collateral Account. Seller shall
indicate on its books for such account Buyer's ownership of the
Purchased Securities. Upon reasonable request from Buyer, Seller
shall provide Buyer with a complete list of Purchased Securities
owned by Buyer.
(c) Upon demand by Buyer or Seller, Seller shall repurchase
from Buyer, and Buyer shall sell to Seller, for the Repurchase
Price all or any part of the Purchased Securities then owned by
Buyer.
4. Margin Maintenance
(a) If at any time the aggregate Market Value of all
Purchased Securities then owned by Buyer is less than 103% of the
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aggregate Repurchase Price for such Purchased Securities, then
Seller shall transfer to Buyer additional Securities ("Additional
Purchased Securities"), so that the aggregate Market Value of
such Purchased Securities, including any such Additional
Purchased Securities, will thereupon equal or exceed 103% of such
aggregate Repurchase Price.
(b) If at any time the aggregate Market Value of all
Purchased Securities then owned by Buyer exceeds 103% of the
aggregate Repurchase Price for such Purchased Securities, then
Seller may transfer Purchased Securities to Seller, so that the
aggregate Market Value of such Purchased Securities will
thereupon not exceed 103% of such aggregate Repurchase Price.
5. Interest Payments
If during any fiscal month Buyer owned Purchased Securities,
then on the first day of the next following fiscal month Seller
shall pay to Buyer an amount equal to the sum of the aggregate
Repurchase Prices of the Purchased Securities owned by Buyer at
the close of each day during the preceding fiscal month divided
by the number of days in such month and the product multiplied by
the Pricing Rate times the number of days in such month divided
by 360.
6. Income Payments and Voting Rights
Where a particular Transaction's term extends over an Income
payment date on the Purchased Securities subject to that
Transaction, Buyer shall, on the date such Income is payable,
transfer to Seller an amount equal to such Income payment or
payments with respect to any Purchased Securities subject to such
Transaction. Seller shall retain all voting rights with respect
to Purchased Securities sold to Buyer under this Agreement.
7. Security Interest
Although the parties intend that all Transactions hereunder
be sales and purchases and not loans, in the event any such
Transactions are deemed to be loans, Seller shall be deemed to
have pledged to Buyer as security for the performance by Seller
of its obligations under each such Transaction and this
Agreement, and shall be deemed to have granted to Buyer a
security interest in, all of the Purchased Securities with
respect to all Transactions hereunder and all proceeds thereof.
8. Payment and Transfer
Unless otherwise mutually agreed, all transfers of funds
hereunder shall be in immediately available funds. As used
herein with respect to Securities, "transfer" is intended to have
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the same meaning as when used in Section 8-313 of the
Massachusetts Uniform Commercial Code or, where applicable, in
any federal regulation governing transfers of the Securities.
9. Substitution
Buyer hereby grants Seller the authority to manage, in
Seller's sole discretion, the Purchased Securities held in
custody for Buyer by Seller in the Repurchase Collateral Account.
Buyer expressly agrees that Seller may (i) substitute other
Securities for any Purchased Securities and (ii) commingle
Purchased Securities with other Securities held in the Repurchase
Collateral Account. Substitutions shall be made by transfer to
Buyer of such other Securities and transfer to Seller of the
Purchased Securities for which substitution is being made. After
substitution, the substituted Securities shall be deemed to be
Purchased Securities. Securities which are substituted for
Purchased Securities shall have a Market Value at the time of
substitution equal to or greater than the Market Value of the
Purchase Securities for which such Securities were substituted.
10. Representations
Each of Buyer and Seller represents and warrants to the
other that (i) it is duly authorized to execute and deliver this
Agreement, to enter into the Transactions contemplated hereunder
and to perform its obligations hereunder and has taken all
necessary action to authorize such execution, delivery and
performance, (ii) the person signing this Agreement on its behalf
is duly authorized to do so on its behalf, (iii) it has obtained
all authorizations of any governmental body required in
connection with this Agreement and the Transactions hereunder and
such authorizations are in full force and effect and (iv) the
execution, delivery and performance of this Agreement and the
Transactions hereunder will not violate any law, ordinance,
charter, by-law or rule applicable to it or any agreement by
which it is bound or by which any of its assets are affected. On
the date for any Transaction Buyer and Seller shall each be
deemed to repeat all the foregoing representations made by it.
11. Events of Default
In the event that (i) Seller fails to repurchase or Buyer
fails to transfer Purchased Securities upon demand for repurchase
from either Buyer or Seller, (ii) Seller or Buyer fails, after
one business day's notice, to comply with Paragraph 4 hereof,
(iii) Buyer fails to make payment to Seller pursuant to Paragraph
6 hereof, (iv) Seller fails to comply with Paragraph 5 hereof,
(v) an Act of Insolvency occurs with respect to Seller or Buyer,
(vi) any representation made by Seller or Buyer shall have been
incorrect or untrue in any material respect when made or repeated
or deemed to have been made or repeated, or (vii) Seller or Buyer
shall admit to the other its inability to, or its intention not
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to, perform any of its obligations hereunder (each an "Event of
Default"):
(a) At the option of the nondefaulting party, exercised by
written notice to the defaulting party (which option shall be
deemed to have been exercised, even if no notice is given,
immediately upon the occurrence of any Act of Insolvency), Seller
shall become obligated to repurchase, and Buyer shall become
obligated to sell, all Purchased Securities then owned by Buyer
for the Repurchase Price of such Purchased Securities.
(b) If Seller is the defaulting party and Buyer exercises
or is deemed to have exercised the option referred to in
subparagraph (a) of this Paragraph, (i) the Seller's obligations
hereunder to repurchase all Purchased Securities in such
Transactions shall thereupon become immediately due and payable,
(ii) all Income paid after such exercise or deemed exercise shall
be retained by Buyer and applied to the aggregate unpaid
Repurchase Prices owed by Seller, and (iii) Seller shall
immediately deliver to Buyer any Purchased Securities subject to
such Transactions then in Seller's possession.
(c) In all Transactions in which Buyer is the defaulting
party, upon tender by Seller of payment of the aggregate
Repurchase Prices for all such Transactions, Buyer's right, title
and interest in all Purchased Securities subject to such
Transactions shall be deemed transferred to Seller, and Buyer
shall deliver all such Purchased Securities to Seller.
(d) After one business day's notice to the defaulting party
(which notice need not be given if an Act of Insolvency shall
have occurred, and which may be the notice given under
subparagraph (a) of this Paragraph or the notice referred to in
clause (ii) of the first sentence of this Paragraph), the
nondefaulting party may:
(i) as to Transactions in which Seller is the
defaulting party, (A) immediately sell, in a recognized market at
such price or prices as Buyer may reasonably deem satisfactory,
any or all Purchased Securities subject to such Transactions and
apply the proceeds thereof to the aggregate unpaid Repurchase
Prices and any other amounts owing by Seller hereunder or (B) in
its sole discretion elect, in lieu of selling all or a portion of
such Purchased Securities, to give Seller credit for such
Purchased Securities in an amount equal to the price therefor on
such date, obtained from a generally recognized source or the
most recent closing bid quotation from such a source, against the
aggregate unpaid Repurchase Prices and any other amounts owing by
Seller hereunder; and
(ii) as to Transactions in which Buyer is the
defaulting party, (A) purchase securities ("Replacement
Securities") of the same class and amount as any Purchased
Securities that are not delivered by Buyer to Seller as required
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hereunder or (B) in its sole discretion elect, in lieu of
purchasing Replacement Securities, to be deemed to have purchased
Replacement Securities at the price therefor on such date,
obtained from a generally recognized source or the most recent
closing bid quotation from such a source.
(e) As to Transactions in which Buyer is the defaulting
party, Buyer shall be liable to Seller (i) with respect to
Purchased Securities (other than Additional Purchased
Securities), for any excess of the price paid (or deemed paid) by
Seller for Replacement Securities therefor over the Repurchase
Price for such Purchased Securities and (ii) with respect to
Additional Purchased Securities, for the price paid (or deemed
paid) by Seller for the Replacement Securities therefor.
(g) The defaulting party shall be liable to the
nondefaulting party for the amount of all reasonable legal or
other expenses incurred by the nondefaulting party in connection
with or as a consequence of an Event of Default.
(h) The nondefaulting party shall have, in addition to its
rights hereunder, any rights otherwise available to it under any
other agreement or applicable law.
12. Single Agreement
Buyer and Seller acknowledge that, and have entered hereinto
and will enter into each Transaction hereunder in consideration
of and in reliance upon the fact that, all Transactions hereunder
constitute a single business and contractual relationship and
have been made in consideration of each other. Accordingly, each
of Buyer and Seller agrees (i) to perform all of its obligations
in respect of each Transaction hereunder, and that a default in
the performance of any such obligations shall constitute a
default by it in respect of all Transactions hereunder, (ii) that
each of them shall be entitled to set off claims and apply
property held by them in respect of any Transaction against
obligations owing to them in respect of any other Transactions
hereunder and (iii) that payments, deliveries and other transfers
made by either of them in respect of any Transaction shall be
deemed to have been made in consideration of payments, deliveries
and other transfers in respect of any other Transactions
hereunder, and the obligations to make any such payments,
deliveries and other transfers may be applied against each other
and netted.
13. Entire Agreement; Severability
This Agreement shall supersede any existing agreements
between the parties containing general terms and conditions for
repurchase transactions. Each provision and agreement and
agreement herein shall be treated as separate and independent
from any other provision or agreement herein and shall be
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enforceable notwithstanding the unenforceability of any such
other provision or agreement.
14. Non-assignability; Termination
The rights and obligations of the parties under this
Agreement and under any Transactions shall not be assigned by
either party without the prior written consent of the other
party. Subject to the foregoing, this Agreement and any
Transactions shall be binding upon and shall inure to the benefit
of the parties and their respective successors and assigns. This
Agreement may be canceled by either party upon giving written
notice to the other, except that this Agreement shall,
notwithstanding such notice, remain applicable to any
Transactions then outstanding.
15. Governing Law
This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts without giving effect to the
conflict of law principles thereof.
16. No Waivers, Etc.
No express or implied waiver of any Event of Default by
either party shall constitute a waiver of any other Event of
Default and no exercise of any remedy hereunder by any party
shall constitute a wavier of its right to exercise any other
remedy hereunder. No modification or waiver of any provision of
this Agreement and no consent by any party to a departure
herefrom shall be effective unless and until such shall be in
writing and duly executed by both of the parties hereto.
17. Intent
(a) The parties recognize that each Transaction is a
"repurchase agreement" as that term is defined in Section 101 of
Title 11 of the United States Code, as amended (except insofar as
the type of Securities subject to such Transaction or the term of
such Transaction would render such definition inapplicable), and
a "securities contract" as that term is defined in Section 741 of
Title 11 of the United States Code, as amended.
(b) It is understood that either party's right to liquidate
Securities delivered to it in connection with Transactions
hereunder or to exercise any other remedies pursuant to Paragraph
11 hereof, is a contractual right to liquidate such Transaction
as described in Sections 555 and 559 of Title 11 of the United
States Code, as amended.
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IN WITNESS WHEREOF, the parties have entered into this
Agreement as of the date first above written.
