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EXHIBIT 10.11.5
AMENDED AND RESTATED
COGENERATED ELECTRICITY
SALE AND PURCHASE AGREEMENT
BY AND BETWEEN
COGENRON INC,
AND
TEXAS UTILITIES ELECTRIC COMPANY
DATED JUNE 12,1985;
AS PREVIOUSLY AMENDED, AND
AS AMENDED AND RESTATED
ON DECEMBER 29, 1997
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INDEX TO AMENDED AND RESTATED CONGENERATED
ELECTRICITY SALE AND PURCHASE AGREEMENT BETWEEN
COGENRON INC. AND TEXAS UTILITIES ELECTRIC COMPANY
ARTICLE 1 - DEFINITIONS OF TERMS..............................................2
"Additional Backdown Energy"...........................................2
"Additional Energy Payment"............................................2
"Agreement"............................................................2
"Annual Excess Nonperformance Day".....................................3
"Available Capacity"...................................................3
"Available Energy".....................................................3
"Availability Plan"....................................................3
"Avoided Energy Costs".................................................3
"Backdown Energy"......................................................4
"CT's".................................................................4
"Capacity Curtailed"...................................................4
"Capacity Factor Performance Level"....................................4
"Capacity Payment".....................................................4
"Cogeneration Facility" or "Plant".....................................4
"Commercial Operating Date"............................................5
"Comparable Energy and Capacity".......................................5
"Contract Level" or "Contract Capacity"................................5
"Contract Rate"........................................................5
"Delivery Point" or "Point of Delivery"................................5
"Discount Energy"......................................................5
"ERCOT"................................................................5
"Energy Payment".......................................................5
"FERC".................................................................5
"Forced Outage"........................................................6
"Gas Price"............................................................6
"Hours Curtailed"......................................................6
"ISO"..................................................................6
"Incremental Lignite Energy Cost"......................................6
"Inadvertent Energy"...................................................7
"Intertie Equipment"...................................................7
"KW" or "kw"...........................................................7
"KWH" or "kwh".........................................................7
"MW" or "mw"...........................................................7
"MWH" or "mwh".........................................................7
"Net Energy"...........................................................7
"Off-Peak Hours".......................................................8
"Off-Peak Months"......................................................8
"Overstatement Event"..................................................8
"PSO"..................................................................8
"PUC"..................................................................8
"PURPA"................................................................8
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"Partial Nonperformance Day" or "PND"..................................8
"Partial Nonperformance Equation"......................................8
"Peak Excess Nonperformance Day".......................................8
"Peak Days"............................................................8
"Peak Hours"...........................................................8
"Peak Hour Partial Nonperformance Day" or "PHPND"......................8
"Peak Months"..........................................................9
"Plant Output".........................................................9
"Plant Output Condition"...............................................9
"Point of Interconnection".............................................9
"Primary Term".........................................................9
"Required Facilities"..................................................9
"Rolling Average"......................................................9
"Secondary Term".......................................................9
"Summer Peak Months"..................................................10
"Summer Excess Nonperformance Day"....................................10
"System Emergency" or "TU Electric System Emergency"..................10
"TGM".................................................................10
"TNP".................................................................10
"TNP Facilities"......................................................10
"TU Electric System"..................................................10
"Trail Operation".....................................................10
"Union Carbide Plant".................................................10
"VOM".................................................................10
"Winter Excess Nonperformance Day"....................................10
"Winter Peak Months"..................................................11
ARTICLE 2 - EFFECTIVE DATE; TERM.............................................11
2.1 Effective Date................................................11
2.2 Primary Term and Secondary Term...............................11
2.3 Option to Extend Secondary Term...............................11
ARTICLE 3 - SALE AND PURCHASE OF ENERGY AND CAPACITY.........................11
3.1 Agreement of Sale and Purchase................................11
3.2 Operation in Parallel.........................................16
3.3 Secondary Term Contract Level Modification....................16
3.4 Designation of Off-Peak and Peak Months.......................17
3.5 Restriction of Deliveries During Primary Term.................17
3.6 Capacity Payments During Primary Term.........................19
3.7 Delivery of Power During Primary Term.........................22
3.8 Capacity Payments During Secondary Term.......................22
3.9 Discount Energy; Inadvertent Energy...........................22
ARTICLE 4 - PAYMENTS.........................................................23
4.1 Total Payment During Primary Term.............................23
4.2 Capacity Payments During the Primary Term.....................23
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4.3 Initial Energy Payments...................................... 24
4.4 Subsequent Energy Payments During the Primary Term........... 24
4.5 Incentive Energy Payments During the Primary Term............ 25
4.6 Reduced Energy Payments...................................... 25
4.7 Payment Obligations.......................................... 25
4.8 Energy Delivered During Trial Operations..................... 26
4.9 Payments During the Secondary Term........................... 26
ARTICLE 5 - METERING, BILLING AND PAYMENT............................ 33
5.1 Metering of Electrical Energy and Capacity................... 33
5.2 Monthly Metering............................................. 33
5.3 Inspection of Meters......................................... 34
5.4 Statement and Payment by TU Electric......................... 35
5.5 Interest on Overdue Payments................................. 35
ARTICLE 6 - INTERCONNECTION AND REQUIRED FACILITIES.................. 35
6.1 Information Regarding Equipment.............................. 35
6.2 Review of Information........................................ 36
6.3 Construction and Operation of Facility....................... 36
6.4 Permits...................................................... 36
6.5 Required Facilities.......................................... 36
6.6 Changes to Facilities........................................ 37
ARTICLE 7 - CONDITIONS OF SERVICE.................................... 37
7.1 Warranty by Cogenron......................................... 37
7.2 System Emergency............................................. 37
7.3 Disconnection................................................ 38
7.4 Deficiency or Excess of Deliveries to TNP.................... 38
7.5 Miscellaneous Conditions of Service.......................... 38
7.6 Duty to Use Good Faith: Gas Supply........................... 41
7.7 Duty to Inform............................................... 43
ARTICLE 8 - OWNERSHIP, INSTALLATION AND MAINTENANCE
OF EQUIPMENT......................................................... 43
8.1 Cost of Installation and Maintenance......................... 43
8.2 Ownership.................................................... 43
8.3 Cogenron's Liability......................................... 43
8.4 Costs Billed to Cogenron..................................... 43
ARTICLE 9 - INSPECTION AND ACCESS RIGHTS............................. 44
9.1 Access Rights................................................ 44
9.2 TU Electric Inspection....................................... 44
ARTICLE 10 - TERMINATION............................................. 44
10.1 Right to Terminate........................................... 44
10.2 Bankruptcy or Insolvency of TU Electric...................... 46
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10.3 Disposition of Plant and Equipment.................................47
ARTICLE 11 - LIMITATION OF LIABILITY; PAYMENT ON TERMINATION; SUPPLY OF
COMPARABLE ENERGY AND CAPACITY; RECOUPMENT OF EARLY CAPACITY PAYMENT;
INDEMNITY...............................................................47
11.1 Limitation of Liability............................................47
11.2 Payment on Termination.............................................48
11.3 Supply of Comparable Energy and Capacity...........................49
11.4 Recoupment of Early Capacity Payment...............................50
11.5 Termination Other Than at End of Year..............................50
11.6 Indemnity..........................................................51
ARTICLE 12 - NO OPERATION IN INTERSTATE COMMERCE.............................52
12.1 Cogenerator Warranties.............................................52
12.2 Right to Suspend and Terminate.....................................52
12.3 Specific Performance...............................................53
12.4 Exceptions.........................................................53
ARTICLE 13 - NOTICE..........................................................54
13.1 Notices............................................................54
13.2 Change of Address..................................................55
ARTICLE 14 - LIABILITY; DEDICATION; SEVERAL OBLIGATIONS......................55
14.1 Liability..........................................................55
14.2 Dedication.........................................................55
14.3 Several Obligations................................................55
ARTICLE 15 - REPRESENTATIONS AND WARRANTIES OF THE RESPECTIVE PARTIES........56
15.1 Cogenron's Representations and Warranties..........................56
15.2 TU Electric's Representations and Warranties.......................57
15.3 Misrepresentation; Breach of Warranty; Fulfillment of Obligations..58
ARTICLE 16 - INSURANCE.......................................................59
16.1 Proof of Coverages.................................................59
16.2 Policies...........................................................59
16.3 Certificates.......................................................59
16.4 Limitation of Liability............................................60
16.5 Coverage and Limits of Liability...................................60
16.6 Release and Waiver.................................................60
ARTICLE 17 - TRANSMISSION SERVICE AGREEMENTS.................................61
17.1 Negotiation........................................................61
17.2 Transmission Service Charges.......................................61
17.3 Transmission of Comparable Energy and Capacity.....................62
17.4 Execution of Transmission Service Agreements.......................63
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ARTICLE 18 - FORCE MAJEURE ...................................................63
18.1 Definition............................................................63
18.2 Conditions Upon Force Majeure ".......................................64
18.3 Limitation of Term....................................................65
18.4 Further Limitation of Term............................................65
18.5 Additional Limitation of Term.........................................65
ARTICLE 19 - GOVERNMENTAL AND REGULATORY BODIES...............................65
ARTICLE 20 - PRIOR RIGHT TO PURCHASE OR LEASE IN PRIMARY TERM.................65
ARTICLE 21 - LEASE OPTION IN PRIMARY TERM.....................................66
ARTICLE 21A - RIGHT TO PURCHASE OR LEASE IN SECONDARY TERM....................67
ARTICLE 22 - WAIVER...........................................................68
ARTICLE 23 - NO RIGHTS OF THIRD PARTIES.......................................68
ARTICLE 24 - NO PARTNERSHIP...................................................68
ARTICLE 25 - SURETY AGREEMENT.................................................69
ARTICLE 26 - CONFIDENTIALITY AGREEMENT........................................69
ARTICLE 27 - ENTIRE AGREEMENT.................................................70
ARTICLE 28 - ASSIGNMENT.......................................................70
ARTICLE 29 - CAPTIONS.........................................................71
ARTICLE 30 - AMENDMENTS.......................................................71
ARTICLE 31 - CHOICE OF LAWS; VENUE............................................71
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AMENDED AND RESTATED
COGENERATED ELECTRICITY
SALE AND PURCHASE AGREEMENT
THIS AMENDED AND RESTATED COGENERATED ELECTRICITY SALE AND PURCHASE
AGREEMENT is executed as of the 29th day of December, 1997, by and between
COGENRON INC. ("Cogenron" or "Cogenerator"), a Delaware corporation with its
principal place of business located in Houston, Texas, with authority to do
business in the state of Texas, and TEXAS UTILITIES ELECTRIC COMPANY ("TU
Electric"), a Texas corporation with its principal place of business located in
Dallas, Texas, and is an amendment and restatement of that certain COGENERATED
ELECTRICITY SALE AND PURCHASE AGREEMENT, dated June 12,1985, between NORTHERN
COGENERATION ONE COMPANY, predecessor-in-interest to Cogenron, and TU Electric,
which agreement dated June 12, 1985 has been previously amended by a first
amendment, dated December 9, 1985; a second amendment, dated September 9, 1986;
a third amendment, dated December 4, 1986; a fourth amendment, dated May 28,
1987; a fifth amendment, dated June 19, 1987; a sixth amendment, dated December
10, 1987; and a seventh amendment, dated June 14, 1988; and which agreement
dated June 12, 1985, as previously amended, is hereby further amended as stated
in this Amended and Restated Cogenerated Electricity Sale and Purchase
Agreement, upon all of the terms and conditions set forth below.
WITNESSETH:
WHEREAS, Cogenron has constructed, owns and operates a Cogeneration
Facility, as defined herein, in Texas City, Texas; and
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WHEREAS, Cogenron has been selling, and desires to continue to sell, and
TU Electric has been purchasing, and is willing to continue purchasing, electric
energy and capacity generated by said Cogeneration Facility;
NOW, THEREFORE, in consideration of the mutual covenants and promises
set forth below, together with other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by both Parties,
Cogenron hereby agrees to sell, and TU Electric hereby agrees to purchase,
electric energy and capacity generated by said Cogeneration Facility in
accordance with the terms of the Cogenerated Electricity Sale and Purchase
Agreement dated June 12, 1985, as previously amended, and as further amended and
restated in its entirety upon all of the following terms, conditions and
provisions.
ARTICLE I - DEFINITIONS OF TERMS
The following terms, when capitalized herein, shall have the definitions
set forth below.
"Additional Backdown Energy" means 200,000 megawatt hours in excess of
322,875 annual megawatt hours (calculated on an annual Rolling Average in
accordance with Section 3.5) of Backdown Energy, provided that such 322,875
figure shall be subject to change in the event that the Contract Level is
changed pursuant to Section 3.1 hereof, such figure to change proportionately
and simultaneously with any change in the Contract Level. This term only has
application during the Primary Term and does not apply during the Secondary
Term.
"Additional Energy Payment" means a $3,000 payment, one or more of which
may become payable in accordance with Section 3.1.2.
"Agreement" or "Cogeneration Agreement" or "Amended and Restated
Agreement" means this document including Exhibit "I" attached hereto, being the
calculation of Avoided Energy Costs
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and schedule of energy payments due under Articles 4.3 and 4.4, Exhibit "II"
attached hereto, being a calculation of Energy Payments due under Article 4.5
hereof, and Exhibit "III" attached hereto, which consists of: (A) Surety
Agreement dated and effective June 12, 1985 between InterNorth, Inc. and Texas
Utilities Electric Company; (B) Letter dated July 17, 1985 executed by
InterNorth, Inc. and Texas Utilities Electric Company; (C) Letter dated May 24,
1988 executed by Enron Corp. and Texas Utilities Electric Company; and (D)
Consent and Assignment Agreement dated June 23, 1997 between Texas Utilities
Electric Company, Calpine Corporation and Enron Corp.
"Annual Excess Nonperformance Day" has the definition set forth in
Section 4.9.1(c).
"Available Capacity" has the definition set forth in Section 4.9.1(a).
"Available Energy" means the total generation output of the Cogeneration
Facility, less Cogenron's use of electricity in operating its generating
equipment.
"Availability Plan" means the latest plan provided by Cogenerator to the
PSO, as required herein, which is received by TU Electric before any direction
or request by TU Electric to operate the Plant in a different Plant Output
Condition. The Availability Plan must include: (i) hourly capacity available
from the Plant to TU Electric for the next business day and for any other day
prior to the next business day which is not a business day (transmitted to the
PSO by 8:00 a.m. of the preceding business day); (ii) changes in the level of
capacity available from the Plant to TU Electric within 15 minutes of any
change, and (iii) in the event of a full or partial outage that requires
repairs, the estimated time to complete the repairs and the amount of capacity
estimated to be available to TU Electric from the Plant after completion of the
repairs.
"Avoided Energy Costs" means those costs as calculated in accordance
with Exhibit I attached hereto.
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"Backdown Energy" means, during the Primary Term, that number of
megawatts equal to (410 MW minus requested capacity) times hours of backdown
requested by TU Electric pursuant to Article 3.5.
"CT's" means combustion turbines, with "2-CT" referring to two
combustion turbines and "3-CT" referring to three combustion turbines.
"Capacity Curtailed" means, during the Primary Term, the difference
between the Net Energy being delivered by Cogenron's Cogeneration Facility at
the time of the request and the Net Energy actually delivered by Cogenron to the
Delivery Point during each of the Hours Curtailed.
"Capacity Factor Performance Level" means, during the Primary Term, except
as otherwise provided herein, the quotient, expressed as a percentage, of: (i)
the total amount of energy that Cogenron was able to deliver to TU Electric at
the Delivery Point during the applicable period, and divided by: (ii) the
product of the number of clock-hours for such period multiplied by Contract
Capacity.
"Capacity Payment" means the amount in dollars, resulting from the rates
specified herein, which will be paid for capacity subject to the provisions
hereof: (i) during the Primary Term, with respect to certain minimum Capacity
Factor Performance Levels and performance tests as specified in this Agreement,
less any other adjustment thereto, and (ii) during the Secondary Term, as
specified in Section 4.9, less any other adjustment thereto.
"Cogeneration Facility" or "Plant" means that electric generating
installation located immediately adjacent to the existing Union Carbide Plant in
Texas City, Texas, insofar as such electric generating installation is located
on Cogenron's side of the Point of Interconnection, excluding, however, all
Intertie Equipment.
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"Commercial Operating Date" means May 1, 1987, which was the first day
when the Cogeneration Facility produced for 24 consecutive hours an hourly
kilowatt output equal to or greater than the Contract Level, which was
applicable as of such date.
"Comparable Energy and Capacity" means capacity and energy which
conforms in every respect to that capacity and energy which Cogenron is
obligated to deliver to TU Electric pursuant to this Agreement.
"Contract Level" or "Contract Capacity" means the amount of electrical
generating capacity, which amount Cogenron is obligated to supply to TU Electric
at the Delivery Point under the terms hereof, which amount is set by Section
3.1.1 hereof during the Primary Term and which is 435 MW, subject to adjustment
for performance tests as specified in this Agreement, for the Secondary Term.
"Contract Rate" means the monthly rate specified in Section 4.9.1 for a
particular month and subject to adjustment as set forth therein, expressed in
dollars per kilowatt. This applies only to the Secondary Term.
"Delivery Point" or "Point of Delivery" means those facilities on the TU
Electric System where energy and capacity generated by the Cogeneration Facility
is delivered hereunder to the TU Electric System.
"Discount Energy" means energy accepted by TU Electric as Discount
Energy as provided in Section 3.9, the price of which will be 98% of TU
Electric's decremental energy price as described in TU Electric's Rate LLP dated
May 16, 1994 or in subsequent versions of same tariff.
"ERCOT" means the Electric Reliability Council of Texas, including any
successor thereto or designees or subdivisions thereof
"Energy Payment" means the amount payable as provided in Article 4
hereof for Net Energy.
"FERC" means the Federal Energy Regulatory Commission.
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"Forced Outage" means any unplanned outage that fully or partially
curtails the Net Energy being delivered to or requested by TU Electric of the
Cogeneration Facility.
"Gas Price" means the dollar amount for the fuel component used in the
calculation of the Energy Payment during the Secondary Term and will equal:
(i) if a gas supply contract that is mutually acceptable to both
Cogenron and TU Electric has been executed in accordance with
Section 7.6 of this Agreement, the price per MMBtu specified in
such gas supply contract;
(ii) if TU Electric elects to supply gas during the Secondary Term
pursuant to Section 7.6, the price will be $0.00; and
(iii) if a gas supply contract mutually acceptable to both Cogenron and
TU Electric has not been executed by Cogenron in accordance with
Section 7.6, the price for the fuel component in each such month
will be (until the Parties agree otherwise in writing) the amount
of actual direct costs incurred by Cogenron per MMBtu to perform
its obligations under this Agreement.
"Gas Price" does not apply during the Primary Term.
"Hours Curtailed" means, during the Primary Term, those hours for which
TU Electric has requested and received reduced energy deliveries from Cogenron,
not including hours reduced for spinning reserve.
"ISO" means the ERCOT Independent System Operator, whose duties are
defined in the ERCOT Operating Guide.
"Incremental Lignite Energy Cost" means the incremental fuel cost of TU
Electric of generation on lignite fuel which, but for the purchase of energy
from the Cogeneration Facility, TU
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Electric would have incurred had TU Electric been required to generate itself.
Capacity costs are not included in this definition. This applies only to the
Primary Term.
"Inadvertent Energy" means any energy received by TU Electric during
Plant Output Conditions C or D as set forth in Section 4.9.2 in excess of the
respective MW levels set in Section 4.9.2 for Plant Output Conditions C or D,
provided TU Electric did not exercise the option to accept Discount Energy
pursuant to Section 3.9. This applies only to the Secondary Term.
"Intertie Equipment" means any and all metering equipment, regardless of
whether said equipment is located on the Cogenron side or the TNP side of the
Point of Interconnection, including any equipment necessary to telemeter output
information, and all intertie relaying facilities deemed necessary by TNP to
protect its facilities, to be installed hereunder for the purpose of operating
the Cogeneration Facility in parallel with the TNP Facilities, the TU Electric
System and any utility connected therewith.
"KW or "kw" means one kilowatt or 1000 watts of electricity.
"KWH" or "kwh" means one kilowatt-hour of electricity.
"MW" or "mw" means one megawatt or 1000 kilowatts of electricity.
"MWH" or "mwh" means one megawatt-hour or one thousand kilowatt-hours of
electricity.
