JOINT VENTURE AGREEMENT
CalEnergy Company, Inc. ("CE") and Kiewit Diversified Group
Inc. ("Kiewit") each recognize the unique strengths of the other
Party and hereby form a Joint Venture to develop, construct, own
and operate power projects internationally as follows:
Strengths: CE brings power project development
expertise, power project
financing expertise, financial wherewithal,
power project operational expertise, broad
knowledge of the international power markets
and knowledge of the specific international
power project opportunities available.
Kiewit brings infrastructure
development expertise, financial wherewithal,
coal mining expertise, and a broad knowledge
of the power markets internationally.
Power Projects: Each Party has the right of first
refusal to pursue through this Joint Venture,
all build, own and operate or build, own,
operate and transfer power projects
identified by the other Party or its
affiliates outside of the United States
except those in which (i) the Joint Venture
could not acquire a controlling interest in
the equity, (ii) bid constraints would
effectively prevent Kiewit's or CE's
participation, or (iii) participant,
contractor or partner constraints would
effectively prevent Kiewit's or CE's
participation. The right of first refusal
covers all international power project
development and bid opportunities, but does
not cover (i) any projects in the
construction or operating stages or (ii)
direct or indirect acquisitions of
development stage projects (subject to the
following sentence), or (iii) acquisitions of
entities owning projects in the construction
or operating stages which also own
development stage projects. Notwithstanding
clause (ii) of the foregoing sentence, if the
acquisition is an acquisition solely (i) of a
project or projects in the development stage
or (ii) of an entity or entities owning a
project or projects in the development stage;
and in either case (i) or (ii) the aggregate
costs incurred on such development stage
project or projects does not exceed $250,000
at the date of the acquisition, then the
right of first refusal shall cover any such
acquisition.
Each Party shall notify the
other Party of any power project subject to
the right of refusal as soon as such Party
believes that such project may be subject to
the right of refusal. If the Joint Venture
does not promptly elect to pursue the
identified power project, either Party may
pursue the power project separately.
Development Manager
& Development Costs: The Parties shall share all project
development costs equally. Development costs
shall only be incurred by, or at the
direction of, CE as the Joint Venture
Development Manager and shall include all
development costs incurred after a power
project has been identified and offered to
the Joint Venture until a Party declines to
participate in such project or a Party or the
Joint Venture or a Project Entity abandons or
transfers its interest in a project or a
Party is otherwise required to discontinue
its participation in a project. Development
costs include out-of-pocket, third party
expenses incurred by the Parties in
furtherance of development of a power project
as well as the actual cost associated with
employees of the Parties who perform work to
develop a power project, in each case at the
direction of the Development Manager.
In no event shall the
reimbursable costs for employees be credited
in excess of the actual fully burdened cost
(as mutually agreed by the Parties) for the
actual time period involved by such staff in
Joint Venture development activities. It is
anticipated that CE employees will perform a
majority of the development activities.
Kiewit shall have the ability, however, to
dedicate up to one full-time equivalent
employee to Joint Venture activities, subject
to agreement by the Parties as to appropriate
time commitment and cost reimbursement
arrangements with respect thereto.
Each Party shall submit bills
(and provide all reasonably requested
supporting documentation) for such
development costs on a monthly basis and each
Party's share of such costs shall be payable
within 30 days of submission of such bills.
Semiannually, the Parties shall review and
reconcile any development costs incurred
hereunder. Verified development costs shall
be recovered at project financial closing
unless converted to equity or subordinated
debt in the projects.
Development Fee: CE shall be entitled to a Development Fee
from the applicable Project Entity equal to
1% of the combined debt and equity necessary
to finance any project, exclusive of amounts
to finance or reimburse the costs of
exploratory drilling. This fee shall be
payable (subject to prior reimbursement of or
credit for all development expenses for the
applicable project and to any Development Fee
deferral or payout conditions required by
applicable project financing entities) at the
full release closing and funding of the
project debt and commitment of the project
equity contributions. This fee will be
payable for all projects closed after January
1, 1997, except for any further units at
Dieng, Indonesia and provided that the fee
payable for any units at Patuha or Bali,
Indonesia shall be limited to .5%.