THERMO ELECTRON CORPORATION THERMO ECOTEK CORPORATION
By: _____________________________ By:
Name: Melissa F. Riordan Name: Brian D. Holt
Title: Treasurer Title: President
AMENDED AND RESTATED MASTER GUARANTEE REIMBURSEMENT
AND LOAN AGREEMENT
This AGREEMENT is entered into as of the 19th day of
December, 1997, by and among Thermo Electron Corporation (the
"Parent") and those of its subsidiaries that join in this
Agreement by executing the signature page hereto (the "Majority
Owned Subsidiaries").
WITNESSETH:
WHEREAS, the Majority Owned Subsidiaries and their
wholly-owned subsidiaries wish to enter into various financial
transactions, such as convertible or nonconvertible debt, loans,
and equity offerings, and other contractual arrangements with
third parties (the "Underlying Obligations") and may provide
credit support to, on behalf of or for the benefit of, other
subsidiaries of the Parent ("Credit Support Obligations");
WHEREAS, the Majority Owned Subsidiaries and the Parent
acknowledge that the Majority Owned Subsidiaries and their
wholly-owned subsidiaries may be unable to enter into many kinds
of Underlying Obligations without a guarantee of their
performance thereunder from the Parent (a "Parent Guarantee") or
without obtaining Credit Support Obligations from other Majority
Owned Subsidiaries;
WHEREAS, the Majority Owned Subsidiaries and their
wholly-owned subsidiaries may borrow funds from the Parent, and
the Parent may loan funds or provide credit to the Majority Owned
Subsidiaries and their wholly-owned subsidiaries, on a short-term
and unsecured basis;
WHEREAS, certain Majority Owned Subsidiaries ("Second Tier
Majority Owned Subsidiaries ") may themselves be majority owned
subsidiaries of other Majority Owned Subsidiaries ("First Tier
Majority Owned Subsidiaries");
WHEREAS, for various reasons, Parent Guarantees of a Second
Tier Majority Owned Subsidiary's Underlying Obligations may be
demanded and given without the respective First Tier Majority
Owned Subsidiary also issuing a guarantee of such Underlying
Obligation;
WHEREAS, the Parent may itself make a loan or provide other
credit to a Second Tier Majority Owned Subsidiary or its
wholly-owned subsidiaries under circumstances where the
applicable First Tier Majority Owned Subsidiary does not provide
such credit; and
WHEREAS, the Parent is willing to consider continuing to
issue Parent Guarantees and providing credit, and the Majority
Owned Subsidiaries are willing to consider continuing to provide
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Credit Support Obligations and to borrow funds, on the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by each party hereto, the parties
agree as follows:
1. If the Parent provides a Parent Guarantee of an Underlying
Obligation, and the beneficiary(ies) of the Parent Guarantee
enforce the Parent Guarantee, or the Parent performs under
the Parent Guarantee for any other reason, then the Majority
Owned Subsidiary that is obligated, either directly or
indirectly through a wholly-owned subsidiary, under such
Underlying Obligation shall indemnify and save harmless the
Parent from any liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by the
Parent as a result of the Parent Guarantee. If the
Underlying Obligation is issued by a Second Tier Majority
Owned Subsidiary or a wholly-owned subsidiary thereof, and
such Second Tier Majority Owned Subsidiary is unable to
fully indemnify the Parent (because of the poor financial
condition of such Second Tier Majority Owned Subsidiary, or
for any other reason), then the First Tier Majority Owned
Subsidiary that owns the majority of the stock of such
Second Tier Majority Owned Subsidiary shall indemnify and
save harmless the Parent from any remaining liability, cost,
expense or damage (including reasonable attorneys' fees)
suffered by the Parent as a result of the Parent Guarantee.
If a Majority Owned Subsidiary or a wholly-owned subsidiary
thereof provides a Credit Support Obligation for any
subsidiary of the Parent, other than a subsidiary of such
Majority Owned Subsidiary, and the beneficiary(ies) of the
Credit Support Obligation enforce the Credit Support
Obligation, or the Majority Owned Subsidiary or its
wholly-owned subsidiary performs under the Credit Support
Obligation for any other reason, then the Parent shall
indemnify and save harmless the Majority Owned Subsidiary or
its wholly-owned subsidiary, as applicable, from any
liability, cost, expense or damage (including reasonable
attorneys' fees) suffered by the Majority Owned Subsidiary
or its wholly-owned subsidiary, as applicable, as a result
of the Credit Support Obligation. Without limiting the
foregoing, Credit Support Obligations include the deposit of
funds by a Majority Owned Subsidiary or a wholly-owned
subsidiary thereof in a credit arrangement with a banking
facility whereby such funds are available to the banking
facility as collateral for overdraft obligations of other
Majority Owned Subsidiaries or their subsidiaries also
participating in the credit arrangement with such banking
facility.
2. For purposes of this Agreement, the term "guarantee" shall
include not only a formal guarantee of an obligation, but
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also any other arrangement where the Parent is liable for
the obligations of a Majority Owned Subsidiary or its
wholly-owned subsidiaries. Such other arrangements include
(a) representations, warranties and/or covenants or other
obligations joined in by the Parent, whether on a joint or
joint and several basis, for the benefit of the Majority
Owned Subsidiary or its wholly-owned subsidiaries and (b)
responsibility of the Parent by operation of law for the
acts and omissions of the Majority Owned Subsidiary or its
wholly-owned subsidiaries, including controlling person
liability under securities and other laws.
3. Promptly after the Parent receives notice that a beneficiary
of a Parent Guarantee is seeking to enforce such Parent
Guarantee, the Parent shall notify the Majority Owned
Subsidiary(s) obligated, either directly or indirectly
through a wholly-owned subsidiary, under the relevant
Underlying Obligation. Such Majority Owned Subsidiary(s) or
wholly-owned subsidiary thereof, as applicable, shall have
the right, at its own expense, to contest the claim of such
beneficiary. If a Majority Owned Subsidiary or wholly-owned
subsidiary thereof, as applicable, is contesting the claim
of such beneficiary, the Parent will not perform under the
relevant Parent Guarantee unless and until, in the Parent's
reasonable judgment, the Parent is obligated under the terms
of such Parent Guarantee to perform. Subject to the
foregoing, any dispute between a Majority Owned Subsidiary
or wholly-owned subsidiary thereof, as applicable, and a
beneficiary of a Parent Guarantee shall not affect such
Majority Owned Subsidiary's obligation to promptly indemnify
the Parent hereunder. Promptly after a Majority Owned
Subsidiary or wholly-owned subsidiary thereof, as
applicable, receives notice that a beneficiary of a Credit
Support Obligation is seeking to enforce such Credit Support
Obligation, the Majority Owned Subsidiary shall notify the
Parent. The Parent shall have the right, at its own
expense, to contest the claim of such beneficiary. If the
Parent or the subsidiary of the Parent on whose behalf the
Credit Support Obligation is given is contesting the claim
of such beneficiary, the Majority Owned Subsidiary or
wholly-owned subsidiary thereof, as applicable, will not
perform under the relevant Credit Support Obligation unless
and until, in the Majority Owned Subsidiary's reasonable
judgment, the Majority Owned Subsidiary or wholly-owned
subsidiary thereof, as applicable, is obligated under the
terms of such Credit Support Obligation to perform. Subject
to the foregoing, any dispute between the Parent or the
subsidiary of the Parent on whose behalf the Credit Support
Obligation was given, on the one hand, and a beneficiary of
a Credit Support Obligation, on the other, shall not affect
the Parent's obligation to promptly indemnify the Majority
Owned Subsidiary or its wholly-owned subsidiary, as
applicable, hereunder.
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4. Upon the request of a Majority Owned Subsidiary, the Parent
may make loans and advances to the Majority Owned Subsidiary
or its wholly-owned subsidiaries on a short-term, revolving
credit basis, from time to time in such amounts as mutually
determined by the Parent and the Majority Owned Subsidiary.
The aggregate principal amount of such loans and advances
shall be reflected on the books and records of the Majority
Owned Subsidiary (or wholly-owned subsidiary, as applicable)
and the Parent. All such loans and advances shall be on an
unsecured basis unless specifically provided otherwise in
loan documents executed at that time. The Majority Owned
Subsidiary or its wholly-owned subsidiaries, as applicable,
shall pay interest on the aggregate unpaid principal amount
of such loans from time to time outstanding at a rate
("Interest Rate") equal to the rate of the Commercial Paper
Composite Rate for 90-day maturities as reported by Merrill
Lynch Capital Markets, as an average of the last five
business days of such Majority Owned Subsidiary's latest
fiscal quarter then ended, plus twenty-five (25) basis
points. The Interest Rate shall be adjusted on the first
business day of each fiscal quarter of such Majority Owned
Subsidiary pursuant to the Interest Rate formula contained
in the preceding sentence and shall be in effect for the
entirety of such fiscal quarter. Interest shall be computed
on a 360-day basis. The aggregate principal amount
outstanding and accrued interest thereon shall be payable on
demand. The principal and accrued interest may be paid by
the Majority Owned Subsidiaries or their wholly-owned
subsidiaries, as applicable, at any time or from time to
time, in whole or in part, without premium or penalty. All
payments shall be applied first to accrued interest and then
to principal. Principal and interest shall be payable in
lawful money of the United States of America, in immediately
available funds, at the principal office of the Parent or at
such other place as the Parent may designate from time to
time in writing to the Majority Owned Subsidiary. The
unpaid principal amount of any such borrowings, and accrued
interest thereon, shall become immediately due and payable,
without demand, upon the failure of the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, to
pay its debts as they become due, the insolvency of the
Majority Owned Subsidiary or its wholly-owned subsidiary, as
applicable, the filing by or against the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, of
any petition under the U.S. Bankruptcy Code (or the filing
of any similar petition under the insolvency law of any
jurisdiction), or the making by the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, of
an assignment or trust mortgage for the benefit of creditors
or the appointment of a receiver, custodian or similar agent
with respect to, or the taking by any such person of
possession of, any property of the Majority Owned Subsidiary
or its wholly-owned subsidiary, as applicable. In case any
payments of principal and interest shall not be paid when
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due, the Majority Owned Subsidiary or its wholly-owned
subsidiary, as applicable, further promises to pay all cost
of collection, including reasonable attorneys' fees.
5. If the Parent makes a loan or provides other credit ("Credit
Extension") to a Second Tier Majority Owned Subsidiary, the
First Tier Majority Owned Subsidiary that owns the majority
of the stock of such Second Tier Majority Owned Subsidiary
hereby guarantees the Second Tier Majority Owned
Subsidiary's obligations to the Parent thereunder. Such
guaranty shall be enforced only after the Parent, in its
reasonable judgment, determines that the Second Tier
Majority Owned Subsidiary is unable to fully perform its
obligations under the Credit Extension. If the Parent
provides Credit Extension to a wholly-owned subsidiary of a
Second Tier Majority Owned Subsidiary, the Second Tier
Majority Owned Subsidiary hereby guarantees it wholly-owned
subsidiary's obligations to the Parent thereunder and the
First Tier Majority Owned Subsidiary that owns the majority
of the stock of such Second Tier Majority Owned Subsidiary
hereby guarantees the Second Tier Majority Owned
Subsidiary's obligations to the Parent hereunder. Such
guaranty by the First Tier Majority Owned Subsidiary shall
be enforced only after the Parent, in its reasonable
judgment, determines that the Second Tier Majority Owned
Subsidiary is unable to fully perform its guaranty
obligation hereunder.