"Net Energy" means, during the Primary Term, the Available Energy
generated by the Cogeneration Facility, less that energy consumed in the
operation of the Union Carbide Plant. "Net Energy" means during the Secondary
Term, the Available Energy generated by the Cogeneration Facility less and
except: (i) Discount Energy (as defined in Section 3.9); (ii) Inadvertent Energy
(as defined in Section 3.9); and (iii) such energy, if any, that is not required
by TU Electric pursuant to Section 3.1.2 and that is sold by Cogenron in
accordance with the terms of this Agreement and on
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a nonfirm and interruptible basis to any other third parties, including any
energy sold for the Union Carbide Plant.
"Off-Peak Hours" means all hours of the year not designated as Peak
Hours.
"Off-Peak Months" means those months not designated as Peak Months.
"Overstatement Event" has the definition set forth in Section 4.9.1(g).
"PSO" means the Power Supply Operations group, an organizational unit of
TU Electric.
"PUC: means the Public Utility Commission of Texas.
"PURPA" means the federal Public Utility Regulatory Policies Act of
1978, 16 U.S.C. Section 2601, et seq., as amended.
"Partial Nonperformance Day" or "PND" has the definition set forth in
Section 4.9.1(a).
"Partial Nonperformance Equation" has the meaning and calculation set
forth in Section 4.9.1(a).
"Peak Excess Nonperformance Day" has the definition set forth in Section
4.9.1(d).
"Peak Days" means all days except Saturdays and Sundays in June, July,
August and September, together with all days in December, January and February.
"Peak Hours" means the hours on Monday through Friday, from 8:00 a.m. to
10:00 p.m., local Dallas time, during the months of June, July, August and
September, and each day, 5:00 a.m. to 10:00 p.m., local Dallas time during the
months of December, January and February; provided that different months may be
designated by TU Electric from time to time pursuant to Article 3.4 hereof,
except neither the total number of Peak Hours nor Peak Months may be increased.
"Peak Hour Partial Nonperformance Day" ' or "PHPND" has the definition
set forth in Section 4.9.1(a).
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"Peak Months" means the seven calendar months January, February, June,
July, August, September and December of each calendar year, provided that
different months may be designated by TU Electric from time to time pursuant to
Article 3.4 hereof.
"Plant Output" means the number of MW which the Plant will generate and
which will be available for transmission when operating in a particular Plant
Output Condition.
"Plant Output Condition" means the condition directed by TU Electric for
Plant Output of the Cogeneration Facility, which Plant Output Conditions are
described as A through E in Section 4.9.2.
"Point of Interconnection" means that point at which the Cogeneration
Facility is electrically interconnected with the TNP Facilities where TNP's
service wires are connected to Cogenron's service wires.
"Primary Term" means that period from June 12, 1985 to midnight, on June
30, 1999.
"Required Facilities" means all equipment and facilities furnished and
owned by TU Electric which are necessary to reliably and safely receive
Cogenron's power and energy into the TU Electric System.
"Rolling Average" means a numeric calculation which is comprised of data
for a specific number of consecutive time periods, which data is summed and
divided by the number of specific time periods included in such average. The
calculation is "rolling" inasmuch as, for each successive rolling average
calculation, data for the earliest time period in the series is deleted while
data for the latest time period in the series is added, as such data becomes
available from time to time.
"Secondary Term" means that period from midnight on June 30, 1999, to
midnight on September 30, 2002.
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"Summer Peak Months" are June, July, August and September, unless
modified otherwise as provided herein.
"Summer Excess Nonperformance Day" has the definition set forth in
Section 4.9.l(e).
"System Emergency" or "TU Electric System Emergency" means any condition
which is declared to be an emergency by TU Electric, the ISO or ERCOT, or any
designee thereof, which may disrupt service to customers or endanger life or
property.
"TGM" means the Transmission Grid Management group, an organizational
unit of TU Electric Company.
"TNP" means Texas-New Mexico Power Company.
"TNP Facilities" means all of the facilities of TNP which are used to
transmit the energy and capacity from Cogenron's Cogeneration Facility to the
Transmission Service Providers for delivery to the TU Electric System.
"TU Electric System" means all of the TU Electric electric facilities,
system, and appurtenances.
"Transmission Service Providers" means those utilities transmitting
energy and power delivered hereunder.
"Trial Operation" means the operation of the Cogeneration Facility which
occurred prior to the Commercial Operating Date.
"Union Carbide Plant" means that presently existing plant owned by Union
Carbide Corporation and located in Texas City, Texas.
"VOM" means Cogenerator's variable operations and maintenance charge for
the Cogeneration Facility, which, throughout the Secondary Term, is deemed to be
$1.80 per MWH.
"Winter Excess Nonperformance Day" has the definition set forth in
Section 4.9.1(f).
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"Winter Peak Months" are January, February and December, unless modified
otherwise as provided herein.
ARTICLE 2 - EFFECTIVE DATE; TERM
2.1 Effective Date. This Amended and Restated Agreement became effective
as of June 12, 1985.
2.2 Primary Term and Secondary Term. Unless otherwise terminated in
accordance with the terms hereof, this Amended and Restated Agreement shall
remain in full force and effect for its Primary Term from June 12, 1985 to
midnight, on June 30, 1999, and then shall continue thereafter into its
Secondary Term from midnight on June 30, 1999 and ending at midnight, on
September 30, 2002.
2.3 Option to Extend Secondary Term. TU Electric and Cogenron shall have
the option to extend the Secondary Term beyond September 30, 2002; provided that
the Parties are able to agree upon the terms and conditions thereof; and,
provided further, that such extension shall be subject to both Cogenron and TU
Electric obtaining like extensions from third parties, including, without
limitation, any Transmission Service Providers, of all other contracts and
agreements necessary and incident to the proposed extension, and TU Electric and
Cogenron hereby agree to use all reasonable efforts in obtaining such extensions
from third parties.
ARTICLE 3 - SALE AND PURCHASE OF ENERGY AND CAPACITY
3.1 Agreement of Sale and Purchase. Pursuant to the terms hereof,
Cogenron agrees to sell and deliver, and TU Electric agrees to purchase and
accept, at the Point of Delivery specified herein, the Net Energy generated by
the Cogeneration Facility. The Net Energy to be sold and
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purchased during the Primary Term shall be governed by Section 3.1.1 hereof;
the Net Energy to be sold and purchased during the Secondary Term shall be
governed by Section 3.1.2 hereof.
3.1.1 Primary Term. During the Primary Term of this Agreement,
Cogenron shall not sell electrical capacity and energy from the
Cogeneration Facility other than to TU Electric and the amount of
electrical capacity and energy which Cogenron is presently and has been
committed to sell for use in the Union Carbide Plant. Subject to the
other terms contained herein, throughout the Primary Term, Cogenron will
have available and deliver, or cause to be delivered, to the Point of
Interconnection capacity and energy for redelivery to TU Electric, and
TU Electric will receive and pay for, capacity and energy of the
Cogeneration Facility at the Contract Level of 410 MW, as adjusted as
provided below in this Section 3.1.1. Such Contract Level amount shall
be determined by a 24-hour performance test, with the results to be
temperature-adjusted (pursuant to manufacturer's specifications) to 91
degrees F at site conditions and adjusted for any capacity reduction due
to line losses. That test shall be performed in accordance with Sections
6 and 22 of the American Society of Mechanical Engineers Power Test
Codes, latest edition, or International Standards Organization Standard
2314. Cogenron shall allow representatives of TU Electric to be present
for such test. Such Contract Level amount may be redetermined by a
24-hour performance test as often as once each calendar quarter, at TU
Electric's election, using data from in-place station meters.
Instrumentation error allowable during testing shall be in accordance
with ANSI B 133.6. The cost of all such performance tests shall be borne
by Cogenron.
3.1.2 Secondary Term. During the Secondary Term, the Net Energy
to be sold by Cogenron and purchased by TU Electric will be dependent
upon the Plant Output Condition then directed by TU Electric, and
Cogenron agrees to operate the Cogeneration Facility at
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the Plant Output Condition directed by TU Electric, except that Cogenron
may elect to operate the Cogeneration Facility at a higher level than
directed by TU Electric for the sale of interruptible and nonfirm energy
to third parties (including any such sales for the Union Carbide
Plant), subject to TU Electric's rights herein. TU Electric has the
continuing right to direct Cogenron to operate, and Cogenron agrees to
operate upon such direction, the Plant to the maximum Plant Output
whenever the Plant is operating in the 2-CT mode, and to request
Cogenron to operate the Plant to produce Plant Output at a level above
435 MW whenever the Plant is in the 3-CT operation mode, and in either
case, the Energy Payment will include an incentive as shown on the
Energy Payment table as set forth in Section 4.9.2 of this Agreement.
Cogenron shall have no obligation to provide TU Electric with output
above 435 MW, but may comply with TU's request at Cogenron's election.
Throughout the Secondary Term, TU Electric will, at all times, have the
continuing right to direct firm sales to TU Electric of up to 435 MW of
Net Energy from the Cogeneration Facility, and, to the extent that
Cogenron is selling any energy from the Cogeneration Facility to third
parties, such third party sales (including any such sales for the Union
Carbide Plant) will be interruptible and nonfirm to the extent that TU
Electric requires deliveries of any energy pursuant to this Agreement up
to a level of 435 MW. If Cogenron elects to make any third party sales
(including any such sales for the Union Carbide Plant), Cogenron will be
responsible for any ancillary services (including scheduling) and
transmission services necessary or desirable in connection with such
sales and will be responsible for any applicable ERCOT ISO services,
fees and charges.
The. minimum or normal Plant Output for the Cogeneration
Facility for the various Plant Output Conditions are specified in the
table set out in Section 4.9.2 of this Agreement.
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TU Electric has the continuing right to direct Cogenron to operate, and
Cogenron agrees to operate, upon such direction, the Plant in a 2-CT
mode Plant Output Condition from time to time throughout the Secondary
Term; provided that, Cogenron will not be obligated to actually take
the Plant from a 3-CT mode Plant Output Condition and operate the Plant
in a 2-CT mode Plant Output Condition, upon TU Electric's direction,
more than 52 times annually unless agreeable to Cogenron in its sole
discretion. TU Electric may direct the Plant from a 3-CT mode Plant
Output Condition to 2-CT mode Plant Output Condition fifteen (15) times
annually for no additional payment, and TU Electric will pay $3,000 as
an energy-related payment (an "Additional Energy Payment") each time TU
Electric directs the Plant from a 3-CT mode Plant Output Condition to
2-CT mode Plant Output Condition in excess of fifteen times per calendar
year; provided that, Cogenron actually takes the Plant from an operating
3-CT mode Plant Output Condition and operates the Cogeneration Facility
in a 2-CT mode Plant Output Condition in accordance with TU Electric's
direction. If, upon direction by TU Electric, Cogenron does not actually
take the Plant from an operating 3-CT mode Plant Output Condition and
operate the Cogeneration Facility in a 2-CT mode Plant Output Condition
in accordance with TU Electric's direction, then, regardless of whether
Cogenron is making third party sales, TU Electric will pay for energy in
accordance with Section 4.9.2 and TU Electric's direction to the 2-CT
Plant Output Condition will not be counted as one of the 52 annual
maximum or 15 annual times at no cost that TU Electric may direct the
Plant from a 3-CT mode Plant Output Condition to 2-CT mode Plant Output
Condition.
Each time that TU Electric directs Cogenron to take the Plant
from a 3-CT mode Plant Output Condition to 2-CT mode Plant Output
Condition, TU Electric will determine
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the duration of time at which the Plant will operate in the specified,
or any other, 2-CT Plant Output Condition, which will be for a minimum
of six hours and a maximum of sixty hours each time TU Electric directs
Cogenron to take the Plant from an operating 3-CT mode Plant Output
Condition to 2-CT mode Plant Output Condition; and, if Cogenerator
actually takes the Plant from an operating 3-CT mode Plant Output
Condition to 2-CT mode Plant Output Condition, then Cogenron will not be
obligated to operate the Plant in a 3-CT mode Plant Output Condition
prior to termination of the period specified by TU Electric, provided
that: (i) at any time after the Plant has operated in one or more 2-CT
mode Plant Output Conditions for an aggregate period of four hours, TU
Electric may, upon two-hours' notice, direct Cogenron to operate in a
3-CT mode pursuant to Plant Output Condition A or C, or request Cogenron
to operate in the 3-CT mode pursuant to Plant Output Condition B; and
(ii) TU Electric may request, prior to the four-hour minimum period set
forth in (i) of this subsection, that Cogenron operate in a 3-CT mode
pursuant to Plant Output Condition A, B or C and Cogenerator will, if
Plant operations allow, operate the Plant in the requested 3-CT mode
Plant Output Condition; provided further that, at any time during which
TU Electric directs Cogenron to take the Plant from a 3-CT mode Plant
Output Condition to 2-CT mode Plant Output Condition, and Cogenron
actually takes the Plant from a 3-CT mode Plant Output Condition and
operates the Plant in a 2-CT mode Plant Output Condition, Cogenerator
may request a maintenance window of twelve (12) hours or less and if, in
the sole judgment of TU Electric, such a maintenance window will not
affect the system operations of TU Electric, then: (a) TU Electric will
approve Cogenerator's request to proceed with the maintenance; (b) to
the degree that the approved maintenance would reduce the Available
Capacity, that reduction in Available Capacity will not be included in
the PND
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or PHPND calculation in the Partial Nonperformance Equation; and (c) TU
Electric may request that Cogenron operate in a 3-CT mode Plant Output
Condition during the approved maintenance window, but Cogenerator is not
obligated to operate the Plant in a 3-CT mode Plant Output Condition
until the end of the approved maintenance window.
3.2 Operation in Parallel. Cogenron shall operate the Cogeneration
Facility in parallel with the TNP Facilities, the TU Electric System,
together with any utility connected therewith, and any Transmission
Service Providers required for transmission.
3.3 Secondary Term Contract Level Modification. During the Secondary
Term, a 24-hour performance test may be performed at TU Electric's election, as
often as once each calendar quarter, and the cost of all such performance tests
will be borne entirely by Cogenron. Unless the Parties mutually agree in writing
otherwise, each 24-hour performance test will be temperature-adjusted (pursuant
to manufacturer's specifications) to 91 degree F at site conditions and adjusted
for any capacity reduction due to line losses. Unless the Parties mutually agree
in writing otherwise, the results of each test will be performed in accordance
with Sections 6 and 22 of the American Society of Mechanical Engineers Power
Test Codes, latest edition, or International Standards Organization Standard
2314, and instrumentation error allowable during testing will be in accordance
with ANSI B 133.6. Cogenron will allow TU Electric representatives to be present
for each such test. If the results of any such performance test indicate that
the Plant is not capable of delivering capacity and energy to the Point of
Interconnection at the Contract Level then in effect, the Contract Level will be
reduced accordingly, effective as of the first day of the month in which the
test was performed; provided that, if any such performance test indicates that a
reduction in the Contract Level should be effected, then Cogenron may request
and conduct, at Cogenron's sole expense, within ten days of the prior test an
additional 24-hour performance test(s), as may be necessary, which will be
conducted
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in the manner set forth above. Cogenron will give TU Electric reasonable advance
notice so that TU Electric may have a representative present during such test.
If the additional performance test(s) indicates that the Plant is capable of
delivering capacity and energy to the Point of Interconnection at a level higher
than the previous test, then the Contract Level will be adjusted to such higher
level, but in no event greater than 435 MW, effective as of the first day of the
month in which the test was performed.
3.4 Designation of Off-Peak and Peak Months. Upon six (6) months notice
to Cogenron, TU Electric may change the designation of a Peak Month as defined
herein to an Off-Peak Month and vice-versa. In no event shall the number of Peak
Months exceed seven in any one calendar year. Peak Hours shall occur only during
Peak Months.
3.5 Restriction of Deliveries During Primary Term. During the Primary
Term, to assist TU Electric in maintaining TU Electric System operating
flexibility, Cogenron agrees to restrict its hourly energy delivery as follows:
TU Electric may require Cogenron to reduce energy deliveries to TU Electric from
said Cogeneration Facility up to, but not to exceed, 15 MW for each of
Cogenron's gas turbines in the Cogeneration Facility. If, in TU Electric's
opinion, additional reductions are required, TU Electric may require that the
output of the Cogeneration Facility be reduced further to as low as 234 MW. The
aforementioned reduction may be imposed by TU Electric upon four hours' notice
at any time, and from time to time, during the Primary Term, but shall be
limited to an annual aggregate of 322,875 MWH, calculated on an annual Rolling
Average, and subject to any change to the Contract Level made pursuant to
Section 3.1, with the annual aggregate changing proportionately and
simultaneously with any change in the Contract Level. The calculation of said
reduced energy deliveries shall be made by hourly determinations of the
difference between the actual Net Energy delivered by Cogenron's Cogeneration
Facility at the time of TU Electric's request for reduction and
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the Net Energy actually delivered by Cogenron to the Delivery Point. Should TU
Electric restrict Cogenron's facility to as low as a 234 MW output, such
restriction shall last a minimum of four hours unless Cogenron agrees to a
shorter time period. In no event shall Cogenron be required to reduce its power
output to less than 234 MW, except in instances of System Emergencies.
3.5.1 Beginning on January 1, 1989 and ending on December 31, 1993,
TU Electric shall have the option to request an additional 200,000 MWH per
year of Additional Backdown Energy provided that the plant output is not
reduced to less than 234 MW by such a request and that such restrictions
shall last a minimum of four hours unless Cogenron agrees to a shorter time
period.
3.5.2 During the Primary Term, when requesting a restriction of
deliveries or Additional Backdown Energy, TU Electric may, at its option,
inform Cogenron of an energy price at which TU Electric is willing to
accept the energy (TU Electric's "Incremental Price"). That price shall be
based on 98% of TU Electric's Incremental Energy Cost but not less than TU
Electric's Incremental Lignite Energy Cost. Cogenron then has the option of
either accepting the requested load reduction or continuing to generate
energy and accepting TU Electric's Incremental Price for energy delivered
to TU Electric that would not have been delivered had the requested load
reduction been accepted. In the event Cogenron elects to continue to
generate, all incremental energy delivered to and paid for by TU Electric
at TU Electric's Incremental Price shall be considered as reductions for
the purpose of determining the allowable MWH of reduction in Section 3.5.
3.5.3 Notwithstanding anything to the contrary contained herein, TU
Electric shall have the right to request Additional Backdown Energy at any
time and from time to time during the Primary Term, and Cogenron shall
comply with such request if it can be
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accomplished, in the opinion of Cogenron, without violating any other agreement
which Cogenron has entered into in order to meet its obligations under this
Agreement.
