Exhibit 10.16.3
[Letterhead]
NRG Generating (U.S.) Inc.
1221 Nicollet Mall
Suite 700
Minneapolis, MN 55403-2445
Telephone (612) 373-5305
Fax (612) 373-8833
May 20, 1996
Mr. Harvey A. Braswell
Stewart & Stevenson Operations, Inc.
2707 North Lake West, 2nd Floor
Houston, TX 77008
Re: Auxiliary Boilers - NRG Generating (Newark) Inc.
Dear Harvey,
Please refer to that certain NRG Generating (Newark) Inc./Stewart &
Stevenson Operations, Inc. Operating and Maintenance Agreement, dated as of
May 1, 1996 (the "Newark O&M Agreement") between NRG Generating (Newark)
Inc. ("NRG Newark") and Stewart & Stevenson Operations, Inc. ("SSOI").
This letter is to confirm the mutual understanding and agreement of NRG
Newark and SSOI that the term "System" as used in the Newark O&M Agreement
includes any auxiliary boiler (and any replacement boiler) used to meet NRG
Newark's obligations under the Amended Power Purchase Agreement or the
Steam Purchasing Agreement dated October 3, 1986, as amended, between NRG
Generating (Newark) and Newark Group Industries Inc. ("Newark Group"), so
long as such boiler is located within the boundaries of the Newark Group
facilities located on Blanchard Street regardless of whether such boiler is
regarded as owned by NRG Newark or Newark Group. It is also our mutual
understanding and agreement that SSOI will operate and maintain the Newark
auxiliary boiler under the terms of the Newark O&M Agreement as modified by
this letter.
Nevertheless, we acknowledge that NRG Newark's current auxiliary boiler is
currently mounted on a movable skidmounting system and that arrangements
are being made by NRG Newark with Newark Group to create a permanent
mounting for it. We recognize that SSOI's budgets underlying the NRG
Newark Agreement did not include the operation and maintenance costs
related to the auxiliary boiler. Consequently, until the auxiliary boiler
is permanently installed as contemplated above, NRG Newark will pay the
operation and maintenance costs outside of SSOI's budget cap under the NRG
Newark Agreement to the extent that SSOI can separately identify and
document operation and maintenance costs specifically related to operation
and maintenance of the auxiliary boiler. Additionally, NRG Newark will pay
the costs incurred in moving the auxiliary boiler to its permanent
installation site.
Subsequent to the permanent installation of the boiler to occur on or about
October 4, 1996 and prior to the effective date of the 1997 budget (January
1, 1997) at which time agreement will have been reached on costs to be
included in the 1997 budget, all parties agree to review Exhibit F of the
Newark O&M Agreement, the Operating Budget, and
initiate a Change Order Budget Statement as defined in the NRG Newark O&M
Agreement to accommodate those variable, incremental O&M costs resulting
from the inclusion of the auxiliary boiler as part of the System. The
incremental costs for the partial 1996 period referenced here are those
that are in excess of 1996 Exhibit F Budget estimates for variable costs
over amounts that would have been incurred.
It is understood that the permanent installation of the auxiliary boiler in
the Newark Group facility will encompass interconnection (mechanical and
electrical) to various Newark Group systems not under control of the
Operator. Owner and Operator agree to review the final installation to
define where Operator scope ends and Newark Group's scope begins with
regard to the auxiliary boiler installation.
SSOI will not be held accountable for damages, repairs, or emission
excedences resulting from unavailability of, or the malfunction of, all
equipment outside of those connections defined as "customer connection".
NRG Newark agrees to indemnify, defend, and hold SSOI and Stewart &
Stevenson ("SSSI") harmless for all damages arising out of the negligent
acts or omissions of Newark Group, its affiliates, employees,
representatives, and contractors.
Furthermore is recognized that SSOI will require 24 hour unrestricted
access to the auxiliary boiler and necessary connections on Newark Group's
property, and NRG Newark agrees to immediately obtain all agreements from
Newark Group to ensure SSOI has such access. SSOI will not be in default
under the NRG Newark O&M Agreement resulting from a lack of access to the
auxiliary boiler and necessary connections.
If the auxiliary boiler package is owned by Newark Group then as an express
condition to SSOI's performance of its obligation under this letter
agreement, NRG Newark shall provide or obtain from Newark Group a
certificate of insurance naming SSOI and SSSI as additional insured on
Newark Group's general liability, excess liability and boiler and machinery
insurance policies, each of which shall be in an amount no less than those
required under the NRG Newark O&M Agreement for such coverages. Such
insurance shall also include waivers of subrogation in favor of SSOI and
SSSI and shall not be canceled or modified except upon 30 days' written
notice.
SSOI agrees to furnish NRG Newark a spare parts list for the auxiliary
boiler to allow operation consistent with good industry practice. Such
costs for procurement will be regarded as initial inventory and will be to
the NRG Newark's account and will not affect SSOI's budget caps as defined
in the NRG Newark O&M Agreement.
NRG Newark agrees to provide or to cause Newark Group to provide all
permits pertinent to the operation and maintenance of the auxiliary boiler
for SSOI's review no less than 10 business days prior to commercial
operation of the auxiliary boiler, regardless of eventual ownership of
auxiliary boiler.
NRG Newark recognizes that the auxiliary boiler will be in an unsecured
environment not with SSOI's control. SSOI shall have no responsibility for
security for the auxiliary boiler and NRG Newark releases SSOI from any
liability for damage to the auxiliary boiler except to the extent such
damage results from the negligent operation and maintenance thereof.
NRG Newark acknowledges that the auxiliary boiler will be located in an
area at the Newark Group facility which may contain unknown environmental
concerns over which SSOI has not control and NRG Newark shall be solely
responsible for ensuring such areas in full compliance with all applicable
laws, permits, and regulations.
SSOI shall not be responsible or liable for, and it shall not constitute an
event of default under the NRG Newark O&M Agreement, the failure of such
area on the auxiliary boiler to comply with such applicable laws,
regulations and permits.
This letter is intended as a clarifying amendment to the NRG Newark
Agreement. Accordingly, the NRG Newark Agreement is hereby amended to
reflect the terms hereof and, except as explicitly stated above, shall
continue in full force and effect in accordance with its provisions.
Additionally, the provisions of Article XIX of the NRG Newark Agreement are
hereby incorporated into this letter as if they were separately stated
herein.
If this letter accurately sets forth the terms of our understanding, please
so indicated by executing a copy of this letter in the space provided
below.
Yours very truly,
NRG GENERATING (NEWARK) COGENERATION
By: /s/ Leonard Bluhm
Name: Leonard A. Bluhm
Title: President
ACKNOWLEDGED AND AGREED TO:
STEWART & STEVENSON OPERATIONS, INC.
By: /s/ Harvey A. Braswell
Name: Harvey A. Braswell
Title: Vice President