6. All payments required to be made by a Majority Owned
Subsidiary or its wholly-owned subsidiaries, as applicable,
shall be made within two days after receipt of notice from
the Parent. All payments required to be made by the Parent
shall be made within two days after receipt of notice from
the Majority Owned Subsidiary.
7. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of
Massachusetts applicable to contracts made and performed
therein.
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IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their duly authorized officers as of the date
first above written.
THERMO ELECTRON CORPORATION
By: _____________________________
Melissa F.Riordan
Title: Treasurer
THERMO ECOTEK CORPORATION
By: _____________________________
Brian D.Holt
Title: President
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
EXHIBIT 10.3
FIRST AMENDMENT TO POWER PURCHASE AGREEMENT
WOODLAND BIOMASS POWER, LTD. (PG&E Log No. 06PO22)
THIS FIRST AMENDMENT TO POWER PURCHASE AGREEMENT
("Agreement"), dated November 6th, 1997 is by and between
WOODLAND BIOMASS POWER, LTD. ("Seller") a California limited
partnership, and PACIFIC GAS AND ELECTRIC COMPANY ("PG&E"), a
California corporation. PG&E and Seller are sometimes referred
to herein individually as "Party" and collectively as the
"Parties."
RECITALS
--------
A. There is a Long-Term Energy and Capacity Power Purchase
Agreement between Seller and PG&E signed by PG&E on
January 24, 1985, and by Seller on November 16, 1984,
(the "PPA"), for the 25,000 kw generator nameplate
biomass-fueled facility (PG&E Log No. 06PO22) located in
the City of Woodland, California (the "Facility"); and,
------------
B. The intent of the Parties is for all terms and
conditions of the PPA to remain in full force and effect
except where expressly amended. Unless otherwise defined
herein, all capitalized and underlined terms shall have
the same meaning as defined in the PPA.
C. Seller believes that sufficient fuel is available for
delivery to the Facility to operate the Facility at
-------- --------
25,000 kw under the PPA throughout the remainder of the
Fixed Price Period.
----------- ------
D. The Parties wish to restructure the PPA as set forth
herein in ways which each Party believes will be to its
benefit.
E. The Parties have had a variety of disputes under the PPA,
including PG&E's administration of Curtailment Option B
as set forth in Appendix C of the PPA.
F. To accomplish these restructuring changes and resolve the
Curtailment Option B dispute, the Parties have agreed to
the terms and conditions set forth below.
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AGREEMENT
THEREFORE, in consideration of the mutual covenants in this
Agreement, the Parties agree as follows:
SECTION I
1. DEFINITIONS
Whenever used in this Agreement, the following terms shall
have the following meanings:
1.01 Curtailment Option B Adder: The adder to energy
payments for the Facility as provided in the first paragraph of
--------
Appendix B at page B-1 of the PPA.
1.02 Fixed Price Period: This term shall have the same
-------------------
meaning in this Agreement as it has in the PPA for the Facility
--------
which is the subject of this Agreement.
1.03 kw: Kilowatts.
1.04 kwh: Kilowatt-hours.
1.05 California Power Exchange.: The California Power
Exchange Corporation ("CA PX"), a California not-for-profit
public benefit corporation, which has been established in order
to conduct competitive auctions for electric power in the State
of California as described in Section 355 of the California
Public Utilities Code.
1.06 PPA Curtailment Provisions: Article 7 and Appendix C of
the PPA. Section A-7 of Appendix A of the PPA is not included in
this definition.
1.07 Monthly Curtailment Period: A continuous period of one
calendar month commencing at 00:00 hours on first day and ending
at 23:59 hours on last day of the calendar month (any one month
from January through May, or September through December during
the Fixed Price Period) during which, at PG&E's sole option,
-------------------
Seller shall physically curtail all deliveries of power from the
Facility to PG&E to zero.
--------
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SECTION 2
2. BLOCK CURTAILMENT DURING THE FIXED PRICE PERIOD
2.01 For the period beginning on January 1, 1998 through the
end of the Fixed Price Period applicable to the Facility, the PPA
----------- ------ --------
Curtailment Option B Provisions shall be superseded in their
entirety by curtailment in accordance with this Section 2 which
defines "Block Curtailment." After the expiration of the Fixed
-----
Price Period in the PPA, this Section 2, and the resulting
------------
amendments to the PPA contained herein, shall have no force or
effect with the sole exception of Section 2.10 which shall
continue in effect.
2.02 Effective January 1, 1998 PG&E may, at its discretion,
curtail the Facility for up to *** hours per calendar year
--------
through the remaining period in the Fixed Price Period in the
------------------
PPA.
2.03 In the final calendar year of the Fixed Price Period,
the total annual amount of Block Curtailment provided by the
Facility will be prorated based on the percentage of the calendar
--------
year which is in the Fixed Price Period.
------------------
2.04 If, as a result of a decision by the court in the
Judicial Council Coordination Proceeding No. 3241 or by a court
or by the California Public Utilities Commission in any action
relating to the end of Fixed Price Period, the Facility's Fixed
------------------ ----------------
Price Period is determined to end on a date that is later than
------------
PG&E's current interpretation of the Fixed Price Period end date,
------------------
Seller will be required to provide additional Block Curtailment
from the Facility to PG&E on a prorated basis as provided in
--------
Section 2.03 above.
2.05 PG&E shall schedule the Block Curtailments from the
Facility in blocks of a minimum of *** consecutive off-peak and
--------
super off-peak hours of curtailment, except for *** block of
curtailment per calendar year which may be less than *** hours.
PG&E shall provide Seller written notice by telecopy (followed by
telephone verification of the telecopy notice) at least 12 hours
prior to each Block Curtailment period. Such notice shall be
provided to Seller's plant manager or representative [fax number
(916) 661-3124; telephone number (916) 661- 4192] in accordance
with PG&E's notice provision described above.
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2.06 During Block Curtailment, Seller may reduce its energy
deliveries to PG&E from the Facility to zero. If the Facility
-------- --------
delivers power during the Block Curtailment hours, PG&E shall pay
for up to *** kwh per half-hour in energy deliveries at a price
equal to ***% of the CA PX day-ahead energy price or, in the
absence of a CA PX day-ahead energy price, at ***% of PG&E's
short-run avoided cost (SRAC) energy prices for the corresponding
hours. PG&E will not pay Seller for deliveries from the Facility
--------
which exceed *** kwh per half-hour during the Block Curtailment
period. It is the intent of this Section for the Facility to
--------
minimize its energy deliveries to PG&E during Block Curtailment
subject to the Facility's physical and regulatory constraints
----------
effecting safe and prudent operation of the Facility.
--------
2.07 PG&E will have the right to cancel Block Curtailment
after it has begun. However, should a Block Curtailment be so
canceled, PG&E will pay a price equal to ***% of the CA PX
day-ahead energy price or, in the absence of a CA PX day-ahead
energy price, at ***% of PG&E's short-run avoided cost (SRAC)
energy prices for the corresponding hours for energy deliveries
for the period from the commencement to the cancellation of that
particular Block Curtailment. No additional payment of any kind
will be due from PG&E for such deliveries. After any Block
Curtailment is canceled, (i) the Facility will be required to
--------
start deliveries on a best efforts basis (ii) payment for any
energy deliveries from the time cancellation of each individual
Block Curtailment period becomes effective will be made in
accordance with the PPA provisions, and (iii) any hours remaining
in a period of scheduled Block Curtailment canceled by PG&E will
be credited by PG&E against the remaining hourly calendar year
limit of Block Curtailment under this Agreement. PG&E may, at
its option, provide a schedule for Block Curtailment by December
31 or earlier of the preceding year for curtailment to occur in
the following year. However, PG&E may revise that schedule as
long as it provides the Seller with a minimum of 12 hours advance
notice of that change. Seller may elect to perform maintenance
during a Block Curtailment. Any scheduled maintenance performed
during Block Curtailment shall reduce the allowance of annual
scheduled maintenance hours available to Seller.
2.08 The Block Curtailment provisions of this Agreement are
not intended to affect Seller's capacity payments, since those
payments are based on deliveries during on-peak and partial peak
hours.
2.09 For the period October 1, 1997 through December 31,
1997, each of PG&E and Seller shall retain its existing rights
under the PPA Curtailment Provisions.
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SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS
2.10 Effective January 1, 1998, all provisions of the PPA
pertaining to Curtailment Option B, including those provisions
contained in Article 7 and Appendix C of the PPA, shall be deemed
to have been rescinded in their entirety and shall no longer have
any force or effect for any purpose whatsoever, except as
provided below. PG&E agrees to continue to adjust the forecasted
off-peak and super off-peak hours' energy prices listed in Table
B-1, Appendix B of the PPA upward by ***% for Period A and ***%
for Period B ('the 'Curtailment Option B Adder') on and after
January 1, 1998, through the end of Fixed Price Period except
during Block Curtailment hours and the Monthly Curtailment
periods covered under Section 3 of this Agreement. The
Curtailment Option B Adder will apply to all off-peak and super
off-peak energy deliveries prior to the successful completion of
the 48-Hour Test covered under Section 3.09 of this Agreement.
The provisions of Appendix A, Section A-7 of the PPA shall
continue to apply for the term of the PPA.
SECTION 3
3. PAYMENT FOR MONTHLY CURTAILMENT DURING THE FIXED PRICE
PERIOD
3.01 For the period beginning January 1, 1998 through the
end of the Fixed Price Period, the following terms set forth in
----------- ------
this Section 3 shall apply. After the end of the Fixed Price
----- -----
Period, this Section 3 will have no further force or effect and
------
the PPA provisions shall apply unmodified by this Section 3.
3.02 Seller shall physically curtail all deliveries of power
from the Facility for *** calendar months each year during the
--------
years 1998 and 1999 ("Monthly Curtailment"), except as described
in Section 3.07 and Section 3.09 below. Monthly Curtailment may
occur only in those calendar months which are at least 2 calendar
months apart. For calendar year 1998, PG&E has the right to
schedule (i) *** months of Monthly Curtailment during any months
from January through May, or (ii) ******** of Monthly Curtailment
during January through May and ********* of Monthly Curtailment
during any month from September through December. For the
calendar year 1998, PG&E may not schedule *** months of Monthly
Curtailment during the month of September through December. For
calendar year 1999 *** months of Monthly Curtailment will occur
during the months of January through May.
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS
3.03 If, as a result of a decision in the Judicial Council
Coordination Proceeding No. 3241 or by a court or by the
California Public Utilities Commission in any action relating to
the end of Fixed Price Period, the Facility's Fixed Price Period
----------------------
is determined to end on a date that is later than PG&E's current
interpretation of the Fixed Price Period end date, Seller will be
------------------
required to provide additional Monthly Curtailment. This
additional Monthly Curtailment and the resulting reduction in
annual scheduled maintenance hours in accordance with Sections
3.02 and 3.08 will be prorated based on the ratio of the number
of Fixed Price Period hours remaining in that year to the total
number of hours in the calendar year. Any additional Monthly
Curtailment that Seller must provide under this Section 3.03 will
be scheduled and provided before the end of the Fixed Price
-----------
Period. Regardless of the end of the Fixed Price Period, for
------
calendar year 1999 Seller will be deemed to have satisfied its
Monthly Curtailment obligations by providing *** months of
Monthly Curtailment by the end of May 1999.