Management
Committee: The Parties shall establish a
management committee to be comprised of two
representatives of each of CE and Kiewit, who
shall act as agents of the parties appointing
them, to oversee and direct Joint Venture
management level decisions. Management
committee decisions shall be made by majority
vote. In the event of a deadlock regarding a
particular project under development which
cannot be resolved by the good faith
negotiations of the Parties, (including the
failure to reach agreement on a turnkey
construction contract) either Party shall
have the right by 15 days prior written
notice to trigger a mandatory discontinuance
of both Parties with respect to the
particular project, in which case the
discontinuance provision below shall apply
and CE shall have the exclusive right to
pursue such project independently; provided
however, that the Parties shall negotiate
mutually acceptable deadlock resolution and
buyout provisions, which may vary from the
foregoing provision as part of the
organizational documents for each Project
Entity. Each management committee shall have
meetings not less often than quarterly. The
Development Manager shall prepare, and the
management committee shall approve, and
review as necessary, annual budgets for Joint
Venture activities. Day to day operational
decisions relating to the Joint Venture, as
well as individual projects and Project
Entities shall be made by the Development
Manager.
Project Entity: After a power project has reached an
appropriate stage of development, CE shall
endeavor to create a Project Entity (e.g.,
corporation, limited liability company,
partnership), which shall be reasonably
acceptable to both Parties, to undertake the
financing of such power project. The Project
Entity organizational documents shall reflect
the equity participation of the Parties and
the fact that CE shall act as the managing
general partner or in an analogous operating
or managing role for such Project Entity,
subject to mutually acceptable management or
shareholder approval rights in favor of
Kiewit. The provisions set forth in this
Joint Venture Agreement relating to the terms
and conditions of each Project Entity may be
varied by mutual agreement of the Parties; in
the event of any conflict between this
Agreement and any agreement relating to a
Project Entity, the agreement relating to the
Project Entity shall control.
Capital Contributions: Unless otherwise negotiated by the
Parties, CE and Kiewit shall each provide 50%
of the equity or other sponsor-provided
funding required from the Parties for
financing a power project developed by the
Joint Venture or a Project Entity. If agreed
by the Parties and acceptable to project
lenders, equity contributions may be made in
the form of construction or engineering or
other services performed. Development costs
may be considered equity contributions of the
Parties to the extent agreed by the Parties
and permitted by the applicable project
lender. The Parties acknowledge that any
commitment by either Party to invest equity
will be conditioned upon obtaining acceptable
rates of return and other acceptable
provisions.
Profit/Loss/
Distributions: All profits, losses and other
distributions (including fees and other
similar compensation) arising from Joint
Venture or Project Entity activities after
repayment of development costs (other than
profits and losses arising under separate
construction and operation and maintenance
contracts) shall be allocated 50/50 to CE and
Kiewit or otherwise in accordance with each
Party's equity contribution.
Operations &
Maintenance: CE shall serve as operator of all power
projects developed by the Joint Venture or a
Project Entity under an agreement acceptable
to the Parties and project lenders which
provides reasonable oversight to the Parties
over operational expenses and activities. CE
shall provide appropriate security (e.g.
letter of credit, guarantee, bond) reasonably
required by lenders or other third parties to
secure performance of its contractual
obligations as operator. CE will be entitled
to reasonable cost recovery, overhead and
profit under such operating agreement.
Accounting: As Development Manager, CE shall
maintain, on behalf of the Joint Venture,
records of development costs and such other
matters as are reasonably required in
connection with Joint Venture activities.
The records of the Development Manager and
each Project Entity shall be accurate in all
material respects and shall fairly present
the position and results of the Joint Venture
and each Project Entity and shall be
prepared on an accrual basis in accordance
with U.S.A. generally accepted accounting
principles consistently applied.
Discontinuance: Except for binding obligations under
executed contracts including construction or
operation and maintenance agreements, with
respect to any project, either Party may
elect to discontinue its participation in the
Joint Venture or any project or Project
Entity by delivering written notice to the
other 15 days in advance of its
discontinuance provided that the
discontinuing party shall use all reasonable
efforts to ensure that such discontinuance
shall not be made in a manner which would
disrupt any near term pending proposals
and/or negotiations such that the remaining
Party is injured and cannot continue with the
proposal/negotiations. Upon delivery of such
notice, the Parties shall for no additional
consideration, execute appropriate
assignment, assumption, indemnity and release
documents which transfer, as of the date of
the date of discontinuance, to the remaining
Party (or an affiliate thereof as designated
by such remaining Party) all obligations and
rights in the respective project or Project
Entity or in all power projects previously
identified in writing to the Joint Venture,
but not yet transferred to a Project Entity,
whichever is applicable. Such
discontinuance by a Party shall be
immediately effective as an assignment of its
interest in any power project; however, the
discontinuing Party shall pay its share of
development costs incurred by the Joint
Venture or Project Entity on or before the
date of discontinuance, although such
expenses may come due later. The
discontinuing Party shall be entitled to be
repaid its share of the development costs
with respect to any discontinued project out
of the construction or project financing
therefor, but only after repayment to the
remaining party (and any new equity
participants) of all development costs
incurred with respect to the Project.