3.6 Capacity Payments During Primary Term. During the Primary Term,
except as otherwise provided herein, and subject to the other terms hereof, TU
Electric agrees to make Capacity Payments to Cogenron in connection with said
Cogeneration Facility, with the applicable rates being specified in Article 4.2
below. For a period beginning on the Commercial Operating Date and ending after
the expiration of six (6) full calendar months after the Commercial Operating
Date, for the purposes of this Agreement: (i) the applicable twelve month
Rolling Average Capacity Factor shall be deemed to be equal to 65.00%, (ii) the
applicable seven month Peak Rolling Average Capacity Factor shall be deemed to
be equal to 75.00%, and (iii) the applicable Peak Rolling Average Capacity
Factor shall be deemed to be equal to 85.00%. After the expiration of six (6)
full calendar months after the Commercial Operating Date, if any one of
Cogenerator's Rolling Average Capacity Factors, calculated on the basis of the
average Capacity Factor Performance Levels achieved by Cogenerator in such
previous six (6) months, fails to be equal to, or to exceed, the corresponding
deemed Capacity Factor specified above, then an adjustment to the previous
Capacity Payments shall be made. The adjustment shall equal the
difference between: (i) each of the Capacity Payments actually made and (ii) the
capacity payments that would have been made if no Capacity Factors had been
deemed pursuant to this Section. Any such adjustment shall bear interest at the
commercial paper rate charged from time to time by NationsBank in Dallas, Texas
from the end of the sixth full calendar month after the Commercial Operating
Date and shall be repayable in twelve (12) equal monthly installments beginning
on the last day of the sixth full calendar month after the Commercial Operating
Date. Additional months (beginning with the seventh and eighth months) will be
added to the selected initial period until such time as a twelve-month Rolling
Average, a seven-month Peak
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Rolling Average and an Peak Hour Rolling Average Capacity Factor Performance
Level can each be determined. Rolling Averages established beginning in the
seventh month shall be utilized to determine whether minimum Capacity Factor
Performance Levels have been maintained at the levels required in order for
Cogenron to receive the full amount of the Capacity Payments at rates specified
in Article 4.2. A seven-month Peak Rolling Average Capacity Factor Performance
Level of 75%, an Peak Hour Rolling Average Capacity Factor Performance Level of
85% and a twelve (12) month Rolling Average Capacity Factor Performance Level of
65%, calculated as specified by the equations below, must each be maintained at
all times in order for Cogenron to receive the full amount of applicable
Capacity Payments. Any restriction of deliveries, as specified in Article 3.5,
which occur will be included in such calculation as the product of Capacity
Curtailed and Hours Curtailed, calculated into the applicable formula as
follows:
SEVEN-MONTH PEAK ROLLING AVERAGE CAPACITY FACTOR:
= Net Energy During Peak Months + (Hours Curtailed x Capacity Curtailed)*
-----------------------------------------
Contract Capacity x Hours in Peak Months
PEAK HOURS (DURING THE MOST RECENT FOUR MONTHS CONTAINING PEAK HOURS) ROLLING
AVERAGE CAPACITY FACTOR:
= Net Energy During Peak Hours + (Hours Curtailed x Capacity Curtailed)**
-----------------------------------------------
Contract Capacity x Peak Hours
TWELVE-MONTH ROLLING AVERAGE CAPACITY FACTOR DURING 1987 AND 1988 ONLY:
= Net Energy During Last + (1/2 (Hours Curtailed x Capacity Curtailed))
Twelve (12) Months -----------------------------------------------
Contract Capacity x Hours in Last Twelve
(12) Months
Twelve-month Rolling Average Capacity Factor after 1988 until the end of the
primary term:
= Net Energy During Last Twelve (12) Months + (Additional Backdown Energy)
----------------------------
Contract Capacity Multiplied
by the Period Hours.
* During Peak Months
** During Peak Hours
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Each such Capacity Factor Performance Level as calculated above shall be
multiplied times 100 to calculate the Capacity Factor Performance Level in
percent, with such calculation being expressed to the nearest one hundredth of a
percent. Should the seven-month Peak Capacity Factor Performance Level at the
end of any month be less than 75%, a Capacity Payment adjustment will be made
which reduces that month's Capacity Payment 4% for each percentage point below
80%. In addition, should the Peak Hour Rolling Average Capacity Factor
Performance Level be less than 85% at the end of any month, a Capacity Payment
adjustment will be made which reduces said month's Capacity Payment 4% for each
percentage point below the 85% minimum Peak Hour Rolling Average Capacity Factor
Performance Level. Should Cogenron, in any month, fail to meet both the 75%
seven month Peak Capacity Factor Performance Level and the 85% Peak Hour Rolling
Average Capacity Factor Performance Level, the reduction of Cogenron's Capacity
Payment for that month shall be the greater of the two as the case may be,
required Capacity Payment reductions or eliminations. If the twelve (12) month
Rolling Average Capacity Factor Performance Level at the end of any month is
less than 65%, Cogenron shall receive no Capacity Payment for that month
irrespective of Cogenron's meeting the seven month Peak Capacity Factor
Performance Level and/or the Peak Hour Rolling Average Capacity Factor
Performance Level for that month.
Notwithstanding anything to the contrary contained herein, in the event
that Cogenron fails to deliver, due solely to fuel unavailability, in any
seventy-two (72) hour period, ninety percent (90%) of the Contract Level, or 90%
of any lower capacity level requested by TU Electric, and such failure is
without the prior written approval of TU Electric, Cogenron agrees to payment
reductions from TU Electric as follows:
(a) for the first two hours, consecutive or nonconsecutive, the
payment reduction will be five percent (5%) of the next Capacity Payment
(unadjusted);
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(b) for the second two hours, consecutive or nonconsecutive, the
payment reduction will be two and one-half percent (2.5%) of the next
Capacity Payment (unadjusted);
(c) for each additional one hour, whether consecutive or
nonconsecutive, the payment reduction will be one percent (1%) of the
next Capacity Payment (unadjusted); provided that, should the next
Capacity Payment (unadjusted) be entirely forfeited by the payment
reduction provided herein, such payment reduction shall apply to later
Capacity Payments until all payment reductions have been paid.
It is further agreed that such payment reductions shall be liquidated
damages and not penalties.
3.7 Delivery of Power During Primary Term. Cogenerator shall at any
time, upon TU Electric's request, increase deliveries of energy up to a maximum
rate of delivery equal to the Contract Capacity plus required spinning reserve,
except to the extent that such energy is unavailable because of Force Majeure,
Forced Outage or scheduled maintenance.
3.8 Capacity Payments During Secondary Term. Payments by TU Electric to
Cogenron during the Secondary Term shall be governed by Article 4 hereof.
3.9 Discount Energy; Inadvertent Energy. During the Secondary Term, when
TU Electric directs Plant Output to Plant Output Conditions C or D as set forth
in Section 4.9.2, TU Electric may, at its option, inform Cogenron that TU
Electric is willing to accept a quantity of energy as specified by TU Electric
in excess of the MW level provided for the Plant Output Conditions directed by
TU Electric (such excess energy being "Discount Energy"). The price for Discount
Energy will be 98% of TU Electric's decremental energy price which is made after
the fact on an hourly basis using TU Electric's economic dispatch model and is
further described in TU Electric's Rate LPP dated May 16, 1994 or any subsequent
tariff that replaces Rate LPP. In addition, if TU Electric does
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not exercise the option to accept Discount Energy, then any energy received by
TU Electric during Plant Output Conditions C or D as set forth in Section 4.9.2
in excess of the MW levels for Plant Output Conditions C or D set forth in
Section 4.9.2 (such excess energy being "Inadvertent Energy") will be paid for
at the same price as Discount Energy; provided that, any Inadvertent Energy
received by TU Electric in excess of 5% of the MW level for the Plant Output
Condition specified by TU Electric will be sold and delivered by Cogenron to TU
Electric at no cost or charge to TU Electric and will result in no payment from
TU Electric for such portion in excess of 5% of the MW level specified for such
Plant Output Condition in Section 4.9.2.
ARTICLE 4 - PAYMENTS
4.1 Total Payment During Primary Term. The total payment by TU Electric
to Cogenron for the Net Energy delivered by Cogenron, and for the capacity of
the Cogeneration Facility made available by Cogenron to TU Electric, shall be
the sum of the Capacity Payment, less transmission facility and/or charges by
Transmission Service Providers, or any other party or entity, and the Energy
Payment, equal to the Net Energy, which makes provision for line losses, any
repayments to Transmission Service Providers for line losses or for charges for
line losses, and less any other reductions pursuant to the terms hereof, such
reductions to be effective up to January 1, 1997. Commencing with January 1,
1997, reduction from payments due to transmission facility and/or service
charges shall be made by TU Electric in accordance with Article 17 hereof.
4.2 Capacity Payments During the Primary Term. Subject to the other
terms hereof, including, but not limited to, Articles 3.5 and 3.6 above, the
applicable rates for calculation of Capacity Payments will be as follows for the
indicated calendar years:
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$ Per KW
Year Per Month
---- ---------
1987 $ 3.17
1988 4.50
1989 15.10
1990 16.86
1991 17.16
1992 17.67
1993 18.15
1994 18.63
1995 19.10
1996 19.64
1997 20.15
1998 20.42
*1999 (first half) 22.19
* First half is January 1 to June 30.
The Capacity Payment will be equal to the applicable rate per kilowatt
as specified above multiplied by the applicable Contract Level, less any
adjustments thereto made pursuant to Article 3.6 above.
4.3 Initial Energy Payments. [Deleted.]
4.4 Subsequent Energy Payments During the Primary Term. Commencing with
calendar year 1989 and continuing until the end of the Primary Term, monthly
Energy Payments for Net Energy delivered which is equal to or less than 70% of
the hours in such month multiplied by the applicable Contract Level specified in
Article 3.1 will be based on the Avoided Energy Cost as specified on Page 2 of
Exhibit I attached hereto. Any Net Energy delivered from the Cogeneration
Facility in excess of (Contract Capacity x Hours in the Month x .7) minus MWH of
Additional
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Backdown Energy for that month, which is not priced based on the criteria set
forth in Article 4.5, shall be priced as set forth on Page 2 of Exhibit 1.
4.5 Incentive Energy Payments During the Primary Term. Commencing with
January 1, 1989 and continuing until the end of the Primary Term, Cogenron will
be paid for Net Energy delivered which is in excess of (Contract Capacity x
Hours in the Month x .7) minus MWH of Additional Backdown Energy in the
corresponding month based on TU Electric's weighted average cost of gas
calculated by the formula shown in Exhibit II, provided both of the following
two criteria are met:
(i) the twelve-month Rolling Average Capacity Factor Performance
Level must be greater than 70%; and
(ii) the current month Capacity Factor Performance Level must be
greater than 70%.
Should either of such criteria not be met, then any energy above said
70% level delivered during said month shall be priced as set forth on Page 2 of
Exhibit I.
4.6 Reduced Energy Payments. [Deleted.]
4.7 Payment Obligations. The Parties are of the opinion that the
capacity and energy rates set forth herein as to both the Primary Term and the
Secondary Term are not subject to alteration by any court or regulatory
authority, including, without limitation, the PUC. If, however, at any time
during the Primary Term or Secondary Term of this Agreement, any court or
regulatory authority, other than in response to a proceeding initiated by TU
Electric for the purpose of requesting or obtaining such disallowance, and after
opportunity for Cogenron to protest, alters the prices for energy and capacity
purchases by TU Electric from Cogenron under this Agreement, or the payments
resulting from those prices, or the ability of TU Electric to recover payments
under this
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Agreement from the customers served by TU Electric on a current, monthly basis,
then any such payments (or portion thereof) hereunder in excess of such amounts
allowed by such court or regulatory authority shall be (effective from the date
of such order, and remaining in effect throughout the term hereof or the
effective date of any subsequent order) deleted from the payments which would
otherwise apply hereunder, provided that, during the Secondary Term only, if the
prices or payments are altered in such manner, then TU Electric will within 30
days after such judgment or order becomes final and non-appealable, provide
Cogenron with written notice of its election, at its sole option, to either: (a)
continue to pay the full price and payments provided in this Agreement, or (b)
to pay the reduced prices or payments resulting from the alteration by the court
or regulatory authority. If the price or payments are altered and TU Electric
elects to pay the reduced price or payments in accordance with clause (b) of the
preceding sentence, then Cogenron, at its sole election may, within 30 days
after receiving notice from TU Electric, terminate this Agreement upon thirty
days written notice. However, any sums initially recouped from TU Electric's
ratepayers in either the Primary Term or the Secondary Term, but which are
subsequently disallowed by the PUC and charged back to TU Electric, shall not be
set-off or credited against subsequent payments made by TU Electric for energy
purchased hereunder from Cogenron, except for the last 30 days included in the
period of such disallowance.
4.8 Energy Delivered During Trial Operations. [Deleted.]
4.9 Payments During the Secondary Term. During the Secondary Term, the
total consideration that TU Electric is obligated to pay for all capacity and
energy delivered will consist of Capacity Payments, Energy Payments and, if any,
Additional Energy Payments. During the Secondary Term, Capacity Payments and
Energy Payments will be determined as follows:
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4.9.1 Capacity Payments. During the Secondary Term, monthly Capacity
Payments shall be calculated by multiplying the Contract Rate by the Contract
Level (subject to adjustment of the Contract Level as provided in this
Agreement), with the Contract Rate for each of the months during the Secondary
Term specified as follows:
Dates: $/KW-Month:
------ -----------
Jul. to Dec. 1999 $5.10
Jan. to Dec. 2000 $5.20
Jan. to Dec. 2001 $5.30
Jan. to Sept. 2002 $5.40
The Contract Rate for a particular month is subject to a performance-related
adjustment, which shall be calculated as follows:
4.9.1(a) A "Partial Nonperformance Day" occurs on any day
during which, as to any hour of such day, the Available Capacity is less
than the Contract Capacity. A "Peak Hour Partial Nonperformance Day"
occurs on any day during which, as to any Peak Hour of such Peak Day,
the Available Capacity is less than the Contract Capacity. "Available
Capacity" is the full amount of capacity (on a kilowatt-hour/hour basis)
available at the level shown in the Availability Plan. The amount of a
Partial Nonperformance Day ("PND") or Peak Hour Partial Nonperformance
Day ("PHPND") will be determined from the following equation ("Partial
Nonperformance Equation"):
PND or PHPND = CONTRACT CAPACITY - LOWEST AVAILABLE CAPACITY
---------------------------------------------
CONTRACT CAPACITY.
4.9.1(b) A "Nonperformance Day" occurs when either: (i) the
total of all Partial Nonperformance Days, as calculated in accordance
with the Partial
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Nonperformance Equation, equals 1; or (ii) an Overstatement Event (as
defined in Section 4.9.1(g) occurs. A "Peak Hour Nonperformance Day"
occurs when either: (i) the total of all Peak Hour Partial
Nonperformance Days, as calculated in accordance with the Partial
Nonperformance Equation, equals 1; or (ii) an Overstatement Event occurs
in a Peak Hour.
4.9.1(c) When the total of all categories of Nonperformance
Days in the current month plus the previous 11 months equals or exceeds
28, then each additional Nonperformance Day in such current month shall
be deemed to be an "Annual Excess Nonperformance Day." If less than 12
full calendar months have occurred since July 1, 1999, then the Annual
Excess Nonperformance Days are calculated using only the lesser number
of months. To reflect this lower-than-expected quality of firmness, the
Contract Rate attributable to such current month shall be reduced by an
amount equal to $0.20 per KW for each such Annual Excess Nonperformance
Day.
4.9.1(d) When the total of all Peak Hour Nonperformance Days in
any current month which is a Peak Month equals or exceeds two, then each
additional Peak Hour Nonperformance Day in such current month shall be
deemed to be a "Peak Excess Nonperformance Day." To reflect this
lower-than-expected quality of firmness, the Contract Rate attributable
to such current month shall be reduced by an amount equal to $0.40 per
KW for each such Peak Excess Nonperformance Day.
4.9.1(e) When the aggregate total of: (i) all Peak Hour
Nonperformance Days in any current month which is a Summer Peak Month;
plus (ii) all such Peak Hour Nonperformance Days during the last three
prior Summer Peak Months equals or exceeds five, then each additional
Peak Hour Nonperformance Day in such current
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month shall be deemed to be a "Summer Excess Nonperformance Day." If
less than four full Summer Peak Months have occurred since July 1, 1999,
then the Summer Excess Nonperformance Days are calculated using only the
lesser number of Summer Peak Months. To reflect this lower-than-expected
quality of firmness, the Contract Rate attributable to such current
month shall be further reduced by an amount equal to $0.20 per KW for
each such Summer Excess Nonperformance Day.
4.9.1(f) When the aggregate of (i) all Peak Hour Nonperformance
Days in any current month which is a Winter Peak Month, plus (ii) all
such Peak Hour Nonperformance Days during the last two prior Winter Peak
Months equals or exceeds five, then each additional Peak Hour
Nonperformance Day in that month is a "Winter Excess Nonperformance
Day." If less than three full Winter Peak Months have occurred since
July 1, 1999, then the Winter Excess Nonperformance Days are calculated
using only the lesser number of Winter Peak Months. To reflect this
lower-than-expected quality of firmness, the Contract Rate attributable
to such current month shall be further reduced by an amount equal to
$0.20 per KW for each such Winter Excess Nonperformance Day.
4.9.1(g) An "Overstatement Event" means: (i) any hour or hours
in a calendar day during which Cogenerator is requested, but is unable,
to deliver to TU Electric an amount of capacity and energy (on a
kilowatt-hour/hour basis) equal to or greater than a level which is 5 MW
less than the level shown in the Availability Plan; or (ii) any period
of a calendar day during which Cogenerator's total average delivered
capacity (on a kilowatt-hour/hour basis), averaged over the entire
period covered by a delivery request from TU Electric, does not equal or
exceed the level
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shown on the Availability Plan; provided that, in calculating such
average, there will be excluded from such calculation any actual
deliveries in excess of 5 MW above the level shown in the Availability
Plan. To reflect this lower-than-expected quality of firmness, TU
Electric's Capacity Payment then due to Cogenerator shall be reduced by
an amount equal to $170,000 for each Overstatement Event, except to the
extent of any event which is excused as referenced elsewhere in this
Section 4.9.1(g). If requested in writing by Cogenron, when an
Overstatement Event is declared by TU Electric, a metering accuracy test
will be performed by TU Electric at Cogenron's expense on all relevant
meters located at Cogenron. This test may be observed by both TU
Electric and Cogenron personnel, or a designee thereof, and will be used
to prove or disprove the load levels used in determining the
Overstatement Event were accurate. Cogenerator is excused from any
Overstatement Event which: (i) Cogenerator proves to TU Electric's
reasonable satisfaction: (A) to have been due to a failure that could
not have been reasonably foreseen by Cogenerator, and (B) was not done
intentionally on the part of Cogenerator, or (ii) if the failure is
because of a forced outage on TU Electric's side of the Delivery Point.
If Cogenron and TU Electric are unable to agree as to whether or not an
Overstatement Event should be excused in accordance with the preceding
sentence, then, unless both Parties agree otherwise, the issue will be
determined by final and binding arbitration, which shall occur in
Dallas, Texas and shall be conducted in accordance with the rules of the
American Arbitration Association.
4.9.1(h) Any Contract Rate reductions or Capacity Payment
reductions made under Sections 4.9.1(c) through (g) are cumulative
and, therefore, added to one
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another. Contract Rate reductions and Capacity Payment reductions may
occur in any month which result in reducing the Capacity Payment from TU
Electric to Cogenerator to zero for that month. Contract Rate reductions
and Capacity Payment reductions may occur in any month that result in a
negative Capacity Payment amount, and, in such event, such negative
Capacity Payment amount will represent a positive amount owed by
Cogenron to TU Electric. At TU Electric's option: (i) any additional
payments (including, without limitation, Capacity Payments and Energy
Capacity) otherwise due in succeeding months shall continue to be
reduced until all reductions have been applied; (ii) TU Electric may
offset any payments due to TU Electric by Cogenerator under this section
against any payments (including, without limitation, Capacity Payments
and Energy Payments) due by TU Electric to Cogenerator under this
Agreement; or (iii) TU Electric may invoice Cogenron for the amount due
and Cogenron shall pay such invoice within thirty days.
4.9.1(i) Determinations of Partial Nonperformance Days,
Nonperformance Days, Partial Peak Hour Nonperformance Days, Peak Hour
Nonperformance Days, Annual Excess Nonperformance Days, Summer Excess
Nonperformance Days, and Winter Excess Nonperformance Days are to be
made based upon availability of Cogenerator's power and energy for the
applicable period even if Cogenerator's ability or delivery of power and
energy to TU Electric is diminished by planned outages, forced outages,
or an event of force majeure (as force majeure is defined in Article 18
of this Agreement) except that a Partial Nonperformance Day or a Peak
Hour Partial Nonperformance Day does not occur, and a day is not a
Nonperformance Day, Peak Hour Nonperformance Day, Annual Excess
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Nonperformance Day, Summer Excess Nonperformance Day, or a Winter Excess
Nonperformance Day, if the Available Capacity for such day is lower than
the Contract Capacity due solely to a forced outage on TU Electric's
side of the Delivery Point.
4.9.2 Energy Payments. During the Secondary Term, the amount of
the applicable Energy Payment will depend upon the then-applicable Plant
Output as directed by TU Electric, pursuant to Section 3.1.2 of this
Agreement. The Energy Payment shall include Cogenerator's VOM charge and
a fuel charge and apply as shown on the following table:
PLANT OUTPUT DIRECTION BY TU ELECTRIC EQUATION FOR ENERGY PAYMENT ($/MWH)
CONDITION
- ----------------------------------------------------------------------------------------------------------------
A TU Electric directs Plant Output to normal Energy Payment = [((8.3 x Gas Price) + VOM) x Net
Plant Output (435 MW) in 3-CT operating Energy (expressed in MWH) generated in Plant Output
mode Condition AJ; provided that this equation does not
or apply to "Ramp Hours," which are defined and
TU Electric directs Plant Output to normal governed by the subsection applicable to Plant Output
Plant Output (275 MW) with 2-CT operating Condition E below.
mode
and
hourly accumulator indicates Net Energy
exceeds 260 MW per hour
or
Cogenron declares a limitation.