3.04 PG&E will provide Seller with at least 30 days advance
written notice for the first Monthly Curtailment period in
January through May 1998. PG&E will provide Seller with a
schedule no later than December 31, 1997 should the second
Monthly Curtailment period occur in the January through May 1998
period. For the September through December 1998 Monthly
Curtailment period, if any, PG&E will provide a schedule by June
30, 1998.
For the January through May 1999 Monthly Curtailment period,
PG&E will provide Seller with a schedule no later than October
31, 1998. If PG&E fails to provide a 1999 Monthly Curtailment
schedule by October 31, 1998, Seller may propose to PG&E the ***
months from the designated curtailment months during which Seller
plans to provide Monthly Curtailment. However, PG&E reserves the
right to make changes to Seller's proposed schedule.
3.05 PG&E may revise a Monthly Curtailment schedule provided
that Seller is notified of such revision by telecopy at least
ninety (90) days prior to the originally scheduled Monthly
Curtailment.
3.06 In consideration of the mutual benefits of Monthly
Curtailment, PG&E will pay Seller a Monthly Curtailment Energy
Payment, for each Monthly Curtailment period in the years 1998
and 1999 as set forth in the Table below. The Monthly
Curtailment Energy Payment for the first month of curtailment for
the Facility shall be the amount specified for the corresponding
month in the Table below for the "First Month of Monthly
Curtailment." The Monthly Curtailment Energy Payment for the
second month of curtailment for the Facility shall be the amount
specified for the corresponding month in the Table below for the
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"Second Month of Monthly Curtailment." The amount shall be paid
by PG&E to Seller at the time required by the PPA, and is subject
to the provisions of Section 3.09 below. Should Seller be
required to provide additional Monthly Curtailment during its
Fixed Price Period as described under Section 3.03 above, PG&E
shall pay Seller an amount equal to the ratio described in
Section 3.03 above, multiplied by the amount specified in the
Table below for the "First Month of Monthly Curtailment" for the
month in which Seller provides such additional curtailment.
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*****************************************************
3.07 Seller may begin energy deliveries 48 hours before the
end of each Monthly Curtailment period applicable to the
Facility. PG&E shall not pay Seller for energy and/or capacity
deliveries during this 48-hour period. Since this Agreement
requires Seller to shut down the Facility after it has qualified
to commence Monthly Curtailment pursuant to Section 3.09 below,
if Seller continues to deliver power to PG&E after the Facility
has commenced Monthly Curtailment, Seller shall not receive any
payment for any such deliveries which take place after the
commencement of Monthly Curtailment.
3.08 During the designated Monthly Curtailment periods,
Seller is allowed to perform maintenance. The Facility's annual
allowance (based on a scheduled maintenance year) of *** hours of
scheduled maintenance as found in Section E-3 of Appendix E of
the PPA will be reduced by *** hours for the first Monthly
Curtailment that occurs in any one month from January to May. A
second Monthly Curtailment that occurs in any month from January
to May will not further reduce the Facility's remaining allowance
of annual scheduled maintenance hours. However, for any second
Monthly Curtailment period that occurs in any month from
September through December, Facility's remaining allowance of
scheduled maintenance hours will be further reduced by *** hours.
Any scheduled maintenance performed in non-Monthly Curtailment
months shall be treated in accordance with the PPA provisions.
After the end of the Fixed Price Period and through the remaining
term of the PPA, Seller will be charged for the actual number of
hours used for performing scheduled maintenance under the
unamended PPA terms.
3.09 (a) It is the express purpose of this Agreement that
Seller shall be compensated only for curtailment it would not
otherwise have provided without the payments provided for in this
Section 3. The tests below in Section 3.09 (b) provide an
objective and exclusive criteria for determining whether this
purpose has been fulfilled,
(b) Seller shall be paid 100% of the Monthly
Curtailment Energy Payment set forth in Section 3.06 above for
the Monthly Curtailment periods of each year, if the Facility can
successfully satisfy item 1) and item 2) below (the "Performance
Requirement"):
1) The Facility delivers power to PG&E at or above an average
of 22,000 kwh per hour for a continuous 48 hour period, as
measured using PG&E's conventional 30-minute metering process
("48-Hour Test"), immediately preceding (i) the Monthly
Curtailment period, or (ii) Block Curtailment that immediately
precedes a Monthly Curtailment, and
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2) The Facility is not fully forced out of operation, except
when caused by PG&E during the period between successful
completion of item 1) above and prior to discontinuance of energy
deliveries during the Facility's preparations to begin the
Monthly Curtailment shutdown.
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SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS
The 48-Hour Test will not be required if within 72 hours
prior to the start of a Monthly Curtailment (i) a Block
Curtailment occurs, provided the Facility had delivered at or
above an average of 22,000 kwh per hour for a continuous 48 hour
period preceding the start of that Block Curtailment; or (ii) any
PG&E caused or invoked interruption of deliveries occurs pursuant
to Appendix A, Section A-7 of the PPA or, (iii) any interruption
of deliveries occurs pursuant to Appendix A, Section A-8 of the
PPA.
(c) Seller shall provide written notice by telecopy
(followed by telephone verification of the telecopy notice) to
PG&E at such time that Seller determines the Facility has met the
Performance Requirement set out in Section 3.09(b) 1) & 2) above.
Such notice will include Seller's metering data which supports
the successful completion of item 1) of Section 3.09(b), as well
as Seller's confirmation of successfully meeting the requirement
of item 2) of Section 3.09(b), the date and time the Facility has
met the Performance Requirement and the date and time Monthly
Curtailment has commenced or will commence. Such notice shall be
provided by telecopy and confirmed by telephone to PG&E's
Manager, Utility Electric Supply or its successor organization
per notice provided by PG&E [fax number (415) 973-9176; telephone
number (415) 973-2875] and to the PG&E Administrator of the
Woodland PPA or its successor [current fax number (415) 973-2151;
current telephone number (415) 973-3791]. PG&E shall notify
Seller by telecopy (confirmed by telephone) within two business
days of receipt of notice from Seller, if it does not concur with
Seller that the Facility has met the Performance Requirement.
Notices to Seller under this Section 3.09 shall be provided by
telecopy to the Facility's plant manager or representative and
confirmed by telephone [fax number (916) 661-3124; telephone
number (916) 661-4192]. Failure by PG&E to respond within two
business days of receipt of notice from Seller shall be deemed to
be notification by PG&E that PG&E concurs with Seller that the
Facility has satisfied the 48-Hour Test.
(d) If the Facility does not meet the Performance
Requirement as of the beginning of the Monthly Curtailment
period, Monthly Curtailment shall not begin until the Facility
subsequently passes the 48-Hour Test, at which time Monthly
Curtailment will commence. Seller shall make reasonable efforts
to successfully pass the 48-Hour Test. The Facility's allowance
of *** and *** hours during the First and Second Monthly
Curtailment periods, respectively, will be prorated based on the
number of hours of curtailment provided to the total number of
hours in the calendar month. Seller shall provide written notice
to PG&E by telecopy (confirmed by telephone) at such time that
Seller determines the Facility has met the 48-Hour Test and the
Monthly Curtailment has commenced. PG&E shall notify Seller by
telecopy (confirmed by telephone) within two business days of
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receipt of notice from Seller if it does not concur with Seller
that the Facility has passed the 48-Hour Test. Failure by PG&E
to respond within the two business days of receipt of notice from
Seller shall be deemed to be notification by PG&E that it concurs
with Seller that the Facility has satisfied the 48-Hour Test.
(e) If the Facility passes the 48-Hour Test after the
designated Monthly Curtailment period has begun, the Monthly
Curtailment Energy Payment will be prorated based upon the ratio
of (i) the number of hours remaining in the Monthly Curtailment
period after the Facility has successfully passed the 48-Hour
Test and commenced Monthly Curtailment to (ii) the total number
of hours in the Monthly Curtailment period. For all energy
deliveries in a Monthly Curtailment period prior to the
commencement of Monthly Curtailment, Seller shall receive ***% of
the Forecast Energy Prices under Energy Payment Option 1 at Table
B-1, Appendix B, of the PPA, including the Curtailment Option B
Adder, if applicable, subject to the limitation in the last
sentence of this paragraph (e). The total energy payment for
such designated curtailment month will be the sum of (i) the
payment for energy delivered prior to commencement of the Monthly
Curtailment plus (ii) the prorated Monthly Curtailment Energy
Payment, provided, however that the total energy payment for such
Monthly Curtailment period will be limited to a maximum amount
equal to 100% of the Monthly Curtailment Energy Payment for the
applicable month as set forth in Section 3.06 above.
(f) Because the first and second Monthly Curtailment
periods during each year shall always be non-consecutive, Seller
is required to satisfy the Performance Requirement individually
for each Monthly Curtailment period by successfully passing the
48-Hour Test.
3.10 Capacity payments for each Monthly Curtailment period
shall be calculated using the Facility's *************** average
historic energy deliveries in the corresponding month (not
including months where Monthly Curtailment was taken at the
Facility), provided that the Facility meets the Performance
Requirement as set forth in Section 3.09 above.
The Monthly Curtailment firm capacity payment for the
Facility will be calculated in accordance with Section E-5 of
Appendix E of the PPA. For purposes of the calculation, the
Monthly Capacity Factor ("MCF") will be deemed to be equal to the
************************ historic average Performance Factor in
the corresponding month (not including months where Monthly
Curtailment was taken at the Facility). If the Facility has not
met the Performance Requirement as of the beginning of a Monthly
Curtailment period, the Monthly Curtailment firm capacity payment
for the month will be calculated in accordance with Section E-5
of Appendix E of the PPA, substituting the following factors for
P and MCF:
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P = A+Y < = (1.0)
---
CX(B-S)X(.8)
A= Total kilowatt-hours delivered during all on-peak and
partial-peak hours in the Monthly Curtailment period prior to
successfully passing the 48-Hour Test and commencement of Monthly
Curtailment excluding any energy associated with generation
levels greater than firm capacity
Y= ******* historic average Performance Factor for the
corresponding applicable month (not including Monthly Curtailment
months) multiplied by C (firm capacity in kilowatts) multiplied
by the sum of on-peak hours and partial peak hours in the Monthly
Curtailment period remaining after successfully passing the
48-Hour Test and commencing Monthly Curtailment.
C = Firm capacity in kilowatts
B = Total on-peak and partial peak hours during the month
S = Total on-peak and partial peak hours during the month the
Facility is out of service on scheduled maintenance or due to a
PG&E forced outage prior to successfully passing the 48-Hour
Test.
For purposes of the Monthly Curtailment firm capacity
payment, MCF will be deemed to be equal to the Performance Factor
(P) as calculated above. For purposes of determining the Monthly
Curtailment as-delivered capacity payment, the Facility will
receive a payment based upon its ********************************
historic average energy deliveries to PG&E in excess of firm
capacity in the applicable time-of-day period for the Facility in
the corresponding month (not including months where Monthly
Curtailment was taken at the Facility). The payment calculation
will be in accordance with Section D-2 of Appendix D of the PPA.
