EXHIBIT 10.46
FUNDING AGREEMENT
1. PARTIES: The Parties to this Funding Agreement ("Agreement") are Magma
Power Company, a Nevada corporation ("Seller") and Southern California Edison
Company ("Edison"), a California corporation, hereinafter sometimes referred
to individually as "Party" and collectively as "Parties."
2. RECITALS: This Agreement is made with reference to the following facts,
among others:
2.1 On April 16, 1985, Imperial Energy Corporation ("IEC") and Edison
entered into a Long Term Power Purchase Contract (the "Power Purchase
Contract"). IEC assigned the Power Purchase Contract to Magma on January 22,
1986 to which assignment Edison consented on March 12, 1986. On April 10,
1988, Magma and Edison executed Amendment No. 1 to the Power Purchase Contract
(the "First Amendment"). The Power Purchase Contract, as amended by the First
Amendment, is hereinafter referred to as the "Power Purchase Contract." Magma
is developing a 38 megawatt ("MW") (nameplate capacity) geothermal electric
power production facility (the "Leathers Plant") in the Imperial Valley at
Niland, California, the electricity from which will be sold to Edison under
the Power Purchase Contract.
2.2 Seller is a signatory to the Funding and Construction Agreement
("Funding and Construction Agreement") among the Imperial Irrigation District
("IID") and independent power companies, listed as participants
("Participants") therein, which was executed on June 29, 1987. Seller's
capacity entitlement
under the Funding and Construction Agreement is sufficient to satisfy its
capacity and energy deliveries under the Power Purchase Contract.
2.3 Seller is, at the date of execution of this Agreement, in full
compliance with the terms and conditions of the Power Purchase Contract, the
Qualifying Facilities Milestone Procedure ("QFMP") and/or Edison's Tariff Rule
21, as applicable.
2.4 Seller and Edison jointly agree that a transmission limit of 400 MW
exists on the capacity of the existing transmission line between Edison's
Mirage Substation and its Devers Substation (the "Mirage/Devers Line") and
that construction of additional transmission facilities may, in Edison's sole
judgment, be required to allow delivery of Seller's electrical energy and
capacity over the portion of Edison's system between Edison's Mirage and
Devers substations. Such facilities shall hereinafter be referred to as the
"Additional Transmission Facilities."
2.5 Seller acknowledges that, because of the transmission priority of its
project under the QFMP and/or Edison's Tariff Rule No. 21, it may not be
entitled thereunder to use the existing Mirage/Devers Line to deliver its
power to Edison. Therefore, Seller is willing to pay a portion of the cost of
the Additional Transmission Facilities which may be required to accommodate
transmission of its electrical energy and capacity, as further set forth
therein.
-2-
3. AGREEMENT: The Parties agree as follows:
4. TERM: Except as provided in Section 5 hereof, this Agreement shall be
effective upon execution by the Parties and shall remain in effect until the
earliest of (a) termination by agreement of the Parties, (b) completion of the
Additional Transmission Facilities, (c) the termination, prior to the
commencement of construction of the Additional Transmission Facilities, of
existing power purchase contracts with an aggregate nameplate capacity of at
least 88.5 MW which have transmission priority under the QFMP or Edison's
Tariff Rule No. 21, as applicable, on the Mirage/Devers Line superior to the
transmission priority of the projects identified in Appendix A hereto, or (d)
January 1, 1995.
5. CONDITION PRECEDENT: This Agreement shall not be effective until the
execution of funding agreements in substantially the form of this Agreement
with all of the developers listed in Appendix A, and the posting of a total of
at least $3.15 million (including Seller's funds) into either escrow accounts
or irrevocable letters of credit, as further set forth in Section 6, by such
developers, whose identity and funding contribution are set forth in Appendix
A to this Agreement.