- ----------------------------------------------------------------------------------------------------------------
B TU Electric requests Plant Output to maximum When in 3-CT mode, Energy Payment = [((8.3 x Gas
3-CT operating mode in excess of 435 MW; Price) + VOM) x Net Energy (expressed in MWH)
or generated in Plant Output Condition B up to 435 MW]
TU Electric requests Plant Output to maximum + [((12.0 x Gas Price) + VOM) x Net Energy
2-CT operating mode in excess of 275 MW. (expressed in MWH) generated in Plant Output
Condition B in excess of 435 MW]. When in 2-CT
mode, Energy Payment = [((8.3 x Gas Price) + VOM)
x Net Energy (expressed in MWH) generated in Plant
Output Condition B up to 275 MW] + [((12.0 x Gas
Price) + VOM) x Net Energy (expressed in MWH)
generated in Plant Output Condition B in excess of
MW].
- ----------------------------------------------------------------------------------------------------------------
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C TU Electric directs Plant Output to 234 MW Energy Payment = [((9.5 x Gas Price) + VOM) x Net
(250 MW in the Winter Peak Months) Energy (expressed in MWH) generated in Plant Output
(minimum 3-CT operating mode) Condition C up to 234 MW (250 MW in Peak Winter
Months)] + [an amount determined in accordance
Section 3.9 for all MWH in excess of 234 MW (250
MW in Winter Peak Months) generated in Plant Output
Condition C].
- ----------------------------------------------------------------------------------------------------------------
D TU Electric directs Plant Output to 125 MW Energy Payment = [((9.5 x Gas Price) + VOM) x Net
(140 MW in the Winter Peak Months) Energy (expressed in MWH) generated in Plant Output
(minimum 2-CT operating mode) Condition D up to 125 MW (140 MW in Peak Winter
Months)] + [an amount determined in accordance
Section 3.9 for all MW in excess of 125 MW (140 MW
in Winter Peak Months) generated in Plant Output
Condition D].
- ----------------------------------------------------------------------------------------------------------------
E Ramp Hour is the hour: Energy Payment if the Hourly Accumulator indicates
Ramp Hour 1. Immediately preceding compliance by the total MWH generated in such Ramp Hour are less
Cogenron with TU Electric's direction to Plant than 300 MWH = [((9.2 x Go Price) + VOM) x MWH
Output Condition A from Output Condition C in Ramp Hour] Energy Payment if the Hourly
or D. Accumulator indicates the total MWH generated in such
or Ramp Hour are equal to or greater than 300 MWH =
2. Immediately following compliance by [((8.3 x Gas Price) + VOM) x MWH in Ramp Hour].
Cogenron with TU Electric's direction to either
Plant Output Condition C or D.
- ----------------------------------------------------------------------------------------------------------------
ARTICLE 5 - METERING, BILLING AND PAYMENT
5.1 Metering of Electrical Energy and Capacity. Electrical energy and
capacity delivered by the Cogeneration Facility to the TNP Facilities shall be
metered with equipment capable of determining energy and capacity deliveries on
a clock-hour basis. All metering and related billing costs shall be paid by
Cogenron. Meters and service switches in conjunction with such meters shall be
installed in accordance with the latest revision of the American National
Standards Institute (ANSI), Incorporated, Standard C12.1.
5.2 Monthly Metering. TU Electric or its agent shall read the meters
pertinent to said service on a monthly basis. In the event a monthly meter
reading is not made, the Parties shall mutually estimate purchases for that
month and render payment accordingly, with adjustments for
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actual purchases being made in subsequent months; provided that, when possible,
adjustments for actual purchases shall be made in the next month's statement.
5.3 Inspection of Meters. All meters used to determine the billing
hereunder shall be sealed and the seals shall be broken only upon occasions when
the meters are to be inspected, tested or adjusted. Either Party shall have the
right to inspect and test all meters upon their installation and in accordance
with the ANSI standards regarding meter testing. Either Party may inspect or
test a meter more frequently than required hereunder, and the expense of such
inspection or test shall be borne equally by the Parties in accordance with the
prevailing provisions and fees of applicable PUC regulations on meter testing.
Such Party shall give reasonable notice to the other Party of the time when any
inspection or test shall take place, and said other Party may have
representatives present at the test or inspection. If any meter is found to be
defective or operating outside the permissible tolerances, it shall be adjusted,
calibrated, repaired or replaced by TU Electric, after Cogenron's concurrence,
at Cogenron's expense. If a meter or other measuring equipment fails to register
or, upon test, is found not to be within the accuracy standards established by
the ANSI, an adjustment, mutually agreeable to the Parties, shall be made
correcting all measurements made by such inaccurate meter or measuring equipment
for:
(l) the actual period during which inaccurate measurements
were made, if such period can be determined, or, if not;
(2) the period immediately preceding the test of the meter or
measuring equipment equal to one-half the time from the
date of the most recent test of such meter or measuring
equipment, provided that the period covered by such
correction shall not exceed six months.
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In the event that the Parties are unable to mutually agree upon any such
adjustment, the Parties shall employ an independent consultant, selected by
mutual agreement of the Parties, to calculate an appropriate adjustment, and the
Parties agree to be bound by the results thereof.
5.4 Statement and Payment by TU Electric. TU Electric shall, within
thirty (30) days from the end of each billing period under this Agreement,
render a detailed statement with payment to Cogenron for Contract Capacity and
Net Energy received during such period. Cogenron shall have the right to
question any statement from TU Electric within one (1) year following the
rendering of such statement. TU Electric shall have the right to set-off against
any payment, fees or other charges due under this Agreement, any amounts due and
owing from Cogenron to TU Electric under this Agreement.
5.5 Interest on Overdue Payments. Interest on any overdue payment due
pursuant to this Agreement shall accrue at a rate equal to the commercial paper
rate, plus one (1) percent, charged from time to time by NationsBank in Dallas,
Texas computed on the basis of a year of 365 or 366 days, as the case may be, to
be applied from the date said payment becomes overdue until the date said
payment is received by the other Party.
ARTICLE 6 - INTERCONNECTION AND REQUIRED FACILITIES
6.1 Information Regarding Equipment. Cogenron agrees to provide to TU
Electric, upon TU Electric's request, information on the design of all equipment
associated with the Cogeneration Facility. Cogenron also agrees to request TNP
to provide to TU Electric, upon TU Electric's request, information on the design
of all equipment associated with any of the TNP Facilities.
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6.2 Review of Information. TU Electric shall not, by reason of its
review of Cogenron's plans and specifications referred to in this article, or by
reason of its review of any TNP plans and specifications, be responsible for
strength of materials, design, adequacy, or capability of the Cogeneration
Facility, or its associated electrical equipment, or the Intertie Equipment, or
any TNP Facilities; and such review shall not be deemed an endorsement, approval
or warranty of the Cogeneration Facility or its associated electrical equipment,
or the Intertie Equipment, or any of the TNP Facilities.
6.3 Construction and Operation of Facility. Cogenron warrants to TU
Electric that the Cogeneration Facility and associated electrical equipment have
been constructed and maintained in a good and workmanlike manner, and shall meet
or exceed industry-accepted standards. To the extent applicable, Cogenron, its
agents, servants, workmen, employees, contractors and subcontractors, shall
observe and follow the provisions of the National Electrical Safety Code in the
operation of the Cogeneration Facility.
6.4 Permits. Cogenron shall be solely responsible for obtaining any
permits or other governmental approvals necessary for the construction,
operation and maintenance of the Cogeneration Facility.
6.5 Required Facilities. TU Electric shall evaluate, design, install,
control, own, operate and maintain all Required Facilities and perform all work,
at TU Electric's expense, necessary to reliably and safely connect the Delivery
Point to the rest of the TU Electric System in order to accept and meter the
energy and capacity to be transmitted hereunder. During the term of this
Agreement, TU Electric may design, construct and install such improvements,
additions or other changes to Required Facilities as it may deem to be necessary
or desirable. TU Electric shall control, operate and maintain any such
improvements, additions or other changes.
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6.6 Changes to Facilities. The Parties recognize that certain
improvements, additions or other changes in or to the Point of Interconnection,
Delivery Point, or Transmission Service Providers' transmission facilities may
be required for the economical, reliable and safe transmission to TU Electric of
the energy and capacity covered hereunder. Any such improvements, additions or
changes relating to the transmission of capacity and energy covered by this
Agreement shall be made in accordance with the then-current PUC Substantive
Rules concerning open access comparable transmission service.
ARTICLE 7 - CONDITIONS OF SERVICE
7.1 Warranty By Cogenron. Cogenron warrants that the Cogeneration
Facility shall continue to produce throughout the term hereof, both the Primary
Term and the Secondary Term, sinusoidal 60 Hertz alternating current power in
accordance with normal utility standards.
7.2 System Emergency. In the event that a TU Electric System Emergency
caused wholly or partially by Cogenron or by the operation of the Cogeneration
Facility shall occur, or an emergency so caused shall occur within the ERCOT
System, Cogenron shall, upon telephonic notice by TU Electric, immediately
correct the condition which created, or is contributing to, the emergency
condition. If Cogenron cannot do so, TU Electric may immediately take whatever
action is necessary, including disconnection of the Cogeneration Facility, to
remedy the problem; it being understood that TU Electric shall have no right or
obligation hereunder to correct or otherwise repair any equipment not owned by
TU Electric. Cogenron shall bear any and all cost or expense directly related to
Cogenron's contribution to said TU Electric System Emergency through Cogenron's
operation of the Cogeneration Facility, including all costs or expenses incurred
by TU Electric or any affiliate thereof in correcting the problem.
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7.3 Disconnection. From time to time, TU Electric may deem it necessary
to disconnect the Transmission Service Providers' facilities from the TU
Electric System in order to make repairs, changes, tests or inspections, or in
the event of an outage of transmission facilities, a TU Electric System
Emergency, or a TU Electric System operating condition which necessitates such.
TU Electric is hereby granted the continuing right to effect such disconnection,
and Cogenron's agreement with TNP shall expressly recognize such right. TU
Electric shall provide Cogenron with such prior notice as may be reasonable or
practical under the circumstances and shall make all reasonable efforts under
the particular circumstances to restore operations as soon as possible. In no
event shall TU Electric be liable to Cogenron for such disconnection or any
costs or damages arising therefrom, so long as such disconnection by TU Electric
was effected by TU Electric in good faith.
7.4 Deficiency or Excess of Deliveries to TNP. If Cogenron fails to
deliver to TNP the amount of energy Cogenron has scheduled to deliver to TNP for
TU Electric's account, then Cogenron shall be solely responsible to TNP for any
such deficiency or excess, and Cogenron shall bear any liability resulting
therefrom.
7.5 Miscellaneous Conditions of Service. It is agreed by Cogenron and TU
Electric that:
7.5.1 TU Electric shall design, install, control and test, at
Cogenron's expense, as often as TU Electric deems necessary, the
telemetering, communications and data acquisition equipment necessary
for effective operation of the Cogeneration Facility, the TNP
Facilities, and the facilities of Houston Lightning and Power Company,
with the TU Electric System. Such equipment shall include communication
and data transmission (telemetering) facilities and control equipment
operable by TGM, and/or any alternate location designated by TU
Electric. Any leased communication facilities shall be obtained and
operated at Cogenron's expense. TU Electric shall also have the right to
design, install, control and test, as often as
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TU Electric deems necessary, metering equipment to monitor the fuel
supply pressure for the Cogeneration Facility.
7.5.2 All generators at the Cogeneration Facility shall remain
on line until system frequency has declined to a level below 58.5 Hertz,
and shall include equipment providing for manual or automatic trip at or
below 58.0 Hertz, with a minimum of a one-half second delay.
7.5.3 The Cogeneration Facility shall be equipped with automatic
controls for both frequency and voltage response, and Cogenron shall
give telephonic notification to PSO at any time when such automatic
controls are out of service or not functioning properly.
7.5.4 Cogenron shall staff the control room of the Cogeneration
Facility with a qualified operator(s) during all hours when the
Cogeneration Facility is in operation.
7.5.5 TU Electric shall promptly notify Cogenron's operator(s)
of any outage or malfunction of equipment and facilities on the TU
Electric System that would prohibit or limit TU Electric's receipt of
power and energy generated by the Cogeneration Facility or any other
condition affecting operation of the Cogeneration Facility. Cogenron
shall report performance of the Cogeneration Facility to TU Electric
utilizing the standard Generator Availability Data System methodology of
the National Electric Reliability Council and in a format and medium
acceptable to TU Electric. In addition, Cogenron shall supply sufficient
data for the calculation of the Peak Hour Rolling Average Capacity
Factor Performance Level.
7.5.6 Cogenron shall obtain prior telephonic approval of PSO for
any closing of main circuit breakers of the Cogeneration Facility,
whether for testing or for operations, and of any outage of, or
limitation on, generation by Cogenron's facility.
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7.5.7 Cogenron shall keep maintenance records of the
generator(s) and control and protective equipment at the Cogeneration
Facility, which records shall be available to TU Electric for inspection
at all reasonable times.
7.5.8 Cogenron shall furnish TU Electric with its long-term
preventive maintenance program for each major item of equipment of the
Cogeneration Facility, including a schedule of planned outages for
inspection, repair, maintenance and over-haul. Such maintenance
information shall be furnished as soon as practicable following
installation of the Cogeneration Facility. Maintenance programs shall be
based on manufacturer's recommendations and may be altered from time to
time by reason of later manufacturer's releases pertaining to major
items of equipment of the Cogeneration Facility together with the
experience of Cogenron in operating same. Cogenron shall promptly advise
TU Electric of any such changes. The specific times for planned outages
of the Cogeneration Facility shall be scheduled annually in advance by
agreement of TU Electric and Cogenron so as to coordinate planned
outages of the Cogeneration Facility with planned outages of TU
Electric's generating facilities, of generating facilities of others
interconnected with the TU Electric System, and of TU Electric's
transmission facilities necessary to receive power and energy from the
Cogeneration Facility.
7.5.9 Cogenron shall report to PSO, on a timely basis, those
items and/or conditions necessary for TU Electric's internal planning
and compliance with TU Electric's guidelines in effect from time to
time. The information supplied shall include, without limitation, the
following: (1) status (on or off line) within 15 minutes; (2)
Availability Plan for the next business day and for any other day prior
to the next business day which is not a business day, including capacity
available from the Plant; (3) generating equipment overhaul or scheduled
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outage plans for the year (updated weekly); (4) any scheduled or planned
transmission or switchyard clearances or maintenance plans for the next
twelve (12) months (updated weekly); (5) time and cause of outage of
Cogenron's generator(s) or circuit breaker(s) included in Cogenron's
Cogeneration Facility; (6) monthly generation estimates by August 1 for
the next calendar year, (7) prompt updates of the monthly generation
estimates when any changes are anticipated; and (8) at least thirty
(30) days prior to each calendar quarter, generation estimates,
calculated on a month-by-month basis, for the next twelve (12) month
period.
7.5.10 Spinning Reserve. During the Primary Term, at any time
when the temperature at the Cogeneration Facility is below 85 degrees F
and up to a maximum of two hundred (200) hours in each calendar year
when said temperature is above 85 degrees F, Cogenron shall, if
requested by TU Electric, provide at least six percent (6%) additional
capacity of the then released capacity for a minimum of six (6)
consecutive hours. The only exception to the foregoing will be those
hours in which the steam demand on the Cogeneration Facility is 300,000
lbs/hr or less, in which case Cogenron will provide 15 MW of additional
capacity. The Cogeneration Facility will be operated in such a manner as
to allow such response to be at a rate of seventy (70) MW in twelve and
one-half (12 1/2) seconds. This Section 7.5.10 shall have no
application during the Secondary Term hereof.
7.6 Duty to Use Good Faith & Gas Supply. All contracts for the supply of
fuel to the Cogeneration Facility shall be negotiated and consummated by
Cogenron in good faith in a manner designed to result in an economic, reliable
and consistent supply of fuel in such quantities as are necessary for Cogenron
to perform its obligations under this Agreement. Both Parties shall continue to
explore methods for providing a natural gas supply for the Plant; provided that,
Cogenron's
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obligations to maintain such supply of gas throughout the Primary Term and
Secondary Term, are not in any event, diminished or affected. Cogenron's total
compensation for fuel, including all transportation, balance premium and other
costs of obtaining fuel supply are included in the Energy Payments.
By April 1, 1998, Cogenron and TU Electric will jointly prepare a
solicitation to acceptable, potential natural gas suppliers detailing the
following information: (a) the delivery point of the gas; (b) the quality of the
gas required; (c) estimated quantities of gas (on an annual and monthly basis)
to be supplied; and (d) the term of such gas deliveries. The solicitation will:
(i) request that bidders offer a gas price per MMBtu based on an acceptable
published natural gas index and (ii) require that bids must be received no later
than May 1, 1998 to be considered. TU Electric will assist Cogenron in the
evaluation of the bids and subsequent negotiation of a gas supply contract. A
gas supply contract, which is mutually acceptable to Cogenron and TU Electric,
will be executed by Cogenron, as purchaser, and the third party, as seller, on
or before June 30, 1998.
If a gas supply contract, which is mutually agreeable to Cogenron and TU
Electric, has not been executed by June 30, 1998, TU Electric, at its sole
election, may elect to supply gas for the Cogeneration Facility during the
Secondary Term upon delivery of written notice to Cogenron by June 30, 1998;
provided that, after receipt of such notice, TU Electric and Cogenron hereby
agree to negotiate in good faith a written amendment to this Agreement setting
out mutually-agreeable terms relating to the supply of gas by TU Electric,
including, without limitation, a provision setting TU Electric's gas supply
obligation at levels for the various Plant Output Conditions that reflect the
heat rates assumed in the equations for Energy Payments contained in the table
set forth in Section 4.9.2.
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7.7 Duty to Inform. Cogenron shall keep TU Electric informed of all
matters significant with respect to the construction and operation of the
Cogeneration Facility and the supply of fuel thereto.
ARTICLE 8 - OWNERSHIP, INSTALLATION AND MAINTENANCE OF EQUIPMENT 8.1 Cost
of Installation and Maintenance. TU Electric shall bear no costs associated with
the maintenance, installation or operation of the Cogeneration Facility or the
Point of Interconnection.
8.2 Ownership. Cogenron shall own, operate, maintain and repair the
Cogeneration Facility at its sole cost and expense, and maintain such facility
in a safe and proper operating condition consistent with all applicable
statutes, regulations, codes, and the duties and obligations stated herein. In
addition, Cogenron shall operate such Cogeneration Facility in accordance with
all of the requirements, guidelines and specifications of TU Electric, as
amended from time to time.
8.3 Cogenron's Liability. Cogenron shall be solely responsible for the
installation, maintenance, and operation of any equipment it deems necessary to
protect the Cogeneration Facility from faults or other conditions on the TU
Electric System, or the TNP Facilities. In addition, Cogenron shall be solely
responsible for, and shall indemnify TU Electric against any liability for, all
present or future federal, state, municipal or other taxes applicable by reason
of the sale of energy and capacity hereunder, or related to the Contract
Capacity, or the installation of the Cogeneration Facility, or otherwise.
8.4 Costs Billed to Cogenron. Any costs to be billed by TU Electric to
Cogenron pursuant to this Agreement will include all out-of-pocket costs of TU
Electric, as well as all internal TU Electric costs, including labor, materials
and equipment, together with fully distributed loading of associated overhead
costs in accordance with TU Electric's standard costing practices. Unless
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otherwise provided by this Agreement, all payments from Cogenron to TU Electric
pursuant to this Agreement shall be payable within thirty (30) days of
Cogenron's receipt of an invoice from TU Electric.
ARTICLE 9 - INSPECTION AND ACCESS RIGHTS
9.1 Access Rights. Cogenron shall cause TNP to allow TU Electric,
throughout the term of this Agreement (and a reasonable time thereafter)
rights-of-way and easements adequate for TU Electric to install, operate,
maintain, repair, replace and remove any facilities or associated electrical
equipment used in connection with any of the operations covered hereunder and
connected to, or affecting in any way, the TU Electric System, including
adequate and continuing access rights. Cogenron shall execute such other
grants, deeds or documents as TU Electric may require to enable it to record
such rights-of-way and easements.
9.2 TU Electric Inspection. Cogenron shall permit and shall cause any
third parties over which it has control to permit employees and inspectors of
TU Electric to examine and conduct such operating tests and inspections as are
reasonably deemed necessary by TU Electric to ascertain that the Intertie
Equipment is functioning properly. Cogenron shall reimburse TU Electric for all
costs associated with such inspection or tests.