Right of First Refusal: Notwithstanding any provision of this
Agreement to the contrary, either Party
("Selling Party") may sell or transfer its
interest in , any project or Project Entity
(but not the Joint Venture) to a third party,
provided it first notifies the other Party
("Offeree Party") of the identity of the
prospective purchaser, assignee or transferee
and sends to the Offeree Party a copy of the
written offer, and provided further that the
Selling Party shall first offer to sell all
its interest in, any project or Project
Entity to the Offeree Party for the same
price, and on the same terms as those being
offered to the Selling Party. The Offeree
Party shall have 90 days after receiving such
offer to accept it. If the Offeree Party
does not agree to purchase the Selling
Party's interest in, any project or Project
Entity with the 90 day period set forth
above, the Selling Party may sell its
interest in , any project or Project Entity
on the terms first proposed in the written
offer sent to the Offeree Party; provided,
however, that no Party may transfer its
interest in, any project or Project Entity to
another unless the transferee agrees in
writing to be bound by the same terms and
conditions of this Agreement (as it applies
to such project or Project Entity) and
becomes a party hereto.
Compliance with Law: In performing their respective
activities hereunder, each Party agrees to
comply with all applicable United States, and
other applicable laws. In this regard, each
Party agrees that neither it nor its
employees, agents or subcontractors shall
make any payment or give anything of value to
any government official to influence a
government decision, or to gain any other
governmental advantage for the Parties, the
Joint Venture, any project or a Project
Entity in connection with the activities
performed hereunder.
Assignment: Except for assignments to affiliates
and assignments to lenders and others (which
each Party agrees to make as reasonably
required for project financing) and
assignments pursuant to the Right of First
Refusal set forth above, neither Party may
sell, transfer, assign or otherwise encumber
any portion of its interest in the Joint
Venture any project, or any Project Entity
without the other Party's prior written
consent. For purposes of this Agreement
"Affiliate" of a Party shall mean a person or
entity controlling, controlled by or under
common control with the Party.
Nature of Joint Venture: The Joint Venture shall not be
considered, and this Agreement shall not be
considered to have formed, a partnership or
other legal entity. Except for CE's rights
to incur project development expenses and act
on behalf of the Joint Venture as Development
Manager within the scope of this agreement,
unless otherwise agreed, neither Party shall
be the agent or representative of, or have
the power to legally bind, the other Party in
connection with the activities of the Joint
Venture, and each Party shall be severally
liable for any obligations to third parties
incurred in connection with Joint Venture
activities.
Term: The term of the Joint Venture shall
be 5 years; but the term may be extended by
mutual agreement of the Parties. The Joint
Venture shall extend automatically successive
terms of one year at the end of its term but
only for the sole purpose of considering
identified power projects not yet rejected or
pursuing power projects for which a Project
Entity has not yet been formed. The term of
each Project Entity shall be as set forth in
its organizational documents which shall
establish a term at least as long as is
required to complete the development,
construction and operation of its respective
power project. The term of the Right of
First Refusal for any identified project or
Project Entity shall extend for a term equal
to the applicable Party's right to an equity
participation in such project or Project
Entity. Notwithstanding the foregoing, the
term of this Joint Venture shall terminate
upon the bankruptcy or dissolution of either
Party.
Cooperation: Since this Joint Venture Agreement is
expected to continue for some time and both
Parties recognize that international power
projects can present unique challenges or
require special arrangements, the Parties
will attempt in good faith to negotiate
additional terms or modifications to this
Agreement in response to any such unique
circumstances which are encountered,
consistent with the intent of the Parties in
forming this Joint Venture.
This Joint Venture Agreement has been duly authorized and
executed by each Party and is intended to be a legally binding
and enforceable agreement under, and governed by, the laws of the
state of New York, U.S.A.
Dated as of: December 4, 1996
Kiewit Diversified Group Inc. CalEnergy Company,
Inc.
/S/ /S/
By: Richard R. Jaros By: David L. Sokol
President Chairman of the Board and
Chief Executive Officer
(Kiewit5.fin)