6. FUNDING ACCOUNT:
6.1 Within 30 days after the last date of execution of a separate funding
agreement in substantially the form of this Agreement by each developer listed
in Appendix A hereto, Seller shall, in the amount determined pursuant to the
formula set forth herein, either (a) provide Edison with an irrevocable letter
of
-3-
credit issued by a commercial lender acceptable to Edison in its sole judgment
allowing Edison to draw the funds for use consistent with the terms and
conditions of this Agreement. The escrow account or letter of credit so
established shall hereinafter be referred to as the "Funding Account." The
dollar amount of Seller's Funding Account shall be the amount specified in
Appendix A hereto as Seller's funding contribution, which is established as
follows:
X = A x (B / C)
Where: X = Seller's Funding Account in dollars
A = Seller's MW capacity as specified in
Appendix A
B = $3,150,000
C = 79 MW
Seller shall not be required to contribute any funds in excess of the amount
identified in Appendix A hereto as Seller's funding contribution.
6.2 Interest which may be paid to the Funding Account shall accrue to the
Funding Account and shall contribute to the principal when earned. Seller
shall not have any right to make withdrawals of accrued interest unless and
until the Funding Account is released to Seller pursuant to Section 6.6 of
this Agreement.
6.3 Edison shall have sole drawing rights on the funds contained in
the Funding Account. Edison may use those funds for payment of the costs
actually incurred by Edison to construct the Additional Transmission
Facilities determined necessary by Edison
-4-
in its sole discretion to accept the electric capacity and energy of Seller
pursuant to the Power Purchase Contract and to pay any taxes levied on those
funds as contributions in aid of construction.
6.4 Seller shall maintain the Funding Account in effect until the
termination of this Agreement pursuant to Section 4 hereof. Failure to do so
shall cause Seller to lose its rights to transmission capacity under this
Agreement and shall cause Edison's obligation to accept Seller's power
pursuant to Section 7.1 of this Agreement to terminate.
6.5 In the event of termination of this Agreement, Edison shall not be
obligated to reimburse Seller for any funds withdrawn from the Funding Account
in accordance with the terms and conditions of this Agreement.
6.6 In the event that this Agreement has terminated pursuant to Section 4
hereof prior to the commencement of construction of the Additional
Transmission Facilities, Edison shall promptly release Seller's Funding
Account to Seller. Seller shall have no other right to terminate or withdraw
funds from the Funding Account.
7. OBLIGATIONS OF EDISON:
7.1 As long as Seller is in compliance with all of the terms and
conditions of this Agreement, Edison shall accept power from Seller pursuant
to Seller's Power Purchase Contract on the date of Firm Operation (as that
term is defined in the Power Purchase Contract) in the amount specified in
Appendix A hereto, regardless of the status of the Additional Transmission
-5-
Facilities on such date. Purchases from Seller shall be made pursuant to the
Power Purchase Contract for energy and capacity delivered to Edison's Mirage
Substation (a) during the term of this Agreement and (b) following termination
of this Agreement only if terminated pursuant to Section 4.
7.2 In the event that Edison enters into an agreement with a developer
other than those listed in Appendix A which requires the use of capacity on
the Additional Transmission Facilities, Edison shall require such developer to
pay a portion of the costs of the Additional Transmission Facilities. Such
payment shall be in accordance with the formula specified in Section 6.1 of
this Agreement. Such payment shall not affect Seller's funding contribution as
specified in Appendix A.
8. OWNERSHIP: Edison shall own and operate any Additional Transmission
Facilities which may be constructed or installed to fulfill Edison's
obligations pursuant to this Agreement.
9. TAXES:
9.1 Edison shall pay ad valorem taxes and other taxes properly attributed to
the Additional Transmission Facilities.
9.2 Edison may, at its sole discretion, use funds from the Funding Account
to pay taxes levied on contributions in aid of construction. However, Seller
shall not be required to pay any tax, or provide any funds for the payment of
any tax, in excess of its funding contribution as set forth in Appendix A of
this Agreement.
9.3 If requested by any taxing authority, Seller or Edison, as the case may
be, shall provide information in its possession
-6-
concerning the Additional Transmission Facilities to such taxing authority.
10. NONDEDICATION OF FACILITIES: Neither Party, by this Agreement, dedicates
any part of its facilities to the public or to the service provided under the
Power Purchase Contract, and such service shall cease upon termination of the
Power Purchase Contract.