ARTICLE 10 - TERMINATION
10.1 Right to Terminate. In addition to the other causes for
termination provided herein, TU Electric shall have the right, except during
occurrences of force majeure (as defined in Article 18 of this Agreement) to
terminate this Agreement, upon written notice, without any liability or
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responsibility hereunder, and without prejudice to any other power, right or
remedy which TU Electric may have hereunder, if any or all of the following
enumerated events occur:
10.1.1 In the event of Cogenron's bankruptcy or insolvency, or in
the event of the initiation of any proceeding, voluntary or involuntary,
against Cogenron under the bankruptcy or insolvency laws, or in the event
of Cogenron's inability to meet its debts in the ordinary course of
business; provided, however, that there shall be no termination of this
Agreement if, within ten (10) days from the receipt of written notice from
TU Electric to terminate, Cogenron as debtor in possession, or Cogenron's
trustee, receiver, assignee or custodian, whichever is obligee under this
Agreement, in writing affirms this Agreement and demonstrates, to TU
Electric's satisfaction, the ability to fulfill its or their obligations
under this Agreement.
10.1.2 In the event any disconnection effected pursuant to Article
7.2 or otherwise hereunder continues for sixty (60) days due to Cogenron's
failure to correct or remedy the cause thereof or its portion of the cause
thereof, provided, however, that if any such cause (other than a failure
to make any required payment hereunder) cannot by the exercise of due
diligence be cured within such sixty (60) day period, TU Electric shall
not have the right to terminate this Agreement if Cogenron within such
sixty (60) day period has taken all steps necessary to begin the cure of
such cause so as to effect said cure as soon after the expiration of such
sixty (60) day period as may be feasible.
However, TU Electric shall have the right to terminate this
Agreement for any such cause of disconnection that continues for six (6)
months from the disconnection date, regardless of Cogenron's attempts to
correct such. No termination shall occur, however, in the event both
Parties agree that satisfactory efforts are being made to cure such cause.
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10.1.3 [Deleted.]
10.1.4 Construction of the Cogeneration Facility is abandoned or
operation of the Cogeneration Facility is abandoned after construction
thereof
10.1.5 If either of the following events occur: (1) during the
Primary Term, if Cogenron fails to deliver energy at an Peak Month Rolling
Average Capacity Factor Performance Level equal to, as a minimum, fifty
percent; or (2) during the Primary Term, if Cogenron fails to deliver
energy at a Peak Hour Rolling Average Capacity Factor Performance Level
equal to, as a minimum, fifty percent.
10.1.6 Cogenron fails to deliver energy at a Capacity Factor
Performance Level equal, as a minimum, to fifty percent (50%) during any
twelve (12) month period during the Primary Term.
10.1.7 TNP or any other Transmission Service Providers becomes
unwilling, unable or fails for any reason, for a period of 180 consecutive
days, to transmit the energy and capacity covered hereunder from the
Cogeneration Facility to the TU Electric System, as required herein.
10.1.8 Cogenron ceases to operate the Cogeneration Facility for a
period of ninety (90) consecutive days, or Cogenron is unable, unwilling,
or fails for any reason to generate and have available for transmission
the capacity and energy required hereunder or deliver Comparable Energy
and Capacity as provided in Article 11.3 below.
10.2 Bankruptcy or Insolvency of TU Electric. In the event of TU
Electric's bankruptcy or insolvency, or in the event of the initiation of any
proceedings, voluntary or involuntary, against TU Electric under the bankruptcy
or insolvency laws, or in the event of TU Electric's inability to meet its debts
in the ordinary course of business, Cogenron, upon providing written notice, may
terminate
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this Agreement; provided, however, there shall be no right to terminate
hereunder if, within ten (10) days from the receipt of written notice from
Cogenron to terminate, TU Electric, as debtor in possession, or TU Electric's
trustee, receiver or custodian, whichever is obligee under this Agreement, in
writing affirms this Agreement and demonstrates to Cogenron's reasonable
satisfaction the ability to fulfill its or their obligations under this
Agreement. In the event of such termination, however, TU Electric will, at
Cogenron's request, use its best efforts to transmit electricity at the then
PUC-approved rules and rates from the Point of Delivery hereunder to any other
electric utility that Cogenron may designate from among the utilities
interconnected with the TU Electric System; provided that such transmission does
not jeopardize the reliability of the TU Electric System and can be done
consistent with TU Electric's service obligations under Texas and federal law.
10.3 Disposition of Plant and Equipment. Cogenron shall be solely
responsible for any costs associated with the removal, relocation or other
disposition of the Cogeneration Facility and the Intertie Equipment upon
termination of this Agreement.
ARTICLE 11 - LIMITATION OF LIABILITY; PAYMENT ON TERMINATION;
SUPPLY OF COMPARABLE ENERGY AND CAPACITY; RECOUPMENT
OF EARLY CAPACITY PAYMENT; INDEMNITY
11.1 Limitation of Liability. Notwithstanding any other provision of this
Agreement to the contrary, neither Party shall be liable to the other hereunder
for loss of profits (except for those which would have been earned under this
Agreement), cost of capital, consequential damages, attorneys fees, damages
arising out of business interruption or costs of business relocation. Moreover,
Cogenron agrees to indemnify TU Electric against, and hold TU Electric harmless
from any claims, demands, suits and liability of any nature raised or made by
Union Carbide Corporation, or by any
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former or current parent, subsidiary or affiliate of Cogenron Inc., or by TNP in
connection with this Agreement, or any operation thereunder, of the Cogeneration
Facility.
11.2 Payment on Termination. In the event that, during the Primary Term,
this Agreement is ever terminated pursuant to the provisions of Articles 10.1
(except for certain instances of termination under Article 10.1.7, as referenced
below in this Article 11.2), 12.2 or 15.3 of this Agreement, Cogenron shall pay
to TU Electric an amount equal to ten percent (10%) of the remaining Capacity
Payments and Energy Payments which would have otherwise been payable to Cogenron
for the remaining Primary Term under this Agreement, had such payments been made
with a 6.5% per annum progressive payment and an assumed 65% Annual Capacity
Factor Performance Level, as calculated below. Cogenron shall pay to TU Electric
the amount shown below for the year in which the termination occurs and shall
also, in addition to the numbers shown below, include interest at the commercial
paper rate charged from time to time by NationsBank in Dallas, plus one percent,
such interest to commence accrual as of the date of termination of this
Agreement. Such payment amount upon termination of this Agreement shall be as
follows:
Termination Payment Amount
during calendar year: (not including interest):
--------------------- -------------------------
1987 $ 82,984,000
1988 81,061,000
1989 76,110,000
1990 74,103,000
1991 71,916,000
1992 69,055,000
1993 65,167,000
1994 60,149,000
1995 53,744,000
1996 45,313,000
1997 34,827,000
1998 22,745,000
1999 8,350,000
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The applicable sum of money shall be payable to TU Electric, in full,
thirty days following the termination of this Agreement; provided, however,
should a termination of this Agreement occur pursuant to Article 10.1.7, the
payment provided in this Article 11.2 shall not apply unless the unwillingness,
inability or failure of TNP or any other Transmission Service Provider to
transmit the energy and capacity covered hereunder is due or attributable to
some act or omission on the part of Cogenron.
11.3 Supply of Comparable Energy and Capacity. In the event Cogenron
ceases operation of the Cogeneration Facility, Cogenron may deliver in
accordance with the terms hereof to TU Electric Comparable Energy and Capacity
produced at another facility within ERCOT, and TU Electric shall accept and pay
for, in accordance with the terms of this Agreement, such energy and capacity as
fulfillment of Cogenron's duties and obligations under this Agreement, provided
that such energy and capacity complies in all respects with the definition of
Comparable Energy and Capacity as contained herein. If Cogenron delivers such
Comparable Energy and Capacity, payment for same shall be the sole
responsibility of Cogenron and TU Electric shall not be liable under any
circumstances for any payments to third parties including, without limitation,
all transmission service charges and fees of any nature. If Cogenron ever ceases
to deliver, in accordance with all the terms hereof, such Comparable Energy and
Capacity (other than any cessation due to a rejection by TU Electric of such
Comparable Energy and Capacity due to cost, as provided below in this Article
11.3), then this Agreement shall terminate as of the date of such cessation and
the applicable amount under Article 11.2 shall become fully due and payable.
TU Electric shall have the continuing right to reject and refuse to pay
Cogenron for any Comparable Energy and Capacity tendered by Cogenron at any time
under this Article 11.3, if TU Electric is able to obtain such energy and
capacity at a lower cost than would be payable to Cogenron
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under this Agreement. In the event of such rejection by TU Electric, Cogenron
shall have no further obligation to deliver Comparable Energy and Capacity
hereunder for the remainder of the then current calendar year. Commencing with
January I of the following year, Cogenron's obligations to deliver energy and
capacity, or Comparable Energy and Capacity, shall commence again in accordance
with all of the terms and provisions hereof, subject to TU Electric's subsequent
exercise of its right of rejection.
11.4 Recoupment of Early Capacity Payment. In the event of the termination
of the Agreement for any reason prior to twelve years following the Commercial
Operating Date, Cogenron shall pay to TU Electric the amounts shown below for
the year in which such termination occurs. (For example, if termination of this
Agreement occurs in the year 1987, Cogenron would owe TU Electric $7,475,000 to
compensate for early capacity payments, plus interest, made by TU Electric to
Cogenron hereunder.)
Year Amount Due,
---- -----------
1987 $ 7,475,000
1988 29,575,000
1989 33,566,000
1990 42,280,000
1991 49,461,000
1992 54,699,000
1993 57,519,000
1994 57,316,000
1995 53,441,000
1996 45,141,000
1997 31,549,000
1998 11,619,000
1999 -0-
11.5 Termination Other Than at End of Year. The amounts shown in Article
11.4 are payable by Cogenron to TU Electric for termination of the Agreement at
the end of the corresponding year. If such termination occurs other than at the
end of a year, then the amount to be paid by
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Cogenron to TU Electric to enable TU Electric to recoup early capacity payments
shall be the sum of the amount payable had termination occurred at the end of
the year prior to the date of termination, plus interest thereon at the rate of
11.75% per annum from the end of such prior year until the date of termination,
plus such portion of the appropriate amount shown below as is proportional to
the day of the year on which the Agreement is terminated.
Year of Termination Amount to be Apportioned
------------------- ------------------------
1988 $21,222,000
1989 515,000
1990 4,771,000
1991 2,213,000
1992 (574,000)
1993 (3,608,000)
1994 (6,960,000)
1995 (10,611,000)
1996 (14,580,000)
1997 (18,895,000)
1998 (23,635,000)
1999 (12,281,000)
11.6 Indemnity. In addition to other indemnities provided herein Cogenron
agrees to defend, protect, indemnify, and save harmless TU Electric, parent or
affiliate corporations, their agents, servants, officers, directors, and
employees, from and against all claims, expenses, demands, judgments, and causes
of action of every kind and character for personal injury or death or damage to
property of Cogenron's agents, servants, and employees, as well as the agents,
servants, and employees of Cogenron's contractors, arising out of or incident
to the construction, operation or maintenance of the Cogeneration Facility.
Cogenron shall defend, protect, indemnify, and save harmless TU Electric,
and its parents or affiliate corporations, and their officers, directors,
agents, servants, and employees from and against any and all claims, expenses,
demands, judgments, and causes of action of every kind and character
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whatsoever arising in favor of any person or entity (other than the agents,
servants, and employees of Cogenron or of Cogenron's contractor, as provided in
the paragraph immediately above), including but not limited to claims, demands,
judgments, causes of action on account of personal injuries or death, or damage
to property arising out of or incident to the construction, operation or
maintenance of the Cogeneration Facility. It is the clear and unequivocal intent
of the Parties hereto that Cogenron's obligation to defend, protect, and save
harmless TU Electric shall be full and complete for any work performed, with the
only exception being that, as to claims arising in favor of persons or entities
other than for injury, death, or damage to the agents, servants, and employees
of Cogenron or Cogenron's subcontractor, TU Electric shall not be entitled to
indemnification for claims, demands, expenses, judgments, and causes of action
resulting from TU Electric's sole negligence.
ARTICLE 12 - NO OPERATION IN INTERSTATE COMMERCE
12.1 Cogenerator Warranties. Cogenerator represents and warrants:
12.1.1 that Cogenerator does not, and will not, directly or through
connections with other entities transmit sell, or deliver electric energy
generated at the Plant in interstate commerce, other than electric energy
that is put into interstate commerce after it is delivered to TU Electric;
and
12.1.2 that Cogenerator has opened, and will keep open, all
electrical connections controlled by it that are necessary to prevent
transmission of electric energy generated at the Plant in interstate
commerce before it is delivered to TU Electric.
12.2 Right to Suspend and Terminate. If Cogenerator transmits, sells,
delivers, purchases, or receives electric energy delivered to TU Electric in
interstate commerce or maintains any
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interconnection for those activities, then TU Electric may, besides any other
remedies it may have, including the remedy specified in Section 12.3 below,
exercise either or both of these remedies:
12.2.1 immediately suspend receipt of electric power and energy
from, and delivery of power and energy to, Cogenerator; or
12.2.2 immediately terminate this Agreement by sending written
notice of termination to Cogenerator.
12.3 Specific Performance. It is impossible or very difficult to
measure in money the damages that would accrue due to any breach of the
representations and warranties made in this Article 12, or any failure in
the performance of any of the obligations contained in this Article 12
and, for that reason, among others, the Parties agree that TU Electric is
entitled to specific performance of this Article 12, besides any other
remedies that may exist and, for that reason, among others, the Parties
agree that TU Electric is entitled to specific performance of this Article
12, besides any other remedies that may exist. Cogenerator waives any
claim or defense that an adequate remedy at law exists, if TU Electric
institutes any proceedings to enforce any provision of this Article 12.
12.4 Exceptions. Nothing in this Article 12 precludes the use of
connections for the transmission of electric energy in interstate commerce
(i) under bonafide emergencies under Section 202(d) of the Federal Power
Act or (ii) if such transmission in interstate commerce occurs because of
the orders of the Federal Energy Regulatory Commission, applicable to TU
Electric, under Sections 210, 211, and 212 of the Federal Act requiring
the establishment, maintenance, modification, or use of any connections
that are involved.
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ARTICLE 13 - NOTICE
13.1 Notices. Unless otherwise stated herein, all notices, demands or
requests required or permitted to be given by either Party to the other under
this Agreement, or any instrument or document required or permitted to be
tendered or delivered by either Party shall be made: (1) by depositing the same
in any United States Post Office, postage prepaid, for transmission by certified
or registered mail (except that payments may be forwarded by regular mail)
addressed to the other Party, or (2) by personally delivering to the other
Party, such transmittal at the following addresses:
If to TU Electric:
with respect to scheduling and dispatching:
Generation Coordinator
Power Supply Operations Group
TU Electric Company
1601 Bryan Street
Dallas, Texas 75201-3411
(214) 812-6240.
with respect to all other matters:
Henry A. Bunting
Manager, Power Resource Acquisition
TU Electric Company
1601 Bryan Street
Energy Plaza, 12th Floor
Dallas, Texas 75201-3411.
If to Cogenron:
with respect to Cogeneration Facility operations:
Shift Supervisor
3221 Fifth Avenue South
Texas City, Texas 77590
(409) 945-7324.
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with respect to all other matters:
President
700 Louisiana, Suite 2360
Houston, Texas 77002
(713) 230-2102.
13.2 Change of Address. Changes in the aforesaid addresses shall be made
by the notice procedure described in Section 13.1 of this Article 13.
ARTICLE 14 - LIABILITY; DEDICATION; SEVERAL OBLIGATIONS
14.1 Liability. TU Electric does not, by review and acceptance of the
plans and specifications for the construction of the Cogeneration Facility,
assume any responsibility or liability for damage or physical injury to: (1) TU
Electric real or personal property or electrical equipment, (2) the real or
personal property of third persons or corporations not a party to this
Agreement, including, but not limited to, Union Carbide Corporation and TNP, (3)
the real or personal property and equipment (including the Cogeneration
Facility) of Cogenron, and (4) any persons who may come in contact with or upon
the Cogeneration Facility and associated equipment; and (5) any other persons or
property, real or personal.
14.2 Dedication. No undertaking by either Party to the other under any
provision of this Agreement shall constitute the dedication of that Party's
electrical system, equipment, or facilities, or any portion of any of the
foregoing, to the other Party or to the public, or affect the status of TU
Electric as an independent corporate entity and a public utility, or Cogenron as
an independent corporate entity.
14.3 Several Obligations. Except where specifically stated otherwise in
this Agreement, each of the duties, obligations and liabilities of the Parties
is to be a several obligation, duty or liability
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and not joint or collective. Nothing contained in this Agreement shall ever be
construed to create an association, trust, partnership or joint venture, or
impose a trust or partnership duty, obligation or liability, on or with regard
to either Party.
ARTICLE 15 - REPRESENTATIONS AND WARRANTIES OF THE RESPECTIVE PARTIES
15.1 Cogenron's Representations and Warranties. In addition to the other
representations, obligations, and warranties of Cogenron provided herein,
Cogenron hereby represents and warrants unconditionally to TU Electric that:
15.1.1 Cogenron is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and has been
duly authorized to do business in the State of Texas.
15.1.2 Cogenron has full corporate power and lawful authority to
accomplish, execute and fulfill all of its obligations and duties
hereunder.
15.1.3 The making and performance by Cogenron of this Agreement have
been duly authorized by all necessary corporate action and will not: (i)
violate any provision of any law, rule, regulation, order, writ, judgment
decree, determination or award presently in effect having applicability to
Cogenron; (ii) violate any provision of the Articles of Incorporation or
Bylaws of Cogenron, or (iii) result in a breach of or constitute a default
under any mortgage, indenture or bank loan or credit agreement or any
other material agreement or instrument to which Cogenron is a party or by
which it or its property is presently bound or affected.
15.1.4 All authorizations, permits, consents, approvals, licenses or
exemptions of, and filings or registrations with, any court or
governmental agency or other authority,
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domestic or foreign, necessary to permit Cogenron to execute and deliver,
and to perform its obligations under this Agreement, have been obtained or
made at Cogenron's sole expense, and Cogenron is not, and will not be, in
violation or default in any respect of or under any law, rule, regulation,
order, writ, judgment, decree, determination or award, and is not, and
will not be, in violation of or default under any mortgage, indenture,
agreement or instrument.
15.1.5 Cogenron possesses the necessary expertise, technology,
manpower, equipment, financial resources and experience to fulfill all of
Cogenron's obligations hereunder, including, but not limited to,
Cogenron's licensing, procurement, transportation, sale, quantity,
quality, and marketing obligations hereunder.
15.1.6 The Cogeneration Facility is, and will continue to be,
throughout the Primary and Secondary Term, a Qualifying Facility, as that
term is used and defined in 18 CFR (Code of Federal Regulations) 292, and
has been since the date of this Agreement in 1985, and, upon request,
Cogenron will provide certification by the FERC of such qualifying status
pursuant to 18 CFR 292.207(b).
15.1.7 Cogenron will comply in a timely manner with all of the
terms, provisions and conditions of this Agreement throughout the term
hereof.
15.1.8 Cogenron shall maintain throughout the term hereof a reliable
fuel supply for the Cogeneration Facility sufficient for such facility to
meet the energy and capacity requirements provided herein.
15.2 TU Electric's Representations and Warranties. TU Electric
hereby represents and warrants unconditionally to Cogenron that:
15.2.1 TU Electric is a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas.
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15.2.2 The making and performance by TU Electric of this Agreement
have been duly authorized by all necessary corporate action and will not:
(i) violate any provision of any law, rule, regulation,
order, writ, judgment, decree, determination or award
presently in effect having applicability to TU Electric;
(ii) violate any provision of the Articles of
Incorporation or Bylaws of TU Electric; or
(iii) result in a breach of or constitute a default
under any indenture or bank loan or credit agreement or any
other material agreement or instrument to which TU Electric is
a party or by which it or its property is presently bound or
affected.
15.2.3 All authorizations, permits, consents, approvals,
licenses or exemptions of, and filings or registrations with, any
court or governmental agency or other authority, domestic or
foreign, necessary to permit TU Electric to execute and deliver, and
to perform its obligations under, this Agreement have been obtained
or made, and TU Electric is not in violation or default in any
material respect of or under any law, rule, regulation, order, writ,
judgment, decree, determination or award and is not in violation of
or default under any mortgage, indenture, agreement or instrument.