If the Facility has not met the Performance Requirement as of the
beginning of its Monthly Curtailment period, the Monthly
Curtailment as-delivered capacity payment for the month will be
determined in accordance with Section D-2 of Appendix D of the
PPA. For purposes of the calculations as-delivered capacity will
be calculated as follows:
As-Delivered Capacity = A+B
Where:
A = Kilowatt hour deliveries by time-of-day period in excess of
firm capacity in the Monthly Curtailment period prior to
successfully passing the 48-Hour Test and commencing Monthly
Curtailment.
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B= ****** historic average kwh deliveries by time-of-day period
in excess of firm capacity in the corresponding applicable month
(not including Monthly Curtailment months) multiplied by the
number of applicable time-of-day periods in the Monthly
Curtailment period remaining after successfully passing the
48-Hour Test and commencing Monthly Curtailment.
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SECTION 4
4. CAPACITY AND ENERGY SALES TO THIRD PARTY
4.01 (a) Any time after January 1, 1998, Seller may, at its sole
discretion, sell additional power (i.e, energy and capacity
exceeding **** mw, and/or ancillary services) from the Facility
to any other party, subject to the limitations set forth in this
Section 4. If Seller decides to sell power in excess of **** mw
from the Facility, Seller will first offer that power for sale to
PG&E before Seller agrees to sell that additional power to any
other party. Seller's offer shall be in writing and shall
include, at a minimum, all pertinent information of proposed sale
including quantity of additional power, price, duration of sale,
time periods of sale, and terms and conditions on which Seller
intends to sell such additional power ("Terms"). Within fifteen
(15) business days of receipt of such written offer, PG&E will
notify Seller that either PG&E rejects Seller's offer or PG&E
will accept Seller's offer to purchase such additional power upon
Seller Terms. Failure by PG&E to respond within fifteen (15)
business days of receipt of Seller's offer shall be deemed to be
rejection by PG&E of Seller's offer. Upon rejection of Seller's
offer by PG&E, Seller shall thereafter be free to sell such
additional power to any other party. Should any of the Terms of
Seller's offer to sell such additional power to a third party
change from the Terms of its offer to PG&E, Seller is required to
resubmit its offer to PG&E to sell such additional power under
the revised Terms. Each time Seller decides to sell power,
Seller must provide PG&E the right of first refusal as per the
protocol described above in this Section 4.01.
(b) Prior to engaging in any power sales to a third party
under this Section 4.01, Seller agrees to execute any and all
agreements deemed necessary by PG&E, the California Independent
System Operator Corporation (ISO) and/or CA PX to engage in such
sales. Seller shall hold PG&E harmless from all charges
associated with the sale or transmission of power to third
parties assessed by the ISO and/or CA PX, including but not
limited to the ISO Grid Management charge, ancillary services
charges, congestion charges, or imbalance energy. All such
charges, if incurred by PG&E, shall be repaid by Seller to PG&E
with interest if applicable.
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4.02 In accordance with Article 5 of the PPA, PG&E shall
accept and pay for up to **** mw in firm capacity deliveries from
Seller with payment determined in accordance with Appendix E of
the PPA. PG&E shall pay Seller for capacity delivered in excess
of firm capacity on an as-delivered capacity in accordance with
As-Delivered Capacity Payment Option 2 set forth in Appendix D of
the PPA up to a total maximum delivery of **** mw. PG&E will not
pay Seller under the terms of the PPA for any energy and capacity
deliveries exceeding **** mw for the remaining term of the PPA.
4.03 Seller agrees that it will take no action under this
Section 4 which will directly or indirectly interfere with the
recovery by PG&E of competition transition charges (CTCs) or
stranded distribution costs (as determined by the California
Public Utilities Commission or other regulatory, legislative or
judicial body of competent jurisdiction), from PG&E's retail
customers as of December 20, 1995, and Seller agrees to make PG&E
whole for any such loss caused by Seller.
SECTION 5
5. RELEASE
5.01 Each Party does for itself, its officers, directors,
agents, employees, attorneys, representatives, subsidiaries,
affiliates, predecessors, successors, partners, limited partners,
and assigns, hereby release and forever discharge the other Party
and its officers, directors, agents, employees, attorneys,
representatives, subsidiaries, affiliates, predecessors,
successors, partners, limited partners and assigns from any and
all claims, demands, causes of
action, obligations or liabilities of any nature whatsoever
(including attorney's fees and costs of suit), whether known or
unknown, which either Party has or ever had against the other
Party including those related to the following matters but
excluding those set forth in Section 5.02 below:
****************************************************************
5.02 ******************************************************
5.03 Each Party represents and warrants that it has given
any and all notices, and obtained any and all consents, powers
and authorities, necessary to permit it and the person executing
this Agreement for it, to enter into this Agreement, settle,
compromise, and release the claims settled, compromised, and
released herein, to do or undertake or forebear from any act
called for herein, and to make this Agreement, and all the
provisions hereof, fully binding on and enforceable against the
other Party to this Agreement.
15PAGE
<PAGE>
5.04 Each Party acknowledges that it may have claims against
the other Party of which it is currently unaware and that it
agrees that this Agreement is intended to extend to any and all
claims arising before the date of this Agreement which it may
have against the other Party, whether known or unknown, excluding
only claims based on the issues described in Section 5.02 above.
As a further inducement and consideration, each party with
respect to the subject matter of this Agreement expressly and
specifically waives any rights or benefits available to it under
California Civil Code Section 1542, which provides: "A general
release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing
the release, which if known by him must have materially affected
his settlement with the debtor."
5.05 Each Party acknowledges that it may have sustained
damages, losses, costs, or expenses that are currently unknown or
unsuspected, and that such damages, losses, costs, or expenses as
may have been sustained may give rise to additional damages,
losses, costs, or expenses in the future. Each Party
acknowledges that the facts may be other than it now understands
them, and this Agreement has been negotiated and agreed upon in
light of this situation, and each Party hereby expressly waives,
with respect to the subject matter of this Agreement, any and all
rights which it may have under California Civil Code Section
1542.
5.06 Each Party acknowledges that the valuable consideration
for settlement of their disputes is solely for its own business
purposes and for the purpose of obtaining peace and preventing
protracted litigation between them. Neither the fact of this
Agreement, nor any of the consideration paid under it is or shall
be construed to be an admission that any claim compromised or
released by this Agreement is valid.
5.07 This Release is freely and voluntarily made. Neither
Party has been influenced to any extent in making this Release by
any representation or statements made by any representative,
agent, employee, attorney, or servant of PG&E or Seller.
5.08 Each Party represents and warrants that it has not
assigned to any other Party the claims being released, and that
it is fully entitled to give this release and discharge to the
other Party.
5.09 PG&E hereby accepts as complete and accurate any and
all prior calculations and related payments to Seller for the
curtailments of any sort entered into between PG&E and Seller
prior to November 5, 1997.
16PAGE
<PAGE>
SECTION 6
6. MEDIATION
6.01 In the event of any disputes, excluding disputes
arising from the matters described in Section 5.02 above, between
PG&E and Seller arising out of or connected with this Agreement
which the parties are unable to resolve through direct
negotiation, either party may serve upon the other at its
principal place of business a request for mediation. Neither
party may file an action against the other in any court unless
and until the party seeking to file such an action has first
requested a mediation hearing and made a good faith effort to
complete the mediation process provided in this Agreement.
6.02 The Party requesting mediation shall recommend a
neutral, independent person with experience in dispute mediations
to act as mediator. The mediator must be selected by agreement
of all Parties. The Parties shall endeavor to hold the mediation
not less than ten or more than twenty days from the date the
Party requesting mediation gives notice of the request for
mediation to the other Party. The mediation shall be held at San
Francisco, California. The cost of mediation shall be borne by
the Parties equally.
6.03 The Parties shall maintain the mediation proceedings in
confidence and shall not disclose to third persons the statements
made therein by the other Party or the mediator. The provisions
of California Evidence Code Sections 1152, 1152.5 and 1152.6
shall apply to the mediation proceedings.
6.04 At least five days before the date of the mediation,
each Party shall provide the mediator with a statement of its
position and copies of all supporting documents. Each Party
shall send to the mediation a person who has authority to bind
the Party. If the dispute involves third parties, they shall
also be asked to participate in the mediation, but their presence
shall not be necessary for the mediation to proceed.
6.05 If a Party has participated in good faith in a
mediation and is dissatisfied with the outcome, that Party may
then invoke all legal rights and remedies available to the Party
at law or in equity.
SECTION 7
7. MISCELLANEOUS
7.01 This Agreement constitutes the entire agreement of the
Parties with respect to the subject matter hereof and supersedes
any and all prior negotiations, correspondence, understandings
and agreements between the Parties respecting the subject matter
of this Agreement.
17PAGE
<PAGE>
7.02 This Agreement may be modified or amended only by a
written instrument signed by the authorized representatives of
both Parties.
7.03 Captions are included herein for ease of reference
only. The captions are not intended to affect the meaning of the
contents or scope of this Agreement.
7.04 No provision of this Agreement shall be interpreted for
or against PG&E or Seller because PG&E, Seller, or their
respective attorneys drafted the particular provision.
7.05 This Agreement shall be construed and interpreted in
accordance with the laws of the State of California, excluding
any choice of law rules that may direct the application of the
laws of another jurisdiction.
7.06 No term or provision herein shall be deemed waived and
no breach excused unless such waiver or consent is in writing and
signed by the Party claimed to have so waived or excused.
7.07 Seller agrees to use reasonable efforts to support the
reasonableness of this Agreement in any proceeding before the
California Public Utilities Commission in which the prudence or
reasonableness of this Agreement is examined. Each Party shall
bear its own costs and expenses in such a proceeding.
7.08 The Parties hereby terminate the Tolling and
Confidentiality Agreement between themselves dated September 25,
1995.
7.09 Except as expressly amended herein, the PPA shall
remain unchanged.
SECTION 8
8. CONFIDENTIALITY PROVISION
Each Party agrees not to disclose the terms and conditions
of this Agreement unless required by any governmental agency,
regulatory authority, court, or otherwise by law. PG&E may
voluntarily disclose the terms and conditions of this Agreement
to the California Public Utilities Commission, provided, however,
PG&E will request the Commission to hold the terms of this
Agreement in confidence.
Each Party may disclose the terms and conditions of this
Agreement to its tax advisors, accountants or other advisors whom
such Party may retain for financial or legal advice, but only on
the condition that all such advisors shall keep the terms and
conditions of this Agreement confidential. Seller may disclose
the terms and conditions of this Agreement to its lenders and
their advisors in order to obtain their consent to this
18PAGE
<PAGE>
Agreement, but shall require such lenders and advisors to keep
the terms and conditions of this Agreement confidential, unless
disclosure is required by any governmental agency, regulatory
authority, court or otherwise by law to do so or unless
disclosure is made in connection with the enforcement by such
lenders of the loan documents between Seller and such lenders.
IN WITNESS WHEREOF, Seller and PG&E have caused this
Agreement to be executed by their duly authorized representatives
as of the date first set forth above.
PACIFIC GAS AND ELECTRIC COMPANY, WOODLAND BIOMASS POWER,
a California corporation LTD.
By: /s/ Junona A. Jones By: Woodland Biomass
--------------------
Power Inc.