11. NOTICES: All notices pertaining to this Agreement shall be in writing and
shall be sufficient if delivered in person or sent by certified mail, postage
prepaid, return receipt requested, to Seller or to Edison at the following
address:
If to Seller: Magma Power Company
11770 Bernardo Plaza Court Suite 366
San Diego, CA 92129
Attention: Secretary
If to Edison: Southern California Edison Company
Post Office Box 800
Rosemead, CA 91770
Attention: Secretary
All notices sent pursuant to this Section 11 shall be effective when received,
and each Party shall be entitled to specify as its proper address any other
address in the United States upon written notice to the other Party.
12. PREVIOUS COMMUNICATIONS: This Agreement contains the entire agreement
between the Parties, their agents, and employees as to the Additional
Transmission Facilities, and merges and supersedes all prior agreements,
commitments, representations, and discussions between the Parties relating
thereto. No Party shall be bound to any other obligations, conditions, or
representations with respect to the subject matter of this Agreement.
-7-
Notwithstanding the foregoing, nothing in this Agreement shall be construed to
terminate, supersede or amend the Power Purchase Contract, except if, and only
to the extent, specifically set forth herein.
13. SUCCESSORS AND ASSIGNS: This Agreement shall not be assigned by Edison
without Seller's consent, which consent shall not be unreasonably withheld.
Seller may assign this Agreement with the written consent of Edison only if
such assignment is in conjunction with assignment of the Power Purchase
Contract. Any such assignment or delegation made without said written consent
shall be null and void. Edison's consent to such assignment shall not be
unreasonably withheld. Any assignment of this Agreement in conjunction with
assignment of the Power Purchase Contract shall be in full compliance with the
applicable terms and conditions of the Power Purchase Contract. Any assignment
of this Agreement shall not relieve the Seller of its primary liability for
any of its duties and obligations hereunder unless the assignee expressly
assumes those duties and obligations in writing.
14. UNCONTROLLABLE FORCE: Neither Party shall be considered to be in default
in the performance of any of its obligations under this Agreement, except for
obligations to pay money, when and to the extent failure of performance shall
be caused by an uncontrollable force. The term "uncontrollable force" shall
mean any cause beyond the control of the Party unable to perform such
obligations including, but not limited to, failure of or threat of failure of
facilities, flood, earthquake, storm, drought,
-8-
fire, pestilence, lightning and other natural catastrophes, epidemic, war,
riot, civil disturbance or disobedience, strike, labor dispute, labor or
material shortage, sabotage, government priorities, restraint by court order
or public authority (whether valid or invalid), and action or nonaction by or
inability to obtain or keep the necessary authorizations or approvals from any
government agency or authority, which by exercise of due diligence such Party
could not reasonably have been expected to avoid and which by exercise of due
diligence it has been unable to overcome. Nothing contained in this Section 14
shall be construed as to require a Party to settle any strike or labor dispute
in which it may be involved.
15. EFFECT OF SECTION HEADINGS: Section headings appearing in this Agreement
are inserted for convenience only, and shall not be construed as
interpretations of text.
16. GOVERNING LAW: This Agreement shall be interpreted, governed, and
construed under the laws of the State of California as if executed and to be
performed wholly within the State of California.
-9-
17. SIGNATURES: IN WITNESS WHEREOF, the Parties hereto have executed this
Funding Agreement this 15 day of June, 1988.
SOUTHERN CALIFORNIA EDISON COMPANY
By /s/ Glenn J. Bjorklund
Vice President
MAGMA POWER COMPANY
By /s/ Andrew W. Hoch
Title: Chairman of the Board
-10-
APPENDIX A
DEVELOPER PROJECT CAPACITY FUNDING
--------- ------- -------- -------
Western Power Imperial Resource 15 MW $ 598,101.27
Group Unit II, Recovery (QFID
Inc. No. 1043)
Earth Energy, Salton Sea II 20 MW $ 797,468.35
Inc. (QFID No. 3028)
Magma Power Leathers (QFID 38 MW $1,515,189.87
Company No. 3026)
Ormesa Ormesa 1E 6 MW $ 239,240.51
Geothermal (QFID No. 3010)
----- -------------
TOTAL 79 MW $3,150,000.00
-11-