15.3 Misrepresentation; Breach of Warranty; Fulfillment of Obligations. In
the event either Party hereto materially breaches any warranty provided herein,
or fails to fulfill any material obligation provided herein, or if any material
representation given herein becomes, subsequent to the date hereof, inaccurate,
or is discovered to have not been accurate when made, then the Party to whom
such representation or warranty was made, or to whom such obligation was due,
may, in addition to any other remedies which may be available at law or in
equity, terminate this Agreement upon thirty (30) days' written notice to the
other Party (such thirty (30) days commencing with the
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date of the other Party's receipt of such notice), if, by the end of said thirty
(30) day period, the other Party has not cured such breach, misrepresentation or
default. Said thirty (30) day notice period shall not be applicable to
termination under Article 10.1 or Article 12.2.
ARTICLE 16 - INSURANCE
16.1 Proof of Coverages. Cogenron shall require that its insurance
carriers provide to TU Electric proof of insurance as required by Article 16.5
in the form of two (2) copies of an insurance certificate form acceptable to TU
Electric. All policies shall be written with insurers acceptable to TU Electric
and the certificates received not less than ten (10) days after execution of the
Agreement. Such certificates shall provide that there will be sixty (60) days'
written notice given to TU Electric of any change in or cancellation of any
policy upon which a certificate is required of Cogenron by this Article hereof.
All coverages required of Cogenron shall be in full force and effect during
Cogenror's performance of this Agreement.
16.2 Policies. All policies shall be written on an occurrence basis,
unless an occurrence basis policy becomes unavailable and shall include TU
Electric, its directors, officers, agents, servants, employees and/or
independent contractors directly responsible to TU Electric as additional
insureds. All policies shall contain an endorsement (if such terminology is not
in the printed form) that Cogenron's policy shall be primary in all instances
regardless of like coverages, if any, carried by TU Electric.
16.3 Certificates. All certificates required in this Article 16 shall be
furnished to TU Electric and shall be subject to the approval and acceptance of
TU Electric, which shall not be unreasonably withheld.
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16.4 Limitation of Liability. Cogenron's liability under this Agreement is
not limited to the amount of insurance coverage required herein.
16.5 Coverage and Limits of Liability. Cogenron at its sole expense shall
maintain the following types of coverage and limits of liability:
Limits of Liability
Type of Coverage of Insurance Policy
---------------- -------------------
(1) Workers' Compensation Insurance Statutory
(2) Employees Liability Insurance 1,000,000 per occurrence
(3) Comprehensive General Public
Liability Insurance $20,000,000 per occurrence
Including: Coverage for damage
caused by blasting, collapse,
underground damage or explosion;
Independent Contractors;
Products, Completed Operations;
Personal Injury; Contractual
Public Liability covering
liability assumed in the
Agreement; Broad Form Property
Damage; and Excess Employees
Liability.
(4) Comprehensive Automobile
Liability $20,000,000 per occurrence
including: Coverage for all owned,
hired or non-owned licensed
automotive equipment.
For Items 3 and 4 above the first $250,000 shall be external coverage, the next
$750,000 may be self-insured, and the remainder up to $20,000,000 shall be
external coverage.
16.6 Release and Waiver. Cogenron agrees to release, and will require
its insurers (by policy endorsement) to waive their rights of subrogation
against, TU Electric, its directors, officers,
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agents, servants, employees and/or independent contractors directly responsible
to TU Electric for loss under the policies of insurance described herein,
damages to Cogenron's properties and/or any other loss sustained by Cogenron,
whether insured or not.
ARTICLE 17 - TRANSMISSION SERVICE AGREEMENTS
17.1 Negotiation. Except for Comparable Energy and Capacity, TU Electric
will administer any transmission service agreements required to deliver energy
and capacity to the Point of Delivery. Cogenron shall have the right to approve
all transmission service agreements that apply to transmission service during
the Primary Term prior to execution by TU Electric, which approval will not be
unreasonably withheld.
17.2 Transmission Service Charge. Except for Comparable Energy and
Capacity, it is agreed that:
17.2.1 Cogenron will reimburse TU Electric for various
percentages of all charges, fees and expenses for transmission service
and line losses (including, without limitation, Access, Impact and loss
components, as now and subsequently defined by the PUC) paid, in money
or in kind, by TU Electric and Cogenron agrees to compensate TU Electric
for any payments due here from TU Electric arising from transmission
service charges, fees and expenses and line losses attributable to
energy and capacity delivered at the Point of Delivery, such
reimbursement by Cogenron to TU Electric to be in the following
percentages for the time periods indicated:
17.2.1 (a) Prior to midnight on December 31, 1996, such
reimbursement by Cogenron will be 100%.
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17.2.l(b) From midnight on December 31, 1996, to midnight on
June 30, 1999, such reimbursement shall be 60% for all Access and Impact
charges and 100% for all loss components experienced by TU Electric.
17.2.l(c) Effective as of midnight on June 30, 1999, there shall
be no further reimbursement.
17.2.2 During the Primary Term, Cogenron will pay any and all
termination and similar charges due under the terms of all transmission
service agreements required pursuant to Section 17.1 to deliver the
cogenerated energy and capacity to the Point of Delivery. Cogenron also
agrees to indemnify TU Electric against any and all liabilities, costs
and expenses, including attorney's fees, which TU Electric may have for
termination and similar charges arising under any such agreements.
17.2.3 Cogenron will have no liability under Sections 17.2.1 or
17.2.2 for termination charges or for charges for transmission and line
losses paid by TU Electric under any such transmission service
agreements which accrue subsequent to midnight, on June 30, 1999, or
subsequent to any purchase or lease of the Cogeneration Facility by TU
Electric pursuant to Article 21 hereof.
17.2.4 TU Electric shall have the right to deduct, from its
payments to Cogenron, in the percentages and for the time periods
indicated in Sections 17.2.1(a) through 17.2.1(c), termination
charges and charges for all transmission service charges and line losses
paid by TU Electric, whether in money or in kind, in respect to or in
connection with any energy and capacity delivered to TU Electric under
this Agreement.
17.3 Transmission of Comparable Energy and Capacity. If Cogenron
delivers Comparable Energy and Capacity in accordance with the
provisions of this Agreement, Cogenron will be
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responsible for: (i) the negotiation of all transmission service agreements
necessary to deliver the Comparable Energy and Capacity to the Delivery Point,
and (ii) all such transmission service charges and fees, including without
limitation, all Access and Impact charges and all loss components, attributable
to the delivery of such Comparable Energy and Capacity to the Delivery Point.
17.4 Execution of Transmission Service Agreements. TU Electric shall use
reasonable efforts to execute and maintain transmission service agreements with
Houston Lighting & Power Company ("HL&P"), with TNP, and with all other
Transmission Service Providers necessary for the transmission of energy and
capacity generated by the Cogeneration Facility and delivered to TU Electric.
ARTICLE 18 - FORCE MAJEURE
18.1 Definition. The term force majeure, as used herein, means acts of
God, sudden actions of the elements, such as floods, hurricanes or tornadoes,
and actions by federal, state, municipal or any other government or agency,
sabotage, war or riots.
18.1.1 The term force majeure does not include any full or
partial curtailment in the electric output of the Facility which is
caused by or arises from the act or acts of any third party including,
without limitation, any vendor or supplier of Cogenerator, unless such
act or acts is itself excused by reason of force majeure.
18.1.2 The term force majeure does not include any full or
partial curtailment in the electric output of the Facility that is
caused by or arises from a mechanical or equipment breakdown, unless
such breakdown is caused by acts of God, sudden actions of the elements,
such as floods, hurricanes or tornadoes, sabotage, war or riots. The
foregoing definition of
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force majeure shall apply even if the mechanical or equipment breakdown
occurs without the fault or negligence of Cogenron.
18.1.3 The term force majeure does not include changes in market
conditions or governments action that affect the cost of Cogenerator's
supply of fuel or that affect the cost or availability of any alternate
supplies of fuel or the demand for Cogenron's product. In addition,
force majeure does not include unavailability of equipment, inability to
obtain permits, labor strikes or slowdowns, or failure or unavailability
of transmission capability, unless same is caused by an occurrence which
would fit the definition of force majeure in this Article 18.
18.2 Conditions Upon Force Majeure. If either Party because of force
majeure is rendered wholly or partly unable to perform any of its obligations
under this Agreement, that Party shall be excused from whatever performance is
affected by the force majeure to the extent so affected provided that:
18.2.1 the non-performing Party gives the other Party within
seven (7) days written notice describing the particulars of the
occurrence;
18.2.2 the suspension of performance is of no greater scope and
of no longer duration than is required by the force majeure;
18.2.3 the non-performing Party uses its best efforts to remedy
its inability to perform; and
18.2.4 when the non-performing Party is able to resume
performance of its obligation underthis Agreement, that Party shall give
the other Party written notice to that effect.
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18.3 Limitation of Term. Except as otherwise provided, a Forced Outage
does not relieve Cogenerator of any of its obligations under this Agreement.
18.4 Further Limitation of Term. Except as otherwise provided, in no
event will any condition of force majeure extend this Agreement beyond its
stated term, nor shall any condition of force majeure extend for a time period
greater than one hundred eighty (180) days, except upon the written consent of
TU Electric, which consent will not be unreasonably withheld; provided, however,
that, if the condition of force majeure is not removed within eighteen (18)
months, TU Electric may, at its sole option and discretion, reduce or terminate
this Agreement.
18.5 Additional Limitation of Term. If force majeure is applicable,
whether declared by Cogenron or by TU Electric, TU Electric shall not be
required to make any Capacity Payment for the month(s) or any portions thereof
during the pendency of any event of force majeure.
ARTICLE 19 - GOVERNMENTAL AND REGULATORY BODIES
This Amended and Restated Agreement and all operations hereunder are
subject to the applicable federal and state laws, together with the applicable
ordinances, orders, rules and regulations of any local, state or federal
governmental authority having jurisdiction.
ARTICLE 20 - PRIOR RIGHT TO PURCHASE OR LEASE IN PRIMARY TERM
Cogenron hereby grants to TU Electric a continuing prior right to
purchase or lease the Cogeneration Facility referenced herein, subject only to a
prior right of purchase or lease by Union Carbide Corporation, upon the same
terms and conditions which Cogenron is willing to sell or lease said facility to
an unaffiliated third party. Cogenron shall supply TU Electric in writing with
full details regarding any offer to purchase or lease which Cogenron is willing
to accept, and TU Electric shall
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have sixty (60) days from receipt of such information in which to give Cogenron
notice of its intent to exercise the prior right to purchase or lease granted
herein. In the event that TU Electric elects not to exercise such right,
Cogenron may consummate such sale or lease with said third party within a period
of sixty (60) days from the earlier of TU Electric's election to not exercise
such right or the expiration of the aforesaid sixty (60) day period. If Cogenron
has not fully consummated said sale or lease within such 60-day period, then TU
Electric's prior right to purchase or lease, in respect to any offer by such
third party, will be revived. In any event, TU Electric's prior right to
purchase or lease shall continue to remain in effect, including during said
60-day period, as to any offers of purchase or lease received from unaffiliated
third parties other than that party which initially made the offer of purchase
or lease previously submitted by Cogenron to TU Electric. This Article 20 shall
only apply during the Primary Term.
ARTICLE 21 - LEASE OPTION IN PRIMARY TERM
If this Amended and Restated Agreement is terminated by TU Electric
pursuant to Articles 10.1 (except for 10. 1.7) or 12.2 or, in addition thereto,
by reason of termination for material breach by Cogenron, under Article 15.3, of
Article 15.1.5 or 15.1.8, TU Electric shall have, for a period of sixty (60)
days from and after termination, the option to lease the Cogeneration Facility
from Cogenron for the balance of the term of this Amended and Restated
Agreement. During the term of this Amended and Restated Agreement, either Party
may, by giving notice thereof, require that the Parties diligently and promptly
expedite the preparation of a lease agreement for the Cogeneration Facility, to
become effective upon the exercise by TU Electric of its option. The Parties
understand that it is the present intention of TU Electric to operate the
Cogeneration Facility for peaking service to the TU Electric System under such
lease. Cogenron warrants that said lease agreement shall
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contain each and every provision that will enable TU Electric to operate the
Cogeneration Facility to provide peaking service. Cogenron further warrants that
the rent to be paid by TU Electric under the lease agreement shall be nominal
only and shall include no profit for Cogenron. Cogenron further warrants that it
has the authority to lease the Cogeneration Facility to TU Electric, together
with the real property upon which the Cogeneration Facility is located. Cogenron
warrants that it shall sell to TU Electric, at the then-reasonable market price,
fuel sufficient for TU Electric to operate the Cogeneration Facility for peaking
purposes. If, within six months after notice by a Party for preparation of a
lease agreement, the Parties have not agreed on the terms and provisions of said
lease agreement, the Parties will, unless both agree otherwise, submit to final
and binding arbitration all matters pertaining to the lease agreement upon which
they have not then agreed. Such arbitration, if required, shall occur in Dallas,
Texas and shall be conducted in accordance with the rules of the American
Arbitration Association. This Article 21 shall only apply in the Primary Term.
ARTICLE 21A - RIGHT TO PURCHASE OR LEASE IN SECONDARY TERM
If during the Secondary Term, Cogenron desires to abandon operation of
the Plant, Cogenron shall give TU Electric 180 days prior notice and TU
Electric shall have a continuing and prior right to purchase or lease the Plant
and all associated rights, facilities, appurtenances and properties, free and
clear of any liens, encumbrances or obligation to third parties, upon such terms
and conditions that will allow TU Electric to operate the Plant in a manner to
generate and deliver to TU Electric the capacity and energy contemplated in this
Agreement at a cost that does not exceed the amount of the payments provided
herein. If the Parties have not agreed upon the terms and conditions of such
purchase or lease within 60 days of the date upon which Cogenron plans to
abandon operation of the Plant, Cogenron and TU Electric will, unless both agree
otherwise, submit to final and binding
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arbitration all matters pertaining to such purchase or lease upon which Cogenron
and TU Electric have not then agreed. The rights provided in this Article 2lA
are in addition to all other rights and remedies that may be available to TU
Electric under this Agreement or otherwise and compliance with this Article 21A
is not intended, and shall not be interpreted, to excuse Cogenron in whole or
part from any of its obligations set forth in this Agreement.
ARTICLE 22 - WAIVER
Any waiver at any time by either Party of any of its rights, duties, and
obligations with respect to any default under this Amended and Restated
Agreement, or with respect to any other matters arising in connection with this
Amended and Restated Agreement, shall not be deemed a waiver with respect to any
subsequent default or other matter, whether or not of like or similar nature.
ARTICLE 23 - NO RIGHTS OF THIRD PARTIES
This Amended and Restated Agreement is intended for the benefit of the
Parties hereto. Nothing herein shall be construed to create any duty to, any
standard of care with reference to, or any liability to, any person not a party
hereto, including specifically, but not limited to, Union Carbide Corporation,
Dominion Resources Corporation, Enron Corporation, Calpine Corporation,
Enron/Dominion Cogen Corp., Texas Cogeneration Company and TNP.
ARTICLE 24 - NO PARTNERSHIP
This Amended and Restated Agreement shall not be interpreted or
construed to create an association, joint venture, or partnership between the
Parties or to impose any partnership obligation or liability upon either Party.
Neither Party shall have any fight, power or authority to enter in any
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agreement or undertaking for, or act on behalf of, or to act as or be an agent
or representative of, or to otherwise bind, the other Party.
ARTICLE 25 - SURETY AGREEMENT
As security for Cogenron's performance under this Agreement, Enron
Corporation, the former parent corporation of Enron/Dominion Cogen Corp.,
executed, contemporaneously with the execution of the June 12, 1985 agreement, a
surety agreement of the same date (as previously amended, modified or otherwise
supplemented). Calpine Corporation (as successor to Enron) and Enron, together
with TU Electric, also executed that Consent and Assignment Agreement dated
August 23, 1997 setting forth the respective obligation of Calpine and Enron. By
its execution below, Enron Corporation hereby consents to this amendment and
restatement of the original June 12, 1985 Agreement, as previously amended and
as further amended herein.
ARTICLE 26 - CONFIDENTIALITY AGREEMENT
This Amended and Restated Agreement is regarded by the Parties to be
confidential and contain proprietary information. Except for such disclosure as
may be compelled by order of court or governmental agency, the Parties agree to
keep confidential and not disclose to any third party: 1) the terms of this
Agreement, or any amendment thereto; 2) any information or material obtained by
one Party from the other pursuant to the terms hereof, including any information
or material obtained through any inspection or audit rights; 3) any information
concerning or relating to the energy and capacity covered by this Agreement, or
the operation of the Cogeneration Facility, or the sales or purchases occurring
or to occur hereunder, or the negotiation of this Agreement. Limited disclosures
of information may be made by one Party hereto with the express written consent
of the
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other Party, which consent shall specify: 1) the third party to whom such
information may be given; 2) the time when such information is to be given; 3)
the manner in which such information is to be relayed; 4) specific details of
what information is to be given; and 5) any further limitations which the other
Party deems advisable. If requested, the Party desiring to make such a
disclosure shall provide the other Party with a copy of any written documents to
be disclosed, or a copy of a transcript of any oral information to be disclosed,
in order for such other Party to determine whether it will grant or withhold its
consent thereto.
ARTICLE 27 - ENTIRE AGREEMENT
This Amended and Restated Agreement supersedes any and all other
agreements, either oral or in writing, between the Parties hereto with respect
to the subject matter hereof and contains all of the covenants and agreements
between the Parties with respect to said matter. Each Party to this Agreement
acknowledges that no representations, inducements, promises, or agreements,
orally or otherwise, have been relied upon or made by any Party, or anyone
acting on behalf of any Party, which are not embodied herein, and that no other
agreement, statement, or promise not contained in this Amended and Restated
Agreement shall be valid or binding.
ARTICLE 28 - ASSIGNMENT
This Amended and Restated Agreement shall inure to the benefit of, and
be binding upon, TU Electric and Cogenron, together with their respective
successors and assigns, except that neither Cogenron nor TU Electric, nor any
approved assignee or successor of either of said Parties, shall assign its
rights or delegate its duties under this Agreement, or any part of such rights
or duties, without the written consent of the other, and Cogenron shall not
sell, lease or sublease the
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Cogeneration Facility, or permit the operation thereof by any other party,
without the prior written consent of TU Electric, and any such assignment,
delegation, lease or sublease made without such prior written consent shall be
null and void; provided, however, the requirement of written consent to an
assignment shall not apply to either Party if it merges into, or substantially
all of its assets are acquired by, another entity which is bound by all the
obligations of this Agreement.
ARTICLE 29 - CAPTIONS
AU indices, titles, subject headings, subheadings, article titles and
similar items are provided for the purpose of reference and convenience and are
not intended to be inclusive, definitive or to affect the meaning, contents or
scope of this Amended and Restated Agreement, or any provision hereof.
ARTICLE 30 - AMENDMENTS
This Amended and Restated Agreement can be amended only by mutual
agreement of the Parties set forth in a written document executed by both
Parties.
ARTICLE 31 - CHOICE OF LAWS; VENUE
All questions concerning the interpretation, validity and enforceability
of this Amended and Restated Agreement and of its terms and conditions, as well
as questions concerning the sufficiency or other aspects of performance under
the terms and conditions of this Amended and Restated Agreement, shall be
governed by the laws of the State of Texas, and venue for any disputes arising
hereunder shall he exclusively in Dallas County, Texas. The payment obligations
of Cogenron to TU Electric under this Amended and Restated Agreement are
performable and payable in Dallas, Dallas County, Texas.
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IN WITNESS WHEREOF, the Parties hereto have caused this Amended and
Restated Agreement to be executed by their duly authorized representatives as of
the date hereinabove set forth, which amends and restates in its entirety that
certain Cogenerated Electricity Sale and Purchase Agreement, dated June 12,
1985.
Cogenron:
COGENRON INC.