Its General Partner
By: /s/ Floyd M.Gent
-----------------
Its: Vice-president,
Asset Management
Name: Junona A. Jones Name: Floyd M. Gent
--------------- --------------
Title: Vice President,
Gas & Electric Supply Title:
--------------------- -------------------
Date of Signature: Date of Signature:
December 23, 1997 November 10, 1997
----------------- -----------------
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
Exhibit 10.4
------------
SECOND AMENDMENT TO POWER PURCHASE AGREEMENT
MENDOTA BIOMASS POWER, LTD. (PG&E Log No. 25C013)
THIS SECOND AMENDMENT TO POWER PURCHASE AGREEMENT
("Agreement"), dated November 6th, 1997 is by and between MENDOTA
BIOMASS POWER, LTD. ("Seller") a California limited partnership,
and PACIFIC GAS AND ELECTRIC COMPANY ("PG&E"), a California
corporation. PG&E and Seller are sometimes referred to herein
individually as "Party" and collectively as the "Parties."
RECITALS
--------
A. There is a Long-Term Energy and Capacity Power Purchase
Agreement between Seller and PG&E signed by PG&E on January 7,
1985, and by Seller on November 16, 1984, as amended by First
Amendment (the "PPA"), for the 25,000 kw generator nameplate
biomass-fueled facility (PG&E Log No. 25C013) located at the City
of Mendota Industrial Park, California (the "Facility"); and,
--------
B. The intent of the Parties is for all terms and
conditions of the PPA to remain in full force and effect except
where expressly amended. Unless otherwise defined herein, all
capitalized and underlined terms shall have the same meaning as
defined in the PPA.
C. Seller believes that sufficient fuel is available for
delivery to the Facility to operate the Facility at 27,000 kw
--------- --------
under the PPA throughout the remainder of the Fixed Price Period.
----- ----- ------
D. The Parties wish to restructure the PPA as set forth
herein in ways which each Party believes will be to its benefit.
E. The Parties have had a variety of disputes under the
PPA, including PG&E's administration of Curtailment Option B as
set forth in Appendix C of the PPA.
F. To accomplish these restructuring changes and resolve
the Curtailment Option B dispute, the Parties have agreed to the
terms and conditions set forth below.
Remaining portion of this page intentionally left blank.
PAGE
<PAGE>
AGREEMENT
THEREFORE, in consideration of the mutual covenants in this
Agreement, the Parties agree as follows:
SECTION 1
1. DEFINITIONS
Whenever used in this Agreement, the following terms shall
have the following meanings:
1.01 Curtailment Option B Adder: the adder to energy
payments for the Facility as provided in the first paragraph of
--------
Appendix B at page B-1 of the PPA.
1.02 Fixed Price Period: This term shall have the same
----- ----- ------
meaning in this Agreement as it has in the PPA for the Facility
--------
which is the subject of this Agreement.
1.03 kw: Kilowatts
1.04 kwh: Kilowatt-hours
1.05 California Power Exchange.: The California Power
Exchange Corporation ("CA PX"), a California not-for-profit
public benefit corporation, which has been established in order
to conduct competitive auctions for electric power in the State
of California as described in Section 355 of the California
Public Utilities Code.
1.06 PPA Curtailment Provisions: Article 7 and Appendix C
of the PPA. Section A-7 of Appendix A of the PPA is not included
in this definition.
1.07 Monthly Curtailment Period: A continuous period of one
calendar month commencing at 00:00 hours on first day and ending
at 23:59 hours on last day of the calendar month (any one month
from January through May, or September through December during
the Fixed Price Period) during which, at PG&E's sole option,
------------------
Seller shall physically curtail all deliveries of power from the
Facility to PG&E to zero.
--------
Remaining portion of this page intentionally left blank.
2PAGE
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
SECTION 2
2. BLOCK CURTAILMENT DURING THE FIXED PRICE PERIOD
----- ----- ------
2.01 For the period beginning on January 1, 1998 through the
end of the Fixed Price Period applicable to the Facility, the PPA
----- ----- ------ --------
Curtailment Option B Provisions shall be superseded in the
entirety by curtailment in accordance with this Section 2 which
defines "Block Curtailment." After the expiration of the Fixed
-----
Price Period in the PPA, this Section 2, and the resulting
----- ------
amendments to the PPA contained herein, shall have no force or
effect with the sole exception of Section 2.10 which shall
continue in effect.
2.02 Effective January 1, 1998 PG&E may, at its discretion,
curtail the Facility for up to *** hours per calendar year
--------
through the remaining period in the Fixed Price Period in the
----- ----- ------
PPA.
2.03 In the final calendar year of the Fixed Price Period,
----- ----- ------
the total annual amount of Block Curtailment provided by the
Facility will be prorated based on the percentage of the calendar
--------
year which is in the Fixed Price Period.
----- ----- ------
2.04 If, as a result of a decision by a the court in the
Judicial Council Coordination Proceeding No. 3241 or by a court
or by the California Public Utilities Commission in any action
relating to the end of Fixed Price Period, the Facility's Fixed
----- ----- ------ ---------- -----
Price Period is determined to end on a date that is later than
----- ------
PG&E's current interpretation of the Fixed Price Period end date,
----- ----- ------
Seller will be required to provide additional Block Curtailment
from the Facility to PG&E on a prorated basis as provided in
--------
Section 2.03 above.
2.05 PG&E shall schedule the Block Curtailments from the
Facility in blocks of a minimum of *** consecutive off-peak and
--------
super off-peak hours of curtailment, except for *** block of
curtailment per calendar year which may be less than *** hours.
PG&E shall provide Seller written notice by telecopy (followed by
telephone verification of the telecopy notice) at least 12 hours
prior to each Block Curtailment period. Such notice shall be
provided to Seller's plant manager or representative [fax number
(209) 655-4525; telephone number (209) 655-4921] in accordance
with PG&E's notice provision described above.
3PAGE
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
2.06 During Block Curtailment, Seller may reduce its energy
deliveries to PG&E from the Facility to zero. If the Facility
-------- --------
delivers power during the Block Curtailment hours, PG&E shall pay
for up to *** kwh per half-hour in energy deliveries at a price
equal to ***% of the CA PX day-ahead energy price or, in the
absence of a CA PX day-ahead energy price, at ***% of PG&E's
short-run avoided cost (SRAC) energy prices for the corresponding
hours. PG&E will not pay Seller for deliveries from the Facility
--------
which exceed *** kwh per half-hour during the Block Curtailment
period. It is the intent of this Section for the Facility to
--------
minimize its energy deliveries to PG&E during the Block
Curtailment subject to the Facility's physical and regulatory
--------
constraints effecting safe and prudent operation of the Facility.
--------
2.07 PG&E will have the right to cancel Block Curtailment
after it has begun. However, should a Block Curtailment be so
canceled, PG&E will pay a price equal to ***% of the CA PX
day-ahead energy price or, in the absence of a CA PX day-ahead
energy price, at ***% of PG&E's short-run avoided cost (SRAC)
energy prices for the corresponding hours for energy deliveries
for the period from the commencement to the cancellation of that
particular Block Curtailment. No additional payment of any kind
will be due from PG&E for such deliveries. After any Block
Curtailment is canceled, (i) the Facility will be required to
--------
start deliveries on a best efforts basis (ii) payment for any
energy deliveries from the time cancellation of each individual
Block Curtailment period becomes effective will be made in
accordance with the PPA provisions , and (iii) any hours
remaining in a period of scheduled Block Curtailment canceled by
PG&E will be credited by PG&E against the remaining hourly
calendar year limit of Block Curtailment under this Agreement.
PG&E may, at its option, provide a schedule for Block Curtailment
by December 31 or earlier of the preceding year for curtailment
to occur in the following year. However, PG&E may revise that
schedule as long as it provides the Seller with a minimum of 12
hours advance notice of that change. Seller may elect to perform
maintenance during a Block Curtailment. Any scheduled
maintenance performed during Block Curtailment shall reduce the
allowance of annual scheduled maintenance hours available to
Seller.
2.08 The Block Curtailment provisions of this Agreement are
not intended to affect Seller's capacity payments, since those
payments are based on deliveries during on-peak and partial peak
hours.
2.09 For the period October 1, 1997 through December 31,
1997, each of PG&E and Seller shall retain its existing rights
under the PPA Curtailment Provisions.
4PAGE
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
2.10 Effective January 1, 1998, all provisions of the PPA
pertaining to Curtailment Option B, including those provisions
contained in Article 7 and Appendix C of the PPA, shall be deemed to
have been rescinded in their entirety and shall no longer have any
force or effect for any purpose whatsoever, except as provided below.
PG&E agrees to continue to adjust the forecasted off-peak and super
off-peak hours' energy prices listed in Table B-1, Appendix B of the
PPA upward by ***% for Period A and ***% for Period B ("the
"Curtailment Option B Adder") on and after January 1, 1998, through
the end of Fixed Price Period except during Block Curtailment hours
----- ----- ------
and the Monthly Curtailment periods covered under Section 3 of this
Agreement. The Curtailment Option B Adder will apply to all off-peak
and super off-peak energy deliveries prior to the successful
completion of the 48-Hour Test covered under Section 3.09 of this
Agreement. The provisions of Appendix A, Section A-7 of the PPA shall
continue to apply for the term of the PPA.
SECTION 3
3. PAYMENT FOR MONTHLY CURTAILMENT DURING THE FIXED PRICE
----- -----
PERIOD
------
3.01 For the period beginning January 1, 1998 through the end of
the Fixed Price Period, the following terms set forth in this Section
----- ----- ------
3 shall apply. After the end of the Fixed Price Period, this Section
----- ----- ------
3 will have no further force or effect and the PPA provisions shall
apply unmodified by this Section 3.
3.02 Seller shall physically curtail all deliveries of power from
the Facility for *** calendar months each year during the years 1998
--------
and 1999 ("Monthly Curtailment"), except as described in Section 3.07
and Section 3.09 below. Monthly Curtailment may occur only in those
calendar months which are at least 2 calendar months apart. For
calendar year 1998, PG&E has the right to schedule (i) *** months of
Monthly Curtailment during any months from January through May, or
(ii) ******** of Monthly Curtailment during January through May and
******** of Monthly Curtailment during any month from September
through December. For the calendar year 1998, PG&E may not schedule
*** months of Monthly Curtailment during the month of September
through December. For calendar year 1999 *** months of Monthly
Curtailment will occur during the months of January through May.
3.03 If, as a result of a decision in the Judicial Council
Coordination Proceeding No. 3241 or by a court or by the California
Public Utilities Commission in any action relating to the end of Fixed
-----
Price Period, the Facility's Fixed Price Period is determined to end
----- ------ ------ ----- ------
on a date that is later than PG&E's current interpretation of the
Fixed Price Period end date, Seller will be
----- ----- ------
5PAGE
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
required to provide additional Monthly Curtailment. This
additional Monthly Curtailment and the resulting reduction in
annual scheduled maintenance hours in accordance with Sections
3.02 and 3.08 will be prorated based on the ratio of the number
of Fixed Price Period hours remaining in that year to the total
----- ----- ------
number of hours in the calendar year. Any additional Monthly
Curtailment that Seller must provide under this Section 3.03 will
be scheduled and provided before the end of the Fixed Price
----- -----
Period. Regardless of the end of the Fixed Price Period, for
------ ----- ----- ------
calendar year 1999 Seller will be deemed to have satisfied its
Monthly Curtailment obligations by providing *** months of
Monthly Curtailment by the end of May 1999.
3.04 PG&E will provide Seller with at least 30 days advance
written notice for the first Monthly Curtailment period in
January through May 1998. PG&E will provide Seller with a
schedule no later than December 31, 1997 should the second
Monthly Curtailment period occur in the January through May 1998
period. For the September through December 1998 Monthly
Curtailment period, if any, PG&E will provide a schedule by June
30, 1998. For the January through May 1999 Monthly Curtailment
period, PG&E will provide Seller with a schedule no later than
October 31, 1998. If PG&E fails to provide a 1999 Monthly
Curtailment schedule by October 31, 1998, Seller may propose to
PG&E the *** months from the designated curtailment months during
which Seller plans to provide Monthly Curtailment. However, PG&E
reserves the right to make changes to Seller's proposed schedule.
3.05 PG&E may revise a Monthly Curtailment schedule provided
that Seller is notified of such revision by telecopy at least
ninety (90) days prior to the originally scheduled Monthly
Curtailment.
3.06 In consideration of the mutual benefits of Monthly
Curtailment, PG&E will pay Seller a Monthly Curtailment Energy
Payment, for each Monthly Curtailment period in the years 1998
and 1999 as set forth in the Table below. The Monthly
Curtailment Energy Payment for the first month of curtailment for
the Facility shall be the amount specified for the corresponding
--------
month in the Table below for the "First Month of Monthly
Curtailment." The Monthly Curtailment Energy Payment for the
second month of curtailment for the Facility shall be the amount
--------
specified for the corresponding month in the Table below for the
"Second Month of Monthly Curtailment." The amount shall be paid
by PG&E to Seller at the time required by the PPA, and is subject
to the provisions of Section 3.09 below. Should Seller be
required to provide additional Monthly Curtailment during its
Fixed Price Period as described under Section 3.03 multiplied by
----- ----- ------
the amount specified in the Table below for the "First Month of
Monthly Curtailment" for the month in which Seller provides such
additional curtailment.
Remaining portion of this page intentionally left blank
6PAGE
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
**************************************
Note: Monthly Curtailment may occur only in those calendar
months which are at least two calendar months apart.
3.07 Seller may begin energy deliveries 48 hours before the
end of each Monthly Curtailment period applicable to the
Facility. PG&E shall not pay Seller for energy and/or capacity
--------
deliveries during this 48-hour period. Since this Agreement
requires Seller to shut down the Facility after it has qualified
--------
to commence Monthly Curtailment pursuant to Section 3.09 below,
if Seller continues to deliver power to PG&E after the Facility
--------
has commenced Monthly Curtailment, Seller shall not receive any
payment for any such deliveries which take place after the
commencement of Monthly Curtailment.
3.08 During the designated Monthly Curtailment periods,
Seller is allowed to perform maintenance. The Facility's annual
-----------
allowance (based on a scheduled maintenance year) of *** hours of
scheduled maintenance as found in Section E-3 of Appendix E of
the PPA will be reduced by *** hours for the first Monthly
Curtailment that occurs in any one month from January to May. A
second Monthly Curtailment that occurs in any month from January
to May will not further reduce the Facility's remaining allowance
----------
of annual scheduled maintenance hours. However, for any second
Monthly Curtailment period that occurs is any month from
September through December, Facility's remaining allowance of
----------
scheduled maintenance hours will be further reduced by *** hours.
Any scheduled maintenance performed in non-Monthly Curtailment
months shall be treated in accordance with the PPA provisions.
After the end of the Fixed Price Period and through the remaining
----- ----- ------
term of the PPA, Seller will be charged for the actual number of
hours used for performing scheduled maintenance under the
unamended PPA terms.
3.09 (a) It is the express purpose of this Agreement that
Seller shall be compensated only for curtailment it would not
otherwise have provided without the payments provided for in this
Section 3. The tests below in Section 3.09 (b) provide an
objective and exclusive criteria for determining whether this
purpose has been fulfilled.
(b) Seller shall be paid 100% of the Monthly
Curtailment Energy Payment set forth in Section 3.06 above for
the Monthly Curtailment periods of each year, if the Facility can
--------
successfully satisfy item 1) and item 2) below (the "Performance
Requirement"):
1) The Facility delivers power to PG&E at or
--------
above an average of 22,000 kwh per hour for a continuous 48 hour
period, as measured using PG&E's conventional 30-minute metering
7PAGE
<PAGE>
process ("48-Hour Test"), immediately preceding (i) the Monthly
Curtailment period, or (ii) Block Curtailment that immediately
precedes a Monthly Curtailment, and
2) The Facility is not fully forced out of
--------
operation, except when caused by PG&E during the period between
successful completion of item 1) above and prior to
discontinuance of energy deliveries during the Facility's
preparations to begin the Monthly Curtailment shutdown.
The remaining portion of this page intentionally left blank.
The 48-Hour Test will not be required if within 72 hours prior to
the start of a Monthly Curtailment (i) a Block Curtailment
occurs, provided the Facility had delivered at or above an
--------
average of 22,000 kwh per hour for a continuous 48 hour period
preceding the start of that Block Curtailment; or (ii) any PG&E
caused or invoked interruption of deliveries occurs pursuant to
Appendix A, Section A-7 of the PPA or, (iii) any interruption of
deliveries occurs pursuant to Appendix A, Section A-8 of the PPA.
(c) Seller shall provide written notice by telecopy
(followed by telephone verification of the telecopy notice) to
PG&E at such time that Seller determines the Facility has met the
--------
Performance Requirement set out in Section 3.09(b) 1) & 2) above.
Such notice will include Seller's metering data which supports
the successful completion of item 1) of Section 3.09(b), as well
as Seller's confirmation of successfully meeting the requirement
of item 2) of Section 3.09(b), the date and time the Facility has
--------
met the Performance Requirement and the date and time Monthly
Curtailment has commenced or will commence. Such notice shall be
provided by telecopy and confirmed by telephone to PG&E's
Manager, Utility Electric Supply or its successor organization
per notice provided by PG&E [fax number (415) 973-9176; telephone
number (415) 973-2875] and to the PG&E Administrator of the
Mendota PPA or its successor [current fax number (415) 973-2151;
current telephone number (415) 973-2163]. PG&E shall notify
Seller by telecopy (confirmed by telephone) within two business
days of receipt of notice from Seller, if it does not concur with
Seller that the Facility has met Performance Requirement.
--------
Notices to Seller under this Section 3.09 shall be provided by
telecopy to the Facility's plant manager or representative and
----------
confirmed by telephone [fax number (209) 655-4525; telephone
number (209) 655-4921]. Failure by PG&E to respond within two
business days of receipt of notice from Seller shall be deemed to
be notification by PG&E that PG&E concurs with Seller that the
Facility has satisfied the 48-Hour Test.
--------
8PAGE
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
(d) If the Facility does not meet the Performance
--------
Requirement as of the beginning of the Monthly Curtailment
period, Monthly Curtailment shall not begin until the Facility
--------
subsequently passes the 48-Hour Test, at which time Monthly
Curtailment will commence. Seller shall make reasonable efforts
to successfully pass the 48-Hour Test. The Facility's allowance
----------
of *** and *** hours during the First and Second Monthly
Curtailment periods, respectively, will be prorated based on the
number of hours of curtailment provided to the total number of
hours in the calendar month. Seller shall provide written notice
to PG&E by telecopy (confirmed by telephone) at such time that
Seller determines the Facility has met the 48-Hour Test and the
--------
Monthly Curtailment has commenced. PG&E shall notify Seller by
telecopy (confirmed by telephone) within two business days of
receipt of notice from Seller if it does not concur with
Seller that the Facility has passed the 48-Hour Test.
--------
Failure by PG&E to respond within the two business days of
receipt of notice from Seller shall be deemed to be notification
by PG&E that it concurs with Seller that the Facility has
--------
satisfied the 48-Hour Test.
(e) If the Facility passes the 48-Hour Test after the
---------
designated Monthly Curtailment period has begun, the Monthly
Curtailment Energy Payment will be prorated based upon the ratio
of (i) the number of hours remaining in the Monthly curtailment
period after the Facility has successfully passed the 48-Hour
--------
Test and commenced Monthly Curtailment to (ii) the total number
of hours in the Monthly Curtailment period. For all energy
deliveries in a Monthly Curtailment period prior to the
commencement of Monthly Curtailment, Seller shall receive ***% of
the Forecast Energy Prices under Energy Payment Option 1 at Table
B-1, Appendix B, of the PPA, including the Curtailment Option B
Adder, if applicable, subject to the limitation in the last
sentence of this paragraph (e). The total energy payment for
such designated curtailment month will be the sum of (i) the
payment for energy delivered prior to commencement of the Monthly
Curtailment plus (ii) the prorated Monthly Curtailment Energy
Payment, provided, however that the total energy payment for such
Monthly Curtailment period will be limited to a maximum amount
equal to 100% of the Monthly Curtailment Energy Payment for the
applicable month as set forth in Section 3.06 above.
(f) Because the first and second Monthly Curtailment
periods during each year shall always be non-consecutive, Seller
is required to satisfy the Performance Requirement individually
for each Monthly Curtailment period by successfully passing the
48-Hour Test.
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
9PAGE
<PAGE>
3.10 Capacity payments for each Monthly Curtailment period
shall be calculated using the Facility's past
----------
********************* average historic energy deliveries in the
corresponding month (not including months where Monthly
Curtailment was taken at the Facility), provided that the
--------
Facility meets the Performance Requirement as set forth in
--------
Section 3.09 above.
The Monthly Curtailment firm capacity payment for the
---- --------
Facility will be calculated
--------
in accordance with Section E-5 of Appendix E of the PPA. For
purposes of the calculation, the Monthly Capacity Factor ("MCF")
will be deemed to be equal to the ************************
historic average Performance Factor in the corresponding month
(not including months where Monthly Curtailment was taken at the
Facility).
--------
If the Facility has not met the Performance Requirement
--------
as of the beginning of a Monthly Curtailment period, the Monthly
Curtailment firm capacity payment for the month will be
---- --------
calculated in accordance with Section E-5 of Appendix E of the
PPA, substituting the following factors for P and MCF:
P= A +Y <= (1.0)
------------
Cx(B-S)x(.8)
A= Total kilowatt-hours delivered during all on-peak and
partial-peak hours in the Monthly Curtailment period prior to
successfully passing the 48-Hour Test and commencement of Monthly
Curtailment excluding any energy associated with generation
levels greater than firm capacity
-------------
Y= ****** historic average Performance Factor for the
corresponding applicable month (not including Monthly Curtailment
months) multiplied by C (firm capacity in kilowatts) multiplied
---- --------
by the sum of on-peak hours and partial peak hours in the Monthly
Curtailment period remaining after successfully passing the
48-Hour Test and commencing Monthly Curtailment.
C= Firm capacity in kilowatts
---- --------
B= Total on-peak and partial peak hours during the month
S= Total on-peak and partial peak hours during the month
the Facility is out of service on scheduled maintenance or due to
--------
a PG&E forced outage prior to successfully passing the 48-Hour
Test.
For purposes of the Monthly Curtailment firm capacity
---- --------
payment, MCF will be deemed to be equal to the Performance Factor
(P) as calculated above.