By:
-------------------------------------
Earl R. Gore
President and CEO
TU Electric:
TEXAS UTILITIES ELECTRIC COMPANY
By:
-------------------------------------
Steven M. Philley
Director, Energy Supply
Calpine Corporation hereby consents to the amendment and restatement of the
Cogenerated Electricity Sale and Purchase Agreement (as defined in the June 12,
1985 Surety Agreement described below) as set forth in this Amended and Restated
Cogenerated Electricity Sale and Purchase Agreement and hereby agrees and
confirms that Calpine Corporation's obligations as set forth in the Surety
Agreement dated June 12, 1985 between Texas Utilities Electric Company and
Calpine Corporation (as successor-in-interest to Enron Corp., (which is the
successor-in-interest to InterNorth, Inc.) and the Consent and Assignment
Agreement dated June 23, 1997 between Texas Utilities Electric Company, Calpine
Corporation and Enron Corp. remain in full force and effect with respect to the
Primary Term only, and accordingly such obligations shall not apply to the
Secondary Term.
CALPINE CORPORATION
By: /s/ ANN B. CURTIS
------------------------------
Ann B. Curtis
Its: Senior Vice President
----------------------------
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IN WITNESS WHEREOF, the Parties hereto have caused this Amended and
Restated Agreement to be executed by their duly authorized representatives as of
the date hereinabove set forth, which amends and restates in its entirety that
certain Cogenerated Electricity Sale and Purchase Agreement, dated June 12,
1985.
Cogenron:
COGENRON INC.
By: /s/ EARL R. GORE
-------------------------------------
Earl R. Gore
President and CEO
TU Electric:
TEXAS UTILITIES ELECTRIC COMPANY
By: /s/ STEVEN M. PHILLEY
-------------------------------------
Steven M. Philley
Director, Energy Supply
Calpine Corporation hereby consents to the amendment and restatement of the
Cogenerated Electricity Sale and Purchase Agreement (as defined in the June 12,
1985 Surety Agreement described below) as set forth in this Amended and Restated
Cogenerated Electricity Sale and Purchase Agreement and hereby agrees and
confirms that Calpine Corporation's obligations as set forth in the Surety
Agreement dated June 12, 1985 between Texas Utilities Electric Company and
Calpine Corporation (as successor-in-interest to Enron Corp., (which is the
successor-in-interest to InterNorth, Inc.) and the Consent and Assignment
Agreement dated June 23, 1997 between Texas Utilities Electric Company, Calpine
Corporation and Enron Corp. remain in full force and effect with respect to the
Primary Term only, and accordingly such obligations shall not apply to the
Secondary Term.
CALPINE CORPORATION
By:
------------------------------
Its:
----------------------------
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Enron Corporation hereby consents to the amendment and restatement of the
Cogenerated Electricity Sale and Purchase Agreement (as defined in the June 12,
1985 Surety Agreement described below) as set forth in this Amended and Restated
Cogenerated Electricity Sale and Purchase Agreement and hereby agrees and
confirms that Enron Corporation's obligations as set forth in the Surety
Agreement dated June 12, 1985 between Texas Utilities Electric Company and Enron
Corporation, (which is the successor-in-interest to InterNorth, Inc.) and the
Consent and Assignment Agreement dated June 23, 1997 between Texas Utilities
Electric Company, Calpine Corporation and Enron Corporation remain in full force
and effect with respect to the Primary Term only, and accordingly such
obligations shall not apply to the Secondary Term.
ENRON CORP.
By: /s/ CLIFFORD BAXTER
------------------------------------
ITS: Senior Vice President
------------------------------------
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EXHIBIT I- 1987-1988 AVOIDED ENERGY COST
(FOR REDUCED ENERGY PAYMENTS
CALCULATED UNDER ARTICLE 4.6)
The avoided energy cost is to be determined by calculating by time period, using
the Texas Utilities Electric Company's economic dispatch model (or comparable
methodology), the difference between the cost of the total energy furnished by
both Texas Utilities Electric Company and the qualifying facility, computed as
though the energy furnished by the qualifying facility had been furnished by
Texas Utilities Electric Company. This calculation will also be the basis of the
calculation of TUEC's Incremental Lignite Energy Cost.
ENERGY PAYMENTS APPLICABLE FOR
YEARS 1987 - 1988
(FOR ARTICLE 4.3)
Year cent/kwh
---- --------
1987 3.56
1988 3.74
In addition to the foregoing amounts, two-tenths (.2) of a mill per KVM shall be
payable by TUEC to Cogenron for energy payments applicable for years 1987-1988.
Exhibit I
PAGE 1 of 2 Pages
82
ENERGY PAYMENTS APPLICABLE UNDER
ARTICLE 4.4
Applicability. Each of the criteria established in Article 4.4 must be met
before pricing under this section is applicable.
Year cent/KWH
---- --------
1989 2.22
1990 2.00
1991 2.00
1992 2.11
1993 2.22
1994 2.33
1995 2.66
1996 2.88
1997 2.77
1998 2.88
1999 2.99
Exhibit I
Page 2 of 2 PAGES
83
EXHIBIT II - ENERGY PAYMENT APPLICABLE UNDER ARTICLE 4.5
Applicability: The criteria established in Article 4.5 must be met before
pricing under the following formula is applicable:
Incentive Energy Payments ($) =
10.3 MMBtu/MWH x .99 x WACOG of TUEC x [Net Energy - (Contract Level x period
hours x .70)]
Where:
WACOG of TUEC = The monthly weighted average cost of GAS for TU Electric in
dollars per MMBtu.
Period Hours = The number of hours in the current month.
In addition to the Incentive Energy Payments calculated by the above
formula, such Payments shall include two-tenths (.2) of a mill per KWH payable
by TU Electric to Cogenerator.
As used in this exhibit, "MMBtu" shall mean one million (1,000,000)
British thermal units.
Exhibit II
Solo Page
84
EXHIBIT III - SURETY AGREEMENT
A. Surety Agreement dated and effective June 12, 1985 between InterNorth,
Inc. and Texas Utilities Electric Company.
B. Letter dated July 17, 1985 executed by InterNorth, Inc. and Texas
Utilities Electric Company.
C. Letter dated May 24, 1988 executed by Enron Corp. and Texas Utilities
Electric Company.
D. Consent and Assignment Agreement dated June 23, 1997 between Texas
Utilities Electric Company, Calpine Corporation and Enron Corp.
Exhibit III
Cover Page
85
EXHIBIT III - SURETY AGREEMENT
A. SURETY AGREEMENT DATED AND EFFECTIVE JUNE 12, 1985 BETWEEN INTERNORTH,
INC. AND TEXAS UTILITIES ELECTRIC COMPANY
Exhibit III-A
Page 1 of 11 Pages
86
EXHIBIT III
SURETY AGREEMENT
THIS SURETY AGREEMENT ("Surety Agreement") is dated and effective as of
this 12th day of June, 1985, by and between INTERNORTH, INC. ("InterNorth"), a
Delaware corporation having its principal place of business in Omaha, Nebraska,
and authorized to do business in the State of Texas, and TEXAS UTILITIES
ELECTRIC COMPANY ("TUEC"), a Texas corporation having its principal place of
business in Dallas, Texas.
WHEREAS, InterNorth has caused the incorporation of Northern Cogeneration
One Company ("Northern Cogeneration"), a Delaware corporation, as a directly or
indirectly wholly-owned subsidiary of InterNorth, and contemporaneous with the
delivery and effectiveness of this Surety Agreement, Northern Cogeneration and
TUEC have executed that certain Cogenerated Electricity Sale and Purchase
Agreement ("the Cogeneration Agreement") dated as of the date of this Surety
Agreement; and
WHEREAS, under such Cogeneration Agreement Northern Cogeneration
(including its successors or assigns) is obligated pursuant to the terms thereof
to make various money payments to TUEC, including, but not limited to, certain
refund obligations, fees, charges, reimbursement for equipment, services or
facilities indemnification obligations, payments due in the event of a
termination of said agreement or an operational cessation, payments due for
breaches of warranty or for misrepresentations,
Exhibit III-A
Page 2 of 11 Pages
87
and payments due pursuant to any judgment rendered under or in connection with
said Cogeneration Agreement, together with such other payments which may be or
become due under said Cogeneration Agreement, including any interest accruing on
any of such funds, such payments to be hereinafter collectively referred to as
the "Northern Payment Obligations"; and Northern Cogeneration is subject to
various other obligations of performance under said Cogeneration Agreement; and
WHEREAS, for the reasons and under the terms stated below, InterNorth and
TUEC desire to enter into this Surety Agreement in connection with such
Cogeneration Agreement;
NOW, THEREFORE, for the consideration recited below, InterNorth and TUEC
hereby agree to the terms and conditions of this Surety Agreement whereby
InterNorth, in full recognition of the valuable and substantial benefits which
will accrue to it as a result of the execution and performance of the
Cogeneration Agreement, unconditionally undertakes and assures the performance
of the Northern Payment Obligations, and unconditionally undertakes and assures
the performance of all obligations of Northern Cogeneration under the
Cogeneration Agreement. InterNorth expressly intends that TUEC unconditionally
rely upon this undertaking and assurance in executing the Cogeneration Agreement
and further acknowledges the actual reliance of TUEC o this Surety Agreement in
its execution of the Cogeneration Agreement.
Exhibit III-A
Page 3 of 11 Pages
88
1. Consideration:
In consideration of the execution by TUEC of the Cogeneration Agreement,
InterNorth does hereby undertake and assure to TUEC, its successors and assigns,
the full, prompt and complete performance by Northern Cogeneration, its
successors and assigns, of all of the Northern Payment Obligations, which
undertaking and assurance are unconditional and absolute. InterNorth agrees that
the undertaking and assurance as set forth herein are and shall be primary
obligations of, and fully and completely enforceable against, InterNorth.
InterNorth acknowledges the receipt and adequacy of the consideration
hereinabove recited and agrees that such consideration fully supports this
Surety Agreement.
2. TUEC's Right to InterNorth's Performance:
It is expressly agreed that, upon any default by Northern Cogeneration,
its successors or assigns, of any of the Northern Payment Obligations or any
portion thereof, as and when due, for any reason whatsoever, TUEC shall be
entitled to performance by InterNorth of the payment of said Northern Payment
Obligations to the same extent as if InterNorth had signed the Cogeneration
Agreement in Northern Cogeneration's place. In addition, upon any default by
Northern Cogeneration, its successors or assigns, in respect to any of its other
obligations as contained in said Cogeneration Agreement, TUEC shall be entitled
to performance by InterNorth of such obligations to the same extent as if
InterNorth had signed the Cogeneration Agreement in Northern Cogeneration's
place.
Exhibit III-A
Page 4 of 11 Pages
89
3. Effect of Termination, Rescission, Cancellation, or Rejection of
Cogeneration Agreement:
(a) Termination, Rescission or Cancellation. In the event of the
termination of the Cogeneration Agreement pursuant to Articles 10,
12, or 15 thereof, or the rescission of the cogeneration Agreement
in its entirety, or upon any other termination or cancellation of
the co generation Agreement, neither InterNorth nor TUEC shall have
any further liability to the other under this Surety Agreement
except as to any Northern Payment Obligations arising out of
obligations surviving such termination, rescission or cancellation,
or matters occurring prior to such termination, rescission or
cancellation, including, but not limited to, any damages suffered or
which may be suffered by TUEC by reason of any breach of the
Cogeneration Agreement by Northern Cogeneration prior to such
termination, rescission or cancellation.
(b) Rejection. In the event of rejection of the Cogeneration Agreement
by any trustee in bankruptcy, or debtor-in-possession, or receiver,
or by order of any court of competent jurisdiction, InterNorth shall
immediately assume and be liable to perform, as the primary
obligation of InterNorth, all obligations of Northern Cogeneration
under the Cogeneration Agreement, including, but not limited to,
each and all of the Northern Payment Obligations. The terms of such
Exhibit III-A
Page 5 of 11 Pages
90
Cogeneration Agreement are incorporated herein by reference. In such
event, the Cogeneration Agreement shall continue in effect as to
InterNorth and TUEC, and InterNorth shall be deemed for all purposes
to be in the position of Northern Cogeneration under said agreement,
and InterNorth shall be entitled to the performance of TUEC under
the Cogeneration Agreement unless InterNorth, in any such event,
delegates and assigns such rights and obligations to a designee
capable, in the judgment of TUEC, of performing the obligations
applying to said Northern Cogeneration. In the event of such
delegation and assignment, InterNorth shall nevertheless continue to
be obligated under and bound by this Surety Agreement, which
agreement shall continue in effect as to all of the Northern Payment
Obligations under the cogeneration Agreement. The Northern Payment
Obligations of any designee under the Cogeneration Agreement, as to
which this Surety Agreement shall continue, shall be the same as the
Northern Payment Obligations owed by Northern Cogeneration under the
Cogeneration Agreement prior to such rejection.
4. Waivers of Notices and Defenses:
The obligations of InterNorth hereunder are primary and absolute,
and no notice of default to, or demand for performance by,
InterNorth shall be required of TUEC. TUEC shall not, as a condition
to the liability of InterNorth hereunder, be required
Exhibit III-A
Page 6 of 11 Pages
91
to:
(i) proceed against Northern Cogeneration or execute upon any
assets of Northern Cogeneration;
(ii) pursue any remedy whatsoever as against Northern Cogeneration.
InterNorth waives any defense arising by reason of any disability of
Northern Cogeneration. Until all indebtedness of Northern Cogeneration to TUEC
has been paid in full, InterNorth has no right of subrogation, and waives any
right to enforce any remedy which TUEC has or may hereafter have against
Northern Cogeneration, and waives any benefit of, and any right to participate
in, any security now or hereafter held by TUEC. No extension of time for
performance, and no alteration, modification or waiver of the obligations
imposed on Northern Cogeneration by the co generation Agreement shall modify,
discharge, or excuse any obligation of InterNorth hereunder.
5. Choice of Law:
The parties expressly agree that all questions and disputes arising out of
or under this Surety Agreement, including, but not limited to, questions and
disputes concerning validity, interpretation, performance, remedies and
enforcement, shall be resolved according to the law of the State of Texas, and
venue for any such dispute shall lie exclusively in Dallas County, Texas. 6.
Limitations on Consolidated Net Worth:
(a) Unless TUEC shall otherwise consent in writing, InterNorth warrants
that, during the entire term of the
Exhibit III-A
Page 7 of 11 Pages
92
Cogeneration Agreement, the Consolidated Net Worth of InterNorth or
any successor or assignee of the obligations of InterNorth hereunder
shall not be less than Two Hundred Fifty Million Dollars
($250,000,000). TUEC recognizes that during the term of the
Cogeneration Agreement InterNorth may be disposing of all or a
portion of its assets, and TUEC consents to any such disposition on
the condition that InterNorth at all times during the term of the
Cogeneration Agreement causes itself or some other entity having a
Consolidated Net Worth of not less than Two Hundred Fifty Million
Dollars ($250,000,000) to be firmly and unconditionally bound by the
obligations of InterNorth under this Surety Agreement as of the date
hereof. InterNorth agrees that at the time of its designation of any
such other entity as its successor obligor hereunder it will cause
such successor obligor to provide to TUEC: (i) the written agreement
of the successor obligor to fulfill the obligations of InterNorth
hereunder, and (ii) satisfactory evidence that the Consolidated Net
Worth of such successor obligor is not less tan Two Hundred Fifty
Million Dollars ($250,000,000). As used herein, Consolidated Net
Worth means, as of the dat of determination thereof, the sum of the
amounts set forth on a consolidated balance sheet of InterNorth and
its consolidated subsidiaries as of such date prepared in
Exhibit III-A
Page 8 of 11 Pages
93
accordance with generally accepted accounting principles, as (i)
stockholders equity including capital stock, capital in excess of
par value and retained earnings (or deficit), and (ii) subordinated
debt, less any amounts at which shares of capital stock of
InterNorth or any of its subsidiaries repurchased by InterNorth or
any such subsidiaries appear on such balance sheet.
(b) InterNorth shall deliver to TUEC, within one hundred twenty (120)
days of the end of each calendar year independently audited
consolidated financial statements showing the financial condition of
InterNorth, and certifying that such financial statements present
fairly the consolidated financial condition of InterNorth, and
certifying that such financial statements were prepared in
accordance with generally accepted accounting principles.
(c) In the event of a change either in the method of accounting by
InterNorth or a change in generally accepted accounting principles
which has the effect of increasing or decreasing the Consolidated
Net Worth of InterNorth as reflected in the financial statements of
InterNorth from the amount that would be included therein based on
generally accepted accounting principles followed by InterNorth on
the date of this Surety Agreement, the parties agree to amend the
Exhibit III-A
Page 9 of 11 Pages
94
provisions of Section 6(a) so that the effect of the restriction
imposed by Section 6(a) is unchanged from that which existed prior
to such change in the method accounting or generally accepted
accounting principles.
(d) InterNorth shall not:
(i) permit North Cogeneration to become less than directly or
indirectly wholly-owned subsidiary through:
(A) merger or consolidation unless the surviving corporation
is a directly or indirectly wholly-owned subsidiary of
InterNorth; or
(B) sale, exchange or transfer, through declaration of a
dividend or otherwise, of the common stock of Northern
Cogeneration.
A wholly-owned subsidiary of InterNorth shall mean a corporation of
which InterNorth owns 100% of the common stock and any other class
of capital stock having voting rights equal to or greater than the
common stock.
7. Successors and Assigns:
This Surety Agreement is binding upon the successors and assigns of
InterNorth.
8. Warranties and Representations:
InterNorth hereby makes unconditionally the following representations and
warranties:
(a) InterNorth is a corporation duly organized and in good standing
under the laws of the State of Delaware, and authorized to do
business in the State of Texas.
Exhibit III-A
Page 10 of 11 Pages
95
(b) InterNorth has the corporate authority to execute, deliver and fully
perform its obligations under this Surety Agreement and all
resolutions, if any, of directors and shareholders required to
authorize execution and delivery of this agreement have been
obtained.
(c) This Surety Agreement constitutes a valid, legal and binding
obligation of InterNorth enforceable in accordance with its terms.
(d) Execution of and performance by InterNorth under this Surety
Agreement does not require the consent or approval of any person or
governmental agency and does not conflict with or breach any terms
or conditions of:
(i) any order, writ or decree of any court or governmental
authority by which InterNorth is bound; or
(ii) any agreement to which InterNorth is a party or by which it is
bound.
IN WITNESS WHEREOF, the parties hereto have executed this Surety
Agreement as of the day and year first above written.
INTERNORTH, INC.
ATTEST: By: /s/ [SIG]
------------------------------------
Vice President
/s/ [SIG]
- -------------------------
Secretary
TEXAS UTILITIES ELECTRIC COMPANY
ATTEST:
By: /s/ [SIG]
/s/ [SIG] ------------------------------------
- -------------------------
Secretary
Exhibit III-A
Page 11 of 11 Pages
96
EXHIBIT III - SURETY AGREEMENT
B. Letter dated July 17, 1985 executed by InterNorth, Inc. and
Texas Utilities Electric Company.
Exhibit III-B
Page 1 of 2 Pages
97
[INTERNORTH LETTERHEAD]
July 17, 1985
Michael D. Spence, President
Texas Utilities Generating Company
400 North Olive, L.B. 81
Dallas, TX 75201
Re: June 12, 1985 Surety Agreement from InterNorth, Inc. to Texas
Utilities Electric Company, Exhibit III to Cogenerated Electricity
Sale and Purchase Agreement between Northern Cogeneration One
Company and Texas Utilities Electric Company, Dated June 12, 1985
In accordance with the request of Texas Utilities Electric Company,
InterNorth, Inc. proposes to amend the captioned Surety Agreement in the
following respects:
a. In the (ii) portion of 6.(a) add the words "to TUEC" between
"evidence" and "that".
b. Immediately following the (ii) portion of 6.(a), add the following
sentence: "Should said entity be unable or unwilling to fulfill the
obligations of this Agreement, InterNorth or its successor entities
shall be liable for fulfillment of these obligations."
If Texas Utilities Electric Company is in agreement with the foregoing,
please sign in the space provided below and return one of the two copies of this
letter amendment to:
Gary D. Hoover
Vice President and General Manager
Cogeneration Business Line
Northern Natural Resources Company
2223 Dodge Street
Omaha, NE 68102
Very truly yours,
INTERNORTH, INC.
By /s/ [SIG]
----------------------------------------
Vice President
Accepted and Agreed to this 6th
day of July, 1985
TEXAS UTILITIES ELECTRIC COMPANY
By /s/ [SIG]
- ----------------------------------------
98
EXHIBIT III - SURETY AGREEMENT
C. LETTER DATED MAY 24, 1988 EXECUTED BY ENRON CORP. AND TEXAS
UTILITIES ELECTRIC COMPANY.