10PAGE
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
For purposes of determining the Monthly Curtailment
as-delivered capacity payment, the Facility will receive a
-- --------- -------- --------
payment based upon its ************************ historic average
energy deliveries to PG&E in excess of firm capacity in the
---- --------
applicable time-of-day period for the Facility in the
--------
corresponding month (not including months where Monthly
Curtailment was taken at the Facility). The payment calculation
--------
will be in accordance with Section D-2 of Appendix D of the PPA.
If the Facility has not met the Performance Requirement as
--------
of the beginning of its Monthly Curtailment period, the Monthly
Curtailment as-delivered capacity payment for the month will be
-- --------- --------
determined in accordance with Section D-2 of Appendix D of the
PPA. For purposes of the calculations as-delivered capacity will
-- --------- --------
be calculated as follows:
As-Delivered Capacity = A + B
-- --------- --------
Where:
A= Kilowatt hour deliveries by time-of-day period in
excess of firm capacity in the Monthly Curtailment period prior
---- --------
to successfully passing the 48-Hour Test and commencing Monthly
Curtailment.
B= ****** historic average kwh deliveries by time-of-day
period in excess of firm capacity in the corresponding applicable
---- --------
month (not including Monthly Curtailment months) multiplied by
the number of applicable time-of-day periods in the Monthly
Curtailment period remaining after successfully passing the
48-Hour Test and commencing Monthly Curtailment.
Remaining portion of this page intentionally left blank
11PAGE
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
SECTION 4
4. CAPACITY AND ENERGY DELIVERIES
4.01 PG&E shall accept and pay for up to *** mw of Seller's
energy and capacity deliveries under the terms of the PPA and
where appropriate as amended by this Agreement. PG&E shall
accept and pay for Seller's energy deliveries exceeding *** mw up
to a maximum of *** mw at prices equal to ***% of the CA PX
day-ahead energy prices or, in the absence of CA PX day-ahead
energy prices, at ***% of PG&E's SRAC energy prices. PG&E will
not pay Seller for energy deliveries exceeding *** mw for the
remaining term of the PPA.
4.02 In accordance with Article 5 of the PPA, PG&E shall
accept and pay for up to 22.0 mw in firm capacity deliveries from
---- --------
Seller with payment determined in accordance with Appendix E of
the PPA. PG&E shall pay Seller for capacity delivered in excess
of firm capacity on an as-delivered capacity basis in accordance
---- -------- -- --------- --------
with As-Delivered Capacity Payment Option 2 set forth in Appendix
-- --------- --------
D up to a total maximum delivery of *** mw. PG&E will not pay
Seller for capacity deliveries exceeding *** mw for the remaining
term of the PPA.
SECTION 5
5. RELEASE
5.01 Each Party does for itself, its officers, directors,
agents, employees, attorneys, representatives, subsidiaries,
affiliates, predecessors, successors, partners, limited partners,
and assigns, hereby release and forever discharge the other Party
and its officers, directors, agents, employees, attorneys,
representatives, subsidiaries, affiliates, predecessors,
successors, partners, limited partners and assigns from any and
all claims, demands, causes of action, obligations or liabilities
of any nature whatsoever (including attorney's fees and costs of
suit), whether known or unknown, which either Party has or ever
had against the other Party including those related to the
following matters but excluding those set forth in Section 5.02
below:
***************************************************************
12PAGE
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
5.02
************************************************************
5.03 Each Party represents and warrants that it has given
any and all notices, and obtained any and all consents, powers
and authorities, necessary to permit it and the person executing
this Agreement for it, to enter into this Agreement, settle,
compromise, and release the claims settled, compromised, and
released herein, to do or undertake or forebear from any act
called herein, and to make this Agreement, and all the provisions
hereof, fully binding on and enforceable against the other Party
to this Agreement.
5.04 Each Party acknowledges that it may have claims against
the other Party of which it is currently unaware and that it
agrees that this Agreement is intended to extend to any and all
claims arising before the date of this Agreement which it may
have against the other Party, whether known or unknown, excluding
only claims based on the issues described in Section 5.02 above.
As a further inducement and consideration, each party with
respect to the subject matter of this Agreement expressly and
specifically waives any rights or benefits available to it under
California Civil Code Section 1542, which provides: "A general
release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing
the release, which if known by him must have materially affected
his settlement with the debtor."
5.05 Each Party acknowledges that it may have sustained
damages, losses, costs, or expenses that are currently unknown or
unsuspected, and that such damages, losses, costs, or expenses as
may have been sustained may give rise to additional damages,
losses, costs, or expenses in the future. Each Party
acknowledges that the facts may be other than it now understands
them, and this Agreement has been negotiated and agreed upon in
light of this situation, and each Party hereby expressly waives,
with respect to the subject matter of this Agreement, any and all
rights which it may have under California Civil Code Section
1542.
5.06 Each Party acknowledges that the valuable consideration
for settlement of their disputes is solely for its own business
purposes and for the purpose of obtaining peace and preventing
protracted litigation between them. Neither the fact of this
Agreement, nor any of the consideration paid under it is or shall
be construed to be an admission that any claim compromised or
released by this Agreement is valid.
13PAGE
<PAGE>
5.07 This Release is freely and voluntarily made. Neither
Party has been influenced to any extent in making this Release by
any representation or statements made by any representative,
agent, employee, attorney, or servant of PG&E or Seller.
5.08 Each Party represents and warrants that it has not
assigned to any other Party the claims being released, and that
it is fully entitled to give this release and discharge to the
other Party.
5.09 PG&E hereby accepts as complete and accurate any and
all prior calculations and related payments to Seller for the
curtailments of any sort entered into between PG&E and Seller
prior to November 5, 1997.
SECTION 6
6. MEDIATION
6.01 In the event of any disputes, excluding disputes
arising from the matters described in Section 5.02 above, between
PG&E and Seller arising out of or connected with this Agreement
which the parties are unable to resolve through direct
negotiation, either party may serve upon the other at its
principal place of business a request for mediation. Neither
party may file an action against the other in any court unless
and until the party seeking to file such an action has first
requested a mediation hearing and made a good faith effort to
complete the mediation process provided in this Agreement.
6.02 The Party requesting mediation shall recommend a
neutral, independent person with experience in dispute mediations
to act as mediator. The mediator must be selected by agreement
of all Parties. The Parties shall endeavor to hold the mediation
not less than ten or more than twenty days from the date the
Party requesting mediation gives notice of the request for
mediation to the other Party. The mediation shall be held at San
Francisco, California. The cost of mediation shall be borne by
the Parties equally.
6.03 The Parties shall maintain the mediation proceedings in
confidence and shall not disclose to third persons the statements
made therein by the other Party or the mediator. The provisions
of California Evidence Code Sections 1152, 1152.5 and 1152.6
shall apply to the mediation proceedings.
6.04 At least five days before the date of the mediation,
each Party shall provide the mediator with a statement of its
position and copies of all supporting documents. Each Party
shall send to the mediation a person who has authority to bind
the Party. If the dispute involves third parties, they shall
also be asked to participate in the mediation, but their presence
shall not be necessary for the mediation to proceed.
14PAGE
<PAGE>
6.05 If a Party has participated in good faith in a
mediation and is dissatisfied with the outcome, that Party may
then invoke all legal rights and remedies available to the Party
at law or in equity.
SECTION 7
7. MISCELLANEOUS
7.01 This Agreement constitutes the entire agreement of the
Parties with respect to the subject matter hereof and supersedes
any and all prior negotiations, correspondence, understandings
and agreements between the Parties respecting the subject matter
of this Agreement.
7.02 This Agreement may be modified or amended only by a
written instrument signed by the authorized representatives of
both Parties.
7.03 Captions are included herein for ease of reference
only. The captions are not intended to affect the meaning of the
contents or scope of this Agreement.
7.04 No provision of this Agreement shall be interpreted for
or against PG&E or Seller because PG&E, Seller, or their
respective attorneys drafted the particular provision.
7.05 This Agreement shall be construed and interpreted in
accordance with the laws of the State of California, excluding
any choice of law rules that may direct the application of the
laws of another jurisdiction.
7.06 No term or provision herein shall be deemed waived and
no breach excused unless such waiver or consent is in writing and
signed by the Party claimed to have so waived or excused.
7.07 Seller agrees to use reasonable efforts to support the
reasonableness of this Agreement in any proceeding before the
California Public Utilities Commission in which the prudence or
reasonableness of this Agreement is examined. Each Party shall
bear its own costs and expenses in such a proceeding.
7.08 The Parties hereby terminate the Tolling and
Confidentiality Agreement between themselves dated September 25,
1995.
7.09 Except as expressly amended herein, the PPA shall
remain unchanged.
15PAGE
<PAGE>
SECTION 8
8. CONFIDENTIALITY PROVISION
Each Party agrees not to disclose the terms and conditions
of this Agreement unless required by any governmental agency,
regulatory authority, court, or otherwise by law. PG&E may
voluntarily disclose the terms and conditions of this Agreement
to the California Public Utilities Commission, provided, however,
PG&E will request the Commission to hold the terms of this
Agreement in confidence.
Each Party may disclose the terms and conditions of this
Agreement to its tax advisors, accountants or other advisors whom
such Party may retain for financial or legal advice, but only on
the condition that all such advisors shall keep the terms and
conditions of this Agreement confidential. Seller may disclose
the terms and conditions of this Agreement to its lenders and
their advisors in order to obtain their consent to this
Agreement, but shall require such lenders and advisors to keep
the terms and conditions of this Agreement confidential, unless
disclosure is required by any governmental agency, regulatory
authority, court or otherwise by law to do so or unless
disclosure is made in connection with the enforcement by such
lenders of the loan documents between Seller and such lenders.
IN WITNESS WHEREOF, Seller and PG&E have caused this
Agreement to be executed by their duly authorized representatives
as of the date first set forth above.
PACIFIC GAS AND ELECTRIC COMPANY, MENDOTA BIOMASS POWER, LTD.,
a California corporation By: Thermendota, Inc.,
Its General Partner
By: /s/ Junona A. Jones By: Floyd M. Gent
------------------- -------------
Its: Vice-president,
Asset Management
Name: Junona A. Jones Name: Floyd M. Gent
--------------- --------------
Title: Vice President, Title: ___________________
Gas & Electric Supply
---------------------
Date of Signature: Date of Signature:
December 23, 1997 November 10, 1997
----------------- -----------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
ECOTEK CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
JANUARY 3, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-03-1998
<PERIOD-END> JAN-03-1998
<CASH> 54,480
<SECURITIES> 0
<RECEIVABLES> 33,572
<ALLOWANCES> 0
<INVENTORY> 23,276
<CURRENT-ASSETS> 131,348
<PP&E> 352,203
<DEPRECIATION> 70,831
<TOTAL-ASSETS> 478,449
<CURRENT-LIABILITIES> 63,411
<BONDS> 112,922
0
0
<COMMON> 2,628
<OTHER-SE> 152,692
<TOTAL-LIABILITY-AND-EQUITY> 478,449
<SALES> 47,809
<TOTAL-REVENUES> 47,809
<CGS> 31,395
<TOTAL-COSTS> 31,395
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,621
<INCOME-PRETAX> 12,857
<INCOME-TAX> 3,326
<INCOME-CONTINUING> 9,258
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,258
<EPS-PRIMARY> .38
<EPS-DILUTED> .25
</TABLE>