Exhibit III-C
Page 1 of 5 Pages
99
[ENRON CORP. LETTERHEAD]
May 24, 1988
Texas Utilities Electric Company
Skyway Tower
400 N. Olive Street, L. B. 81
Dallas, TX 75201
Attn: Mr. Mike Wollitz
Re: Texas City Cogeneration Plant
Gentlemen:
As you know, we have reached an agreement with Dominion Resources, Inc. to
sell its one-half of the outstanding common stock of our subsidiary Enron
Cogeneration Company ("ECC"), which in turn is the parent of Enron Cogeneration
One Company (formerly Northern Cogeneration One Company), the entity with whom
the Electricity Sale and Purchase Agreement was originally executed and which,
with your consent, subsequently assigned that contract to Cogenron, Inc., the
current owner of the Texas City facility. The transactions involved in the sale
to Dominion are described on Exhibit "A", and we hereby formally request your
consent to these transactions (the "Transaction"). We specifically and expressly
reaffirm in all respects the surety obligations set forth in the Surety
Agreement between us dated and effective as of June 12, 1985. The Transaction
will not affect any contractual commitments of Enron Corp.'s subsidiaries to
supply fuel to Cogenron, Inc.
We look forward to an uninterrupted continuation of the working
relationship our companies have enjoyed in the past in connection with the Texas
City Cogeneration Plant.
By /s/ [SIG]
----------------------------------------
We hereby consent to Enron's entering into and consummating the
Transaction.
TEXAS UTILITIES ELECTRIC COMPANY
By /s/ MICHAEL D. SPENCE
-------------------------------------
Name: Michael D. Spence
------------------------------
Title: Division President
------------------------------
Dated: June 15, 1988
--------------------
Exhibit III-C
Page 2 of 5 Pages
100
Exhibit A
DESCRIPTION OF SALE
BY ENRON CORP. TO DOMINION RESOURCES, INC. OF ONE-HALF
OF THE COMMON STOCK OF ENRON COGENERATION COMPANY
Enron Cogeneration Company ("ECC") is a 95%-owned subsidiary of Enron
Corp. ("Enron") and is the parent of Enron Cogeneration One Company ("ECO"),
which in turn owns all of the outstanding common stock of Cogenron, Inc.
("Cogenron"), which owns the 450 MW cogeneration facility in Texas City, Texas.
Various other subsidiaries of ECC own interests in other cogeneration projects.
Enron has execute a contract (the "Purchase Agreement") with Dominion Resources,
Inc. ("Dominion"), a Virginia corporation, for the acquisition by Dominion of
505 of the common stock of ECC for $90 million in cash, subject to certain
adjustments. Dominion, by virtue of its ownership of an electric utility and a
gas utility, is a public utility holding company under the Public Utility
Holding Company Act of 1935 ("PUHCA"), but is exempt from all the provisions of
PUHCA except Section 9(a)(2) by virtue of the intrastate exemption afforded by
Section 3(a)(1) thereof. As a result of transactions that would occur
contemporaneously with the closing of the Purchase Agreement, each of Dominion
and Enron would own 50% of the outstanding common stock of ECC. ECC would
continue to own all of the stock of ECO, which would in turn continue to own all
of the outstanding common stock of Cogenron. Each of Dominion and Enron will
have the right to designate four members of ECC's board of directors and to
approve significant acts or transactions, either directly or through the vote of
their respective directors. It is contemplated that contemporaneously with the
sale Kenneth L. Lay, the Chairman of the Board of Enron, would become Chairman
of the Board of ECC, and that David Heavenridge, currently a Vice-President of
Dominion, would be ECC's President and Chief Executive Officer.
The Federal Energy Regulatory Commission, in response to Dominion's
Petition for Declaratory Order (docket number EL88-11-000), confirmed that the
acquisition by Dominion of a 50% interest in ECC would not, in and of itself,
threaten the qualified status of any of ECC's cogeneration projects, by adopting
an interpretation of 18 C.F.R. Section 292.206 that when an electric utility or
an electric utility holding company has a direct or indirect equity interest in
a subsidiary that has an ownership interest in a qualifying facility, the
ownership interest attributed to the parent will not exceed the parent's
Exhibit III-C
Page 3 of 5 Pages
101
proportionate share of the subsidiary's interest in the qualifying facility.
under that interpretation, Dominion's attributed ownership would not exceed 50%
of any of ECC's projects.
Exhibit III-C
Page 4 of 5 Pages
102
Board of Directors
Enron Corporation
Kenneth L. Lay - Chairman and CEO - Enron
John M. Seidl - President and COO - Enron
Richard D. Kinder - Executive VP, Chief of Staff - Enron
Unnamed
Dominion Resources
Thos. E. Capps - President of Dominion Resources, Inc. and President of
Dominion Energy, Inc.
T. Justin Moore, Jr. - retired Chairman of the Board of Directors of
Dominion Resources, Inc.
*David L. Heavenridge - Vice President - Operations of Dominion Energy,
Inc.
Ronald H. Leasburg - Senior Vice President - Engineering & Construction &
Power Operations (VEPCo)
* will be CEO Enron Cogeneration Company
Exhibit III-C
Page 5 of 5 Pages
103
EXHIBIT III - SURETY AGREEMENT
D. Consent and Assignment Agreement dated June 23, 1997 between Texas
Utilities Electric Company, Calpine Corporation and Enron Corp.
Exhibit III-D
Page 1 of 9 Pages
104
CONSENT AND ASSIGNMENT AGREEMENT
THIS CONSENT AND ASSIGNMENT AGREEMENT (this "Agreement"), dated this 23rd
day of June, 1997 (the "Effective Date"), and effective as of such Effective
Date, is made by and among Texas Utilities Electric Company, a Texas corporation
("TUEC"), Enron Corp., a Delaware corporation ("Enron"), and Calpine
Corporation, a Delaware corporation ("Calpine"). TUEC, Enron and Calpine are
referenced in this Agreement individually as a "Party," and collectively as the
"Parties."
W I T N E S S E T H:
WHEREAS, Cogenron, Inc. a Delaware corporation ("Cogenron"), currently
owns a cogeneration plant, producing electricity and steam, together with
related facilities at Texas City, Texas (the "Facility"); and
WHEREAS, TUEC and Cogenron (as assignee of Enron Cogeneration One Company,
formerly known as Northern Cogeneration One Company) have entered into that
certain Cogenerated Electricity Sale and Purchase Agreement, dated as of June
12, 1985 (as amended, restated, modified or otherwise supplemented from time to
time, the "Power Purchase Agreement"); and
WHEREAS, TUEC and Enron (as successor in interest to Internorth, Inc.) are
parties to that certain Surety Agreement, dated as of June 12, 1985 (as amended,
the "Surety Agreement"), pursuant to which Enron has agreed to assure certain
payment and performance obligations of Cogenron under the power Purchase
Agreement; and
WHEREAS, under Section 6(d) of the Surety Agreement, Cogenron may not
become less than an indirect wholly-owned subsidiary of Enron; and
WHEREAS, Cogenron is currently a wholly-owned subsidiary of Enron/Dominion
Cogen Corp., a Delaware corporation ("EDCC"), whose capital stock is owned 505
by Enron Power Corp., a Delaware corporation ("EPC") and a wholly-owned
subsidiary of Enro, and 505 by Dominion Cogen, Inc., a Virginia corporation
("DCI") and wholly-owned subsidiary of Dominion Resources, Inc., a Virginia
corporation ("DRI"); and
WHEREAS, it has been represented by Enron and Calpine that EPC and Calpine
Finance Company, a Delaware corporation ("CFC"), have entered into that certain
Purchase and Sale Agreement, dated as of March 27, 1997 (as amended, the
"Purchase Agreement"), pursuant to which EPC will transfer to CFC all of EPC's
right, title, and interest in the common stock of EDCC owned by EPC, whereby CFC
will become the owner of 50% of the issued outstanding shares of common stock of
EDCC and DCI will remain the owner of 50% of such common stock of EDCC; and
WHEREAS, Enron desires that TUEC consent, and TUEC has agreed to provide
its consent in accordance with the terms of this Agreement, to Cogenron's
becoming the indirect 50% subsidiary of CFC and the indirect 50% subsidiary of
DRI; and
Exhibit III-D
Page 2 of 9 Pages
105
WHEREAS, such sale of EPC's ownership interest in EDCC is being
consummated pursuant to the Purchase Agreement as of the Effective Date hereof,
and it has been represented by Enron and Calpine that Enron (and/or various
affiliates of Enron) will assign to Calpine (and/or various affiliates of
Calpine) all rights and obligations of Enron (or such affiliates) in and to
certain agreements, including the Surety Agreement, certain of which assignments
are being effected by the terms hereof; and
WHEREAS, Enron and Calpine desire that TUEC consent to the assignment by
Enron to Calpine of Enron's rights and obligations under the Surety Agreement,
and the assumption of such rights and obligations by Calpine, subject to Enron's
continuing liability as provided in this Agreement; and
WHEREAS, the Facility is currently operated by an indirect, wholly-owned
subsidiary of Enron pursuant to an Operations and Maintenance Agreement
(Cogenron Inc.), dated as of August 1, 1995, as amended (the "Original O&M
Agreement"), among Enron Operations Corp. ("EOC"), Cogenron, and EDCC; and
WHEREAS, it has been represented by Enron and Calpine that, as of this
Effective Date, the Original O&M Agreement will be terminated and a new
operations and maintenance agreement is being executed by Cogenron, EDCC and
Calpine (or a subsidiary thereof), as the new operator of the Facility; and
WHEREAS, Enron and Calpine desire to obtain TUEC's consent to such change
in operator of the Facility from EOC to Calpine (or a wholly-owned subsidiary
thereof) pursuant to Article 23 of the Power Purchase Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, and intending to be legally bound, each of the Parties
hereto hereby agrees as follows:
SECTION 1. TUEC CONSENT AND LIMITED WAIVER.
1.1 Consent. Subject to the terms and conditions set forth herein, TUEC
hereby: (i) acknowledges Enron's and Calpine's representations that, immediately
after giving effect to the transactions contemplated by the Purchase Agreement,
CFC and DRI will each own 50% of the issued and outstanding shares of the common
stock of EDCC, and that Cogenron will be an indirect 50% subsidiary of Calpine
and indirect 50% subsidiary of DRI, (ii) so long, and only so long, as Calpine
owns at least a direct or indirect 50% ownership interest in Cogenron (or its
successors or assigns): (a) waives the requirement in Section 6(d) of the Surety
Agreement that Cogenron (or its successors and assigns) be a direct or indirect
wholly-owned subsidiary of Enron, and (b) agrees that the sale of EPC's
ownership interest in EDCC to CFC pursuant to the Purchase Agreement ill not be
a breach of the Surety Agreement; provided that TUEC has not reviewed said
Purchase Agreement and, therefore, TUEC's consent cannot extend to any matter
under the Purchase Agreement other than the sale of stock as has been
represented by Enron and Calpine to TUEC, (iii) consents to the assignment
pursuant to the terms hereof by Enron to Calpine of Enron's rights and
obligations under the Surety Agreement, subject to the continuing liability of
Enron as set forth in Section 2.2 of this Agreement, and (iv) consents to the
change in operator of the Facility from EOC
Exhibit III-D
Page 3 of 9 Pages
106
to Calpine (or a wholly-owned subsidiary of Calpine). Neither Enron, Calpine,
nor TUEC shall be deemed to have waived, released, relinquished, modified or
qualified any of their respective rights or remedies under the Surety Agreement
by virtue of this Agreement, except as specifically set forth herein.
SECTION 2. ASSIGNMENT AND ASSUMPTION.
2.1 Assignment and Assumption. As of this Effective Date, Enron hereby
does grant, transfer and assign to Calpine all of its respective rights,
interests and obligations under the Surety Agreement and Calpine hereby accepts
and assumes all such rights, interests and obligations of Enron under the Surety
Agreement. From and after this Effective Date hereof, Calpine shall perform the
obligations, and inure to any benefit, of Enron under the Surety Agreement, and
Calpine agrees to be bound by all of the terms of the Surety Agreement assigned
to and assumed by Calpine in every way as if an original party thereto.
2.2 Effect of Assignment and Assumption: Extension of Power Purchase
Agreement. Prior to this Effective Date, all undertakings and assurances of
Enron under the Surety Agreement shall remain the unconditional and absolute
primary obligations of Enron. From and after this Effective Date, all
undertakings and assurances of Enron under the Surety Agreement shall be the
unconditional and absolute obligations of each Calpine and Enron.
Notwithstanding anything herein to the contrary, as of this Effective Date,
Calpine shall have primary liability for performance under the Surety Agreement,
it being agreed that Enron shall only be required to perform thereunder after it
has received written notice from TUEC that Calpine has failed to perform under
the Surety Agreement within five days after a demand to so perform was made upon
Calpine, or its permitted successors or assigns, by TUEC, or its permitted
successor assigns. In the event that the Power Purchase Agreement is extended
beyond its current termination dat of June 30, 1999, the Parties acknowledge and
agree that Enron's liability after June 30, 1999 shall be limited to the
obligations of Enron as stated in this Section 2.2 solely for events or
conditions occurring prior to June 30, 1999 and in no event will Enron be liable
for events or conditions under the Power Purchase Agreement which occur after
said date of June 30, 1999, with Enron's liability continuing after said date of
June 30, 1999, as to any events or conditions occurring prior to June 30, 1999,
as stated in accordance with this Section 2.2.
SECTION 3. REPRESENTATIONS.
Each of the Parties hereto represents and warrants to each of the other
Parties hereto, that (a) it is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of incorporation, (b) it
has all requisite corporate power and authority to execute, deliver, and perform
its obligations under this Agreement, (c) it has taken all necessary corporate
action (including any necessary stockholder action) to authorize it to execute,
deliver and perform this Agreement in accordance with its terms, (d) it has duly
executed and delivered this Agreement, and (e) this Agreement is the valid and
binding obligation of such Party, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency and other similar laws relating to
or affecting the enforcement of creditors' rights generally and to general
principles of equity.
Exhibit III-D
Page 4 of 9 Pages
107
SECTION 4. MISCELLANEOUS.
4.1 Further Assurances. TUEC hereby agrees to execute and delivery all
such instruments and to take all such action as may be necessary to effectuate
fully the purposes of this Agreement.
4.2 Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF
RELATING TO CONFLICTS OF LAW).
4.3 Counterparts. This Agreement may be executed in any number of
counterparts and by the different Parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
4.4 Headings Descriptive. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
4.5 Severability. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
4.6 Amendment, Waiver. Neither this Agreement nor any of the terms
hereof may be terminated, amended, supplemented, waived or modified except by an
instrument in writing signed by each of the Parties hereto. This Agreement is
for the specific purpose for which given and shall not preclude any other or
future Agreement that may be required under the Surety Agreement nor shall any
such other or future Agreement be deemed to be required as a result of this
Agreement.
4.7 Successors and Assigns. This Agreement shall be binding upon, and
shall inure to the benefit of, each of the Parties hereto and their respective
permitted successors and assigns. As used in this Agreement, "permitted
successors and assigns" refers to any party permitted to be a successor or
assign under the Surety Agreement.
4.8 Entire Agreement. This Agreement embodies the entire agreement among
the Parties hereto relating to the subject matter hereof and supersede all prior
agreements, representations and understandings, if any, relating to the subject
matter hereof.
4.9 Additional Enron Covenant. Enron and TUEC acknowledge that TUEC and
Cogenron have been engaged in discussions concerning the Power Purchase
Agreement with respect to potential respective liabilities for costs, fees and
losses associated with the transmission of electric capacity and energy from the
Facility to TUEC's Delivery Point under the Power Purchase Agreement (the
"Transmission Charges") which have accrued subsequent to the implementation of
revised Substantive rules promulgated by the Public Utility Commission of Texas
providing for open access transmission service. Enron agrees that, commencing
with the date of this Agreement, and continuing through June 30, 1999, neither
it nor any of its affiliates or subsidiaries will take any action
Exhibit III-D
Page 5 of 9 Pages
108
adverse or that could be adverse to TUEC's position with respect to the
liability of the respective parties to the Power Purchase Agreement (or any
surety thereof) for the Transmission Charges, and Enron represents that neither
it nor any of its affiliates or subsidiaries ( other than Cogenron's previous
discussions with TUEC concerning Cogenron's disagreement as to the Transmission
Charge issue) have taken any such action prior to the date of this Agreement;
provided, however, Enron or any of its affiliates or subsidiaries may file a
response in respect to, or intervene in, proceedings before any state, local, or
federal regulatory or judicial body if any such proceeding concerns or relates
to liability for transmission charges other than those referenced in the Power
Purchase Agreement, and other than those concerning or relating to power
transmitted pursuant to the Power Purchase Agreement. Additionally, Enron agrees
on behalf of itself and its affiliates and subsidiaries to not initiate, file a
response to, or intervene in any proceeding concerning or relating to any issue
having to do with reformation of the Power Purchase Agreement, and Enron
represents that neither it nor any of its affiliates or subsidiaries have
previously done so. The Parties acknowledge that nothing herein is indicative of
Cogenron's position or views with respect to the Transmission Charges, and,
further, that as of this Effective Date, Cogenron will cease to be either an
affiliate or subsidiary of Enron.
4.10 Legal Fees. Enron agrees to pay to TUEC within 20 days of the date
hereof the sum of $20,000 as reimbursement of legal fees and expenses in
connection with this transaction.
REMAINDER OF
THIS PAGE INTENTIONALLY LEFT BLANK
Exhibit III-D
Page 6 of 9 Pages
109
IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement
to be duly executed and delivered by its duly authorized officer as of the date
hereof, also referenced herein as the Effective Date.
TEXAS UTILITIES ELECTRIC COMPANY
By: /s/ HENRY A. BUNTING
-------------------------------------
Name: Henry A. Bunting
---------------------------------
Title: Manager, Resource Acquisition
---------------------------------
ENRON CORP.
By:
-------------------------------------
Name:
---------------------------------
Title:
---------------------------------
CALPINE CORPORATION
By:
-------------------------------------
Name:
---------------------------------
Title:
---------------------------------
The undersigned hereby executes this Agreement solely for the purpose of
agreeing and consenting to any termination or reduction of Enron's obligations
under the Surety Agreement effectuated hereby, pursuant to Section 5.11 of that
certain Purchase Agreement, dated May 4, 1988, as amended, between Enron and
DRI.
DOMINION RESOURCES, INC.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Exhibit III-D
Page 7 of 9 Pages
110
IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement
to be duly executed and delivered by its duly authorized officer as of the date
hereof, also referenced herein as the Effective Date.
TEXAS UTILITIES ELECTRIC COMPANY
By:
-------------------------------------
Name:
---------------------------------
Title:
---------------------------------
ENRON CORP.
By: /s/ [SIG]
-------------------------------------
Name: [ILLEGIBLE]
---------------------------------
Title: SR. VICE PRESIDENT
---------------------------------
CALPINE CORPORATION
By: /s/ RON A. WALTER
-------------------------------------
Name: Ron A. Walter
---------------------------------
Title: Vice President
---------------------------------
The undersigned hereby executes this Agreement solely for the purpose of
agreeing and consenting to any termination or reduction of Enron's obligations
under the Surety Agreement effectuated hereby, pursuant to Section 5.11 of that
certain Purchase Agreement, dated May 4, 1988, as amended, between Enron and
DRI.
DOMINION RESOURCES, INC.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Exhibit III-D
Page 8 of 9 Pages
111
IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement
to be duly executed and delivered by its duly authorized officer as of the date
hereof, also referenced herein as the Effective Date.
TEXAS UTILITIES ELECTRIC COMPANY
By:
-------------------------------------
Name:
---------------------------------
Title:
---------------------------------
ENRON CORP.
By:
-------------------------------------
Name:
---------------------------------
Title:
---------------------------------
CALPINE CORPORATION
By: /s/ RON A. WALTER
-------------------------------------
Name: Ron A. Walter
---------------------------------
Title: Vice President
---------------------------------
The undersigned hereby executes this Agreement solely for the purpose of
agreeing and consenting to any termination or reduction of Enron's obligations
under the Surety Agreement effectuated hereby, pursuant to Section 5.11 of that
certain Purchase Agreement, dated May 4, 1988, as amended, between Enron and
DRI.
DOMINION RESOURCES, INC.
By: /s/ THOMAS F. FARRELL
----------------------------
Name: Thomas F. Farrell, II
--------------------------
Title: Senior Vice President
-------------------------
Exhibit III-D
Page 9 of 9 Pages